5-Year Jail Sentence For Fake Review Scammer

ecommerce jailHere’s some e-commerce marketing advice: Don’t buy fake reviews! We get it; it’s tempting — but also against regulations! And in China, it can land you a five-year stint in the pokey.

(A quick a note: Although this cautionary tale unfolds in China, U.S. online sellers should pay attention because similar schemes have found their way stateside. Remember: Businesses are responsible for third-party promotions carried out on their behalves. U.S. e-commerce entrepreneurs probably won’t land in jail for using fake review services; but they could end up in a world of financial hurt, courtesy of crushing FTC fines.)

The Brushing Ballad of Mr. Li

Li was his last name and “brushing” — (e.g., faking e-commerce transactions and falsifying reviews) — was his game. He opened shop in 2013 and mainly worked with sellers on Taobao (think: Amazon.com of China). At the request of brands, Li enlisted people to purchase empty packages and post fake — but glowing — reviews. The process helped sellers climb Alibaba’s “credibility” ladder, giving them prime search real estate. By 2014, Li had pocketed nearly one million yuan.

Eventually, however, authorities caught up with the brusher. During his trial, Li said he knew he was breaking Taobao’s rules but didn’t think he was breaching the law. Ultimately, authorities sentenced Li to five years. He’s also on the hook for 920,000 yuan (US $135,000) for “breaking national regulations, knowingly spreading fake information online through publishing services for profit, and disrupting the market order with serious consequences.”

Brushing Is Big, Risky Business

Fake purchase and review operations — a.k.a., “brushing” services — are big, underground business in China, and increasingly in the United States. In 2014, experts estimate that nearly 700 companies, along with 500 chat groups, facilitated brushing scams on over 600 billion yuan worth of sales. Just recently, over 50 people “were arrested in Heilongjiang on suspicion of cheating Taobao stores out of 2.47 million yuan.”

Alibaba, China’s top e-commerce platform, also expanded its fraud-busting efforts. Over the past year, the online retailer has punished over 20,000 sellers for using false transaction services. During the same period, Alibaba banned an additional 6,000 accounts for egregious acts of consumer deception.

Fake Review Enforcement Actions: Genuine or Fake?

Are fake review companies the only phonies?

Many businesses argue that online retail platforms are also knee-deep in deception. But instead of trading in phony reviews, they exaggerate efforts to combat fraud.

Despite detractors, though, Zheng Junfang, Alibaba Group’s chief platform governance officer, recently explained to a media outlet: “Taobao has always dealt strongly with credibility-distorting behavior. We currently have a number of measures in place to counter this, including a verification system, manual audits, and a reporting system for users.”

Are fake reviews issues affecting your business? We Can Help.

As consultants who regularly work with e-commerce professionals, we’ve seen the damaging effects of phony reviews. More importantly, we’ve developed solutions that help companies bounce back.

If an online review matter is causing you problems, let’s talk. Our team has worked with hundreds of businesses — large and small. To read more about online trade libel, head to the consumer review section of our blog.

If you’re ready to discuss your situation with an experienced attorney who can explain your options, please get in touch.

Article Sources

Tone, S. (2017, June 22). In Judicial First, Man Imprisoned for Fake Taobao Reviews. Retrieved September 18, 2017, from http://www.sixthtone.com/news/1000374/in-judicial-first%2C-man-imprisoned-for-fake-taobao-reviews

The “All Natural” Marketing Conundrum: A Quick Overview

natural marketing

“Natural.” Legally speaking, it’s a deceptively complex word, but the Food and Drug Administration wants to change that.

What Does Natural Mean, Legally Speaking? (The Jury Is Still Out.)

The FDA wants to “establish a meaningful definition for ‘natural’ so that [the] term would have a common consumer understanding, and whether ‘natural’ claims [should be prohibited] entirely on the grounds that they are false or misleading.”

“Natural” food advertising lawsuits have skyrocketed. According to a report by Perkins Coie LLP, 2015 saw 53 class actions involving labels donning the words “natural” or “all natural.” Despite the number of cases, courts and regulatory government agencies have yet to agree on a national standard.

92% Natural Is Not The Same As “All Natural”

Is it OK to use the phrase “all natural” or “100% natural” if the majority of a product is derived directly from nature? According to the Federal Trade Commission, no it’s not. Jessica Rich, a former director of FTC’s Bureau of Consumer Protection, once explained:

“‘All natural’ or ‘100 percent natural’ means just that—no artificial ingredients or chemicals.”

The FTC targets brands that market mostly-natural products as “all natural.”

