The FCC has long had guidelines that require the application of the Truth in Advertising endorsements on the web. Any form of material connection or incentive for web endorsements, like offline ones, need to be declared. With a blog post, testimonial, review or celebrity endorsement, if there is any form of compensation or close relationship between the party giving the endorsement and the business receiving it, it is required that the relationship be made explicit. It is now clear that these rules apply to online reviews for local businesses, as well.
The guidelines were first published in 2009, but since that time there has been a number of enforcement actions that have clarified the rules in specific areas. In 2010, the FTC cracked down on review spam in the Apple App store created by the app company's marketing firm. In 2011, the FTC imposed significant fines for affiliate marketer's reviews and endorsements. While local reviews fell under the guidelines, there had been no enforcement in the local space, despite abuses, until this past week when the FTC obtained a cease and desist agreement from an auto shipment broker that was incentivizing online reviews with a $50 discount. The auto shipment broker has agreed to stop the deceptive practice of touting online customer reviews, while failing to disclose that the reviewers were compensated with discounts and incentives.
This announcement should be a wake-up call for any local business that is providing any incentives, including something as small as a coupon, to stop the practice. Google and Yelp and others have long held coupon incentives and contests as a violation of their TOS but this federal action now clearly makes the activity of incentivizing local reviews and not being clear about it illegal.
Does this apply to even a very small $10 coupon that you give to customers for a review? Does it apply if there is no requirement that the review be positive?
The answer to those questions appear to be yes. In 2013, in NY State, the Attorney General fined a number of companies for buying, faking or incentivizing reviews. An under-reported aspect of the settlement was a $10,000 fine levied on a tooth-whitening company in New York City that had been offering a no-strings-attached $10 coupon off a future whitening in return for any review, good or bad. I spoke with the owner of the company and, while he thought what he was doing was OK, the cost of a defense was substantial AND the NY State Attorney General had targeted him so his chances of prevailing, even at great cost were small.
It's time to review your review management program. If you are using any form of incentives, even very small ones, to "grease the skids" to increase the likelihood of a review, you should stop. The best bet is to just ask all of your customers for reviews. You will find that if you are doing a great job, your customers will be happy to leave you a review even without any incentives.