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Working & the Economy

States take key role in fighting fake online reviews

The New York office of the online review site Yelp. Photo by Spencer Platt/Getty Images.

By Elaine S. Povich

Stateline, an initiative of The Pew Charitable Trusts, provides daily reporting and analysis on trends in state policy. Read more at Stateline.org.

With studies showing that at least three-quarters of online shoppers check product and service reviews before they buy, the evaluations have become more important than ever in global commerce. But fake reviews upend the system.

In the United States, state attorneys general and a key federal agency are leading efforts to crack down on false or manipulated reviews that can lead to purchases of shoddy products or services and sometimes leave little recourse for consumers. Still, efforts to address the problem pale in comparison to the number of fake reviews and the economic damage they cause, according to recent studies from the Center for Data Innovation and the World Economic Forum.

About 4% of worldwide online reviews are fake, according to the World Economic Forum. That may not sound like much, but the organization estimates that those fake reviews cost $152 billion in online spending annually. And even if the fake reviews don’t cost consumers directly, they can influence purchasers who may choose another product based on a negative review, to the tune of $791 billion in e-commerce spending in the United States alone, the group said.

“It’s a real problem for both consumers and business,” said Daniel Castro, director of the Center for Data Innovation, which published a report in September on the issue. “It can cause financial losses, bad purchases and physical injury.” For example, if a device that is supposed to protect against slippery surfaces fails, it can cause injury, he said.

Castro’s study found that 49% of American consumers trust online reviews as much as recommendations from friends and family, and another 28% put just as much value on them as articles written by experts.

“The problem with fake reviews is there’s a lot of incentive to cheat,” he said, adding that people can use fake reviews to build up their own businesses or to put down a competitor.

Sites that are in the business of “selling trust,” such as Yelp or Google, “want to be a trusted source,” Castro said. “But there’s only so much a platform can do when they are up against people trying to cheat the system. That’s where state laws can make a difference.”

Few states have laws or regulations specifically targeting online reviews, he said. Consumer-friendly states, such as California, Colorado, Illinois and Massachusetts, use their broad consumer protection laws to go after miscreants, while many other states are silent on the issue, he said, or have weak laws.

The Federal Trade Commission is considering new rules to address the problem. In the meantime, it is teaming up with states to file lawsuits on behalf of consumers, since the federal agency cannot seek monetary relief on its own.

Some state lawmakers also are trying to toughen laws.

A bill in Tennessee this year that would have made posting a “factually false” online review about a business a violation of the state Consumer Protection Act and awarded triple damages for the offense died before gaining much traction. It’s already illegal under Tennessee consumer law to use false testimonials.

Tennessee’s consumer protection laws mirror other states’ laws that have punishments, including awarding of damages to injured parties. But the National Consumer Law Center has argued that while some states have strong Unfair and Deceptive Trade Practices laws, many fall short, and “their effectiveness varies widely from state to state.”

In August, a half dozen states, including California, Colorado, Florida, Illinois, Massachusetts and New York, and the FTC sued the online apartment and roommate site Roomster and its owners, for allegedly paying for fake reviews to bolster its reviews and listings. The suit alleges the site also charges customers for access to sham apartment listings. The suit is pending in U.S. District Court in New York.

Last week, the FTC announced it is exploring tougher rules to combat fake reviews, the suppression of negative reviews and payments for positive reviews and served notice in the Federal Register that it is soliciting public comments on the proposed rule through January.

California Attorney General Rob Bonta, a Democrat, said in an interview his state joined the suit against Roomster because it is “facing a housing crisis out of proportion. If there’s an app, they [consumers] are going to trust it … especially when they are seeing all these letters of support.” But he said it’s not just about Roomster or apartment platforms.

“We think it’s likely to be a problem elsewhere,” Bonta said in a phone interview. “I can’t comment on other investigations, but I don’t think this is a phenomenon isolated to just Roomster.”

In a statement to news organizations, Roomster said the allegations are not true and are an example of “overreach” by the FTC.

