Customer online reviews: avoiding Fair Trading Act pitfalls

In recognition of the weight consumers place on online reviews, in recent years, both the New Zealand Commerce Commission (Commission) and the Australian Competition and Consumer Commission (ACCC) have brought prosecutions against businesses engaging in misleading conduct in respect of online customer reviews.

Commerce Commission v Bachcare Ltd

In 2019, the Commission brought a prosecution against Bachcare for manipulating online reviews regarding its holiday accommodation services. This was the first case of its kind in New Zealand. Bachcare’s marketing staff removed negative comments from customers’ online reviews and withheld negative star-ratings. The extent of offending extended to 22% of the properties and 3.4% of the reviews.

Bachcare’s conduct was found to have created an artificially positive impression of the standard of service Bachcare provided. In the Auckland District Court, Judge Singh concluded that Bachcare had taken advantage of consumers’ trust in online reviews. Judge Singh held Bachcare’s conduct was liable to mislead and was in contravention of section 11 and section 40 of the Fair Trading Act 1986 (FTA). Judge Singh considered that Bachcare was too slow in removing the offending representations and ordered it to pay $117,000 for deterrence purposes.

Australian case law

The Australian Competition and Consumer Commission has also been active in policing misleading conduct with regards to online customer reviews.

Australian Competition & Consumer Commission v Aveling Homes Pty Ltd

The Australian Federal Court ordered Aveling Homes to pay A$380,000 for engaging in conduct liable to mislead consumers in connection with online review websites.  Aveling Homes falsely represented that it was independent of the review website when it actually controlled it. Aveling Homes withheld bad consumer reviews on the website which skewed its star-rating to create a positive impression of its services.

The Court found the Group Sales and Marketing Manager personally liable for A$25,000 for being knowingly involved in the conduct.

Australian Competition & Consumer Commission v Meriton Property Services Pty Ltd

Meriton was fined A$3 million for engaging in misleading and deceptive conduct by ‘masking’ the reviews of its properties on TripAdvisor. Once a customer had completed their stay, they would be emailed and prompted to leave a review of their Meriton experience on TripAdvisor. Meriton would deliberately enter the guest’s email details incorrectly into the TripAdvisor system to prevent them from receiving the prompt and leaving a negative review.

This conduct occurred during periods where infrastructure or services had failed and Meriton suspected a customer would leave a negative review, for example, if an elevator had broken. Meriton deliberately directed this conduct to create an artificially favourable impression of the standard of their services. Consumers rely on independent review platforms to educate their consumer decisions and by masking their processes Meriton took advantage of this trust to further their business.

Ensuring that your use of online reviews accords with the FTA

Online reviews must be collated and presented in a way that gives consumers complete and accurate information, so as to enable them to make informed consumer decisions. Misleading online reviews will contravene the FTA and expose an individual to a fine of up to $200,000 or a body corporate to a fine of up to $600,000.

When publishing reviews consider whether you:

  • are aware of any relationships with the Company that may affect the impartiality of a review?
  • reasonably believe that the reviews of the good/service are genuine and not altered in any way?
  • are satisfied that the reviews are being presented in a way that creates a false or misleading impression?
  • have a sufficiently robust review policy in place, that company staff adhere to?

If you would like advice regarding your obligations under the FTA regarding online reviews and how they might affect you or your business, please contact one of the members of Lane Neave’s national Competition and Consumer Protection Law team.

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