seller-incentivized reviews might be misleading (and violate FTC guidelines)

Vitamins Online, Inc. v. HeartWise, Inc., 2016 WL 538458,
No. 13-CV-982 (D. Utah Feb. 9, 2016)
The parties (plaintiff d/b/a NutriGold and defendant d/b/a NatureWise)
make and sell dietary supplements online, including on Amazon; their competing
products  include one containing garcinia
cambogia and one containing green coffee. 
Vitamins Online began selling NutriGold Garcinia Cambogia and NutriGold
Green Coffee products on before 2010, when there was little demand
or competition because they were not well known to consumers.  In 2011, Dr. Oz showcased green coffee
extract for weight loss on his show, causing demand to explode for those that
met his recommendations of at least 45% chlorogenic acid and without any
binders, fillers, or other artificial ingredients, including NutriGold Green
Coffee.  Similarly, demand for garcinia
cambogia extract for weight loss purposes, particularly that meeting his
recommendations, exploded after Dr. Oz recommended it.  The increased demand attracted competition,
including NatureWise, which advertised its products as having Oz-recommended
NatureWise then had its employees vote on the helpfulness of
reviews on its product pages, voting up positive reviews and down negative
reviews, increasing the likelihood that potential consumers would see positive
reviews first.  NatureWise also
encouraged customers to repost positive reviews on by offering them
free products or gifts cards. It would review and, in some cases, edit the
reviews before asking the customers to post them on  (As described, this behavior might also
trigger FTC scrutiny.) 
Vitamins Online alleged that NatureWise made false
ingredients claims, and impliedly false claims by manipulating the ranking and
number of positive reviews on 
NatureWise argued that this manipulation couldn’t be either literally or
impliedly false, because Vitamins Online didn’t show that the votes or the
reviews themselves were counter to the actual user experience or actually deceived
consumers. Vitamins Online did not contend that NatureWise employees were
voting as helpful reviews that were in reality unhelpful or that the reposts
from consumers were counter to their actual experience, but that the votes and
reviews gave a false impression that unbiased
consumers found these reviews helpful and chose to post positive reviews
without anticipating a reward.  Though
the Lanham Act was broad enough to cover these practices as misrepresentations
if they were deceptive, Vitamins Online didn’t show that consumers were
deceived.  The court denied summary
judgment to NatureWise because Vitamins Online might be able to obtain the
necessary evidence via consumers surveys, which the court granted it additional
time to do.
The court turned to injury; the requisite showing depends on
the relief sought. For injunctive relief, likely harm—existing or future—will
do, while proof of causation and specific injury is required for damages.  For comparative advertising or a two-player
market, most courts presume likely injury for purposes of injunctive
relief.  The Tenth Circuit has suggested
that this presumption might apply to an “obvious competitor,” which Vitamins
Online argued that it was, given their direct competition on Amazon and the
fact that NatureWise instructed its graphic designer to create an ad for
NatureWise similar to Vitamins Online’s product page. Vitamins
Online also offered evidence of declining sales corresponding to NatureWise’s
increasing sales and a drop in Vitamins Online’s ranking on Amazon.  The court declined to presume injury here,
though competition and the correlation in sales gains/losses was relevant to
showing injury.  Thus, genuine issues of
material fact existed on causation and injury.
Likewise, the court declined to apply a presumption of
irreparable injury, which it found arguably unsupported post-eBay even as applied to comparative
advertising.  Instead, there was merely a
genuine issue of fact.

from Blogger

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