One maker of insect-control products (United Industries Corporation) challenged claims made by another maker of similar products (The Scotts Company) at the NAD. Among the issues in the challenge was a sweepstakes that Scotts had run to help generate reviews of its products. As part of the sweepstakes, every consumer who submitted a review would get a chance to win a $25 Visa gift card. Although the sweepstakes rules required consumers to disclose that a review was submitted as part of a sweepstakes, that requirement was apparently not mentioned in the ads or call-to-action. According to the challenger, within two days of announcing the sweepstakes, hundreds of favorable reviews appeared on the Scotts website, none of which included the required disclosure.

According to the NAD decision, when Scotts became aware that consumers were not including the proper disclosure, the company took Bug Reviewseveral corrective steps. For example, Scotts included the disclosure requirement in its ads, as opposed to only in the rules. Moreover, the company directed its agency to apply a “Sweepstakes Entry” tag to each review and placed a disclosure on its website where the customer reviews were displayed while the agency completed its tagging. Scotts also reported that it was exploring solutions to have the disclosures applied automatically in the future. The NAD noted that it found the company’s efforts to address the issues to be “sufficient and proper.”

There are a few notable statements in the NAD’s decision. First, the NAD noted that the chance to win a prize in exchange for a review provided “a level of engagement and a connection between the consumers and the advertiser that is not expected and must be disclosed.” The FTC has articulated a similar position. Second, the NAD noted that “simply including the disclosure requirement in a link containing the Official Rules was not effective.” Apparently, few people read that disclosure, so a more prominent mention was necessary. And third, the NAD noted that an advertiser has an “obligation to ensure its sweepstakes rules are followed and to ensure that there is a sufficient and timely disclosure that reviews are incentivized.”

This is not the first case we’ve mentioned dealing with incentivized reviews, and it probably won’t be the last. The FTC and regulators have been focused on this issue for years. This case demonstrates that now companies also need to be worried about being called out by their competitors.

 

In January 2014, AdAge interviewed me about news reports that Machinima had hired influencers to create videos promoting Microsoft’s Xbox One gaming console and games. In a native advertising campaign, the influencers posted positive reviews, but didn’t disclose that they had been paid to do so. During the interview, we speculated about whether the FTC might take action against the campaign and what the result might be. Now, almost 20 months later, we have the answer. This week, the FTC announced a settlement with Machinima.

According the to the FTC, Machinima, the operator of a popular YouTube network, paid two influential gaming bloggers to create videos promoting the new Xbox One console and three new games, but didn’t require the bloggers to disclose that they were paid for the reviews. The bloggers posted four videos that had more than 1.6 million views. To capitalize on this success, Machinima later recruited and paid more people to upload positive reviews, again without requiring a disclosure. This generated another 300 videos and 30 million views in a five-week period.MachinimaXB1

If you follow our blog, you can already guess the problem. As Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said: “When people see a product touted online, they have a right to know whether they’re looking at an authentic opinion or a paid marketing pitch. That’s true whether the endorsement appears in a video or any other media.” Under the proposed settlement, Machinima is required to ensure its influencers clearly disclose when they have been compensated in exchange for their endorsements.

Whether you refer to this as an “influencer” campaign or “native advertising,” the answer is always the same. If your company pays people to review or promote your products in a way that could confuse viewers into thinking the reviews come from independent consumers, you need to take steps to ensure that the reviewers clearly disclose that they have some connection to your company. Make sure you educate reviewers about their responsibilities and take steps to monitor their compliance. If you don’t, you could end up as one of future blog posts.

The NAD recently determined that Euro-Pro could not support a claim that its Shark vacuum receives “more 5-star online reviews than any other vacuum brand.” To support the claim, Euro-Pro had looked at over 4,000 verified reviews on the websites of several major national retailers. Despite the number of reviews included in the analysis, the NAD determined that the data was still insufficient to support the broad claim.

Although Euro-Pro gathered review data from the top 85% of online retailers, the company actually based its claim on a much smaller subset of those reviews. For example, Euro-Pro did not include in its calculations reviews posted on Target, Best-Buy, or Costco websites because those sites did not indicate whether reviews could be verified as coming from actual purchasers. The company also excluded reviews from manufacturer websites because it was concerned about the reliability of those reviews. For example, Euro-Pro found that some reviews were incentivized by free products and was concerned that others could be manipulated or duplicated.

The NAD recognized that it may be difficult to parse through reviews and that advertisers may be left in a “Catch-22” situation. Including non-verified reviews could affect the reliability of the data, while excluding them could affect representativeness of the data. Nevertheless, this difficulty “does not relieve an advertiser from its obligation to provide appropriate and reliable substantiation for its advertising claims.” In this case, the NAD determined that by taking an all-or-nothing approach when deciding whether to include reviews from a certain website, Euro-Pro “materially undermined the reliability” of its calculations. Importantly, the NAD cautioned that “advertisers cannot base claims on tenuous evidence, simply because sufficiently reliable evidence is too difficult to collect.”

