FTC Beat
Posts Tagged ‘Internet Advertising’
Dec 28
2015

Amazon Pursued Fake Reviews In 2015, What Will It Pursue In 2016?

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In 2015, Amazon filed suit against over 1,000 unnamed individuals for allegedly offering to sell fake online reviews (positive or negative) on Fiverr.com (“Fiverr”). The unnamed defendants offer to provide 5-star reviews and some defendants even encourage sellers to provide their own text to use in the review. In order to avoid detection, defendants offer to submit reviews from multiple IP addresses, utilize multiple Amazon accounts, and to complete a Verified Review (which means the reviewed has purchased the product, even though they don’t always require the actual product to be shipped for review). In short, the allegations are that these reviews for sale violate Amazon’s Customer Review Guidelines (which prohibit paid reviews), Fiverr’s own Terms of Service (which requires compliance with third party guidelines), and deceptively provides false reviews to consumers (which violates consumer protection laws).

Interestingly, Amazon did not name Fiverr as a party to the complaint. Instead, Amazon went after the individual sellers and indeed explicitly stated in the complaint that “Amazon will amend this complaint to allege their true names and capacities when ascertained.”

In contrast to Amazon’s approach, the Metallica Plaintiffs in a previously filed case against Napster, sued Napster directly and not the individual users (and eventually obtained their desired result).  Indeed, Amazon has not always omitted operators from its case captions. Last April, Amazon filed a similar lawsuit against a number of companies that operated websites to promote the sale of Amazon reviews. That lawsuit contained very similar allegations to this recent suit against individuals and alleged selling positive reviews, offering a Verified Review, a slow posting of reviews to avoid detection by Amazon, etc. Similar as well to the Napster case, the first Amazon lawsuit also yielded a successful result because the websites targeted in that case were all closed down.

So why is Amazon now going after the individual sellers? And why did Amazon omit Fiverr in this lawsuit?

One possible explanation is that Amazon, like Napster, first attempted to take down the providers (i.e. the website owners) that enabled the fraudulent review process. While that was successful, Amazon likely realized that it was insufficient because the individual reviewers would easily migrate to sites like Fiverr to continue their activities. So, Amazon was forced to file suit against the individual users.

At the same time, Amazon did not include Fiverr as a named defendant because it is more likely to get Fiverr’s cooperation in providing the identities of the unnamed defendants, and, because Fiverr is a legitimate global online marketplace offering tasks and services- in sharp contrast to the defendants in the prior Amazon lawsuit that operated sites and companies for the sole purpose of providing fraudulent Amazon reviews (and further antagonized Amazon by utilizing the Amazon logo on their sites). Additionally, as noted in the current Amazon complaint, Fiverr itself prohibits paid reviews and has tried to prevent them- again in sharp contrast to the companies in the first Amazon lawsuit, whose entire business was selling Amazon reviews.

Or it may be that Amazon has embarked on a process to stop paid reviews and these are the first steps in that ongoing process. As noted in this complaint against the Fiverr sellers, the lawsuit is “the next step in a long-term effort to ensure these providers of fraudulent reviews do not offer their illicit services through other channels.” Thus, Amazon may have simply first pursued the enablers (i.e. the company websites dedicated to fraudulent reviews) and then it pursued the individual reviewers on Fiverr.

The extent to which Amazon will continue to pursue questionable reviews remains to be seen. In 2015, Amazon limited its lawsuits regarding fraudulent reviewers to paid reviewers. In 2016, we may see an assault on the groups of independent people who exchange positive reviews on Amazon (i.e. each party agrees to submit a positive review of the other’s product). This type of arrangement also violates Amazon terms and poses similar concerns to the reliance of consumers on Amazon reviews. Amazon may also question whether this prohibited practice merits attention.

Dec 23
2015

Will The Floodgates Open As Consumer Backlash To Spam Unleashes?

Anti spam filter vector concept in flat style

Every e-mail user receives them, some days in numbers hitting the triple digit mark – those targeted, often annoying and unsolicited e-mails that clog our inboxes, originating from any of a multitude of establishments, including retailers, service establishments, and even our own social media.  Regulation over unwanted e-mails has been limited mostly to the federal Can Spam Act of 2003, which doesn’t prohibit the deluge of e-mails, but rather protects against misleading and deceptive ones and requires the sender to comply with certain requirements, including offering a clear opt-out. A private consumer has limited retribution to enforce the Act, however, and must rely on the FTC, as well as other government entities and Internet service providers, to bring suit to stop the unwanted e-mails. It seems that consumers in recent years are ever more fed up and frustrated with “spam” messages and desire change.  However, as evidenced by a recent class action lawsuit by certain LinkedIn members against the social media giant, consumers may utilize other legal maneuvers to get relief from new marketing tactics employing spam.

LinkedIn is often referred to as the “Facebook of the Professional World.”  With over 300 million+ users, LinkedIn has become the world’s largest professional network since it launched in 2003.  One feature of the network allows a member to import his or her e-mail contacts list and send invitations to connect with others on LinkedIn.  A user is prompted by LinkedIn to click an “Add Connections” link, which then allows LinkedIn to import the list from external e-mail accounts.  LinkedIn uses this feature to grow its number of members.

