Legal Implications Of Online Reviews

More than ever, consumers rely on online reviews to make purchasing decisions. Research shows that people are often inclined to rely on the opinion of others as long as the opinions are impartial. However, not all online reviews are genuine or unbiased. This article explains the legal implications of online reviews in Australia.

Online Reviews

An online review is a peer-to-peer sharing of information about service providers, products or businesses. Online reviews can appear on various platforms, including the consumer’s social media account, dedicated review platforms, or the business’ website. Reviewers share their experiences so other consumers can make informed purchasing decisions. However, this system assumes that online reviews are genuine and independent. Dedicated review platforms and businesses must manage online reviews to ensure that consumers are not misled.

Review Platforms

Review platforms present product and service reviews about a range of different businesses. Popular examples of these internet sites include Urbanspoon for restaurants and Trip Advisor for hotels and accommodation.

Sometimes, a business has a commercial arrangement with a review platform. The purpose of this arrangement is to improve the business’s overall rating on the site. The platform may allow a business to “cherry-pick” reviews to appear on top or prevent the automatic upload of negative reviews. This may breach consumer law because it creates the misleading impression that a business has received mostly favourable reviews. Under Australian consumer law, a company must disclose a commercial relationship with a review platform. In addition, a review platform that uses an aggregate star rating system should reveal the total number of reviews next to the aggregate rating.

Fake Reviews

Review platforms and businesses have an obligation under the Competition and Consumer Act 2010 to remove fake or misleading reviews. A misleading review purports to be impartial but is written by someone with a vested interest. Those with interest include the business itself, a competitor, a paid non-consumer of the product, or a consumer who writes an inflated review for benefit.

Review platforms and companies can often identify a fake review from certain red flags, such as:

• It is part of a sudden surge in reviews about the business;
• It is overly positive or written in marketing language;
• It is written from the business’s IP address or email;
• Multiple reviewer accounts have similar usernames, email addresses or IP addresses; or
• Multiple reviews have similar content and style.

Removing And Editing Reviews

Review platforms and businesses cannot selectively edit or remove negative reviews for commercial reasons. It is misleading if the published reviews do not reflect the variety of submitted consumer opinions. A business should display a content moderation policy to ensure reviewers understand when and why the platform will remove an online review.

The Australian Competition and Consumer Commission (ACCC) investigates and prosecutes misleading business practices. In 2011, the ACCC prosecuted Citymove, a removalist business, for publishing misleading online reviews. Citymove admitted posting fake testimonials on their business website and paid a $6,600 infringement penalty.

To ensure that a business does not breach the consumer laws, it should not:

• Encourage friends and family members to write reviews unless they disclose their personal connection in the review;
• Write reviews of other businesses unless they have used the goods or services and the review is a genuinely held opinion; or
• Solicit other people to write reviews of the business or a competitor’s business unless they have used the goods or services.

Incentives For Reviews

A business that offers incentives in return for positive reviews risks misleading consumers and breaching the Competition and Consumer Act 2010. A business should only offer incentives equally to both complimentary and critical consumers, informing customers that the incentive is available regardless of the nature of the review. Also, the business must prominently disclose the incentive to users who rely on the reviews.

Defamation

Sometimes, a business feels that a negative review damages its reputation. Australian law allows small businesses with fewer than ten employees to file defamation claims over online reviews. A business must prove that the review is malicious or not the reviewer’s honest opinion. In fact, the business must establish that the reviewer intended to create enough damage to make the business lose customers. Reviewers who post negative or malicious content with an ulterior motive can face financial penalties.

A small business that feels defamed should move swiftly to minimise damage to its reputation. The first thing that a business should do is contact the website that published the review to ask for its removal. It is best to seek legal advice at this stage to understand the legal options. Because most online reviews are the reviewer’s honest opinion, it can be difficult to prove a defamation case.

In 2014, the Supreme Court of NSW ordered the Sydney Morning Herald to pay over $600,000 to former restaurateurs after publishing a scathing restaurant review. In 2003, a reviewer visited Coco Roco, a new three-million-dollar fine-dining restaurant. The resulting review claimed that the restaurant was expensive, unpalatable, poorly serviced, and flawed in concept and execution. The owners of Coco Roco were left distraught, patronage immediately declined, and the restaurant closed after six months.

The restaurateurs sued the media organisation for defamation. After an eleven-year court battle, the court ordered that Fairfax Media pay interest on top of the original damages. During the court appeals, Fairfax could not prove the review was fair or true. While this review was published in a newspaper instead of a review platform or business page, it demonstrates the courts’ willingness to order damages in online review defamation cases.

Armstrong Legal can help if you have any questions about online reviews, consumer protections or making a consumer complaint. Please contact the team on 1300 038 223 for legal assistance or representation.