The Problem With The Word “Natural”

An FTC assistant director, Richard Cleland, explained the difficulty with using “natural” on food labels:

“You have different kinds of products that make natural claims, and the consumer understanding of the word natural may depend on what kind of product is being attached to [the term].”

Connect With A Marketing Lawyer

Knowing when to use “natural” is only one of the FTC’s marketing rules. Are you familiar with the others? If not, start with this handy list or promotional dos-and-don’ts.

Are you ready to speak with an attorney who helps businesses with legal marketing issues? If so, please get in touch. Our team is here and ready to help with any and all FTC and business consultation needs.

Article Sources

Long, J. (2017, June 20). FTC Official: Research Needed to Study Consumer Understanding of ‘Natural’. Retrieved September 13, 2017, from https://www.naturalproductsinsider.com/blogs/insider-law/2017/06/ftc-official-research-needed-to-study-consumer-un.aspx

Is It Legal To Post Online Reviews Of My Product?

is it legal to post reviews of your own productsCan I post online reviews of my products? The answer: Only if you prominently disclose your connection to the product. It’s against FTC rules to litter the Internet with phony product reviews that appear impartial but aren’t.

Officials regularly execute fake review stings. In fact, the Federal Trade Commission recently censured a trampoline company for the offense.

What happened? Well, a trampoline company — which we’ll call “Acme Bounce” (not real name) — presumably wanted to boost sales. To shorten a long story, representatives from the company allegedly bought some domains. According to reports, those websites were designed to look like impartial-trampoline review sites featuring “expert” advice. “Acme Bounce” regularly received top marks on said sites.

Well, things weren’t necessarily as they appeared. To shorten a long story, according to the FTC, “[One of the trampoline review websites] was operated by [Acme Bounce] and the company owners.” Additionally, some of the comments on the sites were “not authentic,” and instead “created by the owners of [Acme Bounce].”

In the end, “Acme Bounce” had to pay a sizable fine and agree to certain provisions.

The Four Main Rules Of Online Reviews

Steer clear of an FTC online review-related conflict by following these four rules.

  • Don’t write and post reviews of your products under another person’s name to make it appear like it’s a neutral consumer. If you post a review of your own product, the first line of said review should be something along the lines of, “I am {NAME}, the person who sells this product.”
  • If you give your product away in exchange for a fair review, the reviewers must disclose any material benefit received in exchange for posting an “honest opinion.” If you sell on Amazon, note that any type of incentivized review is off limits.
  • Understand that if you hire a marketing company to promote your products, you’re responsible for said promotional company’s actions. The “I didn’t know what they were doing” argument doesn’t work when it comes to unfair and deceptive marketing.
  • Remember: Factual claims made in promotional materials must be backed up with data and test results.

Click here for a full list of online marketing Do’s-and-Don’ts.

Connect With An Online Product Marketing Attorney

Are you grappling with an online marketing or online sales issue? Perhaps you want to avoid future pitfalls and are looking someone to perform and online marketing audit? Either way, our team has considerable experience working with brands and professional marketers. Get in touch today to begin the conversation.

Article Sources

(2017, June 8). FTC Tramples Fake Reviews. Retrieved July 07, 2017, from http://www.jdsupra.com/legalnews/ftc-tramples-fake-reviews-74147/

Davis, W. (2017, May 31). FTC Charges Trampoline Sellers With Creating Fake Review Sites. Retrieved July 07, 2017, from https://www.mediapost.com/publications/article/302115/ftc-charges-trampoline-sellers-with-creating-fake.html

Reminder: The FTC Punishes Influencers That Don’t Disclose

social media influencer rulesHi there, social media influencer: noteworthy things are happenings in the e-commerce world! Make note: 1) the FTC put celebrity endorsers on notice, and 2) Amazon is rolling out a new social media “influencer” program. In this post, we’ll summarize the events and then review a few social media marketing legal “don’ts.”

FTC to Social Media Celebrities: We’re Watching You

After a consumer watch group applied some pressure, the Federal Trade Commission sent letters to 90 celebrity social media influencers. To paraphrase the message: Stop being tricky with disclosures. Truth-in-advertising rules apply! It’s against regulations to disguise that you’re getting cash-money to hawk products.

According to FTC regulations, any person with a “material connection” to a given product must “clearly and conspicuously disclose relationships to brands” when promoting.

Don’t Try To Bury or Hide Disclosures

Hiding disclosures is also a no-no. Compliance requires that all declarations be made before the “more” button, to accommodate diminished screen real estate on cell phones.