According to the class action lawsuit filed against LinkedIn, if a connection invitation was not accepted within a certain period of time, up to two “reminder’ spam e-mail messages would be sent to the prospects, without the LinkedIn member’s consent to do so. In Perkins v. LinkedIn Corp., the federal district court in the Northern District of California determined that the motion to dismiss filed by LinkedIn would be granted in part and denied in part, thereby allowing the suit to move forward.  In its partial denial of the motion to dismiss, the court reasoned that although the members consented to importing their contacts and sending the invitation to connect, they did not consent to sending the reminder messages on their behalf.  In her Order, Judge Lucy Koh explains,

“Nothing in LinkedIn’s disclosures alerts users to the possibility that their contacts will receive not just one invitation, but three. In fact, by stating a mere three screens before the disclosure regarding the first invitation that ‘We will not . . . email anyone without your permission,’ LinkedIn may have actively led users astray.”

(Order Granting in Part and Denying in Part Defendant’s Motion to Dismiss with Leave to Amend *30).  The plaintiffs also contended that LinkedIn members did not consent to the use of their names and likenesses in the reminder e-mails and were embarrassed and felt that the unwanted e-mails sent to personal contacts affected their professional reputations.

Following the court’s Order, the parties agreed to settle the suit.  The settlement requires the social media giant to pay at least $13 million, as well as  $2.25 million in legal fees, to LinkedIn members who had accounts between Sept. 17, 2011 and Oct. 31, 2014 and sent e-mails through the Add Connections feature. Although LinkedIn did not admit any wrongdoing in the settlement, it agreed to revise its disclosures and clarify that the reminder e-mails would be sent as part of the “Add Connections” service. LinkedIn also indicated its intent to provide an option to cancel the connection invitation, and thereby the reminders, by the end of the calendar year.

Interestingly, with perhaps the fear of a lawsuit on the horizon, Mark Zuckerberg preemptively announced at a recent town hall meeting held in Delhi, India, that Facebook will be reducing the number of invitations it sends to outside contacts of players of the game Candy Crush Saga. Facebook often sends the invitations to contacts who have never used a game and never played games on Facebook, suggesting that they join their friends in a Candy Crush Saga game.  Zuckerberg noted that reducing the number of invitations received was the most upvoted question in an online thread, and he has promised to reduce the number of these unwanted requests.  After the recent LinkedIn settlement, we advise Mr. Zuckerberg to take action swiftly or we may see other unhappy consumers following suit. . . .  with their own suit!

These developments should offer welcomed relief for consumers and our busy delete buttons. However, this may be the tip of the iceberg with regard to the use of the courts and unwanted e-mails. Is the broad Can-Spam Act sufficient to deter spammers? Does the Can-Spam Act do enough to filter out unwanted e-mails? New scenarios have arisen since the enactment of the Act in 2003 and consumers seem to desire more regulation to deter the deluge of e-mails. If swift action isn’t taken by Congress and other regulators, it seems that consumers may take to the courts to set precedent in this ever-changing arena.

posted in:
Internet Law
Dec 15
2014

Will New Facebook Rules Hurt or Help Small Businesses?

Social media communication

Health cleanses to lose unwanted weight in a matter of weeks!  Images of beautiful jewelry to be purchased at great prices that you can even resell! Personalized handbags made to order! If you have a Facebook account, it is more than likely you have seen many of these and similar posts by “friends” in your news feeds or through sharing or commenting by your friends on others’ posts.  Facebook has announced that it will filter out unpaid promotional materials in user news feeds starting in January 2015.

If you run a business that uses social media as an advertising platform, you will need to be aware of these changes. Alternatively, if you have ever wondered how to curb these marketing posts, which seem to increase daily, your wishes may have been heard.

Specifically, Facebook will utilize a new algorithm to filter out posts that advertise products, such as repurposing paid advertisements and promoting sweepstakes or special deals. At first glance, it would appear that this will make it more difficult for entrepreneurs and small businesses to attain new contacts and customers, promote their brand names, and pitch products.  However, while this initial fear is legitimate, it may be unwarranted in the long term, as much of the benefit that this free advertising once provided has already started to dissipate.

Unpaid as well as paid promotional posts in social media have been widely and increasingly utilized for well over a decade. The Wall Street Journal recently stated that Facebook was used as the top promotional tool by more than 80% of small businesses utilizing social media. Small businesses have lost much of the glory and benefit that unpaid advertising once provided, as news feeds have been flooded by a plethora of entrepreneurial pitches. The unpaid posts have become less effective at building a marketing channel, as users have become desensitized to the promotional pitches. Increasingly, users scroll quickly through the incessant free marketing to read more personal feeds.

Additionally, the reach of unpaid posts on Facebook has fallen in recent years. Research supports the notion that simply racking up “likes” or posting ads repeatedly does not produce the sales that were initially anticipated. In a Forrester Research Report released in November, it was suggested that on average, fewer than .1% of people interact with each post. Rather than simply acquiring numbers of user “likes”, companies should look at the value of each fan and how to more fully connect with and engage the loyal fan base. Many also believe that there is still some value to having a direct Facebook page where users can access and like the page, take advantage of special promotions, and invite friends to like and partake in the offers.

