Show the Good With the Bad (and the Ugly): FTC Takes Aim at Third-Party Review Suppression

For the first time, the Federal Trade Commission (FTC) has taken aim at a company's failure to publish negative customer reviews on its website, claiming such a practice is deceptive and violates the FTC Act.¹

On January 25, 2022, the FTC announced it had sued and reached a settlement with fast-fashion retailer Fashion Nova, LLC. Like many online retailers, Fashion Nova's website features customer reviews for its products on a five-star scale. Each product page on Fashion Nova's website displays the product's average star rating and a summary graph of the number of reviews with each star rating, followed by the individual consumers' ratings and reviews.

According to the FTC's complaint, Fashion Nova used a review management service to automatically post four and five-star reviews but withhold thousands of lower-starred reviews. Consequently, the FTC claimed that Fashion Nova had represented "directly or indirectly, expressly or by implication, that the product reviews on [its] website accurately reflect the views of all purchasers who submitted reviews" when that was, in fact, not the case.

The FTC stated it had reached a tentative consent agreement with Fashion Nova (to be finalized after a public comment period) in which the online retailer had agreed to pay $4.2 million to settle the allegations and display "all reviews" posted by customers on its website, except those reviews that are: (1) unrelated to Fashion Nova's products or Fashion Nova's customer service, delivery, returns, or exchanges; and (2) unlawful, profane, obscene, vulgar, or sexually explicit, or content that is inappropriate with respect to race, gender, sexuality, and ethnicity, so long as the criteria for withholding such reviews is applied uniformly across all reviews.

Simultaneously with the announcement of the action against Fashion Nova, the FTC released informal guidance to marketers and platforms with respect to the collection, moderation, and publication of reviews. With respect to moderation, the FTC reminded platforms not to "edit reviews to alter the message" and to "[t]reat positive and negative reviews equally" (i.e., do not subject negative reviews to greater scrutiny). In terms of the publication of reviews, the FTC stated it "favor[s] transparency" and issued five principles to guide platforms:

• 1. Publish all genuine reviews and don't exclude negative ones.
• 2. Don't display reviews in a misleading way. For example, it could be deceptive to feature the positive ones more prominently.
• 3. If you display reviews when the reviewer has a material connection to the company offering the product or service — for example, when the reviewer has received compensation or a free product in exchange for their review — that relationship should be clearly and conspicuously disclosed.
• 4. Clearly and conspicuously disclose how you collect, process, and display reviews, and how you determine overall ratings, to the extent necessary to avoid misleading consumers.
• 5. Have reasonable procedures to identify fake or suspicious reviews after publication. If a consumer or business tells you a review may be fake, investigate and take appropriate action. That may include taking down suspicious or phony reviews, leaving them up with appropriate labels, issuing an alert about them, and addressing the issue with those responsible for it.²

The FTC's action against Fashion Nova and its informal guidance illustrate that the Commission plans to step up its enforcement of weeding out deceptive practices in the consumer review context. Hosts of consumer reviews should heed the FTC's guidance and ensure that they are treating positive and negative reviews alike.

It remains to be seen whether future retailers or platforms in the crosshairs of the FTC will be able to successfully argue that they are immune from liability under Section 230 of the Communications Decency Act for publishing certain reviews and withholding others. Section 230 provides an immunity to providers of interactive computer services from liability arising from third-party created content, and the service provider's exercise of traditional editorial functions with respect to such content.³

FOOTNOTES

1  While this is the first time the FTC has gone after suppressing negative reviews, the FTC recently addressed the issue of misleading reviews and ratings in another enforcement action. See In Re LendEDU, FTC File No. 182-3180, FTC Docket No. C-4719 (May 21, 2020) (complaint) (alleging LendEDU misled consumers to believe their website provided objective product information when, in fact, LendEDU offered higher rankings and ratings to companies that paid for placement).
2  See Review Publication section in FTC's "Featuring Online Customer Reviews: A Guide for Platforms."
3  See, e.g., Batzel v. Smith, 333 F.3d 1018, 1027 (9th Cir. 2003) (recognizing Section 230 protects service providers from liability for "exercising the usual prerogative of publishers to choose among proffered material"); Levitt v. Yelp! Inc., No. C-10-1321 EMC, 2011 WL 5079526, at *6–9 (N.D. Cal. Oct. 26, 2011), aff'd, 765 F.3d 1123 (9th Cir. 2014) (holding Yelp's alleged conduct of "removing certain reviews and publishing others or changing their order of appearance" immunized by Section 230).