The FTC’s action marks the first time the commission directly reached out, with unsolicited guidance, to celebrity endorsers. So far, no measures have been taken. However, if any of the letter recipients continue to flout guidelines, they’ll most likely be slapped with a gigantic fine.

When asked why it chose to focus on this issue, a spokesperson from the advocacy group explained:

“Instagram has become a Wild West of disguised advertising, targeting young people and especially young women. That’s not going to change unless the FTC makes clear that it aims to enforce the core principles of fair advertising law.”

Amazon’s Influencer Program: Do You Know The Rules?

In Amazon’s manifest destiny quest to claim all things retail, as of late, the company has been concentrating on fashion. And, like most style brands, the e-commerce behemoth is enlisting social media influencers to market and promote.

Still in its beta phase, the program is “invitation only” — and according to Amazon, participants don’t have a say in product selection.

So, who is Amazon asking to join this Amazon influencer promotional hive? According to reports, the company considered “various factors, including but not limited to number of followers on various social media platforms, engagement on posts, quality of content and level of relevancy for Amazon.com.”  Amazon was also sure to clarify that “[t]here is no set cut-off and influencers across all tiers and categories are represented in the program.”

Social Media Marketing Crib Sheet

So, what legal issues must Amazon influencers consider when promoting products? What disclosure tactics don’t pass FTC muster? Here’s a quick list.

  • Don’t bury disclosures in a long string of hashtags. The Federal Trade Commission considers it deceptive.
  • Don’t use #sp (for sponsored) or #partner as the only disclosures. They’re not clear enough.
  • Don’t use #Thanks [Brand] as a disclosure. The phrase does not meet FTC truth-in-advertising standards.

Click here for a more in-depth list of social media marketing dos-and-don’ts.

Contact An E-Commerce Business Consultant

If you’re an Amazon influencer or social media promoter with questions for an attorney who handles online marketing issues, get in touch. Our team has helped hundreds of online business entrepreneurs with everything from affiliate marketing contracts to FTC investigations. Our rates? Exceptionally reasonable. Our knowledge-bank? Invaluable. Let’s chat; we have the answers and know-how you need.

Made in the USA: What Are The Labeling Rules?

Made in the USALately, people are talking about U.S. manufacturing — which made us take note of a recent FTC action. The nation’s consumer watchdog busted a company for marketing its products as “Built in the USA” and “Proudly Built in the USA.” Why? Well, according to the agency, many of the brand’s products were “wholly imported” and didn’t qualify as “Made in the USA.”

It’s More Than A Marketing Slogan

“Made in the USA” is not just a marketing slogan. It’s a legal term of art — specifically a “country of origin” label. Using it inappropriately constitutes a regulatory breach — and sometimes rises to the level of fraud.

What Products Can Be Labeled Made in the USA?

When is it appropriate to use “Made is the USA” or “American Made”? When a “product is all or virtually all made in the United States.” What constitutes “virtually”? It depends on the product. For a firm answer, speak to a product marketing attorney about the specifics of your situation because different rules apply to different product categories.

Inappropriately Using “Made in the USA” Can Result In Large Fines

The company mentioned at the top of the post settled with the FTC and didn’t admit any wrongdoing. But they did acquiesce to a 20-year monitoring agreement. However, don’t assume everyone gets a proverbial slap on the wrist. The FTC is authorized to fine companies that flout “Made in the USA” marketing standards. So, to avoid censure, ensure compliance.

Comply Before The FTC Finds and Fines You

Do you sell things for a living? Make sure you’re up-to-date on the latest advertising regulations? The “American Made” labeling rule is only one of many. To read about the rest, visit our marketing law resource center. There, you’ll find explanations of federal marketing rules, plus case studies and legal tips.

Connect With A Product Marketing Attorney

If you have questions, feel free to contact us anytime. Someone from our marketing and advertising team will be happy to answer any questions you have. We look forward to speaking with you soon.

FTC Sued Prevagen Over Representation Of Placebo Results

FTC sued Prevagen

The FTC sued Prevagen’s marketers. Charge: Unsubstantiated marketing. Is the FTC’s claim meritless? Prevagen says yes — and they’re fighting back.

The case serves as a reminder for dietary supplement marketers: Make sure your promotional materials are in line with FTC compliance standards!

Federal Trade Commission (FTC) to Quincy Bioscience (Prevagen Marketers): Your Brain Supplement Marketing Is Misleading!

Who is suing who? The Federal Trade Commission, alongside the New York Attorney General’s office, is suing Quincy Bioscience (“Quincy”) — marketers of Prevagen.

