Public Relations Firm Settles FTC Charges That It Posted Misleading Online Product Reviews
In the first case of its kind brought since the Federal Trade Commission issued its revised endorsements and testimonials guides last year, the FTC announced in late August that it has agreed to a settlement with a California public relations agency alleged to have posted misleading product reviews on Apple’s iTunes store website. The agency, Reverb Communications, Inc., worked on behalf of video game developers and derived fees from a percentage of the sales of its clients’ gaming applications. The FTC alleged that Reverb posted enthusiastic game reviews at the online iTunes store to boost its clients’ sales. While to the public the reviews appeared to come from ordinary consumers, they actually came from Reverb employees and even from Reverb’s owner. The FTC charged that failing to disclose the posters’ financial connections to the video game sellers and creating the false impression that the reviews came from independent disinterested consumers constituted unfair or deceptive trade practices.
Under the proposed settlement order, without admitting any wrongdoing, Reverb agreed to remove the suspect postings and, in any future endorsements, to disclose any material connections and refrain from expressly or by implication misrepresenting the status of any endorser. The settlement did not call for Reverb to pay any monetary penalties.
In its revised endorsements and testimonials guides issued last year, the FTC indicated that it would scrutinize endorsements in new consumer-generated media such as blogs, where material connections between the advertiser and the speaker, such as the blogger’s receipt of payment or free products, are not assumed by the public. As the Reverb case shows, this focus will also naturally apply to employees of a seller’s public relations agency who endorse those products online without disclosing their connection to the seller.