This isn’t the first case in which the NAD has considered the issue of crowdsourced reviews. As we wrote last year, the NAD had previously determined that reviews collected from retailer websites were insufficiently representative or reliable to support Euro-Pro’s “America’s Most Recommended” claim. In both decisions, the NAD stressed that it is not suggesting that no claim could be supported by crowdsourced data. Nevertheless, the decisions suggest that advertisers may face an uphill battle when trying to do so.

Consumers often read reviews before buying a product or signing up for a service. Because of that, many companies closely monitor what consumers say about them online, and even take steps to generate positive buzz. One way companies do that is by incentivizing happy customers to write reviews. Although there is nothing inherently wrong with that tactic, a recent FTC settlement demonstrates that there are still boundaries to what companies can do.

AmeriFreight, an automobile shipment broker, advertised on its website that it had “more highly ranked ratings and reviews than any other company in the automotive transportation business.” It also encouraged prospective customers to trust those reviews, stating: “You don’t have to believe us, our consumers say it all.” What the company didn’t say, however, is that it had provided incentives for some of those consumers to write the reviews.

For example, according to the FTC’s complaint, AmeriFreight provided consumers with a $50 discount, if consumers agreed to review the company’s services online. In addition, the company offered a $100 monthly prize for the review with the “most captivating subject line and best content.” In its agreement with consumers, AmeriFreight also reserved its right to charge consumers who didn’t write reviews, as promised.

As we’ve noted in previous posts, if a company provides consumers with an incentive in exchange for reviewing or promoting the company’s products, the company needs to ensure that the consumers disclose that they’ve received that incentive. That is particularly true in a case like this, where the company itself promoted the reviews, and suggested that the reviews reflected the unbiased views of its customers.

In previous posts, we’ve noted that if a person who writes a review about a product has a connection to the company that makes the product, that connection should be clearly disclosed. The types of connections that trigger this disclosure requirement include things such as payments, free products, and, of course, employment.

According to press reports, on at least two occasions, Yahoo employees posted positive reviews of Yahoo apps in the iTunes app store without disclosing their affiliation with Yahoo. The FTC learned about this, and contacted Yahoo to inquire about what had happened.

After an investigation, the FTC decided not to pursue the case, for four key reasons: (1) only a small number of employees reviewed Yahoo apps without disclosing their affiliation; (2) it didn’t appear that Yahoo had encouraged employee to write the reviews; (3) the apps were free and didn’t include in-app purchases; and (4) Yahoo committed to improve its social media policy and to more actively inform employees of the policy.

If you haven’t thought about your company’s social media policy recently, you may want to do that. As a general matter, you shouldn’t encourage employees to review your products. (Some companies have gotten into trouble when they encouraged reviewers to pose as independent consumers.) You should also make sure your employees know that if they do decide to review your products on their own, they must disclose that they are employed by you.

Last week, in a case of first impression, the NAD determined that reviews collected from retailer websites were insufficiently representative or reliable to support a broad “America’s Most Recommended” claim. The claim was made by Euro-Pro, who advertised that its Shark vacuum was “America’s Most Recommended Vacuum.” The ads disclosed that the claim was based on the “percentage of consumer recommendations for upright vacuums on major national retailer websites.” Euro-Pro argued that its vacuum had a statistically significant higher percentage of “would recommend” responses than any of the other brands.

Even though the claim was based on over 10,000 reviews and the results were statistically significant, the NAD was concerned that Euro-Pro’s methodology lacked some of the controls that are typically present in surveys. For example, the NAD questioned whether the survey sample was representative of population as a whole. (Although the majority of vacuums are sold in brick-and-mortar stores, the majority of the reviews in Euro-Pro’s sample were from online-only stores.) Moreover, each website worded the “recommendation” question differently, making it difficult to make clear comparisons. And the questions were worded in a manner that cast further doubt on the reliability of the data.

The NAD noted that, in light of the wealth of consumer reviews available online, it is not surprising that advertisers want to use this data as a basis for ad claims. However, while the NAD “is open to advertisers using new technology and information to support their claims,” it stressed that “the standards of truthfulness, reliability, and representativeness to which advertiser’s substantiation is held remain the same.” It may not always be easy to meet those standards with crowd-sourced data.

This morning, New York Attorney General Schneiderman announced that his office had concluded a year-long undercover investigation into the reputation management industry and the practice of posting fake reviews online.

Many search engine optimization (“SEO”) companies offer customers online “reputation management” services. During the investigation, the AG learned that some SEO companies perform these services through less-than-reputable means. For example, some companies create fake profiles on review websites and pay freelance writers to post reviews. This practice — commonly known as “astroturfing” — constitutes false advertising. The AG entered into Assurances of Discontinuance with 19 companies who engaged in this practice, with penalties ranging from $2,500 to just under $100,000.

If you read this blog, you already know it’s a bad idea to fake reviews. And you already know that if your company provide incentives for consumers to write reviews, those incentives must be disclosed. But the question is whether your partners know these things, too. If you are working with another company to help boost your reputation online, you should take steps to ensure they are performing their services in a way that complies with the law.