Why is the FTC suing Prevagen’s Marketers? The FTC regularly penalizes companies for promoting questionable findings. But this case is a bit different. The Commission objects to how Quincy presented information, not the veracity of the study from which the information came. Specifically, the FTC condemned Quincy’s failure to disclose allegedly near identical results for both placebo and active participants.

How does Prevagen feel about the lawsuit? Often, companies caught in an FTC web lick wounds, cut losses (and a check), and call it a day. But Quincy is swinging back. The supplement marketer feels the FTC overstepped its bounds and is forcing unfair scientific interpretations down the throats of small businesses.

The Curious Case of the Jellyfish Protein

A jellyfish protein — and active ingredient in Prevagen — calcium researches have used apoaequorin since the 1960s. But newer — arguably fringe — research suggests the substance may enhance memory function.

But, like many touted supplements — (omega-3’s come to mind) — the medical community’s jury is still hanging outside the courtroom. To wit, the American Pharmacists Association summarizes its stance thusly: “Human data on apoaequorin are limited to small, company-sponsored trials that do not meet expected scientific standards.”

Marketing and Science: An Uneasy Partnership

The intersection of science and marketing is riddled with potholes. On one hand, dangerous products shouldn’t land on shelves, which requires a certain amount of oversight. On the other hand, mixing scientific studies with promotional materials can be a messy legal recipe. Why? Because science is not a monolith; a singular idea. Scientists don’t always agree. Which raises the question: Should judges be determining the proper way to present scientific findings?

This suit is unique because the FTC and AG aren’t questioning a study’s veracity, which is the norm in “unsubstantiated claim” cases. Instead, commissioners contend that Quincy failed to present the results adequately; (specifically, the purported near identical results for placebo and dosed participants). To put it another way, the FTC doesn’t think Quincy is providing “reliable evidence of a treatment effect.”

The FTC’s Rule About Scientific Support

You may be wondering: “Why can the FTC sue over certain scientific studies but not others?” And that’s the question Quincy wants people to ask. But is it the right question?

Quincy insists the lawsuit is subjectively rooted, and therefore meritless. In a statement the company argued:

“Quincy has amassed a large body of evidence that Prevagen improves memory and supports healthy brain function. This evidence includes preclinical rat studies, canine studies, human clinical studies, and, most importantly, randomized, double-blind, placebo-controlled human clinical testing. This type of testing has long been acknowledged by both the FTC and the FDA to be the ‘gold standard’ for scientific evidence.

“The FTC does not allege that Quincy’s principal clinical study fails to meet the FTC’s and FDA’s own definition of ‘gold standard,’ nor does the FTC allege that the study was poorly designed or inappropriately conducted, or that it failed to rely on scientifically-validated measures.

“The sole dispute rests on the interpretation and analysis of the data, with the regulators attempting to hold the company to a standard that is unreasonable, scientifically debatable, and legally invalid. Their experts simply disagree with ours over how to interpret the study results. The FTC should not be the arbiter in matters of scientific debate. We are proud of the work we have done to support Prevagen’s effects and believe our large body of evidence clearly satisfies the longstanding standard to support such claims.”

This squabble over semantics may prove to be the crux of the case. Quincy could win by convincingly framing the FTC’s argument as scientific interpretation, as opposed to objective oversight. But is an interpretive variance truly the problem?

Scientific method convention stands: If a control group’s results aren’t statistically different than “activated” participants’, then it’s back to the lab to form a new hypothesis. The FTC will undoubtedly argue something to this effect. But, hey, you never know; a sympathetic judge could see it Quincy’s way.

Lame-Duck FTC Means Ruling Should Be Vacated?

Quincy is also upset that only two commissioners voted on the action. In a statement, the company characterized the suit as “another example of government overreach and regulators extinguishing innovation by imposing arbitrary new rules on small businesses like ours.” Quincy also accused the agency of being “short-staffed and lame-duck.”

FTC Sued Prevagen And They’re Not Backing Down

The FTC and AG are standing firm in their decision. Jessica Rich, an agency director, chastised, “The marketers of Prevagen preyed on the fears of older consumers experiencing age-related memory loss. But one critical thing these marketers forgot is that their claims need to be backed up by real scientific evidence.”

Warning Letter Dates Back To 2012

Was the suit a shock to Quincy? Maybe not. According to reports, the Commission sent the company a warning letter in 2012. Which just goes to show: Don’t assume you’re in the clear if nothing ever came of that FTC caution from years ago.

