Businesses today rely extensively on social media, Facebook likes or other social media mentions, and online reviews for their company’s success. And because consumers rely on these reviews in making purchasing decisions the honesty and integrity of the reviews and the reviewers are essential to avoid consumer deception. For these reasons, companies must increasingly focus on the accuracy of their reviews, as well as the authenticity of the reviews about their competitors.
Take for example a recent lawsuit filed by Casper Sleep Inc. Casper Is a mattress startup company made headlines for selling $100 million worth of its bed-in-a-box mattresses that are “the size of a mini fridge” in its first year. Casper had initially signed up for affiliate marketing with three companies owning the websites Mattress Nerd, Sleepopolis, and Sleep Sherpa. Casper, however, ended its affiliate marketing after concluding that the marketing companies did not fairly disclose to customers that its mattress reviews were not completely unbiased. But after ending its relationship, Casper’s high ratings across these websites allegedly plummeted.
In response, Casper filed three separate lawsuits against the marketing companies for deceptive marketing practices. All three suits make substantially identical claims, alleging that the website operators misrepresented themselves as independent sources and not making clear disclosures, as outlined by the Federal Trade Commission’s advertising guidelines.
The lawsuit against Defendant Derek Hales best sums up these lawsuits: Hales owns the website http://www.sleepopolis.com (“Sleepopolis”), which features his reviews of mattresses, pillows, bedding, and other sleep products. Casper claims:
“Through his website … Hales holds himself out as an independent and unbiased mattress reviewer. In reality, however, Hales collects sales commissions from Casper’s competitors, whose products Hales reviews. Hales’s reviews steer [website viewers] toward products from whose makers Hales receives these benefits, and away from products— such as Casper mattresses—from whose makers Hales receives nothing. In this way, Hales is part of a surreptitious economy of affiliate scam operators who have become the online versions of the same commission-hungry mattress salesmen that online mattress shoppers have sought to avoid.
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By falsely conveying that his reviews are independent and unbiased, Hales has damaged Casper’s reputation, distorted the consumer marketplace, and deprived Casper of significant revenue due to lost sales.”
The lawsuits were only recently filed in April of this year. Also, an amended complaint was just filed on June 10, 2016. So there is a lot of litigation to be had before a decision is reached. Accordingly, whether Casper’s lawsuits are successful remains to be seen.
Even so, these lawsuits should be a wake-up call for any business with a social media or online presence. More specifically, companies need to carefully evaluate their Internet advertising and marketing efforts to make sure they do not violate applicable state or federal law.
In this regard, the Federal Trade Commission (FTC) regulates online marketing. Among the FTC regulations is the requirement that companies conspicuously disclose if an individual is compensated for his or her testimonial about a product.
Also, attorney generals for various states have increasingly scrutinized affiliate marketing relationships. Such relationships have also spawned various private lawsuits across the country.
For more information about Internet and social media laws affecting your business, contact Internet attorney Jason Shinn.