Monday, September 26, 2016

Advertiser's self-voting on positive reviews as "helpful" may be false advertising

Vitamins Online, Inc. v. HeartWise, Inc., 2016 WL 5106990, No. 13-CV-982 (D. Utah Sept. 19, 2016)

Following up on its previous opinion, the court rules again about the possible falsity of reviews posted in exchange for undisclosed gifts of the reviewed product.

Vitamins Online sells dietary supplements online, including on Amazon under the brand name NutriGold.  Defendant (NatureWise) does the same, selling competing garcinia cambogia and green coffee supplements. Vitamins Online sold its versions before 2010, but then Dr. Oz made them famous and caused competitors to enter the market.  NatureWise had its employees vote on the helpfulness of some of the reviews on its product pages, promoting positive reviews and demoting negative reviews. NatureWise also encouraged customers to post or repost their positive reviews on Amazon by offering them free products or gifts cards; “NatureWise would review and, in some cases, make minor edits to the reviews before asking the customers to post them on Amazon.”  The number of positive Amazon reviews a product receives affects that product’s position in Amazon search results.

NatureWise argued that it didn’t make any false or misleading statements, which led the court to a scholarly and thorough discussion of omissions under the Lanham Act.  Because the language of the Lanham Act bars “any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact” that constitute infringement or false advertising, false advertising doesn’t “necessarily require a false or misleading description or representation of fact.”  In other words, “the statute unambiguously allows for a false advertising claim to be based on the ‘any word, term, name, symbol, or device’ language as long as the use of that conduct ‘in commercial advertising or promotion’ results in the unlawful effect of ‘misrepresent[ing] the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.’”

The court thought that NatureWise’s Amazon-related conduct could fall under the concept of a “device.”  Offering free products was a mechanism to increase positive reviews; NatureWise also used a mechanism provided by Amazon “for the special purpose of increasing the visibility of positive reviews and decreasing the visibility of negative reviews.” 

NatureWise also argued that its conduct wasn’t “commercial advertising or promotion” because it wasn’t the source of the statements at issue (an argument already rejected above) and because there was no evidence that the statements at issue were viewed by a sufficient number of the relevant purchasing public.  The court rejected an actual viewing standard, and held that “the test only requires a showing that the information was sufficiently disseminated to the relevant purchasing public.” The information at issue—the reviews and helpfulness votes—was available on the NatureWise Amazon product pages.  NatureWise only sells the products at issue on Amazon, so that information was disseminated to all of NatureWise’s actual or potential customers, which was enough to satisfy the test.

But was there a misrepresentation?  Offering free products in exchange for positive reviews wasn’t enough to show that that NatureWise’s conduct gave a false or misleading representation of the nature, characteristics, or qualities of NatureWise’s goods or commercial activities. Vitamins Online failed to show that the reviews posted by the customers were not genuine.  But what about disclosing that they were in exchange for free products? The FTC thinks this disclosure is material to consumers to judge the credibility of the review and therefore required.  I agree—I do give less weight to positive reviews with the required disclosure, though I don’t discount them entirely.  The court doesn’t discuss whether the reviews failed to disclose the quid pro quo, just says that Vitamins Online didn’t show that the reviews were false or misleading.

However, manipulating the prominence of the reviews block voting on the helpfulness of the reviews could constitute a false or misleading representation.  (Note that the reason for this is essentially the same reason that quid-pro-quo reviews ought to be disclosed!)  “The representation being made by the placement of these reviews on the product page is that customers wrote, posted, and rated the reviews and that the reviews that appear first in the list are the ones that customers found to be most helpful.”  Distorted ranking of helpfulness could clearly deceive consumers about which reviews were most helpful.

NatureWise argued that, to be actionable, an omission has to relate to an affirmative claim, and that therefore there can be no liability when it didn’t make any affirmative claims.  But the court’s reasoning above disposes of that argument (and NatureWise did make affirmative claims about helpfulness/lack thereof of particular reviews to consumers).  “Because Vitamins Online has demonstrated that the reality, that some customers and a block of employees of the manufacturer voted on the helpfulness of some of the review, may be different than the implied representation, that a certain number of customers voted on the helpfulness of some of the reviews, the court concludes that genuine issues of material fact exist as to whether the statements are false by necessary implication.”

Section 43(a) is not a “federal codification of the overall law of unfair competition,” but the court concluded by noting that, even under its broad interpretation, several “causes of action related to unfair competition” would still not be covered by the Act, including “trade secret violations,” “[c]ontractual disputes,” and “false claims of trademark rights.”

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