Markets Wired

The Federal Trade Commission today announced its first case challenging a marketer’s use of fake paid reviews on an independent retail website. In settling the agency’s complaint, Cure Encapsulations, Inc. and its owner, Naftula Jacobowitz, resolved allegations that they made false and unsubstantiated claims for their garcinia cambogia weight-loss supplement and that they paid a third-party website to write and post fake reviews on Amazon.com.

“People rely on reviews when they’re shopping online,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “When a company buys fake reviews to inflate its Amazon ratings, it hurts both shoppers and companies that play by the rules.”

What the FTC Did to Protect Consumers

According to the FTC’s complaint, the defendants advertised and sold “Quality Encapsulations Garcinia Cambogia Extract with HCA” capsules on Amazon.com as an appetite-suppressing, fat-blocking, weight-loss pill.

The FTC alleges that the defendants paid a website, amazonverifiedreviews.com, to create and post Amazon reviews of their product. The FTC contends that Jacobowitz told the website’s operator that his product needed to have an average rating of 4.3 out of 5 stars in order to have sales and to, “Please make my product … stay a five star.”

As described in the FTC’s complaint, the reviews the defendants bought were posted on Amazon.com and gave the product a five-star rating. The complaint charges the defendants with representing that the purchased Amazon reviews were truthful reviews written by actual purchasers, when in reality they were fabricated.

The FTC’s complaint also alleges that the defendants made false and unsubstantiated claims on their Amazon product page, including through the purchased reviews, that their garcinia cambogia product is a “powerful appetite suppressant,” “Literally BLOCKS FAT From Forming,” causes significant weight loss, including as much as twenty pounds, and causes rapid and substantial weight loss, including as much as two or more pounds per week.

What the Settlement Means

The proposed court order settling the FTC’s complaint prohibits the defendants from making weight-loss, appetite-suppression, fat-blocking, or disease-treatment claims for any dietary supplement, food, or drug unless they have competent and reliable scientific evidence in the form of human clinical testing supporting the claims.

The order also requires the defendants to have competent and reliable scientific evidence to support any other claims about the health benefits or efficacy of such products. In addition, it prohibits them from making misrepresentations regarding endorsements, including that an endorsement is truthful or by an actual user.

The order next requires the defendants to email notices to consumers who bought Quality Encapsulations Garcinia Cambogia capsules detailing the FTC’s allegations regarding their efficacy claims. In addition, the order requires the defendants to notify Amazon, Inc. that they purchased Amazon reviews of their Quality Encapsulations Garcinia Cambogia capsules and to identify to Amazon the purchased reviews.

Finally, the order imposes a judgment of $12.8 million, which will be suspended upon payment of $50,000 to the Commission and the payment of certain unpaid income tax obligations. If the defendants are later found to have misrepresented their financial condition to the FTC, the full amount of the judgment will immediately become due.

The Commission vote authorizing the staff to file the complaint and proposed stipulated final order was 5-0. The FTC filed the complaint and proposed order in the U.S. District Court for the Eastern District of New York.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated final injunctions/orders have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works to promote competition and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook, follow us on Twitter, read our blogs, and subscribe to press releases for the latest FTC news and resources.