FTC Cracks Down on Reviewers

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FTC Cracks Down: New Rules For Audiophile And Home Theater Reviews

The FTC's new ruling exposes hidden perks audiophile reviewers receive for glowing reviews. This crackdown aims to restore trust in audio gear reviews.

cecritic.com

 

[Ampexed]

That swamp has been ripe for a good draining for, what, 50 years?

 

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That swamp has been ripe for a good draining for, what, 50 years?

It’s about time

 

[A-Line]

I really don't expect the glossy mags to be compliant unless forced by penalty of heavy fines. Others will simply close up shop rather than comply.

 

[Ron Resnick]

Here is the text of the final rule:

https://www.ftc.gov/system/files/ftc_gov/pdf/r311003consumerreviewstestimonialsfinalrulefrn.pdf

 

[Ron Resnick]

• Buying Positive or Negative Reviews: The final rule prohibits businesses from providing compensation or other incentives conditioned on the writing of consumer reviews expressing a particular sentiment, either positive or negative. It clarifies that the conditional nature of the offer of compensation or incentive may be expressly or implicitly conveyed.

This addresses the relationship between reviews in print and online audio magazines and advertising by manufacturers, distributors and dealers in those magazines. "Pay to play" reviews for advertising is banned where the pay is conditioned upon a "particular sentiment."

Where the rubber meets the road on this issue is the analysis of whether advertising payments to the magazines by manufacturers, distributors or dealers are conditioned upon a review of their products with a particular sentiment. We know reviews are not explicitly or implicitly so conditioned, but I suspect that a statistical analysis of manufacturers' advertising payments and positive reviews of those manufacturers' products would reveal a pretty darn strong correlation.

This prohibits a company and an influencer or a consumer from entering into an implicit understanding that the influencer or the consumer will receive a discount in return for posting a favorable review of the company's products. Long-term equipment "loans" now are more questionable than ever.

Sure the reviewer enjoying the components on long-term loan would say that there is "no condition for a particular sentiment." But how many of the components Jonathan Valin has today on long-term loan were never the subject of a positive review?

Does the long-term loan of one component from a manufacturer and the review of another component from that same manufacturer violate the rule or not? Such certainly would violate the spirit, if not the letter, of the rule.

Regulators inevitably argue that "one may not do indirectly what one may not do directly." The defendant's rebuttal is that "mechanical rules have mechanical solutions."

The "particular sentiment" element is likely what would get reviewers off the hook.

 

[Ron Resnick]

• Review Suppression: The final rule prohibits a business from using unfounded or groundless legal threats, physical threats, intimidation, or certain false public accusations to prevent or remove a negative consumer review. The final rule also bars a business from misrepresenting that the reviews on a review portion of its website represent all or most of the reviews submitted when reviews have been suppressed based upon their ratings or negative sentiment.

This section would have applied to the Cameron Oatley/dCS affair.

 

[Ron Resnick]

My initial feeling is that this is a very big deal for the high-end audio industry!

 

[Ron Resnick]

• Insider Reviews and Consumer Testimonials: The final rule prohibits certain reviews and testimonials written by company insiders that fail to clearly and conspicuously disclose the giver’s material connection to the business. It prohibits such reviews and testimonials given by officers or managers. It also prohibits a business from disseminating such a testimonial that the business should have known was by an officer, manager, employee, or agent. Finally, it imposes requirements when officers or managers solicit consumer reviews from their own immediate relatives or from employees or agents – or when they tell employees or agents to solicit reviews from relatives and such solicitations result in reviews by immediate relatives of the employees or agents.

This prohibits an audio manufacturer from disseminating a review or testimonial by its officers, employees or its agents without disclosure of the relationship.

 

[Ron Resnick]

Please know that the only thing that matters is the actual text of the regulation. A summary description or characterization of the regulation is not authoritative.

As of the day and time of this post I am copying and posting descriptions of the regulation sections from an FTC release (and not the text of the final rule itself) only because for some reason I cannot copy and paste here off of my iPhone sections of text of the actual regulation from the PDF released by the FTC.

 

[Ron Resnick]

This is a more complicated analysis. It takes time and "working" with the rule to parse through the meaning and implication of every word.

But it appears to me upon a quick, initial reading that an influencer in a small industry like high-end audio can qualify as a "well-known person"* in that industry under the rule, and that such persons' endorsements would qualify as "Celebrity Testimonials."

