As consumers rely more and more on the “independent” reviews of their peers in choosing products and services, advertisers need to remain vigilant that their role (if any) in disseminating such reviews is fairly disclosed, accurate and not misleading.  The pitfalls in this area were recently illustrated by a pair of enforcement actions brought by the Federal Trade Commission and the National Advertising Division of the Better Business Bureau.  These actions, the latest in a series of similar enforcement efforts, confirm that review sites remain a hotbed of enforcement activity, and both actions serve as good reminders of the standards that review sites must observe to avoid similar actions.

The first of these actions is an FTC enforcement against LendEDU, which centered around the “objective,” “honest,” “accurate,” and “unbiased” rankings of financial products that LendEDU posted to its review site.  The FTC alleged that, far from being objective and honest, these rankings were in fact determined based on compensation from the companies being ranked.  In addition, the FTC alleged that over ninety percent of LendEDU’s “unbiased” positive reviews were in fact written by LendEDU employees and their friends and families.

The FTC and LendEDU finalized a settlement in this case on May 28.  In addition to a $350,000 payment, this settlement prohibits LendEDU from misrepresenting the objectivity of its ratings.  LendEDU must further disclose any facts that may influence its rankings, including any compensation or other connections with the companies that it ranks.  The settlement also imposes a number of standard compliance reporting and record-keeping obligations on the company.

This case is the latest in a long series of FTC enforcements involving fake or misleading customer reviews.  The FTC brought an assortment of high-profile actions regarding such reviews in 2019 against businesses offering products ranging from subscription snack boxes to skincare products.  Review-related issues continue in 2020, as evidenced not only by this case but by additional enforcement actions against businesses selling supplements and pain-relief products.

NAD has also been active in this area:  just a few days after the FTC finalized its LendEDU settlement, NAD concluded an inquiry into three of L’Oreal’s review sites.  On June 3, NAD announced that L’Oreal had agreed to make changes to its Makeup.com, Skincare.com, and Hair.com websites to make clear that the content on these sites was written by or for L’Oreal.  All three of these sites feature a variety of articles on improving the health and aesthetics of readers’ hair and skin.  As part of its routine monitoring program, NAD noted that, although the sites made references to L’Oreal, they lacked any readily noticeable disclaimers informing consumers that the content on these sites was created at the direction of L’Oreal.  According to NAD, consumers could be deceived if they believed the sites conveyed only independent content when in actuality they were paid advertisements.

L’Oreal responded immediately to the inquiry, explaining that its more noticeable logos and disclaimers had been inadvertently moved during a website redesign.  L’Oreal promptly modified its sites to make clear that their content is written by or for the company, and NAD concluded the inquiry without further action or recommendations.

As the LendEDU case illustrates, businesses must take care not to mislead customers into thinking that rankings or reviews are independent or objective when they are in fact subject to other influences.  The FTC’s Endorsement Guides require businesses to disclose any “material connections” between a reviewer and a product or company.  As such, if reviews are influenced by money, relationships, or some other connection that readers would not expect, this fact should be disclosed.  The L’Oreal case also provides a reminder that in addition to the Endorsement Guides, advertisers need to be familiar with the Commission’s December 2015 Enforcement Policy Statement on Deceptively Formatted Advertisements and the dot.com disclosure guidelines.

In addition, the L’Oreal case provides a few reminders about when disclosures are necessary and what form they must take.  Even beyond reviews, businesses must inform consumers when content that they would assume is independent, such as articles or editorials, actually is written by or for a company.  And just posting a small disclaimer may not be enough; these notices must be clear and conspicuous to avoid scrutiny by the FTC and NAD.

Tags: Endorsements, Federal Trade Commission
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Photo of John Graubert John Graubert

John Graubert has more than 40 years of experience in a wide range of complex antitrust and consumer law matters. He has handled investigations and litigation in industries including pharmaceuticals, manufacturing, food and dietary supplements, fintech, online commerce, and a variety of other…

John Graubert has more than 40 years of experience in a wide range of complex antitrust and consumer law matters. He has handled investigations and litigation in industries including pharmaceuticals, manufacturing, food and dietary supplements, fintech, online commerce, and a variety of other consumer products and services. His antitrust work has addressed monopolization and exclusionary conduct, agreements, distribution issues, the Robinson-Patman Act and mergers, among other issues. In consumer protection cases, he has defended companies accused of deceptive or unfair conduct under the FTC Act, ROSCA, Made in USA rules, endorsement and testimonial guides and guides for environmental marketing, and in actions brought by State Attorneys General.

From 1998 to 2008, John served as Deputy General Counsel and Principal Deputy General Counsel (including several stints as Acting General Counsel) at the Federal Trade Commission. In that position, John managed all litigation, legal counsel, policy studies, and administrative functions within the Office of General Counsel. He also advised the Commission and agency staff on antitrust and consumer protection matters and administrative law. He was involved in dozens of litigated matters for the Commission, including FTC v. Swedish Match, et al. (D.D.C. 2000) and FTC v. Schering-Plough, et al. (11th Cir. 2005), and received the A. Leon Higginbotham Award and the Award for Distinguished Service.

John is the former co-chair of the firm’s Advertising and Consumer Protection Practice Group and an Adjunct Professor at the Georgetown University Law Center, most recently teaching Global Competition Law and Policy.

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Photo of Laura Kim Laura Kim

Laura Kim has a proven track record of successfully resolving clients’ most important consumer protection matters before the FTC, State AGs, and the NAD. She is well-known for her insider knowledge of the FTC as well as her practical approach to accomplishing her…

Laura Kim has a proven track record of successfully resolving clients’ most important consumer protection matters before the FTC, State AGs, and the NAD. She is well-known for her insider knowledge of the FTC as well as her practical approach to accomplishing her clients’ objectives.

As chair of Covington’s Advertising & Consumer Protection Investigations practice group, Laura represents corporate and individual clients in investigations before the FTC and State Attorneys General. She also provides pragmatic compliance advice on a wide range of consumer protection issues, including substantiating claims involving generative artificial intelligence, environmental benefits, and “Made in USA.” She counsels brands on emerging issues involving influencers, consumer reviews, AI-generated content, and subscription autorenewals. Laura regularly represents both challengers and advertisers before the NAD, achieving favorable outcomes in matters involving artificial intelligence, influencers, and claim substantiation.

During her twelve-year tenure at the FTC, Laura served as Assistant Director in two divisions of the Bureau of Consumer Protection, Attorney Advisor to Chairman William E. Kovacic, and Chief of Staff to Bureau Director Jessica Rich. She oversaw major rulemakings—including the Green Guides and the Telemarketing Sales Rule—and supervised dozens of investigations and enforcement actions. As Assistant Director in the Division of Enforcement, Laura also supervised compliance monitoring and enforcement proceedings for companies under federal court or Commission order.

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Photo of Ryan Miller Ryan Miller

Ryan Miller is an associate in the Washington, DC office. His practice focuses on both trademark matters, with an emphasis on counseling and litigation, and regulatory matters related to consumer protection.

Ryan helps technology and consumer brands to navigate the increasingly complex regulatory…

Ryan Miller is an associate in the Washington, DC office. His practice focuses on both trademark matters, with an emphasis on counseling and litigation, and regulatory matters related to consumer protection.

Ryan helps technology and consumer brands to navigate the increasingly complex regulatory landscape pertaining to trademark, advertising, and consumer protection issues. He provides counseling and compliance advice on a variety of advertising matters, working with clients to minimize regulatory and litigation risks while advancing their business and marketing goals.

Ryan has an active and diverse pro bono practice consisting of both litigation and regulatory matters.

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