While unpaid marketing posts will be filtered, Facebook will still offer “promoted posts,” that allows businesses to pay a certain amount, starting at $5 and reaching to several thousand dollars, in order to have posts on their pages viewed by a wider pool of users. Facebook is not the only platform to seek payment for wider distribution.  For a fee, Google likewise offers businesses the opportunity to “boost their ranking” in search results. It is likely that if entities have to pay a small fee for advertising, they may take a longer look at the content of the business post or material being promoted to be sure it is interesting and grabs a user’s attention.

Although start-up companies with very little initial cash may take a hit as these rules begin to take effect, small business may not see a big difference in the long term. As the saying goes, nothing of value comes for free, and it seems that the value of unpaid advertising has already fallen dramatically. Social media paid advertising is still rather cost effective when compared to other methods of advertising. Although the quantity of posts by businesses may fall, one can also anticipate that small businesses will value the content in each post.  In other words, if people are paying to advertise, the quality of each post will likely improve.  Small businesses will also look to other social media platforms such as LinkedIn and Twitter or perhaps the next “hot” social media outlet that offers the benefit of unpaid marketing, at least until those platforms likewise become ineffective.  Small businesses may still want to use Facebook for advertising, but in a more creative, targeted way and by means of engaging with their fan base. One thing is for certain, the world of social media is ever changing and evolving, and still offers entrepreneurs and small businesses tremendous benefits, which were not present two decades ago.  Social media platforms will, however, continue to review and modify the types of advertisements and promotions permitted on their sites.

posted in:
Uncategorized
Dec 05
2013

Report From FTC Briefing – Blurred Lines: Advertising or Content?

The FTC held a workshop on Wednesday to examine the blurring lines of advertisements and content in digital media today. Executives from a myriad of professions gathered to discuss how sponsored content in digital publications takes form and affects the consumer.

Native advertising, or sponsored content, is the practice of masking advertising to look like news articles and features of the publications where they appear. The Internet has witnessed this practice grow aggressively in the past few years, and the FTC has already issued a warning to advertisers, saying it won’t hesitate to enforce rules against misleading advertising.

One of the main issues discussed during the panels today was how consumers were affected by native advertisements. Staff attorneys from the FTC repeatedly stressed that marketers bear the responsibility to ensure that the original source of the advertisement is transparent to the consumer. Often times, especially on social media outlets such as Twitter, links are tweeted or retweeted along with other links, causing confusion. Marketers like this because their native advertisements will become blurred and perceived as actual content. Studies have shown that native advertisements actually receive more views than naturally occurring ads. Bob Garfield, MediaPost columnist, said of native ads, “Native advertising is not deception, it’s a conspiracy of deception that’s becoming harder and harder to spot. This is unfair for the consumer.”

Sponsored content run by various websites is already being carefully watched by the agency. FTC Chairwoman, Edith Ramirez, said of native advertising, “The delivery of relevant messages and cultivating user engagement are important goals. But it’s equally important that advertising not mislead consumer by presenting ads that resemble editorial content.”

But not everyone at the workshop on Wednesday was convinced this is a problem for the consumer. David Franklyn, University of San Francisco law professor, claimed that studies at his university showed 35 percent of consumers could not identify a sponsored advertisement. Additionally, nearly half of the consumers studied did not know what ‘sponsored content’ meant. “How can consumers have a problem with something that they don’t even know exists,” asked Franklyn. Lastly, and perhaps most importantly, a third of the consumers reported they did not care if something was an advertisement.

Another popular topic at today’s workshop was the deceptive advertising in the marketing of diet pills and the supplement industry as a whole. The FTC is beginning to crack down on the practices of this industry. The agency described their ‘endorsement guides’ as they pertain to advertising – certain principles must be met between the marketer and the buyer. Along the same lines, in an internal FTC memo, the agency noted that another recent problem with search engines was the ambiguity behind search results and the fake testimonials that came with the diet pill ads. The FTC stressed that consumers have the right to know what search results were ‘naturally occurring’ opposed to paid results.

Native advertising is by no means a phenomenon that exists only in obscure corners of the internet.  Sites such as the Huffington Post, Proctor and Gamble and BuzzFeed have all been engaging in these native advertisement practices. Additionally, 73 percent of online publishers reported they have offered sponsored content opportunities on their sites. Other online publications, such as The New York Times, are considering offering these types of ads in 2014.

Even though many consumers seem to be at peace with sponsored content, based on results found from studies at the University of San Francisco Law School, consumers are still being exposed to deceptive advertising practices. And any time that happens, the enforcement side of the FTC is likely to get involved. Will we see an enforcement case on native advertising as early as 2014? That’s unclear, but if more companies, like the Times, plan to engage in these practices, there is a high probability we will see the FTC take action sooner rather than later.

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About Ifrah Law

FTC Beat is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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