FTC to Amerifreight – Failure to Disclose Review Incentives Against the Law

Update: it would appear that Amerifreight’s Google listing has been taken down. 

The FTC has, for the first time, successfully sued a company for incenting on line reviews and not declaring this material connection.

According to Google reviewer mb2970s:

mb1970s

mb1970s

 

7 months ago
I was moving from Nashville to Albuquerque. This is the third time that I have ever transported a vehicle (previously with two other companies).

Pros:
1. Vehicle arrived safely without any damage or items stolen (although that is more of a comment re: the carrier).
2. Vehicle was picked up within the 1-15 day window agreed to.
3. Vehicle was delivered in a timely fashion.

Cons:
1. Prior to choosing this company, I called twice, left a voicemail message, and emailed the customer service rep without a response. I was once told that the customer service rep was at lunch and would call me back in an hour. I called back over two hours later, and the rep did not know that I had called. Based on the reviews, I went ahead and used them anyway.
2. The quoted price was based on giving a “fair review” on two websites. If you don’t leave a review, they’ll add $50 to your quote, which would be $50 more than any other company quoted me (including several that had a carrier immediately available when I spoke to them … however, I kept with Amerifreight based on their online reviews).
3. The customer service rep gave me very little information up front, and after we got off the phone sent me an email with multiple items that I had to fill out before they would start looking for a carrier. I was not told about the need to fill out these forms before they would start looking, so I’m glad I read through the forms immediately.
4. One of the forms states that your chances of getting a carrier quickly is greatly increased if you say that they can charge you up to $200 more to book a carrier without calling you first. They state that they will try to keep from doing this.
5. When I was called with a carrier available, it was for $250 more than quoted (after the $50 discount for writing a review).
6. I’m having to write this review in order to get a discount that brings my costs to the same as other carriers offered. The other carriers were quoting me based on immediately available carriers (not estimates/quotes).
7. When I asked about the student discount, I was told not to bother because it basically just drops the amount that they’ll list your vehicle for (hence less likely to ship … and will likely have to raise the price anyway). I think this is deceptive advertising.
8. When I received an email reminding me about this review, there was a long paragraph about how I should leave a 5-star review if at all possible because it would effect how the customer service rep was compensated.

Summary:
While this company transported my car safely and in the window requested, I’ve had better experiences with other companies that cost less (even during high auto transport seasons). I will not use Amerifreight again.

Today The FTC announced an agreement with Amerifreight that they will cease the practice:

AmeriFreight, an automobile shipment broker based in Peachtree City, Georgia, has agreed to a settlement with the Federal Trade Commissionthat will halt the company’s allegedly deceptive practice of touting online customer reviews, while failing to disclose that the reviewers were compensated with discounts and incentives.

The FTC’s complaint marks the first time the agency has charged a company with misrepresenting online reviews by failing to disclose that it gave cash discounts to customers to post the reviews.

“Companies must make it clear when they have paid their customers to write online reviews,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “If they fail to do that – as AmeriFreight did – then they’re deceiving consumers, plain and simple.”

AmeriFreight is an automobile shipment broker that arranges the shipment of consumers’ cars through third-party freight carriers. Its website touted that the company had “more highly ranked ratings and reviews than any other company in the automotive transportation business.” As part of its advertising, it encouraged consumers to “Google us ‘bbb top rated car shipping.’ You don’t have to believe us, our consumers say it all.”

Amerifreight currently
 has 540 reviews at Google and 21 at Yelp. 

The settlement is significant in being the first time that the FTC has inserted itself into the local review space. While there was no monetary settlement, Amerifreight did agree to cease and desist and agree to 20 years of oversight to prevent future abuses.

This action was a long time coming but makes it clear that incentives are inappropriate country wide.

It is though amazing to me what so many folks are willing to do for $50. Hardly reinforces my faith in humanity.

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FTC to Amerifreight - Failure to Disclose Review Incentives Against the Law by

21 thoughts on “FTC to Amerifreight – Failure to Disclose Review Incentives Against the Law”

  1. Well it sounded like they were holding them hostage for a discount, versus what many seem to do which is provide extra service or product if they leave a review.

    If the FTC is going to crack down on companies I know many SMB’s would love it if they would do the same to Yelp when Yelp buries many legit reviews – that’s part of what frustrates SMB’s to incentive for reviews in the first place.

  2. I have one client, in particular, whose competition regularly gives discounts to get reviews. It is qute obvious when this practice is in play as the reviews will pile up for a few days. Granted this is a small local business, but this practice hurts everyone. Would be great if there was a way to flag a business who uses the practice of giving customers discounts for services rendered, would make the playing field a little more even.

  3. @Toby
    Yelp is protected under Federal law and by recent court cases as well. They have little liability and there is little given the inequities of our legal and political structure that a business will be able to do about it. I think you can count on them NOT doing anything about Yelp.

    How much they crack down on SMBs remains to be seen but the risk seems not worth any reward.

  4. So, if a pizza place I went to sends me an email offering me 10% off my next order if I give them a review, that’s not allowed? I’d like to fully understand the issue here – it seems to me that the issue was the CURRENT transaction was reduced in price based on an a-priori agreement to leave a review vs giving an incentive on a FUTURE transaction?

  5. @Scott
    The issue of providing a coupon falls into the category of a “material connection” area of the law. While it is debatable whether a coupon discount is a material connection, during September of 2013, NY State had a similar enforcement action.