The FTC Keeps A Close Eye On Dietary Supplement Marketers

The FTC’s Prevagen censure comes as little surprise. Not only are the ads ubiquitous (in certain regions), but they appeal to senior citizens. The AG remonstrated, “It’s particularly unacceptable that this company has targeted vulnerable citizens like seniors in its advertising for a product that costs more than a week’s groceries, but provides none of the health benefits that it claims.”

Yes, The FTC Wins Dietary Supplement Lawsuits – A Lot

This post isn’t a case-merit analysis. It’s still early stages; both sides have reasonable arguments; the devil will be in the litigatory details.

However, as attorneys who work with dietary supplement marketers and keep up-to-date on industry happenings, we wanted to point out a small curiosity in Quincy’s statement. It reads:

“The FTC has already brought three similar cases against three other companies in which the Commission tried to impose its own rigid interpretation of a company’s scientific evidence to prohibit truthful, non-misleading claims. In each case, the FTC lost.”

How did you interpret that statement? Did you walk away thinking the FTC lost every deceptive marketing case involving a nootropic? Not the case. For example, in 2015, the Commission went head-to-head with the folks behind Procera AVH, a product promising to “restore memory loss and improve brain function.” Originally, the court slapped a $150 million judgment on the supplement distributors, but the FTC agreed to a final payout of $1.4 million to satisfy the censure.

We point this out not to question Quincy, but to warn dietary supplement marketers: The FTC does prevail…often. Don’t be complacent when it comes to advertising compliance.

Connect With An FTC Attorney

Being investigated by the FTC? Have questions about advertising and marketing compliance? We’re here to help.

Homeopathic Marketing Guidelines: FTC Issues New Rules

old fashion medicine bottles picture to accompany a post about homeopathic marketingThe FTC has zero time for homeopathic hyperbole. Called the “Enforcement Policy Statement on Marketing Claims for Over-the-Counter (OTC) Homeopathic Drugs,” the FTC’s latest guidelines address the dos-and-don’ts of homeopathic marketing materials.

After analyzing concerns, the nation’s consumer watchdog averred:

[T]he FTC will hold efficacy and safety claims for OTC homeopathic drugs to the same standard as other products making similar claims. That is, companies must have competent and reliable scientific evidence for health-related claims, including claims that a product can treat specific conditions. The statement describes the type of scientific evidence that the Commission requires of companies making such claims for their products.

Homeopathy Marketing Guidelines: Long History, Little Science

Homeopathy sits at the crossroad of belief and science. A healing methodology dating back to the 18th century, the practice involves micro-doses of symptom-inducing ingredients. Over the past two decades, new age devotees have revived the methodology.

Yet, fringe popularity doesn’t guarantee efficacy; as far as the medical community is concerned, homeopathy falls under the anti-scientific umbrella.

The 18th-century factoid is pivotal in the FTC’s stance on homeopathic marketing.  According to the guidelines, commissioners understand that “claims may include additional explanatory information to prevent the claims from being misleading.” In other words, so long as the packaging conveys that “[this claim is] based only on theories of homeopathy from the 1700s that are not accepted by most modern medical experts,” then it’s fine. (Sorry. Slapping a Dr. Quinn doppelganger on your label probably won’t cut legal muster.)

Don’t Skirt Homeopathic Marketing Guidelines with Tricky Language

The FTC’s announcement also condemns undercutting “a disclosure with additional positive statements or consumer endorsements reinforcing a product’s efficacy.”

“The bottom line, when it comes to FTC marketing compliance,” explained marketing and advertising lawyer Dan Warner, “is to avoid deception; and definitely don’t make unsubstantiated claims.” When asked about the new OTC homeopathic marketing guidelines, Warner explained, “To be fair, the FTC’s latest announcement isn’t necessarily a brand new stance, but a reminder that questionable science shouldn’t be used in promotional materials. Do so, and you risk a fine.”

Get Help From A Dietary Supplement Marketing Lawyer

If, after reading the FTC’s new homeopathic marketing guidelines, you still have questions, get in touch with Kelly / Warner Law. We regularly perform advertising audits to help clients avoid FTC fines.

More FTC compliance standards this way.

Social Media Marketing Maven: Chrissy Teigen

picture of social media icons on phone to accompany post about Chrissy Teigen's social media marketing prowessWhen she’s not lip sync battling, Chrissy Teigen apparently ponders social media marketing mysteries! Recently, the brand influencer Twitter-shared some musings about FTC advertising compliance.

