Wednesday February 27, 2019

FTC Fines Amazon Merchant $12.8 Million for Fake Advertising and Paid Reviews

Yesterday, the U.S. Federal Trade Commission announced what it says is "its first case challenging a marketer's use of fake paid reviews on an independent retail website." The FTC claims that Cure Encapsulations, Inc. paid third party reviewers to write and post fake reviews on Amazon, and that they also made "false and unsubstantiated claims" about the weight loss supplement they were trying to sell. In addition to forcing the Amazon merchant to provide "competent and reliable scientific evidence" to back up the claims about the company's current and future products, the proposed FTC court order "imposes a judgment of $12.8 million, which will be suspended upon payment of $50,000 to the Commission and the payment of certain unpaid income tax obligations. If the defendants are later found to have misrepresented their financial condition to the FTC, the full amount of the judgment will immediately become due." Thanks to KitGuru for the tip.

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"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..." The FTC alleges that the defendants paid a website, amazonverifiedreviews(dot)com, to create and post Amazon reviews of their product. The FTC contends that Jacobowitz told the website's operator that his product needed to have an average rating of 4.3 out of 5 stars in order to have sales and to, "Please make my product … stay a five star." As described in the FTC's complaint, the reviews the defendants bought were posted on and gave the product a five-star rating. The complaint charges the defendants with representing that the purchased Amazon reviews were truthful reviews written by actual purchasers, when in reality they were fabricated.