In 2017, the FTC filed a complaint in the Southern District of Florida against World Patent Marketing and its owner, alleging that they operated an invention-promotion scam, promising would-be inventors help — for considerable fees — with launching their inventions, help which the company then failed to provide. Mixed in with the garden variety fraud and deception allegations was an interesting recital of the defendants’ efforts to suppress consumers’ negative reviews of the company’s services (or lack thereof).
The defendants allegedly threatened consumers who complained with lawsuits and criminal prosecution. The company also allegedly even used physical threats against their unhappy customers. And, they included a “confidentiality” provision in their contracts with customers, prohibiting them from making any negative statements about the company in social media or elsewhere. These acts, FTC alleged, violated the FTC Act as “unfair.”
Yesterday, the FTC announced a settlement with the company. The order imposes a $25,987,192 judgment that will be partially suspended when $78,670 in frozen funds are transferred to the Commission and the company owner has paid $976,330. In addition, under the proposed settlement order, the defendants are banned from invention promotion activities, misrepresenting any good or service, and suppressing the availability of truthful negative comments or reviews by consumers.
Why is this of note? While the defendants’ actions here are, as alleged, rather extreme, it seems likely that, as consumer reviews become a more and more important source of information to consumers, companies’ efforts to keep them from public view will come under more scrutiny by regulators and others. The FTC not only has the Consumer Review Fairness Act in its arsenal (see our previous Alert) but as this case illustrates, its traditional unfairness authority as well. Marketers take heed.
Online reviews by existing customers can be an important source of information for prospective purchasers. The positive reviews and the absence of negative reviews convinced or likely convinced many consumers WPM was a successful and legitimate company. Defendants’ suppression of negative online information impeded potential customers from making informed decisions about whether to enter into a business relationship with WPM.