*I see this elaboration in the comments discussion section of the regulation: "For example, an influencer may be well known to a subset of individuals interested in a particular subject."

 

[ssfas]

It's quite interesting. You have to look at the explanation of the intention of §465.4 starting on page 77.

The rule is:

§ 465.4 Buying Positive or Negative Consumer Reviews. It is an unfair or deceptive act or practice and a violation of this part for a business to provide compensation or other incentives in exchange for, or conditioned expressly or by implication on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative, regarding the product, service, or business that is the subject of the review.

There is an interesting comment on page 80 that seems pertinent to most audio reviews:
A consumer organization said in its comment that, “[w]hen a reviewer feels pressured to express a certain sentiment, regardless of how that pressure was generated, the net result is a deceptive review,”

The obvious pressure is the knowledge that the publication you are writing for receives significant advertising revenue from the supplier of the product under review.

A way to test these rules would be for say 100 audio manufacturers who do not advertise in The Absolute Sound or Stereophile to club together and each send one or two products to those magazines and see how many are reviewed over, say, the next 12 months. If the reviews over that period are (a) predominantly from advertisers, (b) mostly positive, (c) any unsolicited product reviews generally less positive, then a collective complaint might lead to some enforcement.

This would be easy for cable companies. Just put them in the post with a reply paid label. There are more than enough cable companies.

The other way to successfully enforce would be to prove that Michael Fremer is an AI generated bot. That shouldn't be difficult.

Of course TAS and the like could just say that their magazine is an outlet for advertising infomercials for their commercial sponsors and not independent reviews. I doubt many people would be that bothered because it's stating the obvious.

 

[tima]

Federal Trade Commission Announces Final Rule Banning Fake Reviews and Testimonials

The Federal Trade Commission today announced a final rule

www.ftc.gov

This is about reviews generally and does not 'target' audiophile reviews.

I never heard of "cecritic.com". On the surface they are anonymous. They don't say who is funding them, but they do sell advertising. Although they are a political organization, I have no problem with a statement of rules from the FTC. I suggest relying on official FTC communication rather than the heavily editorialized account on the cecritic.com web site.

The FTC Is Not Targeting "Audiophile Reviews" - Twittering Machines

Michael Lavorgna's Twittering Machines: HiFi with a twist

twitteringmachines.com

My initial feeling is that this is a very big deal for the high-end audio industry!

I don't, because the established reviewing community of authors is basically honest. I say ''established reviewing community of authors' because there are so many Web sites popping up that publish what they claim are audio reviews.

It is not a perfect world and there always will be charlatans. Readers have an obligation to know what they are reading.

 

[tima]

This is a more complicated analysis, but it appears to me upon a quick, initial reading that an influencer in a small industry like high-end audio can qualify as a "well-known person" in that industry under the rule, and that such persons' reviews and posts would qualify as "Celebrity Testimonials."

 

[ssfas]

This is a more complicated analysis, but it appears to me upon a quick, initial reading that an influencer in a small industry like high-end audio can qualify as a "well-known person" in that industry under the rule, and that such persons' reviews and posts would qualify as "Celebrity Testimonials."

The definition of Celebrity Testimonials is:

Celebrity testimonial means an advertising or promotional message (including ...) that consumers are likely to believe reflects the opinions, beliefs, or experiences of a well-known individual who purchased, used, or otherwise had experience with a product, service, or business.

This aims to ban things like someone says Brad Pitt loved their speakers when he once walked past a store with them in the window and smiled in the general direction of said store.

Plus, Brad Pitt is a celebrity. Michael Fremer isn't, nor is anyone else in the audio industry. How many people in the audio business have IP or image rights of any value outside of the audio industry?

The whole idea of celebrity testimonials is that someone who is actually famous (not Michael Fremer, but possibly Brad Pitt) works with a brand for advertising and promotional purposes, they are not independently reviewing the product.

There may be some people who actually believe George Clooney likes Nespresso coffee. That's fine because he is a celebrity and he is clearly promoting the product. He doesn't have to like it. His advertisements cannot be construed as an honest review.

 

[andromedaaudio]

The best example lately was all those famous people pumping FTX.

On you tube everybody is pumping products these days lol.

