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Attorney general cracks down on fake online reviews

“Caveat emptor,” or “let the buyer beware” goes the old adage. But what does that mean in the online world?

That question goes to the heart of a recently concluded investigation by the office of the New York State Attorney General. That agency announced last month that it had reached a $350,000 settlement with 19 companies for posting bogus online reviews to consumer review sites like Yelp, Citysearch and Google Local.

The yearlong investigation found that the offending companies, many of them part of the so-called search engine optimization or online reputation management industry, flooded the Internet with fake consumer reviews on behalf of their clients. The state agency also reached settlements with a number of small businesses that hired the SEO firms.

Known as astroturfing, a play on the synthetic carpeting that looks like grass, the technique relies on the human instinct to believe word-of-mouth advice when making purchasing decisions. The Federal Trade Commission ruled in 2009 that paying for positive reviews without disclosing that the reviewer has received compensation amounts to deceptive advertising. Astroturfing also violates a number of state laws, including New York Executive Law § 63(12), and New York General Business Law §§ 349 and 350.

“I think it boils down to, when we see a (traditional) ad, we know it’s a biased review,” said Bonnie Patten, executive director of Truth In Advertising, a Connecticut-based nonprofit that aims to protect consumers from false advertising and deceptive marketing.

Attorney General Eric Schneiderman echoed that sentiment when announcing the results of the investigation. “Consumers rely on reviews from their peers to make daily purchasing decisions on anything from food and clothing to recreation and sightseeing,” said Schneiderman in a statement. “This investigation into large-scale, intentional deceit across the Internet tells us that we should approach online reviews with caution.”

Astroturfing and similar practices can have real-world consequences up to and including making or breaking a business, the Attorney General’s Office said in the same statement. A 2011 Harvard Business School study estimated that a one-star rating increase on Yelp translated to an increase of 5 to 9 percent in revenues for a restaurant. Representatives from the state agency also cited a Cornell University study that found a one-star swing in a hotel’s online ratings on sites like Travelocity and TripAdvisor corresponded to an average 11 percent sway in room rates.

The underlying phenomenon is nothing new, according to cybercrime specialist Art Bowker. For example, financial manipulators have long used false rumors and other means to pump up the value of a stock they held in order to sell at an artificially inflated price. What is new, he said, is that the anonymity of the Web and the ubiquitousness of social media make this sort of scam exponentially easier to perpetrate. “I think you are going to see a lot more of this with social media,” he said.

Research on the amount of astroturfed online consumer product reviews suggests that it is widely present across the Internet, said Patten. A 2012 report from the research firm Gartner, for example, projects that by 2014, 10 to 15 percent of all reviews on social media may be bogus. Research by the University of Chicago’s Bing Liu puts the numbers even higher at roughly one third of all reviews currently posted on social media.

While sites like Yelp explicitly ban false online reviews in their terms of service, and use filtering software and other means to detect them, the attorney general’s investigation illustrated the wide variety of ways SEO firms and others use to get around them.

Posing as the owner of a New York City-based yogurt shop, investigators called prominent SEO companies within the state for assistance in combating negative reviews on consumer review websites. During some of the calls, SEO representatives offered to create bogus positive reviews of the yogurt shop on the same types of sites.

Among other techniques, the SEO firms used IP spoofing techniques to mask their identities and set up hundreds of bogus online profiles. Some firms also hired freelance writers from as far away as Eastern Europe, the Philippines and Bangladesh through sites like Craigslist, Freelancer.com and oDesk to write and post fake reviews.

Many of the SEO-generated ads seeking writers were quite explicit about the duplicitous nature of what they sought. Among them, for example, was: “We need a person that can post multiple positive reviews on major REVIEW sites. Example: Google Maps, Yelp, CitySearch. Must be from different IP addresses… So you must be able to have multiple IPs. The reviews will be only few sentences long. Need to have some understanding on how Yelp filters works. Previous experience is a plus…just apply –)we are a marketing company.”

Other businesses cited in the investigation offered discounts, free products or services and financial compensation to consumers in exchange for positive online reviews that did not disclose the true nature of the compensatory relationship.

Both Patten and Bowker said they are unaware of any other current campaigns to curb astroturfing by state or federal regulatory agencies within the U.S. Neither expects the practice of astroturfing to disappear anytime soon. Indeed, earlier in the month, Taiwan’s Federal Trade Commission fined Samsung Electronics $340,000 for paying people to post fake online comments disparaging a competitor. “I think it will be a tough battle policing this kind of thing,” said Bowker.

In addition to settlements ranging from $2,500 to slightly under $100,000, the Attorney General’s Office exacted Assurances of Discontinuance from the 19 firms in which they pledged to discontinue astroturfing techniques. The full list of offending companies included A&E Wig Fashions, Inc. d/b/a A&E and NYS Surgery Center; A.H. Dental P.C. d/b/a Platinum Dental; Body Laser Spa Inc.; The Block Group, LLC, d/b/a Laser Cosmetica and LC MedSpa, LLC; Bread and Butter NY, LLC d/b/a La Pomme Nightclub and Events Space; Envision MT Corp.; iSEOiSEO; Medical Message Clinic and HerballYours.com ; Metamorphosis Day Spa, Inc.; Outer Beauty, P.C., Lite Touch Plastic Surgery, P.C., Staten Island Special Surgery, P.C., Sans Pareil Surgical, PLLC; Stillwater Media Group; Swan Media Group, Inc. and Scores Media Group, LLC; US Coachways Limousine, Inc. and US Coachways, Inc.; Utilities International, Inc. d/b/a Main Street Host; The Web Empire, LLC; Webtools, LLC and Webtools Internet Solutions Ltd.; West Village Teeth Whitening Service, LLC; Magic Smile, Inc., aka Magic Smile; XVIO, Inc.; and Zamdel, Inc. d/b/a eBoxed.

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