Fake reviews in the marketplace: the EU stance and what to expect from the UK
Locations
The EU Directives
Consumers rely on online reviews when shopping or booking online, and online businesses must provide consumers with clear and visible information on the reliability of such reviews.
The Unfair Commercial Practices Directive (Directive 2005/29/EC) covers misleading practices in relation to consumer reviews. Articles 6 and 7 set out rules on unfair commercial practices, including unfair advertising, which directly harm the economic interests of consumers. The rules aim to safeguard the consumer's ability to make an informed decision.
From 28 May 2022, the Better Enforcement and Modernisation Directive (Directive (EU) 2019/2161) will further clarify the position on misleading reviews, by explicitly stating that selling, buying and submitting false consumer reviews in order to promote products is prohibited. The new directive also requires Member States to impose a clear obligation on marketplaces to inform consumers about the procedures that are in place to handle reviews. The Directive defines marketplaces as any software, operated by or on behalf of the trader, which allows consumers and traders to conclude online sales and service contracts either on the online marketplace's website or on a trader's website that uses computing services provided by the online marketplace.
CMA investigations
Fake consumer reviews are an issue that has caught the attention previously of the UK's Competition and Markets Authority (CMA). In May 2020, the CMA launched an initial investigation looking into suspicious reviews where, for example, a single user has reviewed an unlikely range of products or services, or where the reviewer has received incentives to review. In June 2021, the investigation led the CMA to open formal enforcement cases against Amazon and Google, alleging that they had not done enough to tackle fake reviews on their marketplaces.
In a discussion paper published at the beginning of this month, the CMA identified that sellers may be using review merging – where all reviews for closely related products are gathered in one place – to raise star ratings of items and artificially inflate the listings of products seen by customers. Although the practice of review merging is legitimate, the CMA expressed concerns about marketplaces' failures to protect consumers adequately.
What next?
The Commission will continue working with the CPC on the issue of fake reviews and support national authorities in their enforcement actions. While the UK is not bound to follow the new Directive, there have been calls to change the law in the UK to prevent fake reviews, and the CMA has been increasingly active more generally in regulating Big Tech. With Google, Amazon and Apple already on its sight, the CMA is expected to pay close attention to the work of the Commission and the CPC.
As the issue of fake reviews becomes an increasing focus for regulators, online sites and marketplaces in the UK and EU can expect to face increased scrutiny from enforcement authorities. Those in scope should:
- Review and, where necessary, update the information available to consumers on the site, to ensure transparency on how product reviews are obtained. This should also include – for example – considering how reviews are presented and/or grouped on the site so as to create a representative picture of the product;
- Review the internal processes and technical measures in relation to the verification of consumer reviews to ensure that reviews remain genuine and originate from consumers who actually purchased the product or service; and
- Review and update internal policies to guarantee that incentivised reviews and the submitting of, or the commissioning of others to submit, false consumer reviews or endorsements is strictly prohibited. This should also include – for example – submitting 'likes' on a particular product or review.
RECENT UPDATE
On 20 April 2022, the UK Government has announced reforms to protect the public from misleading reviews in marketplaces. While current plans include making it plainly illegal to commission or host fake reviews, consultations on the new legislation will seek to prevent traders and marketplaces:
- commissioning users to submit fake reviews,
- hosting consumer reviews without taking reasonable steps to check their authenticity, and
- offering or advertising to submit, commission or facilitate fake reviews.
The government is set to give the CMA enhanced powers to award compensation to consumers and directly enforce consumer law by imposing financial penalties for:
- breaching consumer protection laws, with penalties worth up to 10% of global annual turnover for businesses or up to £300,000 in the case of an individual,
- breaching undertakings given to the CMA, with penalties worth up to 5% of a business’ annual global turnover or up to £150,000 for an individual, and additional daily penalties for continued non-compliance, or
- non-compliance with an information notice, concealing evidence or providing false information, with penalties worth up to 1% of a business’ annual global turnover or up to £30,000 for an individual, and additional daily penalties for continued non-compliance
Additionally, the government plans to support consumers and traders to resolve disputes without court action by amending the ADR Regulations 2015 and requiring businesses offering consumers dispute resolution services to be accredited against these.
While the government is seeking further evidence on how best to regulate tactics used on online shoppers, the reforms underline the UK's commitment to adapt to new trends displayed within marketplaces as well as the need for those in scope to implement the steps necessary to ensure compliance.
For further information, please contact John Brunning or Andrea Carrera.
This article was co-authored by Andrea Carrera.