LOS ANGELES — Think “no harm, no foul” when posting (or soliciting) fake reviews? Then New York Attorney General Eric T. Schneiderman has a real wake-up call for you.
Schneiderman announced yesterday that his office has reached settlements with 19 online companies regarding their use of fake reviews on websites — levying $350,000 in fines — in a year-long undercover investigation known as “Operation Clean Turf.”
According to the AG’s office, by producing fake reviews, these 19 companies violated multiple state laws against false advertising and engaged in illegal and deceptive business practices — including attempting to hide their identities through IP spoofing and creating fake online profiles on consumer review websites, then paying freelance writers from the Philippines, Bangladesh and Eastern Europe to carry out their deception.
“The practice of preparing or disseminating a false or deceptive review that a reasonable consumer would believe to be a neutral, third-party review is a form of false advertising known as ‘astroturfing.’” The AG explains. “Astroturfing is false and deceptive, and it violates, inter alia, New York Executive Law § 63(12), and New York General Business Law §§ 349 and 350.”
Among the targeted firms were search engine optimization (SEO) and online “reputation management” companies that often recruit foreign workers to post reviews raving about a specific company, individual, product or service, in hopes of burying legitimate, negative reviews on the same topic — the process known as “astroturfing” — after the perfect but artificial appearance of these shiny synthetic lawns.
Adult entertainment was also caught in the AG’s crusade, with Swam Media Group, Inc. and Scores Media Group, LLC, agreeing to cease posting fake reviews and to pay a fine.
“The manager of this licensee of the Scores gentlemen’s club franchise orchestrated an astroturfing campaign with the help of a freelance writer that resulted in 175 fake reviews of entertainers at the Scores adult club in New York City and an affiliated website, ScoresLive.com, most of which were posted online,” the AG’s report stated.
As for the scope of the problem and the potential profits to be made, the AG cites studies concluding that online reviews can make or break companies. For example, one survey shows that 90 percent of consumers say online reviews influence their buying decisions, while a Harvard Business School study estimates that a one-star rating increase on Yelp translates to an increase of five to nine percent in restaurant revenues, while Cornell has found that a one-star swing in a hotel’ online ratings at sites including Travelocity and TripAdvisor, equates to an 11 percent average sway in room rates. Set this against the backdrop of a Gartner projection that by 2014, between 10 and 15 percent of social media reviews will be fake
The legal clampdown on advertising practices is just the latest hurdle to face the online marketing world, but a troubling aspect of this action is that it wasn’t taken by the FTC, but by a state level jurisdiction — complicating the landscape for operators everywhere.
“Consumers rely on reviews from their peers to make daily purchasing decisions on anything from food and clothing to recreation and sightseeing,” Schneiderman stated. “This investigation into large-scale, intentional deceit across the Internet tells us that we should approach online reviews with caution. And companies that continue to engage in these practices should take note: ‘Astroturfing’ is the 21st century’s version of false advertising, and prosecutors have many tools at their disposal to put an end to it.”
It is a crusade that is garnering support from the online review industry, with Yelp being a vocal advocate on behalf of 100 million monthly visitors who trust the site’s integrity.
“We take many steps … including the use of automated filtering software, leveraging our vast user community for tips about suspicious content, undercover sting operations, legal action, and cooperation with law enforcement,” Yelp’s Senior Litigation Counsel, Aaron Schur, stated, applauding Schneiderman for his willingness to tackle the issue of illegal fake reviews. “We look forward to continuing to cooperate with the New York Attorney General’s office and any other interested law enforcement office or regulator to protect consumers and business owners from efforts to mislead.”
Schur’s statement is a clear indication that New York’s action is not the last that we have heard about a clampdown on fake reviews — and with adult entertainment already in the crosshairs, the industry has received a fair warning that if you want to post claims about your performers or sites, they had better be from real people, be genuine and unsolicited.
