By Hayley Duquette

Recently, the Federal Trade Commission (“FTC”) entered into a settlement agreement with Sunday Riley Modern Skincare, LLC and its CEO, Sunday Riley, regarding charges against the skin-care company for violating the FTC Act. After a whistleblower revealed on Reddit that the company had asked its employees to post positive reviews of its products on Sephora’s website, the FTC filed a complaint against Sunday Riley for violating federal law. The whistleblower had leaked an email sent to employees that laid out detailed instructions for posting these fake reviews. According to the FTC’s complaint, Sunday Riley had violated the FTC Act’s prohibition of (1) making false or misleading endorsement claims, and (2) deceptive failure to disclose material connections with endorsers. As grounds for the charges, the FTC pointed to the company’s habit of instructing its employees to create fake Sephora accounts and pose as impartial, ordinary consumers in order to boost Sunday Riley’s ratings and reputation.

The Texas-based company launched in 2009 and has become a high-end cult-favorite, with its products retailing between $22 and $158. Founded by its CEO of the same name, Sunday Riley offers a wide range of skin-care products that are marketed on their website as cutting-edge and cruelty-free. Employees of the company, including the CEO, began using fake accounts to review their products starting in 2015. After Sephora recognized the IP addresses that these fake reviews were coming from, it removed them. Instead of taking this opportunity to cease its deceptive trade practices, Sunday Riley began using a virtual private network (“VPN”) to continue posting reviews by hiding its IP addresses (VPNs mask IP addresses and thus allow for virtually untraceable online activity). The FTC complaint lists four specific instances of the company instructing its employees to write reviews using the VPN. In addition, the company detailed exactly how to use the VPN, how to create new accounts without detection, and how to construct the reviews so that they seemed authentic. The company also instructed employees to “dislike” any negative reviews so that they would be removed. The FTC complaint quotes an email sent by the CEO in which she points out that the removal of negative reviews translates directly to sales. Sunday Riley employees were further told to always leave five-star reviews, with requests of at least three reviews per week.

In addition to having the employees conceal their identities behind VPNs, the company also coached them on making their reviews more realistic and credible. Employees were encouraged to write reviews on other products as well in order to build up a profile history, and to refrain from posting reviews on the same days that products launched, since they wouldn’t have arrived (and, presumably, have been used long enough to show results) on the same day. Some of the instructions sent to employees also included advice on how to make themselves seem relatable in their reviews, such as fabricating personal experiences of struggles with certain skin conditions. The FTC complaint alleges that these practices establish failure to constitute material facts, as knowing that a review was written by a company employee would likely impact how consumers weigh the review’s credibility when making their purchasing decisions.

The settlement reached by the FTC and Sunday Riley is essentially an order for Sunday Riley to cease and refrain from posting fake reviews online. It instructs the company to ensure that any reviews posted by its employees clearly disclose their connection to Sunday Riley. The settlement also requires the company to maintain and submit certain records for twenty years, and to comply with the FTC’s monitoring of certain activity. While the settlement prevents Sunday Riley from continuing to boost its sales by increasing its product ratings, many have pointed out that this is hardly a punishment for breaking federal law. The company is not subject to any fines or consequences stemming from its deceptive trade practices. FTC Commissioner Rohit Chopra issued a dissenting statement in which he criticizes the no-money, no-fault settlement for its unlikelihood of deterring other wrongdoers. Chopra also points to the fact that “[f]ake reviews distort our markets by rewarding bad actors and harming honest companies.” Chopra calls on the rest of the FTC to attack this growing problem.

Many share the same sentiment as Chopra – that the settlement with Sunday Riley was not an adequate punishment for the company’s actions. It will be interesting to see whether the backlash that this settlement has garnered will make for a different outcome, should another company be found to have engaged in similar practices.

Student Bio: Hayley Duquette is currently a 3L at Suffolk University Law School, concentrating in Intellectual Property. She is the Chief Content Editor of the Journal of High Technology Law, and a student attorney with Suffolk’s Intellectual Property & Entrepreneurship Clinic. Prior to law school, Hayley received a Bachelor of Arts Degree in English from Endicott College where she graduated with magna cum laude honors.

Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.

 

 

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