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Retailer Rebuked by FTC for Posting Fake Online Reviews

But two commissioners say the agency is going too easy on the firm.

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Retailers of all types want a flattering online presence, but a new Federal Trade Commission case serves as a warning: Fake reviews don’t pay.

The FTC has halted what it calls the “deceptive online marketing tactics” of a company that allegedly used fake product reviews posted by its employees on a well-known retail website.

Cosmetics firm Sunday Riley Modern Skincare LLC and its CEO, Sunday Riley, have agreed to settle an FTC complaint, according to a press release from the agency. They were alleged to have posted fake reviews to Sephora.

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“Dishonesty in the online marketplace harms shoppers, as well as firms that play fair and square,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “… It undermines the marketplace, and the FTC will not tolerate it.”

Wired.com noted, however, that the settlement “did not require the company to admit fault, notify customers of the fraud, or turn over any ill-gotten gains.”

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As such, Commissioner Rohit Chopra, who along with Commissioner Rebecca Slaughter dissented from the FTC decision, stated: “Dishonest firms may come to conclude that posting fake reviews is a viable strategy, given the proposed outcome here. Honest firms, who are the biggest victims of this fraud, may be wondering if they are losing out by following the law. Consumers may come to lack confidence that reviews are truthful.”

As detailed in the FTC’s complaint, Texas-based Sunday Riley Skincare sells a variety of cosmetic products, including Luna Sleeping Night Oil, Good Genes All-In-One Lactic Acid Treatment, Blue Moon Tranquility Cleansing Balm, Start Over Active Eye Gel Cream, Bionic Anti-Aging Cream and C.E.O. Rapid Flash Brightening Serum. The company sells its cosmetics at Sephora, a multinational chain of personal care and beauty stores, and on the Sephora.com website. The products sell for between $22 and $158 each, according to the FTC.

Sephora allows consumers to leave customer reviews of products sold on its website, providing a forum for sharing authentic feedback about the products it sells, the FTC explained. In its complaint, the agency alleged that between November 2015 and August 2017, Sunday Riley Skincare managers, including Riley herself, posted reviews of their branded products on the Sephora site using fake accounts created to hide their identity, and requested that other Sunday Riley Skincare employees do the same thing.

The FTC alleged that after Sephora removed fake employee-written reviews, Sunday Riley Skincare employees suspected this was because Sephora recognized the reviews as coming from their IP addresses. Sunday Riley Skincare then allegedly obtained, according to one of the company’s managers, “an Express VPN account [to] … allow us to hide our IP address and location when we write reviews.” A VPN (virtual private network) lets users access the internet privately using separate servers to hide their online activity.

The FTC complaint also quoted from a July 2016 email that Riley wrote to her staff directing each of them to “create three accounts on Sephora.com, registered as … different identities.” The email included step-by-step instructions for setting up new personas and using a VPN to hide their identities, and directed employees to focus on certain products, to “[a]lways leave 5 stars” when reviewing Sunday Riley Skincare products, and to “dislike” negative reviews. “If you see a negative review – DISLIKE it,” Riley wrote, adding: “After enough dislikes, it is removed. This directly translates into sales!!”

The FTC’s complaint charged Sunday Riley Skincare and the CEO with two violations of the FTC Act: 1.) making false or misleading claims that the fake reviews reflected the opinions of ordinary users of the products; and 2.) deceptively failing to disclose that the reviews were written by Riley or her employees.

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The proposed administrative order settling the FTC’s allegations against Sunday Riley Skincare and Riley is intended to ensure the respondents do not engage in similar allegedly illegal conduct in the future, according to the release. First, the order “prohibits the respondents, in connection with the sale of any product, from misrepresenting the status of any endorser or person reviewing the product,” according to the agency. This includes misrepresentations that the endorser or reviewer is an independent or ordinary user of the product.

Next, the order “prohibits the respondents from making any representation about any consumer or other product endorser without clearly and conspicuously disclosing any unexpected material connection between the endorser and any respondent or entity affiliated with the product.” Such disclosures must be made in close proximity to the product review or endorsement.

In addition, the order requires the respondents to instruct their employees and agents about their responsibilities to clearly and conspicuously disclose their connections to the respondents’ products in any endorsements.

The Commission vote approving the administrative complaint and proposed consent order in the Sunday Riley matter was 3-2, with Chopra and Slaughter voting no.

The public may submit comments on the proposed consent order through Regulations.gov. The comment period opened on Oct. 25. Comments will be accepted for 30 days from publication in the Federal Register, after which the agency will decide whether to make the proposed consent order final. Comments received will be posted on Regulations.gov.

Over the years, INSTORE has won 80 international journalism awards for its publication and website. Contact INSTORE's editors at [email protected].

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