We learned:

  • Chrissy Teigen is serious about her online marketing work and keeps up-to-date with FTC regulations. We say, “Good on her!” Every influencer should familiarize themselves with Federal Trade Commission compliance standards.
  • Chrissy collaborates with brands to draft promotional tweets.
  • Teigen, (like many marketers), doesn’t quite understand why some tea and smoothie social media influencers seem allergic to #ad or #spon promotional hashtags, which are, technically, required.

The FTC’s social media marketing rules

  • Promotional Hashtags: Influencers, marketers, and brands are expected to use #ad, #spon, #sponsor, or #paid in promotional tweets, ‘grams, and other social media posts.
  • Disclose Material Relationships: Read the Dot Com Disclosures to determine the necessary promotional declarations for your product. Don’t want to wade through an FTC regulatory document? Click here for the most important points.
  • Be Mindful of Promotional Language: Don’t lie about product benefits; don’t fib about ingredients; don’t rely on questionable scientific studies to support claims. The FTC has — and will continue to — sue over these types of infractions.

Twitter, Facebook, and Instagram promotions are ubiquitous, but online marketing regulations are still nascent. Please don’t misunderstand the assertion. Regulations DO exist; brands risk sizable fines for shirking guidelines. And even though the FTC has earned a reputation for, shall we say, mutable justice… consistency has, over the past year, quietly snuck its way into the investigation equation.

Want to evade the FTC’s prying eyes?  Clean up your marketing compliance house.

Click here to read about other digital promotional legalities. Head this way to speak with someone who can help solve your social media marketing challenges.

Amazon Sues Over Fake Reviews: FBA News

Picture of fake dollar bill to accompany a blog post about Amazon sues over fake reviews

Amazon Does Not Suffer Fools Fake Reviews

Amazon sues over fake reviews, and actively engages courts to enforce its “zero tolerance” stance. Recently, the company filed yet another lawsuit against several phony feedback facilitators.

Amazon Sues Over Fake Reviews

In the past year alone, the online retailer has already sued hundreds of businesses and individuals who create and deploy fake reviews. (You can read about other instances here, here, and here.)

Why Does Amazon Hate Fake Reviews?

Amazon — (and the Federal Trade Commission, for that matter) — views fake reviews as an act of unfair competition. Or, in legalese, buying fake reviews violates Section 5 of the FTC Act because the practice qualifies as an intentional attempt to mislead consumers.

Amazon explained its position to TechCrunch

“Our goal is to eliminate the incentives for sellers to engage in review abuse and shut down this ecosystem around fraudulent reviews in exchange for compensation. As long as this type of abuse exists, we will continue to take enforcement and legal action against sellers participating in fraudulent reviews.”

Discount-For-Review Programs Are Also Against Amazon Policy

The news comes in the wake of Amazon’s announcement to purge the site of incentivized reviews (exception: books).

What does this mean for e-commerce entrepreneurs? In all probability, traditional advertising will make a triumphant comeback.

Is Amazon Hamstringing Startups?

In addition to investor cynicism, Amazon’s recent crackdowns have sparked a concern flame in the e-commerce industry. Is Amazon, in a way, raising the barrier of entry way too high, by ultimately forcing startups to outlay a larger initial marketing spend?

Fake Reviews v. Discount-For-Reviews: Both Are Now No-Nos on Amazon

What is the difference between fake reviews and discount-for-review programs? The former conspicuously violates Federal marketing regulations; the latter is (perhaps, it’s now more accurate to say, “was”) an enormously helpful startup marketing tool — which also spawned an entire promotional services niche, feedback facilitation.

Or, to put it simply: discount-for-review programs helped grow the online business economy.

Difficult But Necessary?

On account of Amazon’s no-holds-barred approach to exterminating solicited reviews, a big e-commerce question now looms: Do Amazon’s actions fall into the “difficult-but-necessary” category? Did company quants crunch numbers and discover that its third-party selling programs were ballooning at a breakneck — and unsustainable — speed, flooding the platform with potentially problematic digital detritus?

Because here’s the thing: Amazon is currently the top-dog, and as such, greatly exposed. It must be careful. Other online retailers are patiently crouching in the tall weeds, waiting for the perfect opportunity to pounce — and that opportunity could be Amazon’s deteriorating respectability. After all, if the platform becomes synonymous with counterfeit goods and phony reviews, the public will start to look elsewhere.

Adjust To Survive

Now, does all this news spell doom and gloom for FBA sellers? No. Surviving amounts to adjusting. Brands and marketers should consider:

  • Launching products at a low price, along with a well-executed customer satisfaction email campaign, which encourages consumers to leave reviews.
  • Readjusting budgets to include other types of “Off Amazon” marketing efforts.
  • Adding an unexpected packaging surprise. Why? Because people are more likely to leave a review if they’re delighted by an unanticipated treat. This tactic also has the added advantage of acting as a counterfeit deterrent.