Bonta said he thinks California’s unfair competition laws and regulations are sufficient but said the FTC’s decision to seek comment on proposed new, tougher federal regulations has merit. “The more watchdogs on the block the more regulations and laws on this, the better,” he said.

Rich Cleland, assistant director of the FTC’s Division of Advertising Practices, said in an interview the agency is looking at new rules to “shore up our potential to secure civil penalties.” He said the department partnered with the half dozen states in the Roomster case because states are able to obtain monetary damages — a consequence taken away from the feds last year in a U.S. Supreme Court case.

Also last year, the FTC put more than 700 companies on notice that if they used false endorsements, the agency was ready to take action.

The FTC has been hamstrung, Cleland said, because last year’s high court ruling in AMG Capital Management LLC v. FTC stripped the agency of its ability to seek monetary damages in cases in which it sued.

Cleland and the other experts said consumers, meanwhile, can do a few things to temper their reliance on online reviews, such as checking a variety of sources for reviews, and checking whether certain reviewers have reviewed lots of other unrelated items and what they recommended, studying the language of the reviews to check for generalities versus specifics and viewing them all skeptically, especially overly positive or negative ones.

“I suppose there is a tendency to think if you want to rely on consumer reviews, you assume the risk of doing so,” he added. “Sort of a buyer beware. But I believe consumers should not rely on reviews exclusively.”

In 2016, following the lead of California and Maryland, the federal government instituted the right-to-gripe law that protects consumers from retaliation by retailers if they post a bad review. But that law does not address some retailers’ attempts to “steer” reviews on their site by putting the bad ones at the bottom, rather than listing them chronologically, for example.

Mary Engle, executive vice president for policy at the BBB National Programs office in Washington, D.C., said consumers “have to really have their guard up” when looking at online reviews.

Companies, she said, “can and do purchase fake reviews.” She advises consumers to research the reviews and look to see whether the FTC or the Better Business Bureau have any cases involving the companies and whether the reviews of a product are from those who have actually bought the product.

Review platforms such as Yelp, Google, Amazon and Trustpilot have their own mechanisms to try to cut down on fake reviews, representatives of several companies said.

Julianne Rowe, a spokesperson for Yelp, one of the most popular review platforms, said in a phone interview that the company uses both technological and human resources to weed out fake reviews. Among other safeguards, the company investigates when it detects a large number of reviews from the same IP address or sees reviews from users who might be connected to a group that incentivizes and coordinates fake reviews. It also takes into account flags from other consumers pointing to possible illicit reviews, she said.

Yelp, she said, prohibits reviews that the company has solicited.

“What Yelp’s recommendation software looks for are reviews that may be less reliable, users that are less active, unhelpful rants and raves, and conflicts of interest, such as reviews from employees, friends or family,” Rowe said. Only 73% of reviews are recommended by the automated software, she said.

Amazon announced in October that it had filed suit against 10 American companies, as well as firms in Spain and Italy, seeking to stop the sources of fake reviews.

In a statement emailed to Stateline, Google said its policies “clearly state reviews must be based on real experiences and information, and we closely monitor 24/7 for fraudulent content, using a combination of people and technology. When we find scammers trying to mislead people, we take swift action ranging from content removal to account suspension and even litigation.”

Christie Garratt, a spokesperson for Trustpilot, said via email that 89% of its customers in the U.S., U.K., and France now say they look at reviews prior to making a purchase. “Inevitably, this makes them attractive to businesses that want to manipulate, and this is a constantly evolving problem — a bit like credit card fraud, it will never go away,” she wrote. “What we can tell you is that in 2021, we identified and removed 2.7 million fake reviews from our platform — which is actually just over 5% of total reviews submitted that year.”

But even with the monitoring and curation of companies, consumers still are the ultimate arbiter of what they buy, and they should be constantly skeptical, said Teresa Murray, director of the consumer watchdog program of the U.S. Public Interest Research Group.

“Even if the FTC really puts the hammer down and starts imposing large fines … you have to be a little cynical,” she said. “If a review is completely over the top, or if it’s humongously negative, or it’s dropping profanity and wishing the people at the company had never been born, that could be a clue that it’s not accurate.”