Fake Online Reviews Cost 19 Companies $350,000

fake-stampWhen people read online reviews of a business, it's often difficult to figure out which reviews are legitimate and which aren't much more than a paid advertisement placed by either the company itself, or someone who got some type of kickback for writing a positive review, such as a gift certificates or free merchandise.

Some companies are being proactive and deleting or marking reviews they suspect to be fake, such as Yelp with their Consumer Alerts. The FTC already considers fake reviews illegal.

New York is going further. Regulators today announced their crackdown on illegal reviews, and have reached agreements with 19 different companies who will stop posting and soliciting fake reviews as well as pay $350,000 in penalties.

The crackdown, dubbed "Operation Clean Turf", targeted both companies who purchased the fake reviews, as well as the companies who are creating the fake reviews. A total of seven companies offering "reputation enhancement" services were caught in the year-long investigation, along with their clients they post reviews for.

What types of businesses were caught in the crackdown? They include a laser hair removal chain, and adult entertainment club, the charter bus service U.S. Coachways, and a teeth whitening service.

New York investigated by using a honeypot. One of their investigators claimed to be a business owner who is the victim of unfair bad reviews online, and was looking to solicit the services of a reputation management company to turn it around with some positive reviews.

Many of those companies took the bait. Interestingly, one of them was Main Street Host, whose inbound marketing specialist Olivia Roat posted last year complaining about fake reviews:

Fake reviews undermine the credibility of the Internet. Olivia Roat, a marketing consultant for Main Street Host, a Buffalo digital marketing agency, discussed her growing realization that fake reviews are omnipresent on the company’s blog last year. "Say it ain’t so!" she wrote. Who, she wondered, could be trusted?

Apparently not Main Street Host, which was one of the 19 companies that signed an agreement to desist. The agreement says Main Street Host "engaged in astroturfing on behalf of over 30 clients," using a term referring to writing fake reviews. Executives there could not be reached for comment on Sunday.

The company agreed to pay a $43,000 fine for writing fake reviews for their own company and their clients.

There is a lot of value in having a business or service that reviews very well on places such as Yelp, and the problem has been gaining more and more momentum as more people turn to online reviews to help them choose a a company.

In a 2011 Harvard Business School study, a researcher found that restaurants that increased their ranking on Yelp by one star raised their revenues by 5 to 9 percent. A 2012 Gartner study estimated that one in seven recommendations or ratings on social media sites like Facebook would soon be fake. And there have been instances where all the reviews of a product have been secretly bought and paid for by the seller of the product.

The fact that New York is cracking down on those who are soliciting and creating fake reviews should be a wake-up call to many marketers who may have engaged in this type of activity. In this case, New York was going back through fake reviews as far back as at least October 2010, which is quite a long time when it comes to online marketing.

When you consider the case of Main Street Host, they were fined $43,000, but it does make you wonder how much money they actually made from creating fake reviews for 30 different clients as well as any business brought into them from their own fake reviews for the company. In that regards you have to consider that the benefits of those positive reviews far outweighs the fine, because when it comes down to it the fines are quite low when you consider the payoff.

With this investigation, only 19 companies were penalized, although some of them did work on behalf of multiple clients, but you have to expect the number of actual fake reviews for New York businesses would be exponentially higher. And most people think nothing of writing one or two positive reviews for their own business or the business of a friend.

This investigation does raise the question about whether companies should try and remove some of the reviews they had placed that are fake, or just hope no one investigates. While this was only New York, businesses in other states who have engaged in this type of fake reviews activity should be worried that other states may do the same thing, because it really wouldn't be that surprising to see them many other states jump on the bandwagon to investigate fake reviews in their own states, if they haven’t already begun their own investigations.

According to the press release, these were the 19 companies penalized:

  • A&E Wig Fashions, Inc. d/b/a A&E and NYS Surgery Center
  • A.H. Dental P.C. d/b/a Platinum Dental
  • Body Laser Spa Inc.
  • The Block Group, LLC, d/b/a Laser Cosmetica and LC MedSpa, LLC
  • Bread and Butter NY, LLC d/b/a La Pomme Nightclub and Events Space
  • Envision MT Corp.
  • iSEOiSEO
  • Medical Message Clinic and HerballYours.com
  • Metamorphosis Day Spa, Inc.
  • Outer Beauty, P.C., Lite Touch Plastic Surgery, P.C., Staten Island Special Surgery, P.C., Sans Pareil Surgical, PLLC
  • Stillwater Media Group
  • Swan Media Group, Inc. and Scores Media Group, LLC
  • US Coachways Limousine, Inc. and US Coachways, Inc.
  • Utilities International, Inc. d/b/a Main Street Host
  • The Web Empire, LLC
  • Webtools, LLC and Webtools Internet Solutions Ltd.
  • West Village Teeth Whitening Service, LLC; Magic Smile, Inc., aka Magic Smile
  • XVIO, Inc.
  • Zamdel, Inc. d/b/a eBoxed