CommentaryJohanna Nestor, University of Pittsburgh School of Law Class of 2012, is currently working as a law clerk for the Office of the Attorney General of the State of Florida. She writes on the issue of astroturfing and businesses using false and misleading information to bolster their reputations in online forums, and the role state attorneys general can play in discouraging this behavior…
It is increasingly common for a prospective buyer of a product or service to seek out the reputation of the company online. As such, there are many websites that operate with “user generated content” or information that is created and uploaded by members of the general public. The Internet serves as an excellent resource for customers that wish to review and share their experiences on product review websites or web boards; those with negative experiences can also take their grievances to complaints boards. Along the same vein, customer testimonials can be used to build trust by showing prospective customers a company has been historically reliable.
While this is an excellent tool, when searching out reviews consumers should be cautious in deciding what they believe. Nonetheless, while caution is essential, individuals should not have to deal with misleading or false information. In 2009, the Attorney General of New York settled with the cosmetic surgery company, Lifestyle Lift, over false positive reviews posted on websites. Lifestyle Lift employees posed as consumers on product review message boards, attacked posters with negative reviews and also created at least 9 separate websites that appeared to be created by prior satisfied customers. These websites contained customer testimonials, before and after pictures, diaries of the procedure and a comments section, and they were made to look as if they were unaffiliated with Lifestyle Lift. While the pictures were actual Lifestyle Lift customers, the diaries, customer testimonials and all the comments from “independent users” where in fact created by Lifestyle Lift employees.
Lifestyle Lift also posted false positive information on user generated content websites, such as the review board RealSelf.com, which Lifestyle Lift later settled with. Furthermore, Lifestyle Lift not only posted false reviews, they also created a rival website made to look like a third party review board, called cosmetictoday.com, where Lifestyle Lift employees posted positive reviews. This website also allowed for independent third parties to post, but critical reviews were often removed. Lifestyle Lift also paid for advertisements through search engines that increased the number of customers brought to its review board.
Many review boards have terms of service that outline the ways in which visitors may use their websites. For example, RealSelf’s terms make it clear that it would not tolerate reviews by employees for the benefit of their employers, or false, misleading or exaggerated positive reviews, and this is true of the majority of product and service review boards. However, in their terms of use most websites also state that they are not responsible for the validity of their postings. While this makes it difficult to police and enforce the authenticity of information, the good news is that the offices of attorneys general can help to regulate astroturfing by going after companies who engage in this behavior. In the Lifestyle Lift case the New York Attorney General’s Office was able to get $300,000 in penalties and costs, in addition to an injunction banning Lifestyle Life from further posting anonymous reviews online and a requirement to disclose its affiliation in any online promotion or website.
Moreover, government entities like the attorney general can obtain identity information for online postings and website ownership through properly issued subpoenas. For most review boards, whenever a consumer creates a profile or makes a post, his Internet Protocol (IP) address and a related email address are stored. In the terms of service, users are generally advised of this. IP addresses can be traced back to an individual by identifying and subpoenaing the Internet Service Provider (ISP). Email addresses used to create a profile usually have IP logs stored by the email address provider. Additionally, businesses generally have a large enough account to have a static, as opposed to dynamic, IP addresses assigned by their ISP, meaning that a business may have a specific IP address that does not change, making tracing easier. With regard to websites, even though it is easy to restrict the ability to look up their registration information, this information is also discoverable through a subpoena. Therefore, even though the Internet can seem to provide an anonymous forum for false posters to hide behind, information is recorded and posters can be identified.
An interesting and recent development in consumer protection is that the Federal Trade Commission (FTC) has for the first time settled with a consumer for providing a false and misleading customer-testimonial for a company. In FTC v. Dalbey, the FTC alleged that Russell Dalbey and his wife defrauded customers and made misleading claims through his company that provides educational materials on how to earn a substantial income and accumulate wealth in the real estate market by earning commission on seller-financed promissory notes. The FTC alleged that Dalbey aired various versions of an infomercial called Winning in the Cash Flow Business, which offered various materials such as booklets, CDs, and DVDs, with prices ranging from $40-160, promising to teach consumers how to find and make money brokering notes. These infomercials included customer testimonials, which stated that through using Dalbey’s system they had made substantial amounts of money. One testimonial claimed to make as much as $1.2 million in 30 days.
Marsha Kellogg gave one such testimonial. She stated that she made $79,975.11 in one deal and $134,573 in total earnings. In reality, Kellogg had earned only $29,975.01 in the deal and her total earnings were $84,573. The complaint alleged that Kellogg made a representation that was false and misleading, and therefore constituted a deceptive practice in violation of the Federal Trade Commission Act, as well as a false representation as to the benefits of goods or services in violation of Colorado law. Kellogg chose to settle [PDF] the complaint with the FTC and entered an order whereby she agreed to be permanently enjoined from misrepresenting the length of time, and ease with which she, and others, can find, broker and make money through promissory notes. She also agreed to have her prior statement withdrawn and to cooperate with the FTC and the Colorado Attorney General’s Office in the further investigation of Dalbey’s operation.
Without a doubt, a business should be concerned with its reputation online, and it can only be expected that a business would present and promote flattering information to prospective customers whether it be through online customer testimonials or infomercials. Lifestyle Lift acknowledged that negative online reviews and criticisms posed a threat to their business because it painted the company in a negative light. However, when a company deliberately provides false information and has its employees pose as anonymous satisfied customers, it crosses into an impermissible realm. While Lifestyle Lift and Russell Dalbey have completely different business models, they both engaged in providing customer testimonials through various outlets that were either false, misleading or that inadequately disclosed the entities they were created by or affiliated with. The good news is that the FTC and the attorneys general of various states are taking steps to help curb such behavior in the future.
Johanna Nestor, recently graduated from Notre Dame’s Mendoza College of Business with a degree in Information Technology Management and a supplementary major in Peace Studies. She is also an Intellectual Property Certificate candidate at the University of Pittsburgh School of Law.
Suggested citation: Johanna Nestor, Federal and State Action Against False Advertising, JURIST – Dateline, Aug. 14, 2011, http://jurist.org/dateline/2011/08/johanna-nestor-consumer-protection.php.
This article was prepared for publication by Megan McKee, the head of JURIST’s student commentary service. Please direct any questions or comments to her at studentcommentary@jurist.org
