The Truth is in the Stars: The FTC Cracks Down on Suppression of Negative Online Reviews

February 16, 2022

When purchasing products online, it is common for consumers to read product reviews. These reviews often include a type of rating system designed by the company’s website. For example, Amazon products are displayed with a rating between one and five stars—five indicating positive reception by consumers. The higher the review score, the more credible the product appears, and the more likely consumers are to purchase it. However, negative scores can deter customers by revealing low-quality products, poor customer service, and other issues. Importantly, as Jameela Ghann points out in her blog article on Fera AI, product reviews work as a tool to increase consumers’ “trust and loyalty” to a particular brand.  However, what is a company supposed to do when it receives bad reviews for a product? Following Ghann’s advice, the company should evaluate its shortcomings and work to improve them. Unfortunately, this guidance is not always embraced.

Recently, the Federal Trade Commission (FTC) sent a message regarding the display of negative reviews on company websites. The FTC made it clear that negative reviews cannot be hidden merely because of their critical nature.

Recently, the Federal Trade Commission (FTC) sent a message regarding the display of negative reviews on company websites. The FTC made it clear that negative reviews cannot be hidden merely because of their critical nature.

What prompted this issue of first impression for the FTC? The FTC filed a complaint in which it alleged that “in numerous instances” between 2015 and 2019 Fashion Nova—a fast-fashion brand with over 20 million Instagram followers and whose clothes is frequently worn by celebrities—“suppressed product reviews with ratings lower than four stars.” Based on the complaint, “numerous instances” translates to the company’s failure to “approve or publish hundreds of thousands lower-starred, more negative reviews.”

So, why is the FTC involved? One of the FTC’s goals is to “[p]rotect consumers from unfair and deceptive practices in the marketplace.” This language has been used by the agency to tackle issues like companies directing employees to post fake product reviews, false advertising, and identity theft.  Likewise, when it comes to online reviews and particularly, whether consumers are getting the full picture of what other purchasers are saying, the FTC is “committed to ensuring that consumers and honest businesses are not cheated by dishonest review practices.”

Although Fashion Nova agreed to pay $4.2 million to settle with the FTC, the takeaway from this situation is that this is the first time the FTC has denounced this type of “review suppression” and online stores must be even more careful with their consumer review methods. While Fashion Nova may be the face of the issue, it is not alone. The FTC also stated that ten other companies would be notified that concealing or “avoiding” negative reviews constitutes an unfair or deceptive practice that is a violation of the FTC Act. How will the FTC be able to monitor online review practices going forward? Interestingly, three Congressmen recently introduced a bill that would address AI automated decision-making—the Algorithmic Accountability Act of 2022. While the focus of the bill is to target “racial and gender bias in AI tools and automated systems,” the e-commerce market also employs AI technology. Even here, Fashion Nova made use of a “third-party online product review management interface” which was programmed to “autopublish” four and five star ratings, but to reserve lower ratings for later approval. The company argued that reliance on this interface was the reason for the unpublished negative reviews and that those reviews were released in 2019 when the company learned of the situation.

Under the proposed bill, companies would be required to “perform an audit of their AI systems.” The results of the audit would go directly to the FTC who would then “create a public database where consumers can review critical decisions that have been automated by companies.”  Based on this system, if a company’s practice is to withhold negative or lower-rating reviews, the public database would allow consumers to know that such a practice is ongoing. The publicity of the algorithm could deter online companies from using practices that make consumers uneasy about the reliability of product reviews. However, this 2022 AI auditing proposal is relatively fresh and has not been voted on. It is unclear whether e-commerce companies like Fashion Nova would be subject to the same auditing system as, for example, a financial services business because the bill appears to focus on “finance, healthcare, housing, education and more.” Nonetheless, it is clear that both lawmakers and the FTC are continuing to encourage and demand transparency for consumers when it comes to online services. For now, online companies should evaluate their customer review processes to ensure they align with the goals of the FTC and let the honest ratings speak for themselves. 

Claudia Perez

Claudia is currently a 2L in law school and attended the University of Miami for college where she majored in Biology. With a background in science, she gravitates toward in intellectual property issues in the law. She enjoys dancing and trying new recipes. See Claudia’s previous blog post here.