UK regulator to scrutinise practices around use of online reviews and endorsements

The Competition and Markets Authority (CMA) has opened a 'call for information' on online reviews and endorsements (11-page / 347KB PDF) in an effort to encourage feedback from industry, consumer groups and other stakeholders. It said it wants to make sure that the influence online reviews and endorsements has on consumers' decision-making is not skewed by misleading information. The CMA's deadline for responses is 25 March.

"This is a fact-finding exercise to increase our knowledge and understanding," the CMA said. "It will look at a range of online reviews and endorsements that are accessed by UK consumers, including those on web blogs, video blogs, social media, specialist review sites, trusted trader sites, retail platforms, and retailers’ own websites. It will also look at the roles that media companies, online reputation managers and search engine optimisers play in helping businesses to promote their products/services and manage their reputations in relation to these sites."

"While the growth in the use of online reviews and endorsements has the potential to empower consumers to make more informed purchasing decisions, businesses can benefit too. Recommendations from reviews or bloggers can pull in new customers, feedback from consumers can help suppliers to improve customer services, and blogs and social media provide new opportunities to advertise and promote products and services. Conversely, false or misleading reviews or endorsements have the potential to mislead consumers and harm businesses," it said.

The CMA said it is particularly keen for information on how consumers select and use review sites and blogs and how reliant they are on them, as well as on how suppliers and intermediaries acting on their behalf "promote their brands and manage their reputations online (in so far as these activities affect what consumers see on review sites and blogs)" and whether this has the potential to mislead consumers.

The authority also said that it would like to know more about how online review sites, blogs and other hosts of reviews seek to prevent the misleading of consumers. The CMA also wants to know if the way the reviews on products and services are displayed "have the potential to distort consumers’ decision-making".

Guy Lougher, head of EU and UK competition law at Pinsent Masons, the law firm behind Out-Law.com, said: "The CMA's interest in online reviews and endorsements comprises part of a much broader review by the UK's competition authorities of online sales and advertising practices, including the conduct of online price-comparison websites and online intermediaries. For example, the CMA's recent market investigations into private motor insurance and payday lending have both led to remedies involving online price comparison websites. It is also likely that the role and importance of online price comparison websites will be an important factor taken into account in the CMA's current market investigations into energy supply and retail banking."

The CMA said its call for information was "wide-ranging" but that it would give particular focus to practices in the online markets for home repairs, maintenance and improvement; hotels and holidays; and beauty and grooming products.

Competition law expert Sammy Kalmanowicz of Pinsent Masons, said the CMA's call for information fits with objectives the regulator has already outlined and also ties in with a range of international enforcement initiatives.

"The CMA has already outlined its intention to look more closely at how online and digital markets are operating over the next year or so, and to this effect launched a separate call for information on the commercial use of consumer data earlier this year," Kalmanowicz said. "A focus of the CMA's interest is likely to be on online platforms that act as intermediaries or gatekeepers. This latest call for information ties in with that agenda since online reviews and endorsements are often provided and presented by intermediaries such as TripAdvisor and others."

"There has been interest in online review and endorsements by UK regulators in the past, and consumer protection authorities across the globe have identified concerns in this area. For example, in the US a number of businesses have been fined for posting 'fake' reviews, whilst guidance for businesses on how to manage online reviews have been issued in the US, Australia and France. In Italy, TripAdvisor was fined €500,000 after the regulator held that the company did not do enough to prevent fake reviews from being posted on its site and gave users the impression that those reviews were authentic," he said.

Kalmanowicz said the CMA's call for information on online reviews and endorsements appears to have "a more immediate focus" than its other call for information on the commercial use of consumer data.

"The CMA seems to be hinting at an intention of soon undertaking further action regarding online reviews and endorsements after it has analysed the responses to its call for information," Kalmanowicz said. "In its paper the CMA mentions the fact that it is aware of a number of potential concerns about misleading practices. It also explicitly makes reference to a market study or consumer enforcement action as potential outcomes from the call for information exercise. It did neither of those things when asking stakeholders for details about the commercial use of consumer data."

The Advertising Standards Authority (ASA) in the UK has previously investigated and censured businesses that engaged in reviews and endorsements. In 2012 the ASA said TripAdvisor misled visitors to its site by posting claims the website contained trusted, honest reviews from more than 50 million genuine travelers.

The ASA has also considered a number of cases involving celebrity endorsements of products on Twitter, and held that Nike breached UK advertising rules when footballers Wayne Rooney and Jack Wilshere posted endorsements without making sufficiently clear that their communications were ads. Mars escaped ASA censure for a similar Twitter ad campaign run with the help of celebrity endorsements.

UK consumer protection laws prohibit unfair commercial practices, which include using advertorials – editorial comment to promote a product – without making it clear that the trader has paid for the promotion.

The Consumer Protection from Unfair Trading Regulations also ban businesses from pretending to be a consumer and giving themselves a positive review in a practice known as 'astroturfing' as it fakes grass-roots support for a product or service. This is a criminal offence and business proprietors are potentially liable for an unlimited fine and a prison sentence of two years.

In 2011, the Internet Advertising Bureau (IAB) UK and Incorporated Society of British Advertisers (ISBA) published guidance on how brand owners and marketers can comply with consumer protection laws and rules on advertising when making a payment in order to "editorially promote" products and services on social media platforms.

The advertising bodies said that marketers paying others to use editorial space in social media to promote their goods or services should "ensure that the author or publisher of the message discloses that payment has been made," the guidelines said. Disclosure "will ensure that it is clear to consumers that it is a marketing communication," it said.-