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30 August 2015 | Sally Foreman, Davies Collison Cave

Online testimonials, product reviews, endorsements -- managing the risk of false and misleading claims

The power and the liability

Word of mouth is one of the best ways to sell a product or service. Many consumers rely on reviews for information about goods and services to assist in purchasing. A glowing testimonial or endorsement can have a strong influence on a consumer's decision to purchase a product or service. In the online environment, testimonials, reviews or endorsements may appear on a business' own website, in social media or on a review platform.

Consumers expect reviews, testimonials and endorsements to be independent and genuine or at least transparent in the case of paid endorsements. In view of this, there are obligations on businesses to ensure that a review, endorsement or testimonial is not misleading, deceptive or false. For many businesses this may seem an overwhelming responsibility.

Moreover, the online environment presents new challenges. For example, it is not uncommon for celebrities to promote products. Particularly in the case of Twitter, it is becoming increasingly difficult to determine whether the celebrity has been paid for the tweeted endorsement or the celebrity was simply tweeting about their genuine love of a new shoe or favourite restaurant.

Tips for practitioners

Practitioners can assist their client's in managing the risk of false and misleading claims in the online environment by:

  • ensuring clients establish a Social Media Policy setting clear "rules" for content posted on its website or social media pages or by third party franchisees and/or contractors in the online environment;
  • encouraging clients to conduct regular monitoring of its website and/or social media pages; and
  • educating clients about what constitutes a false, misleading or deceptive claim.

What is a false, misleading or deceptive review?

Product reviews, testimonials and endorsements may mislead a consumer if they are presented as independent and impartial but in fact were written by:

  • the business itself or a franchisee or contractor; or
  • a competitor intending to sabotage a business; or
  • someone paid to write the review that has not used the product or service; or
  • someone who has used the product or service but written an inflated review to receive a financial or non-financial benefit; and that fact is not clearly disclosed.

The above examples are obvious cases of conduct, which may be misleading or deceptive. Quite apart from the issue of whether or not the content of the review testimonial or endorsement is false or misleading, the fact that in the above examples the review, testimonial or endorsement is presented as being independent and impartial is misleading in itself.

The conduct would be misleading if it induced or was capable of inducing customers into believing that the review, testimonial or endorsement was genuine when it was not.

Practitioner tips for clients

The importance of being online and using social media is undeniable. Indeed 71% of internet users are more likely to purchase from a brand that they are following on a social networking site. This offers a business an irresistible opportunity to market its product or service on mass. It also means that new obligations are imposed on business to ensure that a review, endorsement or testimonial is not misleading, deceptive or false. It is therefore strongly advisable for all businesses operating in the online environment to create and enforce polices which apply across the business as well as to franchisees and contractors minimising the risk of false and misleading claims in this context.

Read the full article in Internet Law Bulletin August 2015, Volume 18 No 5