Need Advice From An Amazon E-Commerce Attorney?

Our firm helps business owners overcome online review challenges, in addition to other Internet business issues, like account suspensions, counterfeiting, and intellectual property troubles.

Source

Supplement Marketers: Are You Crossing The Language Compliance Line?

picture of apple filled with dietary supplements to accompany blog post about supplement marketersLegal advice for supplement marketers: Be careful wording promotional materials. Strict rules apply. Breaking them could cost you millions.

FDA Takes Notice Of Trade Show Marketing Materials

Picture it (TM Sophia Petrillo). March 2016; the Natural Products Expo West Center [wavy lines transport us to a flashback]…

Health enthusiasts buzzed round the nutraceutical carnival; aromatherapy dominated olfactory senses, and a Washington State supplement brand charmed marketing materials into recycled tote bags.

Several weeks later, the material found its way to the FDA, who in turn issued a stern warning about “non-compliant disease claims.”

What Phrases Should Supplement Marketers Double Check?

So, with what wording did the FDA take issue? Here’s a list:

  • “…used in herbal medicine to help slow the progression of disorders for the eye…”
  • “…lowers blood pressure in hypertensive individuals…”
  • “…lower cholesterol levels…”
  • “…protects against cardiovascular diseases…”
  • “…slow the progression of diabetic and hypertensive retinopathy…”
  • “…protect against development of cancerous prostate cell lines…”
  • “…clinically effective in treatment of alcoholic cirrhosis…”
  • “Clinically improves cognitive function [for Alzheimer’s, vascular or mixed dementia patients].”

Are the above expressions always out of bounds? No. It’s important to understand that context is key.

Play it safe by having a marketing lawyer review your advertising materials before launching a campaign — everything from your website to trade show pass outs.

Interested in other marketing legal issues? Jump this way.

Are you a supplement marketer in need of a compliance review? Get in touch.

Source

Amazon’s New Review Policy: Big Changes

Picture of two business people on couch to accompany blog post about Amazon’s new review policy
Amazon’s new review policy crashed into Planet-Online-Retail, and now feedback facilitators are working round the clock to adjust business models.

Let’s take 3 minutes to outline the situation — in plain language — and examine how the change will affect Amazon sellers and reviewers.

How Amazon Reviews Used To Work

Before this e-commerce October surprise, Amazon let sellers offer discounts in exchange for product reviews, so long as the reviewer included proper disclosures. The system seemed to work and even spawned review facilitation businesses that helped vendors plan and execute discount-for-review programs.

But Amazon never seemed entirely comfortable with paid reviews, of any ilk. In fact, to combat the trend, platform engineers deployed a “learned algorithm that gives more weight to newer, more helpful reviews” and implemented stricter “verified purchase” badge requirements.

Amazon has even sued a few unlucky pay-for-review services, which you can read about here and here.

Amazon’s New Review Policy Points

So, what was the big change? In short: Sellers can no longer offer free products and discounts in exchange for a review. Here is a handful of specific points:

  • Sellers can’t use third-party services to loophole around the restriction.
  • The policy took effect immediately, but vendors shouldn’t worry about past posts. However, Amazon may remove old reviews “if they are excessive, and don’t comply with prior policy.”
  • Sellers CAN “continue to offer discounts and promotions as long as they are not offered in exchange for reviews.
  • Ignoring Amazon’s new review policy is grounds for account suspension.
  • Review facilitators can no longer require members to leave reviews.

Authors Are Exempt From Amazon’s New Review Rules

Which segment of Amazon World doesn’t have to worry about the new review guidelines? Authors. Giving away advanced copies of a book, in exchange for a review, is a publishing industry solemnity — and the online retail giant doesn’t want to disturb the ancient institution. In Amazon’s exact words, the company will “continue to allow the age-old practice of providing advance review copies of books.”

What’s VINE Got To Do With It?

Discount-for-feedback programs are strictly prohibited “unless […] facilitated through the Amazon Vine program.”

Wait, what?

Yep, Amazon is now the only acceptable channel for early offer arrangements. But even that’s a slight misnomer because Amazon doesn’t “incentivize [Vine members to give] positive star ratings, attempt to influence the content of reviews, or even require a review to be written.”

Is Amazon Sticking It To The Proverbial “Little Guy”?

