New York Attorney General Eric Schneiderman sent out a strong warning to companies that use fraudulent online reviews and endorsements as a marketing tactic by fining a pair of local companies – as well as two from California – for their “astroturfing” practices, in other words, secretly paying for good reviews.
The two New York business are Rani Spa, which offers spa and related services such as skin care and hair treatments at locations in New York and Long Island, and Premier Retail Group, a chain of cosmetic and beauty supply stores with locations through the state. The California businesses are Here2Four, which operates under the business name of ESIOH Internet Marketing, and offers search engine optimization, social media market and other digital services and Machinima, an online entertainment network that distributes content in video form about video games and the gaming culture on its YouTube channel and through other social media avenues.
The four companies were issued fines that ranged from $15,000 to $50,000, according to settlements with each of the businesses announced earlier this month by Schneiderman’s office. In the case of Machinima, the company had similar allegations brought against it by the FTC that resulted in a settlement in 2015.
“Consumers rely on reviews and other endorsements on the Internet to inform themselves in making purchasing decision,” Schneiderman said in a press release issued Feb. 11 by his office. “This investigation continues my office’s historical work into ‘astroturfing’ over the Internet and signals to companies that consumers deserve honesty and transparency in their review, endorsements and related content.” Astroturfing is the practice of concealing the identity of the sponsors of a message for the purpose of greater credibility. Studies have shown that online reviews about companies and products can positively impact public image and sales.
The laws enforcement by the New York Attorney General’s Office include the state’s Executive Law, Sec. 63 (12) and General Business Law, Sections 349 and 350. These laws make it illegal to rely on deceptive acts or practices in the conduct of any business. Also, the Federal Trade Commission’s Guide Concerning the Use of Endorsements and Testimonials in Advertising says that failing to disclose the true relationship or connection between an endorser and the sponsoring advertising company is a deceptive practice.
In the case of Premier, the investigation by Schneiderman’s office found that the company solicited reviewers through a Craigslist ad and paid for more than 30 fraudulent reviews of stores in the state. Some individual reviewers were paid as much as $250 and were given instructions that explained precisely how to write the review. A total of $30,000 of the company’s $50,000 fine was suspended, as long as Premier abides by the details of the settlement.
Rani Spa relied on an offer by a Canadian businessman to post fraudulent positive reviews on Yelp.com. He would post only a single review per day to avoid being discovered by Yelp’s spam filter. Considering the company’s financial condition, $48,000 of the $50,000 was suspended – as long as Rani Spa does not post any more fake reviews and follows other conditions included in the settlement.
The investigation into Machinima took more than two years and determined that the company paid several gaming experts, known as influencers, thousands of dollars to post positive reviews of the Microsoft Xbox One and several video games for the system. Two endorsers received $15,000 and $30,000 for their endorsement videos, which received a total of nearly 1 million views online. As with the reviews for Premier and Rani Spa, the videos paid for by Machinima did not disclose the relationship between the people producing the fraudulent endorsements and the company. Because of the size of Machinima, none of the company’s $50,000 fine was suspended.
ESIOH Internet Marketing hired more than 50 freelance writers, through online ads, to produce at least 200 fake reviews praising its small-business clients. The reviewers were given the information ESIOH wanted in the reviews, along with the instructions to create a positive review. The company paid $10 to $15 for each 50- to 100-word review. None of the $15,000 against ESIOH was suspended.