US FTC Sues Online Retailer for Concealing Negative Reviews

The upshot, for busy people:

• The US Federal Trade Commission (FTC) sued a retailer for concealing negative consumer reviews. This was the FTC’s first case enforcing the law using this theory.
• To avoid problems, don’t hide bad reviews; don’t pay people only to give good reviews; review carefully what you tell consumers about your consumer reviews; and scrutinize the practices of any third parties you partner with to help manage your consumer reviews.

What happened? On January 25, 2022, the FTC announced a lawsuit and settlement with a “fast fashion” retailer, Fashion Nova, alleging that the company deceived consumers by concealing negative reviews from its website—the agency’s first use of this theory. The FTC’s complaint (filed in its administrative process) alleged that the company used a third-party review management service to filter complaints so that consumers only saw 4- or 5-star reviews; consumers could not see reviews of 3-stars or worse. The FTC believed this practice was deceptive because Fashion Nova represented by implication—there were no allegations of express representations—that “the product reviews on the Fashion Nova website accurately reflect the views of all purchasers who submitted reviews.” To settle the case, Fashion Nova agreed to pay the FTC $4.2 million.

The FTC hasn’t said what authority it relied on to get that monetary payment. Last year, the Supreme Court held that the FTC could not get monetary relief for first-time violations of Section 5 of the FTC Act—the only violation alleged here.

What does this mean for my business? The FTC is laser-focused on deceptive practices related to customer reviews and endorsements. The agency says it sent warning letters to 10 companies that offer review management services. And this case builds on the FTC’s Notice of Penalty Offense sent to more than 700 companies alerting them to possible civil penalties for deceptive endorsement practices.

So if you are a retailer, marketer, platform, or any other type of business that works with consumer reviews, be careful to avoid any actions that the FTC, a state attorney general, or others might consider manipulation. That means don’t hide bad reviews; don’t pay people only to give good reviews; and review carefully what you tell consumers about your consumer reviews. If your business works with third parties to manage consumer reviews, scrutinize their practices carefully because your company could be on the hook for third-party conduct.

To help companies comply, the FTC provided guidance for marketers and for platforms.