FTC Sanctions AmeriFreight for Touting Incentivized Reviews
As reported most recently in FTC Declines to Take Action Over Yahoo! Astroturfing, the Federal Trade Commission had shown great reluctance to sanctions firms for violating the Endorsement Guidelines updated in 2009 to address social media. In December, however, the FTC sanctioned Deutsch LA for using its employees to promote Sony Playstation via twitter without disclosing their connection. See Inside Sony/Deutsch LA Consent Decree: FTC Cracks Whip on Endorsement Guidelines in Social Media.
Now, once again the FTC has entered into a consent decree with a company for incentivizing and then touting its reviews without disclosing their involvement. AmeriFreight, an automobile shipment broker based in Peachtree City, Georgia, has agreed to halt the company’s allegedly deceptive practice of touting online customer reviews, while failing to disclose that the reviewers were compensated with discounts and incentives.
The FTC’s complaint marks the first time the agency has charged a company with misrepresenting online reviews by failing to disclose that it gave cash discounts to customers to post the reviews.
“Companies must make it clear when they have paid their customers to write online reviews,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “If they fail to do that – as AmeriFreight did – then they’re deceiving consumers, plain and simple.”
AmeriFreight is an automobile shipment broker that arranges the shipment of consumers’ cars through third-party freight carriers. Its website touted that the company had “more highly ranked ratings and reviews than any other company in the automotive transportation business.” As part of its advertising, it encouraged consumers to “Google us ‘bbb top rated car shipping.’ You don’t have to believe us, our consumers say it all.”
According to the FTC’s complaint, AmeriFreight and its owner, Marius Lehmann, violated Section 5 of the FTC Act by failing to disclose that they compensated consumers for their online reviews. Specifically, according to the complaint, the respondents:
- Provided consumers with a discount of $50 off the cost of AmeriFreight’s services if consumers agreed to review the company’s services online, and increased the cost by $50 if consumers did not agree to write a review;
- Provided consumers with “Conditions for receiving a discount on reviews,” which said that if they leave an online review, they will be automatically entered into a $100 per month “Best Monthly Review Award” for the most creative subject title and “informative content”;
- Contacted consumers after their cars had been shipped to remind them of their obligation to complete a review to receive the “online review discount,” and qualify for the $100 award;
- Failed to disclose the material connection between the company and their consumer endorsers — namely, that AmeriFreight compensated consumers to post online reviews;
- Deceptively represented that its favorable reviews were based on the unbiased reviews of customers.
The FTC’s blog post explained:
Here’s how the Endorsement Guides put it: “When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.” Why? In AmeriFreight’s case, for example, prospective consumers of AmeriFreight’s services undoubtedly would view AmeriFreight’s reviews more critically if they knew that AmeriFreight gave consumers $50, and the chance to win $100, to write them.
According to the complaint, AmeriFreight’s claim that the company was a highly rated or top ranked auto shipment broker based on its customers’ unbiased reviews was false. In truth, AmeriFreight’s customers are biased – AmeriFreight paid them so it could generate a high volume of reviews, and incentivized them to write positive ones with additional monthly $100 giveaways. The complaint also charges that AmeriFreight represented that the online reviews are those of satisfied customers – but failed to mention it paid those customers to post reviews.