 

[Ron Resnick]

Federal Trade Commission Announces Final Rule Banning Fake Reviews and Testimonials

The Federal Trade Commission today announced a final rule

www.ftc.gov

This is not the text of the actual regulation. I already posted the text of the actual regulation.

Here it is again: https://www.ftc.gov/system/files/ftc_gov/pdf/r311003consumerreviewstestimonialsfinalrulefrn.pdf

I never heard of "cecritic.com". On the surface they are anonymous. They don't say who is funding them, but they do sell advertising.

It is irrelevant. I made no reference to it or its comments.

Although they are a political organization, I have no problem with a statement of rules from the FTC. I suggest relying on official FTC communication rather than the heavily editorialized account on the cecritic.com web site.

Again, the only part of the FTC release that is completely authoritative is the regulation itself:

https://www.ftc.gov/system/files/ftc_gov/pdf/r311003consumerreviewstestimonialsfinalrulefrn.pdf

 

[Ron Resnick]

This is about reviews generally and does not 'target' audiophile reviews.

The FTC Is Not Targeting "Audiophile Reviews" - Twittering Machines

Michael Lavorgna's Twittering Machines: HiFi with a twist

twitteringmachines.com

This is a largely irrelevant point. Whether audiophile reviews are mentioned (targeted) in the regulation is irrelevant.

Absent an exception (the rule applies to your activities but we are carving you out of the rule) or an exclusion (the rule does not apply to your activities; you are outside the scope of the regulation), or over time, the pronouncement or the evolution of a "safe harbor" for high-end audio arising from the "no-action" letter process, this FTC regulation attaches to the business activities defined by the regulation. High-end audio land does not have to be enumerated or mentioned explicitly in the regulation for the regulation to apply to our industry.

Through administrative actions and through enforcement actions by the FTC under this new regulation, as adjudicated and moderated by inevitable litigation against the FTC by respondents in those administrative actions and enforcement actions, and through private litigation by plaintiffs asserting state law claims consistent with this new regulation if states incorporate portions of this new regulation into their own laws against deceptive practices,* the meaning of this new regulation and its many provisions, and its applicability to a wide range of business activities, will be refined and will evolve over time.

For now, at least, this new regulation means what it says -- and it applies to high-end audio.

*A regulation promulgated by an administrative agency of the executive branch does not create directly a private right of action.

 

[Mike Lavigne]

as a General Manager of a large auto dealer having played the review game in Auto Retailing since the dawn of the internet; it did present businesses with challenges. especially for a Honda car dealership in a competitive metro market. Honda's customer base expected the highest performance and integrity.

Google reviews could be quite influential with our customers. and many customers would attempt to leverage reviews to gain advantages. we had a very strong and rigorous customer feedback and review reaction process. and i was the point person for it for decades. there was a whole industry grown up parallel to this situation within the car business that catered to car dealerships to manage and manipulate reviews. and there was a line in the sand that some dealerships crossed to play games, even torpedoing competing in-market dealers.

manufacturers and dealers separately surveyed every customer and also solicited reviews. pay plans were many times seriously impacted by them. dealerships would lose award opportunities, even could be refused opportunities for acquisition of additional sales points, based on survey results.

recently manufacturers did back away from much of this as customers were suffering from survey fatigue and employees were leaving the industry over this issue. one thing about the car business i don't miss and am especially glad to be rid of is customers who would be abusive and leverage things in this way. it was easily the worst part of my job. i never had an employee issue that caused me to lose sleep. but plenty of customer issues i could not get out of my mind.

customer satisfaction is a slippery slope. the internet and social media has run amuck. customers are ultra empowered and the balance tips into chaos quickly.

glad i'm no longer any part of it.

i realize that product reviews and endorsements are in some ways a separate subject. but not completely.

 

[Ron Resnick]

In some respects I think this regulation actually hits a valid target. While researching on Google a local contractor I discovered that some of the contractor's reviews were completely fake ("posted" by people who didn't exist), and other reviews were from former or current employees or agents (pretending to be unrelated third parties). I suspect this goes on pretty commonly. Under this regulation both of these kinds of deceptions are prohibited.

The FTC eventually will initiate enforcement actions against particular alleged violators to make examples of the application of the regulation. In the meantime a regulation like this has in terrorem value against prospective wrongdoers.