Fake Reviews, Corporate Gag Orders Eyed by Feds

Consumers have come to rely on online reviews to make decisions about important purchases but can be misled by fake reviews and by companies’ efforts to waylay negative reviews.

The Consumer Financial Protection Bureau (CFPB) wants to put a stop to such deceptive and possibly illegal practices, and today issued a new policy guidance designed to do just that.

“In America, no corporation should be able to silence a customer from posting an honest review online,” said CFPB Director Rohit Chopra. “Corporate disinformation campaigns that suppress legitimate reviews or manufacture fake reviews are not only a threat to free speech and fair competition, they are also illegal.”

The CFPB’s guidance describes certain business practices related to customer reviews that are generally unlawful under the Consumer Financial Protection Act, including:

• Contractual ‘Gag’ Clauses: Attempting to silence consumers from posting an online review can undermine fair competition. Banks and financial companies that include clauses in form contracts that forbid a consumer from posting an honest review may be engaged in unfair or deceptive practices.
• Fake Reviews: Markets can be harmed if consumers cannot trust that online reviews are legitimate. Laundering fake reviews in ways that appear completely independent from the company to improve their ratings may constitute a deceptive practice.
• Review Suppression or Manipulation: Consumers cannot easily shop and compare products and services when firms engage in practices to limit the posting of negative reviews or manipulate reviews to trick or confuse consumers. The guidance explains why these practices may be unlawful.

Today’s effort is related to the Federal Trade Commission’s efforts to deter fake reviews and related fraud across the digital economy. The FTC recently voted to put hundreds of businesses on notice about fake reviews and misleading endorsements, which may result in significant penalties against marketers that engage in misconduct.

Banks and financial companies should ensure that their customer review practices comply with all applicable laws, including the Consumer Financial Protection Act, the CFPB said. Violations are subject to civil penalties and other legal consequences.

Read today’s bulletin, Unfair and Deceptive Acts or Practices That Impede Consumer Reviews .