FTC Fines Fashion Company $4.2 Million for Blocking Negative Customer Reviews

In a first-of-its-kind case, the Federal Trade Commission required Fashion Nova to pay $4.2 Million for blocking negative customer reviews in violation of the FTC Act. Shortly after, the agency released new guidance for online retailers and review platforms. As the FTC continues to crack down on major companies, these new standards are worth review.

The FTC's Recent Allegations with Fashion Nova

Fashion Nova, LLC, is a California-based "fast fashion" retailer that describes itself as "the world's leading quick-to-market apparel and lifestyle brand." The company operates an e-commerce platform, as well as a handful of brick-and-mortar locations, and has a major presence in social media, including over 25 million followers and partnerships with celebrities like Cardi B, Megan Thee Stallion, Justin Bieber, and Kendall Jenner.

In its allegations against Fashion Nova, the FTC alleges that Fashion Nova has been misleading its customers in violation of Section 5 of the U.S. FTC Act by blocking negative customer reviews of its products. Specifically, a recent press release by the FTC states that the retailer "misrepresented that the product reviews on its website reflected the views of all purchasers who submitted reviews, when in fact it suppressed reviews with ratings lower than four stars out of five."

In the complaint, the FTC calls out Fashion Nova for their comment review framework. Specifically, Fashion Nova used a third-party online review system that automatically posted four-and-five star reviews to the website, but held lower-starred reviews for the company's approval. However, the company never approved nor posted the hundreds of thousands of lower-starred reviews. To settle the allegations, Fashion Nova has agreed to pay a little over $4 million and will be forced to post all reviews of products currently being sold on its website. This is not Fashion Nova's first run-in with the FTC. In April 2020, it had to pay $9.3 million for failing to ship products in a timely manner and illegally issuing gift cards in place of refunds.

FTC Releases New Guidance for Online Retailers 

In addition to the settlement with Fashion Nova, the FTC also recently released guidance about customer review management that online retailers should carefully consider. According to the "Soliciting and Paying for Online Reviews" guidance, retailers are encouraged to carefully review the processes by which reviews are collected and posted. While collecting reviews, companies should not prevent, discourage, or intimidate people from submitting negative reviews. Companies should also not only ask for reviews from people who will leave positive ones. Moreover, the FTC encourages companies to have "reasonable processes in place to verify that reviews are genuine and not fake, deceptive, or otherwise manipulated" and to treat positive and negative reviews equally. Finally, for reviewing publications, the FTC staff encourages companies to publish all reviews and not to display reviews in a misleading way.  

Primary Takeaway

Companies should provide notice to their digital marketing and website management teams. Tampering with reviews is prohibited by the FTC and may be viewed as an unfair or deceptive trade practice in violation of the FTC Act. Retailers are encouraged to review their existing practices to ensure compliance. If you have any questions about making sure your company's policies are aligned with the latest FTC updates and guidance, please contact Anthony Lupo, Eva Pulliam, Dan Jasnow, Destiny Planter, or the Arent Fox professional who usually handles your matters.


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