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Misleading online reviews: Not recommended

Misleading online reviews: Not recommended

By Charles Noonan

Consumer Law Social Media 

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Consumers place trust and confidence in online reviews when making purchasing decisions. Accordingly, the manner in which reviews are collected, moderated and published is an area of heightened focus for the ACCC.

Snapshot:

  • Due to the influence of online reviews in consumer decision making, businesses and individuals often go to great lengths to avoid negative perceptions online.
  • The Australian Consumer Law prohibits online reviews that are collected, moderated and/or published in a misleading manner.
  • Those who ignore the ACCC’s guidance on the matter risk being the subject of the enforcement action in this area of increased focus for the regulator.

The Australian Competition and Consumer Commission (ACCC) has a clear and simple message for businesses and individuals who post, or facilitate the posting of, misleading online reviews: don't do it. While the ACCC has reiterated this message through media releases and formalised guidance, recent enforcement action serves as a reminder to the business community that the regulator is increasingly willing to prosecute unscrupulous businesses seeking to “[take] advantage of consumer trust in online reviews”.1

The widespread use of online reviews

The power of online reviews in a digital economy should not be underestimated. The Sensis Social Media Report 2016 2 examined how Australian businesses and consumers are using social media, noting that:

“Online blogs and reviews remain a fairly widespread influence on purchasing decisions with 60 per cent of social media users claiming to read them before making a purchase. Fifty eight percent will look at up to five reviews before making a decision, which means around four in 10 read even more.”3

The Report then states that such data “underlines the need for businesses and brands to do everything they can to get on the front foot and avoid negative reviews if they can”. 4 However, firms and individuals should also be mindful that attempting to avoid or conceal negative online reviews may attract the unwanted attention of a regulator that is no stranger to investigating and bringing enforcement action with respect to online conduct prohibited under the Australian Consumer Law (ACL).5

Misleading or deceptive conduct

The far-reaching and flexible nature of the ACL has been a key strength in enabling the law (and regulators) to adapt to, and address, new developments in a rapidly-changing online environment,6 including the publication and management of misleading online reviews. Section 18(1) of the ACL is framed in notoriously broad terms and states that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Section 29(1) of the ACL also prohibits a broad range of conduct including the making of false or misleading representations relating to goods or services that purport to be testimonials,7 as well as the making of false or misleading representations concerning testimonials or representations that purport to be such testimonials.8 Additionally, s34 of the ACL relevantly prohibits conduct that is liable to mislead the public “as to the nature, the characteristics, the suitability for their purpose or the quantity of any services”.

In an oft-cited passage used in the application of these (and similar) provisions of the ACL, in ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 634, Allsop CJ observed at [39]–[42]:

“Conduct is misleading or deceptive or likely to mislead or deceive if it has the tendency to lead into error . . .

“There is no meaningful difference between the words and phrases ‘misleading or deceptive’ and ‘mislead or deceive’ (s18), ‘false or misleading’ (s29(1)(a)) and ‘mislead’ (s33) . . .

“It is necessary to view the conduct as a whole and in its proper context . . .

“In assessing advertising material, the ‘dominant message’ of the material will be of crucial importance.”

Accordingly, such principles are likely to guide a determination as to whether conduct or a representation is misleading or deceptive in contravention of the ACL, whether arising online or otherwise.

ACCC guidance

Businesses and individuals

To assist businesses and individuals to comply with their obligations under the ACL when publishing and managing online reviews, in November 2013 the ACCC published its guidance “What you need to know about: Online reviews – a guide for business and review platforms”. The ACCC recognised that “online consumer reviews are increasingly being relied upon by consumers as a low cost means of making more informed purchasing decisions”9 and emphasised three key themes to be borne in mind when dealing with online reviews:

Transparency: Industry players should be open and transparent to consumers about commercial relationships which impact on (or may impact on) consumer reviews.

Impartiality and misleading reviews: Reviews may mislead consumers where they appear impartial, but are actually written by:

(i) the reviewed business

(ii) a competitor of the reviewed business

(iii) a third party on behalf of (i) or (ii) above (such as a marketing or public relations firm)

(iv) a third party paid to write a review of a product or service they have not used

(v) a party who writes an inflated review because they have been provided with a financial or non-financial benefit.

