Given the ever-expanding importance of influencer endorsements and positive
online reviews, it is no surprise that fraud in this sector is endemic.
However, in a welcome development for established brands, the Federal Trade
Commission (FTC) signaled it is cracking down on fraudulent online reviews
and influencer marketing by issuing two recent decisions:
FTC v. Devumi, LLC et al.
The FTC and a corporate defendant and its CEO stipulated to the entry
of a permanent injunction and monetary damages of $2.5 million dollars
against the CEO (all but $250,000 suspended). This decision resolves an
FTC complaint accusing the defendants of committing unfair and
deceptive trade practices through the sale of “fake indicators of
social media influence,” i.e., friends, likes, followers, subscribers,
views, reposts, comments, and anything else designed to draw attention
and/or raise the profile or influence of a social media account.
FTC v. Sunday Riley Modern Skincare, LLC.
The FTC and cosmetics company Sunday Riley Modern Skincare, LLC filed a proposed order to
settle the administrative case pending before the FTC in which the FTC
accuses Sunday Riley and its namesake CEO of engaging in two separate unfair and deceptive
trade practices: (a) posting fake reviews of the company’s products
online, and (b) failing to disclose that reviews were written by Sunday
Riley employees. The final order requires that any online reviews,
endorsements or comments (such as “disliking” negative reviews)
prominently disclose any connection between the reviewer and Sunday
In a press release addressing the settlements, the FTC suggests that these
two cases are just the beginning of its efforts to “halt the deceptive
online marketing tactics” because “[p]osting deceptive or inaccurate
information online pollutes the e-commerce marketplace” and “harms
shoppers, as well as firms that play fair and square.” (See FTC’s
Oct. 21, 2019, press release,
Devumi, Owner and CEO Settle FTC Charges They Sold Fake Indicators of
Social Media Influence; Cosmetics Firm Sunday Riley, CEO Settle FTC
Charges that Employees Posted Fake Online Reviews at CEO’s Direction.) Director of the FTC’s Bureau of Consumer Protection Andrew Smith is
quoted as saying: “Posting fake reviews on shopping websites or buying and
selling fake followers is illegal. It undermines the marketplace, and the
FTC will not tolerate it.”
Notably, with respect to the Sunday Riley administrative order, two FTC
commissioners issued a dissent criticizing the settlement as too lenient
because it includes “no redress, no disgorgement of ill-gotten gains, no
notice to consumers, and no admission of wrongdoing.” (See
Statement of Commissioner Rohit Chopra Joined by Commissioner Rebecca
Kelly Slaughter, In the Matter of Sunday Riley, Commission File No. 1923008, Oct. 21, 2019.) The dissenting commissioners warned that the FTC was falling behind international peers in tackling the issue of fake online reviews.
So what are the takeaways? Companies should create clear guidelines for
their employees on social media posts about their products or competitors’
products — properly disclosing the affiliation is key. Companies also
should require that any paid influencers they engage confirm that they do
not pay for followers or likes, and ensure their social media managers
build company social media accounts organically. Additionally, be aware
that, with the FTC taking such a strong stance on these issues, consumer
class actions and Lanham Act claims are sure to follow.