A fake yogurt shop in Brooklyn, N.Y., was used as the base for the New York attorney general's massive sting against fake online reviews. As a result of the yearlong undercover effort, dubbed "Operation Clean Turf," the state brought action against 19 companies.
The 19 companies agreed to cease their practice of writing fake online reviews for businesses. Several firms, including Zamdel, XVIO, Laser Cosmetica, U.S. Coachways and Swam Media Group, paid penalties ranging from $2,500 to just under $100,000 each for a total of $350,000.
It's the largest enforcement action ever taken against the practice of false advertising known as "astroturfing" (the practice of preparing or disseminating a false or deceptive review) by any state or the Federal Trade Commission.
Posing as the owner of the yogurt shop, representatives from the AG's office called leading SEO companies to help them combat negative reviews on consumer review websites. Through the course of its investigation, they found that companies used IP spoofing techniques to flood the Internet with fake consumer reviews on websites such as Yelp, Google Local and CitySearch. Companies that posted reviews solicited people to write them, then hid their identities by creating fake online profiles and paying freelance writers from places like the Philippines and Eastern Europe.
"This investigation into large-scale, intentional deceit across the Internet tells us that we should approach online reviews with caution," said New York AG Eric Schneiderman. And companies that continue to engage in these practices should take note: Astroturfing is the 21st century's version of false advertising, and prosecutors have many tools at their disposal to put an end to it," he warned.
Even though New York state's case may be the largest to date, it is unlikely to be the last enforcement action by authorities that are worried about digital marketing practices that blur the lines and confuse consumers. The state of Florida has brought two enforcement actions against Lifestyle Lift, first for fake reviews, and later for insufficient disclosures.
Under its authority to prohibit false advertising, the FTC has brought two cases in 2009 and 2011 against fake online reviews used by Reverb Communications (2009) and Legacy Learning Systems (2011). The agency has also expanded its investigations into deceptive ad practices to search engine results and native advertising. An FTC workshop on native advertising is planned for December.
"It's all part of the same theme. Consumers need to understand what is advertising and what is an independent search or review," said Gonzalo Mon, a partner with Kelley Drye. "FTC is very interested in this; it's a big priority with them."