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FTC settles with Fashion Nova for $4.2 million for blocking negative product reviews

Today, the FTC announced a $4.2 million settlement with California-based Fashion Nova, a “fast fashion” retailer, over allegations that the company deceived consumers by suppressing negative reviews from its website.

What is Fast Fashion?

Fast Fashion is a term used to describe clothing designs that move quickly from the design process to retail stores.  This fast turnaround process allows mainstream consumers to take advantage of high demand fashion trends typically based on catwalk styles presented during Fashion Week or designs worn by celebrities.  They are generally priced significantly less than well known name designs.

FTC Allegations and Guidance for Review Platforms

According to the FTC complaint, Fashion Nova used a third-party online product review management service to automatically post four and five-star customer reviews while withholding thousands of lower star reviews.

As a result of these practices, the FTC claimed that Fashion Nova expressly or impliedly represented that customer reviews on its website “accurately reflect the views of all purchasers who submitted reviews,” which was not true.  According to the FTC, suppressing a product’s negative reviews deprives consumers of potentially useful information and artificially inflates the product’s average star rating.  As part of the settlement, Fashion Nova is prohibited from making misrepresentations about any customer reviews or other endorsements.  In addition, Fashion Nova must post all reviews of products currently being sold.  An exception being  reviews that contain obscene, sexually explicit, racist, or unlawful content and reviews unrelated to the product or customer services (shipping and returns).

Also introduced today, the FTC issued informal guidelines for review platforms and online retailers addressing the collection, moderation, and publication of online reviews.  Warning letters were sent to 10 companies, that offer review management services, notifying them that avoiding the collection or publication of negative reviews violates the FTC Act.

Collection and Moderation of Reviews

Further advised by the FTC, is that companies not ask for reviews only from customers who will most likely leave only positive remarks.  Suppressing negative reviews deprives consumers of potentially useful purchasing information and wrongly inflates the products average star ratings.  Additionally, companies that provide customers incentives for leaving reviews should not condition the incentive on the review being positive, and should disclose details of the incentive provided.  As to moderation, the FTC advises that companies should (1) have processes in place to verify that reviews are genuine and not fake, deceptive or otherwise manipulated; (2) not edit the reviews to alter the message; and (3) treat positive and negatives reviews equally.

FTC Advises on Publication of Reviews

  1. Publish all genuine reviews and do not exclude negative ones.
  2. Don’t display reviews in a misleading way, including featuring positive reviews more prominently.
  3. Any material connection between the customer and company offering the product or service should be clearly and conspicuously disclosed.
  4. Clearly and conspicuously disclose how you collect, process, and display reviews, and how you determine overall ratings, to the extent necessary to avoid misleading consumers.
  5. Have reasonable procedures to identify fake or suspicious reviews after publication. If a consumer or business tells you a review may be fake, investigate and take appropriate action, including taking down suspicious or phony reviews, leaving them up with appropriate labels, issuing an alert about them, and addressing the issue with those responsible for it.

With the FTC’s announcement comes an increased interest in deceptive practices relating to online customer reviews.  All companies relying on consumer reviews, as part of its online marketing platform, should take a hard look at policies and practices for collection, moderation, and publication to ensure they are in FTC compliance.

Authored by Brett A. Elliott.  For questions or more information regarding these developments, please contact Brett or the KTC attorney with whom you normally work.