The Federal Trade Commission (FTC) recently announced a new action and proposed settlement with the telemedicine firm NextMed. The action, which may seem familiar to those who followed FTC advertising cases of years past, focuses on unsubstantiated claims for a weight-loss product, along with allegations about price-related deception, fake testimonials, and fake consumer reviews.
What may be most notable about the case, however, is a novel complaint count alleging that the company engaged in certain unfair practices by trying to manipulate the favorability of consumer reviews on a third-party website. This action can serve as a warning to companies using such sites to aggregate – and advertise – consumer reviews of their products or services.
Unfair review practices
The NextMed complaint describes conduct from 2022 – meaning the company was not subject to the FTC’s Rule on the Use of Consumer Reviews and Testimonials, which only went into effect last year. The Rule would have covered some of the practices at issue, such as disseminating fake testimonials and generating fake reviews.
For this case, the FTC had to rely instead on its traditional, broad authority under the FTC Act to go after allegedly unfair or deceptive commercial practices. The agency has used this authority in the past and can still use it for practices relating to reviews or testimonials, regardless of the Rule’s applicability. (A principal advantage of the Rule, from the enforcer’s perspective, is the availability of civil penalties for knowing violations.)
The novel count for “unfair consumer review practices” appears to mark the first time the FTC has alleged in a case that any of the following conduct can violate the FTC Act:
- Selectively soliciting reviews from satisfied customers
- Offering compensation to customers in exchange for their removing or changing honest negative reviews
- Flagging or disputing negative reviews with a third-party platform without a reasonable basis to do so
The complaint says that the third-party platform (Trustpilot) removed many fake NextMed reviews and that it also detected and advised NextMed about the review manipulation.
These three review practices are not uncommon in the marketplace. While the Rule doesn’t cover them, the FTC has put advertisers on notice that they may be illegal. In the Endorsement Guides, a well-established FTC guidance document updated in 2023, Section 255.2(d) reads:
“In procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, reporting, or editing consumer reviews of their products, advertisers should not take actions that have the effect of distorting or otherwise misrepresenting what consumers think of their products.”
The Guides then provide illustrative examples at Section 255.2(e)(10) and (11), very similar to the allegations in this case involving selective solicitation and reporting negative reviews. Meanwhile, another FTC guidance document indicates that it may be an unfair practice to offer incentives to take down negative reviews.
Uncertainties
The complaint count alleging unfair review practices leaves some unresolved questions about limiting principles. For example, it’s easy to see why selective solicitation of reviews may be unfair. At a large enough scale, an advertiser could potentially skew a set of reviews to look much more positive – with a higher overall star rating – than they would have been without cherry-picking reviewers.
As the FTC noted in Section 255.2(e)(10)(i) of the Guides, it’s important that consumers not be “deprived of information relevant to their decision to purchase or use the products, or be misled as to purchasers' actual opinions of the product.” In other words, consumers need to be aware of the good and the bad, even if it means they may be less likely to purchase the product.
But what about when it happens on a small scale? Would it be illegal for a food truck owner to ask a favorite customer to write a review, but not ask the customer who said it was the worst taco they ever ate? The FTC isn’t likely to sue the food truck owner, but where the agency draws the line is unclear.
Another legal gray area involves the act of offering incentives – like gift cards or refunds – to consumers to remove negative reviews. Is such conduct illegal if the advertiser has proof that the people receiving these offers had left dishonest or inaccurate reviews? The NextMed complaint doesn’t say, but the implication seems to be that the negative reviews here were honest or, at least, that the company would have taken the same action either way.[1]
Key takeaways
Based on this new count, marketers and compliance officials are encouraged to take note of the following:
- Certain customer service and brand management conduct that might have seemed acceptable in fact might be considered an unfair practice under consumer protection laws. That risk may arise especially when an advertiser manipulates the information environment in its favor via consumer reviews.
- When it comes to consumer reviews, the FTC isn’t limiting its enforcement activity solely to violations of the new Rule. Paying attention to the FTC’s cases and guidance on these points will thus continue to be important.
- Companies that use vendors to collect or bolster their consumer reviews, or to improve their online reputation, are encouraged to exercise due diligence and ensure that these actors aren’t engaged in the kind of practices alleged in this case. Under the FTC Act, companies can be held liable for what third parties do on their behalf.
Finally, it’s worth noting that the FTC approved this matter 3–0. While the FTC has recently taken a stance against an expansive view of unfairness, its recent move to probe whether social media platforms acted unfairly in moderating political content seems to point in the opposite direction.
A connection between that probe and NextMed may be that, in both matters, FTC leadership is thinking about unfairness as a way to take action against companies that allegedly take steps to stop certain opinions from reaching online audiences.
[1] This also raises questions about how brands address dissatisfied customers in review-related communications. In another guidance document known as “The FAQs,” issued in conjunction with the Guides, FTC staff answers that it’s okay to contact such customers and try to make them happy: “You’re welcome to contact unhappy customers and respond to their concerns. You can also ask them if they’ll add updates to their reviews. However, asking them to change or delete their initial negative reviews could mislead readers.”
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