Posternak Blankstein & Lund LLP is now Arent Fox. Read the press release

FTC Takes Hard Line On Fake Paid Reviews

New York-based company Cure Encapsulations, Inc. and its owner Naftula Jacobowitz, settled Federal Trade Commission charges that the company paid a third-party website to write and post fake reviews for a weight-loss supplement on an independent retail website and made false and unsubstantiated claims in those fake reviews.

What Happened?

Cure Encapsulations advertised and sold “Quality Encapsulations Garcinia Cambogia Extract with HCA” capsules as an appetite-suppressing and carb- and fat-blocking weight-loss supplement through an independent retail website. The website allows consumers who have purchased products to leave reviews and provide a one- to five-star rating for the product. Cure Encapsulations paid a third-party website to post a series of positive, five-star reviews in order to boost the supplement’s rating and maintain a high rating. The company misleadingly represented that these reviews, which make unsubstantiated claims, including that the supplements were a “powerful appetite suppressant” and cause weight loss of up to 20 pounds, were posted by consumers who had actually purchased and used the product. In its first case against fake paid review, the FTC charged Cure Encapsulations with unfair and deceptive business practices as well as false and misleading advertising.

Consumers rely heavily on reviews from other consumers when they shop online. A significant number of positive reviews can have the effect of convincing a consumer who is on the fence about a product to make a purchase. As the FTC’s Director of Consumer Protection stated, “it hurts both shoppers and companies that play by the rules” when a company uses fake reviews to attract customers.

Under the proposed order settling the FTC’s complaint, Cure Encapsulations is prohibited from making misrepresentations that an endorsement is truthful or made by an bonafide consumer, and from making any health benefit or efficacy claims for any dietary supplement, food, or drug unless such claims are supported by competent and reliable scientific evidence. The company is also required to notify consumers who bought the supplements about the FTC’s allegations and attaching a National Institute of Health fact sheet that explains how Garcinia Combogia has “little to no effect on weight loss.” To top it all off, the order imposes a $12.8 million judgment, with $50,000 due now and the remainder as a means to enforce the order and in the event Cure Encapsulations misrepresented its financial condition to the FTC.

Practical Tips

This action sets a strong precedent that the FTC is willing to target companies that abuse online markets in this way. To avoid a situation such as this, we recommend abiding by the following rules:

  • When using endorsements, remember that all endorsements must reflect the honest opinion of the person making the endorsement, and all material connections between the endorser and the advertiser must be clearly disclosed;
  • An endorsement cannot make representations that would be deceptive if made directly by the advertiser. Advertisers are liable for unsubstantiated claims made in endorsements;
  • All advertising claims must be appropriately substantiated. Health-related claims must be supported by competent and reliable scientific testing, such as clinical trials; and
  • Do not rely on a trusted platform to mask false advertising!

Contacts

Continue Reading