    Most of the enforcement actions in that case were about truth in advertising issues and buying reviews. However one of the defendants that was fined $10,000 received that fine for exactly the coupon behavior that you mention. I spoke with him and while he felt that he might have prevailed in a court of law he wasn’t sure so he settled.

    There is also the issue of the Terms of Service of the review providers. Both Google and Yelp for example explicitly prohibit this sort of activity. And while Google is probably too big to notice, Yelp has been known to sue for less.

    So while it might or might not be legal, it would appear that the Attorney General of NY thinks it is illegal, Yelp and Google don’t like it. Thus is likely NOT worth the risk.

  6. @Mike – thanks, but I’m still not fully on board here. The article you referenced was companies that were hiring people to write fake reviews, and/or paying them to get reviews put on popular sites. I’m talking about a 1-1 relationship between the business owner and their customer, where the business offers an incentive to give them an online review or feedback. No 3rd party involvement, no paying or offering this incentive to a person or agency that is not a legitimate customer.

    There are so many discussions about how hard it is to get people to give you feedback online – most people are consumers of content, not creators. So, smaller businesses will generally need to offer an incentive to get people to do something they otherwise wouldn’t do. I’m having a very hard time understanding how/why a business offering a discount or some other promotion in exchange for feedback is illegal.

  7. However one of the defendants that was fined $10,000 received that fine for exactly the coupon behavior that you mention. I spoke with him and while he felt that he might have prevailed in a court of law he wasn’t sure so he settled.

    The company was a tooth whitening company, mentioned near the end of the AG’s press release with no details of the particulars. I happened to know the owner and I called him.

    He was fined $10,000 for offering a $10 coupon off future teeth whitening in return for a review.

    The case is exactly like the Pizza coupon. My point is that it is risky to offer a coupon given the above case(s).

    As to the “need” for small business to incent, I disagree. I run a reputation/review management product and the trick to getting reviews is 1)ask and 2)provide exemplary service. It is a numbers game as many are not predisposed to leaving a review. There are other barriers imposed by the review sites.

    But just following the above guidelines you will get 1-2 reviews per 100 asks. If you interact with 50 new customers a month that will result in 1 review every month or so. 12 in a year. 48 over 4 years. That’s plenty.

  8. Mike: The case was between the FTC and the business.

    I would strongly suggest that a smart competitor of this business read the review on google and notified the FTC, thereby instigating the lawsuit.

    As a business you cannot control what customers are going to write.

    I suppose if the potential reviewers are monitored beforehand by a review management system you have an idea what will be written. Had that process preceded the review, the company might have ferreted out the writer’s intentions. Possibly.

    In any case if a business is incentivising customers to write a review and that does make the light of day via the written review there is a strong likelihood that a savvy competitor could pick it up and report it. In tough markets with tough competition that is quite likely

    Big potential problems a la this case. I’d heed Mike’s warnings.

  9. I’m having a very hard time understanding how/why a business offering a discount or some other promotion in exchange for feedback is illegal.

    It is not the offer that is illegal. It is the failure to declare a “material connection”. Because your reviews have been written by people who have received an incentive for doing so the legal thinking is that you are effectively deceiving the public if that relationship is not revealed.

    Obviously a coupon does not constitute a significant material basis but apparently it was enough in NY for the AG to go after the Tooth Whitening Company.

  10. Thanks for the additional info Mike. I do agree that simply asking for reviews/feedback will (at least) get you 1-2% of your customers responding. May not work as well for people in a service business that don’t see as many people each day. But I would still suggest that more feedback is a good thing, and there is nothing wrong with a business asking for it and even incenting it, as long as there is no pre-condition to the incentive.

    For the teeth-whitening guy, was the $10 coupon for only a positive review or any review? Is there any public information on this case I can read?

  11. Mike, I enjoy reading your blog. You mentioned that Amerifreight failed to disclose that their reviewers were being compensated. Does this only apply to Google? Because on Yelp (http://www.yelp.com/biz/amerifreight-peachtree-city), they indeed mentioned it in response to reviewer Didi B. on 3/6/2014.

    They stated “We do compensate for reviews at transportreviews.com, but on yelp, the BBB or google. We encourage customers to leave honest reviews so we can see how we perform and where we fall short. Reviews helps us to improve our services according the feedback we receive from our customers. We DO NOT compensate for only good reviews. All reviews are being compensated, good or bad.”

    Would this not absolve them of any blame? Or could the FTC have been monitoring them for a time prior to them posting that?

    Thanks.

    1. @Wayne
      I think, from my reading of the case (note I am not a lawyer) that EACH reviewer is obligated to note the financial relationship for the reviews to not be illegal. This is not about Google’s TOS but about the FTC truth in advertising requirements that potential customers understand that reviewers have been incentivized.

  12. Wow, getting reviews can big a big pain in the butt. I personally know of a local company that does give people who leave reviews for their business a gift. They don’t ask for reviews, but when that client comes in they get a gift. What slowly happens is they tell their friends and the cycle begins. Do you guys think that is wrong?

    1. @Carlos
      It strikes me that if it smells like a fish, its a fish. And defending yourself in these cases can be very expensive. So even if you or the business don’t think its incentivizing, if the Attorney General does you will have a very expensive defense on your hands.

  13. Well, it sounded like they were holding them hostage for a discount, versus what many seem to do which is provide extra service or product if they leave a review.
    How much they crack down on SMBs remains to be seen but the risk seems not worth any reward.

    1. The FTC is but one of several regulators you need to worry about. In NY State the attorney general has cited businesses for even giving out a coupon after the sale with no pressure for a positive outcome.

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