New York Attorney General Eric Schneiderman announced settlements with Machinima, Inc. and three other companies in separate investigations regarding the companies' role in posting fraudulent content on the Internet. This includes fake Yelp reviews.
Machinima agrees to pay $50,000 for failure to require disclosure of payments to gaming experts endorsing Xbox on YouTube, while the other three companies (Premier Retail Group, ESIOHInternet Marketing, and Rani Spa) are also forced to pay penalties and agree to stop posting fake reviews.
According to the AG, Premier Retail Group solicited reviewers through ads posted on Craigslist to write positive reviews in exchange for free samples, vouchers, and other compensation even if they hadn't visited one of their locations. One such ad said, "Have a Strong Yelp account? Want to make money writing reviews?” The company paid a penalty of $50,000, $30,000 of which is suspended assuming compliance with the settlement agreement.
ESIOHInternet Marketing, according to the AG, solicited over 50 freelance writers on Craigslist and Fiverr to write over 200 fake reviews of its small business clients for $10 to $15 per review. The company agreed to stop posting fake reviews and related deceptive trade practices and pay a $15,000 penalty.
Finally, Rani Spa engaged in the efforts of a Candian businessman who offered to boost their online reputation by posting fake Yelp reviews. The company agreed to stop posting fake reviews and related deceptive trade practices and pay a penalty of $50,000.
A press release from the AG's office says:
Ensuring honesty on the Internet is of paramount importance to consumers because of the effect that online reviews can have in influencing consumers’ purchasing decisions. According to one survey, 90% of consumers say that online reviews influence their buying decisions. Multiple studies have concluded that online reviews can make or break companies. A 2015 Nielsen Study reveals that 66% of the global consumers trust consumer opinions posted online, making it the third-most-trusted source of information about businesses after word-of-mouth and recommendations from friends and family. A highly-cited Harvard Business School study from 2011 estimated that a one-star rating increase on Yelp translated to an increase of 5% to 9% in revenues for a restaurant. Cornell researchers have found that a one-star swing in a hotel's online ratings at sites like Travelocity and TripAdvisor is tied to an 11% sway in room rates, on average.
The settlements announced today are a continuation of the Attorney General’s commitment to ensuring accurate and reliable consumer reviews. In September, 2013, AG Schneiderman announced “Operation Clean Turf,” the largest investigation into astroturfing by a law enforcement agency, resulting in settlements with 19 companies that paid over $350,000 in penalties. After an extensive undercover investigation into the reputation management industry, AG Schneiderman’s office found that companies had flooded the Internet with fake consumer reviews on websites such as Yelp, Google Local, and CitySearch; used techniques to hide their identities, such as creating fake online profiles on consumer review websites; and paid freelance writers from as far away as the Philippines, Bangladesh and Eastern Europe $1 to $10 per review.
Yelp discusses the AG's announcement on its blog:
Through Yelp’s advanced recommendation software and Consumer Protection Initiative that includes undercover investigations, Consumer Alert program, and legal enforcement efforts, we’ve been able to mitigate the effect of these bad actors. We filed legal action in 2013 against James McNulty, the internet scammer paid by Rani Spa, which led to his admission that Yelp’s recommendation software had foiled his attempts to place fake reviews. ESIOH Marketing halted their services and took down their website in response to our demands in 2014, and Yelp caught Premier Retail Group (aka Infinite Beauty) soliciting reviews on Craigslist the same year, which resulted in us removing many paid reviews and closing associated user accounts.
The sad reality is that some businesses will always be tempted to try to game the system, which is why Yelp is committed to continuing our efforts and leading the industry in an aggressive stance against astroturfers. We commend the work here of the New York Attorney General and hope to see other regulators follow their lead.
Yelp posted its Q4 and full-year 2015 earnings earlier this week. The company reported 34% growth in cumulative reviews at about 95 million.
Image via Wikimedia Commons