In this age of social media, companies and brands have faced countless criticisms for their lack of transparency, copyright infringements disguised in the form of “flattery or inspiration” and we can’t forget the many inclusivity flops.
Brands, including beauty brands, are now dedicating more of their marketing budgets to paying influencers for their “honest” reviews in hopes that they can convince the public to purchase their products. What’s more striking is that consumers are heavily relying on social media for help in determining where to place their value and money. With these stakes, some companies have turned to deceptive practices in a search for social media popularity.
Recently, the Federal Trade Commission (“FTC”) entered into settlement agreements and consent orders with two companies and their respective CEO’s after finding that companies engaged in deceptive acts or practices in violation of the Federal Trade Commission Act: top skincare brand, Sunday Riley Modern Skincare LLC (Sunday Riley) and Devumi, LLC (Devumi), a social media marketing company.
In settling with Sunday Riley, the FTC found that from 2015 to 2017 the company directed its employees to create fake online accounts on Sephora.com and post fake five-star reviews on its own products. A whistleblower reported that the requests came directly from Sunday Riley managers and the CEO herself, Ms. Riley. Employees were also directed to dislike any negative reviews because after a while, according to Ms. Riley, a certain amount of dislikes will remove the negative reviews altogether. The stipulated order bans Sunday Riley and its CEO from misrepresenting the status of any product reviewer. It also orders the company to disclose any “material” personal connection it has with any product endorser including third parties that are affiliated with the product.
In settling with now defunct Devumi, the FTC found that the company had used its websites to sell fake social media engagement through bot and sock puppet accounts where one person pretends to be multiple users and controls these accounts as such. Devumi sold fake followers on many social media platforms such as LinkedIn, Twitter, YouTube, Vine, Sound Cloud and more. It sold fake followers to just about anyone who wanted to increase their popularity and influence to the public. The company’s customers included lawyers, musicians, writers, and actors. Between 2015 and 2017, Devumi grossed $15 million dollars from their deceptive activities. They were able to deceive the public on many fronts. The FTC order bans Devumi from selling and assisting the sale of social media influence to third parties using social media platforms. Devumi is also banned from further misrepresenting and assisting others in doing so. Devumi, fined for $2.5 million dollars but only ordered to pay a $250,000 judgment, is the first of its kind.
Neither Sunday Riley nor Devumi were forced to admit wrongdoing and consumers were not able to receive refunds for their purchased beauty products. It is clear that these business practices can lead companies in trouble with the FTC, and such settlements may deter others businesses from selling deceptive media practices. In the meantime, consumers can:
- Determine whether positive reviews are provided by paid endorsers
- Compare online reviews from many sources such as Amazon, Sephora and Ulta beauty, and
- Understand popularity can be bought