The U.S. Federal Trade Commission is finally tackling the scourge of fake reviews on online marketplaces like Amazon, bringing its first successful case against a company that it said paid to artificially boost its product’s ratings.
The agency filed a complaint on Feb. 19 alleging that the company, Cure Encapsulations, Inc., and its owner, Naftula Jacobowitz, paid a website called Amazonverifiedreviews.com to post glowing critiques of a weight loss supplement called garcinia cambogia. In addition to maintaining a rating of at least 4.3 out of 5 stars, the reviews asserted that the product was a “powerful appetite suppressant” that “literally blocks fat from forming” — claims that the FTC found to be false and unsubstantiated.
As part of the terms of the settlement, announced Tuesday, the company must notify Amazon that it paid for fake reviews, violating the e-commerce giant’s terms of service, and must contact anyone who purchased the supplements to disclose the FTC’s findings.
Cure Encapsulations and its owner are also now barred from making “weight loss, appetite suppression, fat-blocking or disease treatment claims for any dietary supplement, food or drug unless they have competent and reliable scientific evidence in the form of human clinical testing supporting the claims.” If the company does continue marketing products, it is prohibited from misrepresenting endorsements. Finally, the agency levied a $12.8 million judgment against the company, of which it will have to pay $50,000, with the remainder due if it is found to have misrepresented its financial situation.
“People rely on reviews when they’re shopping online,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “When a company buys fake reviews to inflate its Amazon ratings, it hurts both shoppers and companies that play by the rules.”
Amazon’s fake-review problem has been widely known for years: The company banned incentivized reviews in October 2016 and has since shut down accounts suspected of abusing the system and even sued websites and individuals for selling fraudulent reviews online. Still, the issue has persisted, according to review audit sites like ReviewMeta and FakeSpot.
“We welcome the FTC’s work in this area,” an Amazon spokesperson said in a statement. “Amazon invests significant resources to protect the integrity of reviews in our store because we know customers value the insights and experiences shared by fellow shoppers. Even one inauthentic review is one too many. We have clear participation guidelines for both reviewers and selling partners and we suspend, ban and take legal action on those who violate our policies.”
Fake reviews are particularly rampant in high-margin categories like Bluetooth speakers and headphones, per the sites, but certain styles of shoes and accessories are targets, too. These categories will likely become even more competitive as an increasing number of shoppers turn to Amazon for fashion purchases.
Last year, a survey of several of the top Facebook groups showed that footwear had become a popular category for sellers looking to trade free or heavily discounted product for glowing reviews. For example, posts for knitted sneakers, LED kids’ shoes and platform stilettos have racked up dozens of comments from interested users, while many such items ultimately earned failing grades on more legitimate review websites.
Until now, federal regulators haven’t intervened to prevent the proliferation of fraudulent reviews, which can be used to promote dangerous products (the offending weight loss supplement has been associated with acute liver failure), counterfeits or poor-quality merchandise, but the FTC’s latest case should put unscrupulous sellers on watch.
Over the years, Amazon has had a strenuous relationship with some shoe brands, most notably Birkenstock, over alleged knockoffs on its platform. It made headlines in 2017 when Nike announced a trial partnership with the e-tail behemoth — a deal market watchers deemed an “if you can’t beat ’em, join ’em” move on Nike’s part, after it too struggled to rein in unauthorized sales of its wares.
Just this month, Amazon admitted to its challenges with controlling the proliferation of counterfeit goods on its site. While the firm isn’t legally responsible for third-party counterfeits, it has said that it has zero-tolerance policy on fake items.
Only time will tell whether the FTC’s involvement marks a significant step toward Amazon building and maintaining a higher level of trust for both shoppers and sellers on the site.
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