Amazon’s new review policy press release states that “when done carefully,” incentivized reviews “can be helpful to customers by providing a foundation of reviews for new or less well-known products.”

To put it another way: Amazon admits that “incentivized reviews” help online retail startups, but it’s outlawing the practice regardless? Apparently so.

Now, does this mean it’ll be impossible to start a successful FBA store? Not at all. Most review facilitators have already operationally adjusted to the change.

But beyond that, in the simple terms, people like reviewing products. Stick to an effective marketing plan — which includes follow-up e-mails and superior customer service — and you shouldn’t notice a seismic change in sales.

Online Retail Legal Reminders and Considerations

Before our 3-minutes are up, we wanted to leave you with 3 legally minded thoughts:

  • “Unfair and deceptive marketing” rules do apply. Adhere to them or risk and FTC investigation and fine.
  • In light of Amazon’s new review policy, feedback services should make a Herculean effort to contact their review-writers’ networks. Don’t forget, a review that includes something to the effect of “received at a discount for an honest and unbiased review,” is now non-compliant.
  • Account suspension is reversible in some instances. Talk with an online retail consultant who can help pinpoint the exact problem, and provide the best plan of action to restore your account.

Good luck with Amazon’s new review policy. If you have questions, get in touch.

China’s New Online Marketing Law

China online marketing law
Quick question: Do you market or advertise on Chinese websites? Did you know a new Chinese online marketing law went into effect on September 1, 2016?

According to Eugene Low, a partner at the Hong Kong office of Hogan Lovells, the previous regulations were “a bit piecemeal” and not precisely defined. This law changes all that.

A Short List Of China’s Digital Promotion Rules

Here’s a snapshot of China’s online marketing laws (some are old, others new):

  1. Acts of “online marketing” include electronic advertising, promotional emails, paid search results, links, and embedded media “with the purpose of promoting goods or services.”
  2. All paid and native advertising must be conspicuously marked as such.
  3. The Chinese government reserves the right to“guard against false and misleading practices.”
  4. Online ads for prescription medication and tobacco are prohibited.
  5. Sellers need government approval to run digital ads for medical supplies, pesticides, vet meds, and other categories of health products.
  6. All paid advertising must be clearly marked in search results.

Additionally, the Chinese government expects businesses to hire new employees to fulfill online marketing requirements and monitoring.

The Roots Of China’s New Online Marketing Law

Earlier in the year, a man suffering from a rare type of cancer died after participating in a hospital drug study advertised on the search engine Baidu. His death stirred controversy, and many citizens “accused Baidu of taking money to promote less proven treatments.” Even the Communist Party’s main newspaper, People’s Daily, tossed some shade Baidu’s way by publishing an article entitled Commentary: Death of college student raises questions on Baidu’s ethics. Here’s an excerpt:

“Companies that were involved in services that deal with human life should be particularly conscientious of their duties when conducting their businesses. Billions of net users trusted Baidu for their search engine and online forum services, the company is hence responsible for the trust and is obligated to taking up their social responsibilities.”

On account of the incident, search engines operating in China must now make sure SERP ad returns don’t exceed 30% of a page’s content.

Who Will Be Affected By China’s New Online Marketing Rules?

Are China’s new promotional laws going to disrupt the market? Probably not. Will they have AN impact? Sure. But a giant one? Unlikely.

China already enforces strict Internet regulations; this latest statute is simply the cherry-on-top — a finishing detail on the country’s longstanding conservative approach to mass media.
Will the online promotion standards impact profits? Maybe. Maybe not. This WSJ article explained:

[New] policies most likely won’t diminish businesses’ bottom lines because pay-for-click ads often run on a bidding system for a limited amount of space. Other analysts, however, said taxes for businesses may increase because the new rules clearly define paid-search results as advertisements.

Major Chinese Websites That Will Probably Be Affected By The New Online Marketing Laws

Chinese Website Revenue Private or Public Closest U.S. Equivalent (in focus, not valuation)
Baidu $9.9 billion – Dec 2015 Public – BIDU Google
Alibaba $15.1 billion – 2016 Public – BABA Amazon
Sina Weibo $482 million – 2011 (Entire Conglomerate) Public – WB Twitter
58.com $297.8 million – 2nd Quarter 2016 Public – WUBA Craigslist
Sohu $852 million – 2011 Public – SOHU Mix of Google and Twitch
Tencent Weibo $15.4 billion – 2015 (Entire Conglomerate) Public – TCEHY Twitter

Need assistance with a Chinese Internet law issue? Visit our friends at Harris / Moure.