POSTED BY Jillian Hira on October 4, 2013
“Astroturfing,” known to many as the 21st century version of false advertising, has cost nineteen different companies over $350,000 in the state of New York. This past Monday the New York Attorney General’s Office announced the results of a year-long investigation into the producing of fake online reviews for businesses around the state. The undercover investigation looked into reputation-management agencies used to alter consumer-review websites. What they discovered was a number of agencies flooding websites such as Yelp, Citysearch, and Google Local with fake consumer reviews. Some businesses hiring these companies to “astroturf” include a charter bus operator, a teeth-whitening service, a laser hair-removal chain, and an adult entertainment club. On it’s face false advertising for these businesses may seem harmless, but further investigation discovered that services capable of more permanent danger were buying false reviews, including dentists, lawyers, and an ultrasound clinic.
Attorney General, Eric T. Schneiderman, stated for the New York Times, “What we’ve found is even worse than old-fashioned false advertising. When you look at a billboard, you can tell it’s a paid advertisement, but on Yelp or Citysearch, you assume you’re reading authentic consumer opinions, making this practice even more deceiving.” According to Yelp’s senior litigation counsel, more than 100 million visitors use Yelp each month for the purpose of researching various products and services. For businesses that are doing poorly, “astroturfing” is the perfect solution. Chief executive for US Coachways was upset about low ratings posted on Yelp. Rather than fix the problems customers were citing, the company hired freelance writers to write favorable reviews and even posted some five-star reviews themselves. Following the investigation, 19 different companies entered agreements to cease such misleading practices. Among them, Coachways has agreed to pay $75,000 in fines for writing fake reviews online.
The Attorney General claimed that such conduct violates New York General Business Laws §§ 349 & 350 on false advertising and deceptive business practices. Though the Federal Trade Commission was not yet involved, such conduct would likely also violate 15 U.S.C. §45 on Unlawful Methods of Competition. The statute states that, “any unfair or deceptive acts or practices affecting commerce are declared unlawful.” For purposes of determining whether conduct constitutes unlawful activity, either actual knowledge of deceptive acts or a reckless disregard for the truth is sufficient. Furthermore, the FTC does not have to prove actual deception occurred to hold businesses liable under 15 U.S.C. §45. Rather, a likelihood of deception or a capacity to deceive is the only criteria necessary.
The FTC’s “Guide Concerning the Use of Endorsements and Testimonials in Advertising” can be used as a second reference in determining whether a business’s advertising constitutes unlawful activity. Under “General Considerations” the guide states, “endorsements [or testimonials] must reflect honest opinions, findings, beliefs, or experience of the endorser…an endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser.” Based on the laws provided by the FTC and the extent to which individuals rely on consumer-review websites, it is clear that the conduct of those businesses investigated by the New York Attorney General were engaged in unlawful methods of advertising. Still, it will take continued policing by the law enforcement and review sites to stop businesses from posting false advertisements in the future.
