A cautionary tale about misleading online customer reviews

Online tasking platform Service Seeking recently landed itself in hot water with the Australian Competition and Consumer Commission (ACCC) for its misleading customer review system. The site was hit with a $600,000 penalty by the Federal Court last month and was ordered to publically display its wrongdoings with a correction notice to be featured prominently on its website and app for 60 days: ACCC v Service Seeking Pty Ltd [2020] FCA 1040.

Background

Service Seeking operates as an online platform which connects businesses with customers seeking assistance. Businesses offering a wide range of services can create a business profile on the site and customers can post jobs and receive quotes from businesses in their area.

Platforms such as Service Seeking rely heavily on online reviews. Customers undoubtedly use reviews to compare services and to make informed decisions when selecting a service provider. The reviews are a prominent feature of the business' profile and the overall star rating is displayed in the search results. The business with the best overall star rating is displayed first in the searches.

From July 2016 to November 2018, Service Seeking gave businesses the option to use its "Fast Feedback" system. After a job was completed, businesses had the option to use Fast Feedback to gain a customer review. Businesses were able formulate a review and send it to the customer for confirmation. A business could select from a number of feedback options: that the job was completed "on time", "on budget", "to a professional standard", or "with good communication". A star rating out of five could also be chosen.

The site would then automatically generate an online review and send it to the customer's email address. The customer had the option to agree to publish the review or reject the review and write their own. If the customer did not take any action within 42 to 96 hours of receiving the email, then the review and star rating would be automatically posted on the business's profile.

The "Fast Feedback" feature was used to create about 21,000 reviews between July 2016 and November 2018. Approximately 80% of the reviews were published by default, meaning the reviews were automatically published without customer input.

The ACCC commenced proceedings against Service Seeking in the Federal Court in relation to its online reviews. The ACCC alleged that Service Seeking had engaged in misleading or deceptive conduct and false or misleading representations, in contravention of the Australian Consumer Law, which is found at Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the ACL).

In particular, it was alleged that Service Seeking had contravened section 29(1)(e ) of the ACL. This section states, inter alia:

Section 29: False or misleading representations about goods or services

A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

(f) make a false or misleading representation concerning:

• a testimonial by any person; or

• (ii) a representation that purports to be such a testimonial; relating to goods or services; ...

The Federal Court's decision

Service Seeking admitted liability for the contraventions and the parties filed a statement of agreed facts and a minute of consent orders to determine the proceeding.

Essentially, Service Seeking accepted that the automatically generated reviews had the effect of purporting to be testimonials by the customers themselves. It also accepted that by allowing the publication of the reviews, it engaged in misleading or deceptive conduct, as well as conduct that was likely to mislead the public as to the nature, characteristics and the suitability of the services of the businesses on the website.

The Court found that the Fast Feedback system was harmful for a number of reasons. Primarily, it deprived potential customers of an opportunity to accurately compare services provided by the businesses on the website. It also unfairly disadvantaged businesses who did not use Fast Feedback and whose profiles only contained genuine customer reviews.

In his judgment, Justice Jackson said:

"Service Seeking engaged in a systematic course of conduct for the self-interested purpose of increasing the attractiveness of its website to businesses and consumers in a manner which it must have known would give rise to numerous instances of misleading conduct. This was an abuse of the trust that customers can be inferred to have placed in the site."

The Court ordered that Service Seeking:

• Be restrained for a period of three years from publishing any review without the express written consent of the customer;

• Pay a pecuniary penalty of $600,000 for breaches of the ACL;

• Publish a corrective notice on the homepage of its website and app setting out its conduct and the finding of the Court; and

• Establish and implement a compliance program.

Service Seeking was also ordered to pay the ACCC's costs in the sum of $40,000.

A lesson on online reviews and testimonials for real estate professionals

Online reviews and testimonials from clients are often used by agents to promote their services in order to attract listings and potential clients. As this case clearly demonstrates, there are significant penalties which may apply if it transpires that a review is not genuine or it does not accurately reflect the views of the person who provided it.

Agents should also bear in mind that Article 9(a) of the REIQ Standards of Business Practice provides that members must not make false or misleading representations or statements about properties or businesses, or engage in any conduct which is likely to mislead or deceive.

Read real estate agency practice related facts and tips here.