Back in April 2022, we reported on an FTC action against the New York-based online room and roommate finder platform, Roomster, its owners, as well the company that sold Roomster the fake reviews for use on the platform. According to the complaint filed in federal court in New York by the FTC and several states, and asserting violations of the FTC Act and the applicable state analogs, Roomster “inundated the internet with tens of thousands of fake positive reviews to bolster their false claims that properties listed on their Roomster platform are real, available, and verified” and to drive traffic to the platform.
At that time, FTC settled with just the company that sold the reviews to Roomster. Of course, the settlement barred the company from selling reviews or misrepresenting the veracity of any review. It also required the company to notify Apple and Google that Roomster paid it for reviews and to identify all the purchased reviews and when they were posted. The company also was required to pay $100,000 to the states.
Now, there’s a settlement with Roomster itself, along with its owners. The proposed order permanently bans Roomster and its owners from paying or otherwise providing incentives for consumer reviews, and from using or disseminating reviews where they have a relationship with the reviewer that might affect the review’s weight or credibility. And it includes a monetary judgment of $36.3 million and civil penalties totaling almost $11 million payable to the states.
Significantly, the proposed order also requires Roomster to take steps to monitor its affiliate marketers. It must routinely review, without notice – on at least a monthly basis – the affiliates’ marketing materials; investigate consumer complaints about them; and provide refunds to consumers who were impacted by their conduct that violated the order. It must also halt payments and terminate affiliates who pose as consumers or otherwise misrepresent themselves.
A new rule on fake reviews is likely coming. Even without it, as this proposed order shows, the FTC and states clearly have the interest and means to attack them. But with it, the FTC will be able to get civil penalties too, just like the states.
“Baiting renters with fake reviews and bogus listings harms those trying to find an affordable place to live and cheats honest competitors, undermining the online marketplace.” ~ Samuel Levine, Director of the FTC’s Bureau of Consumer Protection