Online reviews have the power to both boost sales, and cause them to plummet. They are routinely used by consumers for gaining a snapshot of a business’s reputation. But sometimes, the image they portray is not entirely accurate.
The Australian Competition and Consumer Commission (ACCC) receives around 10,000 complaints about fake reviews every year. Most from competing businesses.
The motivations for creating fake reviews is clear – financial gain through increased sales.
The risk of using forged testimonials however, is often not considered – significant financial loss through legal penalties.
The ACCC often commences legal proceedings against companies they believe are distorting their online reputation through dodgy testimonials. And the penalties can be severe…
The letter of the law
Creating fake reviews is prohibited under Australian Consumer Law (ACL). More specifically, the behaviour is captured by section 18, which states that:
‘a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’.
Forging reviews is considered to be an action likely to mislead or deceive a consumer. This is due to the reliance customers place on reviews for deciding where to purchase their goods or services from.
Crucially, the fake testimonials do not actually have to mislead or deceive anybody, they only need to have the potential to mislead or deceive.
Also, the testimonials do not need to be completely fake to be caught under this legislation. Businesses that edit their online reviews may also be considered to have engaged in falsifying testimonials.
For posting fake reviews, the Court can order a wide range of remedies, including injunctions, penalties, corrective notices, compliance programmes, and declarations.
The ACCC have been repeatedly successful in making businesses accountable for this type of behaviour, and show no sign of letting up.
In December 2015, the ACCC was successful in the Federal Court against A Whistle (1979) Pty Ltd, the franchisor trading as Electrodry Carpet Cleaning, for posting false testimonials online. The company was ordered to pay $215,000 in penalties.
The reviews in question appeared on a number of third party sites including Google, Yelp, Word of Mouth and True Local. The ACCC argued that the testimonials were provided by contractors or people associated with Electrodry, and not by genuine customers.
ElectroDry were found to have directed their agents or contractors to post false testimonials online, and induced franchisees to post such testimonials through cash incentives – including $1,000 payments.
The Federal Court ordered Electrodry to pay a whopping $215,000 fine, as well as imposing injunctions, demanding they place corrective advertising, and charging the company with some of ACCC’s legal costs.
Earlier in 2015, a removalist company called CityMove was fined $30,600 for posting a mere three fake reviews – one on YouTube and two on Google+.
While this penalty may seem exorbitant, the company had actually already been fined for engaging in such behaviour. In 2011, CityMove was caught posting fake reviews on a website of their own creation – movingreview.com.au.
The business had copied reviews from another review website (ensuring the language seemed genuine) and pasted them on their own. That breach cost them $6,600.
The steep price rise in the 2015 proceedings provides a clear indication for businesses, of just how serious the Federal Court considers such breaches of the ACL. The $30,600 fine was a warning to every other business considering creating fake testimonials, a warning that it is not worth it.
The ACCC is currently pursuing a tasking platform, called ServiceSeeking, which allows consumers to find and hire tradies.
The ServiceSeeking ‘Fast Feedback’ system allowed tradespeople to write their own reviews, after finishing a job. The draft would then be sent to the consumer, who had three days to respond. If the consumer did not modify the review in the three days allocated, it was automatically uploaded.
This system effectively allowed people to create their own testimonials, prompting the ACCC to file legal proceeding in December of last year.
The case is currently before the Federal Court and could potentially result in a record breaking penalty, as around 16,000 reviews were found to have been automatically uploaded.
We’ll have to wait and see what the Federal Court makes of the genuineness of ServiceSeeking’s testimonials, but the case certainly demonstrates the importance of considering whether your review system could potentially be misleading, regardless of your good intentions.
The use of online testimonials is constantly increasing, and evidence suggests that the number of false testimonials is rising also.
These actions are a reminder that businesses must be transparent, and avoid misleading conduct when operating online. False testimonials are a clear breach of the Australian Consumer Law.
Online traders should consider themselves warned, the ACCC is serious about pursuing offenders.