Impression: The overall impression created by a body of reviews must reflect the opinions of the reviewers who have submitted the reviews; it may be misleading for review platforms to selectively remove or edit reviews, particularly negative reviews, for commercial or promotional reasons.10

These messages were largely reiterated in the ACCC’s guidance for private traders, published in November 2016.11

Platform operators

Platform operators administer, facilitate and manage transactions between buyers and sellers in the sharing economy.12 Platform operators may also often use reviews, ratings or feedback mechanisms as a means of regulating quality, trust and safety for consumers and service providers alike.13 In light of the key role and significant influence that platform operators may have in providing information and education to consumers (and businesses), in 2016 the ACCC published “Platform Operators in the Sharing Economy: A guide for complying with the competition and consumer law in Australia”,14 explaining that platform operators should (among other things):

  • not publish reviews that they know are fake
  • not engage in conduct that manipulates ratings
  • have processes in place to identify conduct (such as the provision of incentives) that could result in the manipulation of ratings
  • avoid soliciting or incentivising reviewers to post reviews, especially positive reviews (or, if incentives are offered, these should be clearly disclosed and not conditional on whether a review is positive or negative)
  • have detailed and clearly displayed moderation policies that set out the circumstances in which reviews will be edited, rejected or deleted
  • as a default, display reviews in the order that they are received.15

ICPEN guidance and digital influencers

In June 2016, the International Consumer Protection and Enforcement Network (ICPEN) released a set of guidelines for market participants involved in the collection, moderation and publication of online reviews and endorsements. Of particular interest is the ICPEN Guidelines for digital influencers 16 – those with a large and/or active social media following, who are often used to market or endorse products or services online. Similar to the guidance referred to above, in utilising online influence for commercial purposes the ICPEN guidelines provide that digital influencers should:

  • disclose, clearly and prominently, whether content has been paid for
  • be open about other commercial relationships that might be relevant to the content
  • only give genuine views on markets, businesses, goods or services.17

While not currently reflected in Australian consumer protection guidance, these guidelines have since been endorsed by ACCC deputy chair Delia Rickard who explained that “[c]ompliance with these guidelines will build consumer confidence in online reviews, and help review platforms, traders and digital influencers avoid regulatory action”.18 It is for this reason that even enterprising individuals on social media should be cautious when broadcasting reviews of products and/or services to their online audiences. Although there has been a recent uptake of “#ad” and “#spon” (and similar hashtags) by social media influencers to indicate that certain content is the product of a commercial relationship, it remains doubtful as to whether the use of these indicators alone will be sufficient to discharge one’s obligations under the ACL.

Recent enforcement action

In light of the importance of online reviews in consumer decision-making and the presence of clear and extensive regulatory guidance on the subject in Australia, the ACCC has made clear that it is willing and able to take enforcement action with respect to misleading or deceptive online reviews.

Aveling Homes

In March 2017, the ACCC instituted proceedings in the Federal Court of Australia against Perth-based home building company Aveling Homes Pty Ltd (Aveling Homes) and its group sales and marketing manager Sean Quartermaine for alleged misleading conduct and false or misleading representations.19 The alleged conduct concerned review websites Aveling Homes created for its businesses, Aveling Homes and the First Home Owner’s Centre. The ACCC alleged that Aveling Homes:

  • created review websites that represented they were independent of Aveling Homes when in fact they were not
  • gave consumers the overall impression, through the appearance, layout and features of the websites, that they were affiliated with an independent third party consumer review website when this was not the case
  • intentionally managed these review websites, including through obscuring or deleting adverse reviews to ensure a favourable overall impression of Aveling Homes to consumers.20

Shortly prior to trial, the parties reached a settlement which was then approved by the Court. Agreeing that its conduct contravened ss18 and 34 of the ACL, Aveling Homes agreed to pay pecuniary penalties of $380,000 and Mr Quartermaine agreed to pay $25,000 for being directly and indirectly knowingly concerned in, or a party to, the contraventions. McKerracher J held that these sums were appropriate, having regard to a number of factors including:

  • the extensive duration of the conduct (between 9 and 12 months)
  • the lost opportunity of some customers to accurately compare products and services
  • the loss and damage suffered by Aveling Homes’ competitors
  • the intentional nature of the conduct.21

In addition to pecuniary penalties, Aveling Homes also agreed to not make representations of a similar nature for a period of three years, to publish a corrective notice on its websites, to establish, maintain and administer a suitable Consumer Law Compliance Program and, along with Mr Quartermaine, pay the ACCC’s costs of the proceeding fixed at $95,000.22

Meriton Homes

In November 2016, the ACCC initiated proceedings against Meriton Property Services Pty Ltd in the Federal Court of Australia for misleading or deceptive conduct in connection with the posting of reviews of its properties on the popular TripAdvisor website.23 Review Express is a service operated by TripAdvisor whereby participating businesses provide TripAdvisor with email addresses of customers who have consented to passing on their details. TripAdvisor then prompts these customers via email to submit a review of their recent experience with that particular business. The ACCC alleged that, from November 2014 to October 2015, Meriton prevented guests who might give a negative review from receiving TripAdvisor’s ‘Review Express’ email by either (a) masking these guests’ email addresses by inserting additional letters into them; or (b) withholding these guests’ email addresses from TripAdvisor altogether. The ACCC claimed that, on several occasions, Meriton engaged in this conduct when infrastructure (such as hot water) or services (such as elevators) had failed.

