17 Mar Legacy Learning Systems Pays: Misleading Reviews
A headache from a misleading ad?
A company has to pay $250,000 for misleading their customers through fake reviews of their product.
Legacy Learning Systems Inc., owned by Lester Gabriel Smith is the distributor of the Learn and Master Guitar, a home learning guide to play guitar in the form of DVDs and written manuals. The company was charged by the Federal Trade Commission (FTC), based on illegal advertisements of their product by hiring “Review Ad” online affiliates. These internet affiliates promote the product on their blog posts, articles and other online advertisements by acting as end consumers. The endorsements made by these affiliates are closely hyperlinked to the company’s website. In return, the affiliates get compensation (cash or free products) on every sale of the product, as the result of their endorsements and referrals. FTC reports that the company benefited around $5 million from these false reviews.
Misleading online reviews are rampant these days, and the government considers this advertisement tactic similar to false and deceptive advertising. Issued in 2009, the revised FTC’s guides mandate every company to keep their endorsements and testimonials in line with FTC regulation. Under the revised Guides, a customer’s endorsements and testimonials of a product or a service, should be based on his or her own experience, in case the experience is not typical, typical end results should be disclosed. In addition, the revised guides also explain that any connection between the reviewer and the seller, in money or free products- transaction that is not typical- should be disclosed.
Learning Legacy is just one of the several companies that violated the FTC Act. A few years ago, Lifestyle Lift through their product, Turkey Necks, was caught with the same violation and was charged to pay $300, 000.
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