Fake Amazon reviews draw fraud charges in groundbreaking FTC case

The US Federal Trade Commission has successfully brought the first ever case against using fraudulent, paid Amazon reviews to falsely advertise an online product, the agency announced Tuesday evening. The company in question, named Cure Encapsulations, Inc. and owned by Naftula Jacobowitz, paid a third-party website to write five-star Amazon reviews for a weight-loss supplement called garcinia cambogia. The plant, native to Indonesia, is widely mischaracterized as contributing to weight loss, but is in fact known to cause acute liver failure.

Cure Encapsulations paid a website called amazonverifiedreviews.com to keep the product’s Amazon rating above 4.3 out of 5 stars, with reviews stating that the supplement worked as a “powerful appetite suppressant” and “literally blocks fat from forming.” The FTC found those claims to be false and unsubstantiated.

“People rely on reviews when they’re shopping online,” Andrew Smith, the FTC’s director of consumer protection, said in a statement. “When a company buys fake reviews to inflate its Amazon ratings, it hurts both shoppers and companies that play by the rules.” The FTC first filed its complaint on February 19th, and reached a settlement in just under a week.

As part of the settlement, Cure Encapsulations has agreed to never again make a “weight-loss, appetite-suppression, fat-blocking, or disease-treatment claims for any dietary supplement, food, or drug” unless the company has “competent and reliable scientific evidence in the form of human clinical testing” to support its claims. The settlement also prohibits the company from misrepresenting endorsements, including whether a review or testimonial is from a real customer who purchased the product.

Cure Encapsulations must now inform Amazon that it paid for reviews, itself a violation of Amazon’s rules around promotional content, and must also notify all customers who purchased the weight-loss supplement. To keep the company in line, the FTC is imposing a $12.8 million fine, with only $50,000 due today and the remainder used as a way to enforce the judgement and in the event Cure Encapsulations misrepresents how much money it has on hand.

Amazon, in a statement given to The Verge, said its pleased the FTC is taking action. “We welcome the FTC’s work in this area. 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,” a company spokesperson said. “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 Amazon reviews have been known as a problem for years, but regulators have shown little interest in cracking down on the practice until this recent suit. That’s pushed Amazon to go after the review sellers themselves, including filing individual lawsuits against sellers on freelance job sites like Fiverr. Yet the FTC’s latest action sets a firm precedent that the agency is willing to go after companies that abuse online markets and platforms like this. It’s not clear whether the agency has the resources to curb the behavior behind some of the biggest bad actors on sites like Amazon, but the settlement sends a message that companies like this can’t rely on the trusted veneer of these marketplaces to excuse false advertising.

The FTC has shown a growing interest in abusive practices in the tech industry in recent months, far beyond the low-level scams of fake Amazon reviewers. Earlier today, the FTC announced it would be forming a task force with 17 staff attorneys to monitor and take action against anti-competitive behavior in US technology markets. The task force appears focused on the increasingly centralized power of a few Silicon Valley giants like Google and Facebook.

Correction: A previous version of this article said Amazon has done little to prevent fake reviews from proliferating on its website. That is not true; Amazon has filed numerous lawsuits against review-selling sites and individual sellers on freelance job sites.

https://www.theverge.com/2019/2/26/18242303/ftc-fake-amazon-reviews-lawsuit-false-advertising