The central question for the Court was whether this conduct was “likely to mislead or deceive” (ACL, s18) and whether this conduct was “liable to mislead the public” as to “the nature, the characteristics, [or] the suitability for their purpose” of the accommodation services provided by Meriton (ACL, s34).24 After finding that Meriton’s email masking and email withholding practices created a more positive or favourable impression of the quality or amenity of the Meriton properties on the TripAdvisor website,25 Moshinsky J held that consumers were (or were likely to have been) led into error in breach of s18 of the ACL; Meriton’s conduct minimised the awareness of prospective patrons about the frequency and kinds of negative experiences and service disruptions encountered by its customers, thereby creating an impression that was incomplete and inaccurate.26 For these reasons, Moshinsky J also held that, in breach of s34 of the ACL, the conduct of Meriton was liable to mislead the public as to the characteristics and the suitability of the accommodation services provided by Meriton.27

A hearing as to relief against Meriton will be held on a date fixed by the Court. The ACCC is seeking pecuniary penalties, declarations, injunctions, corrective publication orders, orders for the implementation of a consumer law compliance program and costs.28

Conclusion

Consumers place significant trust and confidence in online reviews when making purchasing decisions. Accordingly, the manner in which online reviews are collected, moderated and published is an area of heightened focus for the ACCC. Although the ACCC has gone to great lengths in assisting businesses and individuals with complying with their obligations under the ACL, those who ignore these warnings may risk being the subject of prosecution by a regulator striving for a five-star enforcement rating.

Charles Noonan is an associate attorney at Gibson, Dunn & Crutcher LLP, London.

1. ACCC, ACCC releases guidance about online product reviews (3 December 2013), www.accc.gov.au/media-release/accc-releases-guidance-about-online-product-reviews

2. Sensis, Social Media Report 2016: How Australian people and businesses are using social media (1 June 2016).

3. Note 2 above, p5.

4. Note 3 above.

5. Schedule 2 of the Competition and Consumer Act 2010 (Cth).

6. Consumer Affairs Australia New Zealand, Australian Consumer Law Review: Final Report (March 2017), p67.

7. ACL, s29(1)(e).

8. ACL, s29(1)(f).

9. ACCC, What you need to know about: Online reviews – a guide for business and review platforms (November 2013) p4.

10. Note 9 above.

11. ACCC, The Sharing Economy: A guide for private traders (3 November 2016).

12. ACCC, Platform Operators in the Sharing Economy: A guide for complying with the competition and consumer law in Australia (3 November 2016), 15. See p2, where this guidance explains that Uber and Airbnb are examples of platform operators, rather than EBay and Gumtree who merely act as “classified markets”.

13. ACCC, Platform Operators in the Sharing Economy: A guide for complying with the competition and consumer law in Australia (3 November 2016), p2.

14. (3 November 2016).

15. Note 14 above, pp8–11.

16. International Consumer Protection and Enforcement Network, Online Reviews and Endorsements: ICPEN Guidelines for Digital Influencers (June 2016).

17. Note 16 above, p7.

18. ACCC, International consumer protection enforcers issue guidance for online reviews and endorsements stakeholders (1 July 2016), www.accc.gov.au/media-release/international-consumer-protection-enforcers-issue-guidance-for-online-reviews-and-endorsements-stakeholders.

19. Australian Competition and Consumer Commission v Aveling Homes Pty Ltd [2017] FCA 1470.

20. Note 19 above, at [30].

21. Note 19 above, at [49].

22. Note 19 above.

23. Australian Competition and Consumer Commission v Meriton Property Services Pty Ltd [2017] FCA 1305.

24. Note 19 above, at [201].

25. Note 19 above, at [203].

26. Note 19 above, at [205].

27. Note 19 above, at [215-216]

28. ACCC, ACCC takes action against Meriton over online reviews (24 November 2016), www.accc.gov.au/media-release/accc-takes-action-against-meriton-over-online-reviews

 


Disclaimer: Views expressed by commentators are not necessarily endorsed by the Law Institute of Victoria Ltd (LIV). No responsibility is accepted by the LIV for the accuracy of information contained in the comments and the LIV expressly disclaims any liability for, with respect to or arising from any such views.

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