Earlier this week, New York’s Attorney General, A.G. Schneiderman, announced the state had penalized 19 companies for their illegal practice of writing online fake reviews, but that hardly resolves the growing trend of paid-for reviews.
The OAG has entered into Assurances of Discontinuance with 19 companies, with penalties ranging from $2500 to just under $100,000. The practice of preparing or disseminating a false or deceptive review that a reasonable consumer would believe to be a neutral, third-party review is a form of false advertising known as “astroturfing.” Astroturfing is false and deceptive, and it violates, inter alia, New York Executive Law § 63(12), and New York General Business Law §§ 349 and 350.
According to research conducted by Michael Luca and Georgios Zervas of Boston University, only 5% of reviews in 2006 were fake, but that number has grown to 20% as of this year.
Yelp alone contains more than 30 million reviews of restaurants, barbers, mechanics, and other services, and has a market capitalization in excess of four billion dollars. Moreover, there is mounting evidence that these reviews have a direct influence on product sales.
As the popularity of these platforms has grown, so have concerns that the credibility of reviews can be undermined by businesses leaving fake reviews for themselves or for their competitors. There is considerable anecdotal evidence that this type of cheating is endemic in the industry.
Even real reviewers are not to be trusted. In a separate study at Cornell University, researchers found that the most trusted Amazon reviewers were frequently given free products from manufacturers and agents in order to boost their reviews. In other words, they were not getting money but goods. The study is called “Free Lunch.”
While the 19 companies in NY’s “Operation Clean Turf” vows to stop their practice, this doesn’t prevent other companies in the US or overseas from creating more fraudulent reviews. Companies enlist inexpensive freelance writers from countries like Bangladesh and the Philippines to write reviews for as little as $1-$10 USD. That’s much cheaper than advertising.