The commission settled a case against apparel retailer Fashion Nova and issued new guidance for retailers and their online reviews vendors.

In late January, the Federal Trade Commission, for the first time, settled a case dealing with a retailer’s alleged failure to post negative reviews on its website. And the commission says it will take additional steps to police online product reviews.

In its settlement with the FTC, online apparel retailer Fashion Nova LLC (No. 111 in the 2021 Digital Commerce 360 Top 1000) agreed to pay a $4.2 million fine and refrain from suppressing customer reviews of its products. Fashion Nova retains the right to exclude reviews unrelated to the product or customer services and those containing obscene, sexually explicit, racist or unlawful content.

At roughly the same time it announced the Fashion Nova settlement, the FTC said it would send letters to 10 unnamed vendors that provide product review management services. The commission’s letters ask the 10 companies to review their policies and practices to ensure they are lawful. The vendors should then “terminate any services that allow for or result in consumer deception,” the letters say.

The FTC also released new guidance for online retailers and review platforms to educate them on the commission’s principles for collecting and publishing customer reviews in ways that do not mislead consumers.

The FTC’s interest in online reviews is not entirely new. It has acted in the past against retailers and brands accused of posting fake positive reviews on their websites. In October 2021, the FTC warned more than 700 businesses that they could incur significant civil penalties if they use reviews or other endorsements “in ways that were found to be unlawful in prior FTC administrative cases.” But the commission says it never settled a case against a retailer accused of suppressing negative reviews until now.

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Sucharita Kodali, a retail analyst at Forrester Research, says it’s unclear how common it is for retailers to suppress negative reviews. But that’s part of why it’s so deceptive.

“I haven’t heard of that being a huge problem. But it’s hard to know because someone whose review was suppressed would have to report it,” Kodali says. “There are more studies that say that most reviews are positive. That said, brands have workarounds to negative reviews in any case. They’ll often relaunch products as new items, which isn’t always evident to consumers. So, they won’t necessarily suppress negative reviews, but they work creatively to not draw attention to them.”

Fashion Nova denies wrongdoing

The FTC said Fashion Nova used a third-party online product review management interface to post four- and five-star reviews automatically and hold lower-starred reviews for the company’s approval. From late-2015 until November 2019, the FTC alleges that Fashion Nova never approved or posted hundreds of thousands of lower-starred, negative reviews.

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“Deceptive review practices cheat consumers, undercut honest businesses, and pollute online commerce,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement. “Fashion Nova is being held accountable for these practices, and other firms should take note.”

Fashion Nova disputes everything in the FTC complaint and unequivocally denies any wrongdoing. In a statement mailed to Digital Commerce 360, the retailer criticized the FTC for making “inaccurate and deceptive” allegations.

“Fashion Nova never suppressed any website reviews, and it immediately and voluntarily addressed the website review issues when it became aware of them in 2019. Fashion Nova is highly confident that it would have won in court and only agreed to settle the case to avoid the distraction and legal fees that it would incur in litigation,” the statement said.

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The statement said the root of the problem was the retailer’s “reliance on a reputable third-party enterprise software vendor.” The vendor sent some ratings and reviews to Fashion Nova for analysis. But, at one point, Fashion Nova “inadvertently failed to complete this process given certain resource constraints during a period of rapid growth,” the statement says. The retailer says it fixed the review-posting problem several years ago.

Star ratings and reviews are important

According to a January survey of 1,108 U.S. online shoppers from Digital Commerce 360 and Bizrate Insights, most shoppers (51%) said the quality and quantity of product reviews are among the factors most likely to lead them to place an order on a retail website.

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Kodali says allowing customers to post ratings and reviews “are table stakes now” for online retailers. That makes it hard for merchants to sidestep the problem by omitting that functionality from their ecommerce sites.

“They are among the most common features that shoppers expect, regardless of whether they may sometimes create difficulties,” Kodali says about ratings and reviews. “You have no choice but to include them on your site.”

What the new federal guidance says

The FTC’s new guidance for retailers and their online reviews vendors asks them to prohibit practices aimed at misleading consumers. Among the tips:

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  • Don’t ask for reviews from people who haven’t used or experienced the product or service.
  • Don’t ask your staff to write reviews of your business, or at least disclose that relationship in the reviews.
  • Don’t ask for reviews only from customers you think will leave positive ones.
  • Don’t ask family and friends for reviews, at least not without ensuring that they disclose their connection in the reviews.
  • If you offer an incentive for a review, don’t condition it, explicitly or implicitly, on posting a positive review.

Forrester’s Kodali says the FTC’s actions indicate the commission is serious about giving online reviews some level of oversight.

“But we’ll see how many others get fines other than this company,” Kodali says. “There are lots of sellers soliciting positive reviews, which is also not allowed.”

The January settlement was not Fashion Nova’s first encounter with the FTC. In April 2020, Fashion Nova agreed to pay $9.3 million to settle FTC allegations that it failed to properly notify consumers and give them the chance to cancel their orders when it failed to ship merchandise promptly. The FTC says the retailer also illegally used gift cards to compensate consumers for unshipped merchandise instead of providing refunds.

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