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What is the legal position around fake online reviews and unlabelled endorsements?
We spoke with Miranda De Savorgnani of Outer Temple Chambers about this area of law. Although many businesses simply choose to put these sorts of shenanigans down to 'sharp' business practice, they are putting themselves at great risk if they do so.
In particular, she comments on the recent report, 'Online reviews and endorsements', from the Competition and Markets Authority (CMA) and what it means for businesses.
In this report, the CMA has set out its expectations as to how businesses and review sites will ensure they are in compliance with the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) when they engage in any commercial practice directly connected with the promotion, sale or supply of goods and service. In particular, businesses (and anyone acting on their behalf) should:
In addition, review sites (meaning any website that hosts customer reviews) should:
The CMA identified a number of practical approaches used by reputable review sites to help mitigate the impact of fake reviews. Review sites may:
Where trusted trader schemes find their members have submitted fake reviews, they can terminate their membership. Similarly, review site providers can terminate contracts with clients found to have generated fake reviews.
A 2015 study on comparison tools, produced by ECME Consortium (in partnership with Deloitte) for the European Commission, also makes various recommendations in relation to user reviews.
The CMA opened an investigation using its consumer enforcement powers into a number of companies in connection with the potential non-disclosure of paid endorsements, as a result of information it received during its call for information that 'a number of large companies and media agencies' had requested that paid adverts published in blogs and other online publications were not presented as such.
The CMA is likely to engage with the parties and to determine whether they are willing to offer acceptable remedies such as undertakings to clearly identify paid adverts online. If the parties are unable to agree remedies with the CMA, the CMA may take civil enforcement action in respect of breaches of the CPRS as community infringements (breaches of EU-derived legislation) under the Enterprise Act 2002, Pt 8, which may result in fines for the companies and media agencies.
The CMA considers that unlabelled paid online endorsements give rise to greater concerns than other practices like fake reviews and therefore may warrant greater action for several reasons. First, the practice of paying for unlabelled endorsements is hard for consumers to detect. Consumers may only learn from their experiences of the products and services that they buy, after relying on undisclosed paid endorsements.
Second, consumers may use these tools to make one-off decisions, making the learning process potentially slower. Third, the information provided may still be of some limited use to consumers even if it distorts their decision-making. If consumers are reasonably satisfied with their experience, there is likely to be less impetus for the sector to adjust.
The British Standards Institution (BSI) is currently undertaking work with the Department for Business, Innovation and Skills and the Consumer Protection Partnership on approval schemes--which include sites that hold customer reviews--that promote consumer trust, such as 'marks' or codes of practice. Research suggests that these schemes are influential in consumers' purchasing decisions but the variety of schemes can cause confusion for consumer and traders. This work is intended to identify common challenges faced by the providers of approval schemes, traders and consumers, and explore whether these could be addressed by a new BSI standard.
In much the same direction as the law in relation to businesses, although the UK advertising industry relies on a well-established system of self-imposed controls to enforce it. The UK Advertising Codes lay down rules for advertisers, agencies and media owners to follow. The UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing (CAP Code) essentially reflects various requirements in law, in particular the CPRs.
However, it should be noted that although they are both based on the same principles of transparency, the CAP Code has a narrower scope than the CPRs. The CPRs cover a wider range of practices and include requirements which go further than the CAP Code.
The Advertising Standards Authority (ASA), as the independent body that endorses and administers the CAP Code, has made several relevant adjudications in the area of unlabelled paid endorsements. It has also produced advice for market participants on the subject as well as guidance on labelling, including in social media. The Committee of Advertising Practice (the ASA's sister body), also has a Copy Advice Team that advertisers and publishers can use if they want free, expert guidance on the CAP Code rules.
Given that the ASA is considered an 'established means' for ensuring compliance with the CPRs in non-broadcast advertising, the CMA and local authority enforcer are likely to refer CPR cases falling within its area of expertise to it for action.
So what do you think? Do let us have your thoughts below.
Interviewed by Nicola Laver. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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