Jash from Star Plus Group worked hard on a digital marketing strategy for his electrical contracting business. He wrote glowing testimonials and reviews with 5 star ratings and posted them online under fictitious names. Jash could see it was a great strategy as he watched his website ranking improve through fake customer ratings.
But Justice McElwaine took a very different view of the strategy. He found that posting the false reviews and testimonials was illegal because it was false, misleading and deceptive, in contravention of the Australian Consumer Law.
This article contains an analysis of the digital marketing strategy and the reasons why Star Plus Group was ordered to pay a large penalty, was restrained from posting false testimonials and reviews, was ordered to publish a corrective notice and was ordered to pay the Commissioner’s legal costs.
The decision is: Commissioner for Consumer Affairs (SA) v Star Plus Group (in liq) [2023] FCA 778, a decision of the Federal Court of Australia (11 July 2023).
The false Testimonials and Reviews
Star Plus Group is a small sized business which provides contract electrical, plumbing and gas fitting services to commercial and residential customers in Adelaide in South Australia.
Between June 2017 and May 2020, the Star Plus Group was very busy posting false testimonials and reviews. It posted 126 false testimonials on the Yellow Pages website and 22 false reviews on the Product Review website.
The reviews contained favourable comments on the services purportedly provided, were in the form of consumer recommendations, The star ratings posted with the reviews caused the Star Plus Group to be highly rated by comparator websites. It even used the star ratings to promote its own website.
The Star Plus Group admitted that its conduct contravened the Australian Consumer Law.
The Yellow Pages Testimonials
When a business advertises their services on the Yellow Pages website, customers can leave testimonials.
This is an example of a false testimonial published by Star Plus Group under the fake name “Mateo B”, which was accompanied by a fake photograph:
Thanks so much! I absolutely recommend - Jash and Tom did an amazing job with our panel upgrade today. They were done so quickly and even checked other rooms and fixed problems without charging us a dime more than the estimate. Thanks so much! I will absolutely recommend your services to everyone that needs it.
The Court observed that there was a degree of sophistication undertaken to disguise the location of the person responsible for the posted reviews. The Star Plus Group created the reviews on a local ISP or used software such as Virtual Private Network. How else could you explain reviews from Nairobi, Kenya, the Netherlands or Los Angeles, United States?
The Court found that the testimonials were made in contravention of sections 18(1) 29(1)(e) and (f) of the Australian Consumer Law because they were false, were from fictitious individuals and the content of each testimonial did not reflect the opinion of a genuine consumer.
The Product Review website
Businesses can register on the Product Review website and customers can review and give a star rating to the business from 1 to 5 stars (with 5 stars the highest).
This is an example of a fake testimonial posted under the fake name “Bradley” of Adelaide who rated the business 5 stars out of 5:
Thank you Star Plus Group for the prompt and professional service. We don’t go anywhere else for our electrical and plumbing needs. Would highly recommend your service to others.
Because it was necessary to submit a tax invoice to post on this website, the Star Plus Group created a fictitious tax invoice addressed to the fictitious “Bradley” at a fictitious address in South Australia, with the fictitious description “work performed tradesman”, with a fictitious charge of “$482 plus GST”.
All purported customers of Start Plus Group on this website gave a 5 star customer rating and a positive and detailed review highly recommending the services of Star Plus Group.
The Court found that the reviews were false, misleading or deceptive and made in contravention of the Australian Consumer Law.
The Star Plus website
The Star Plus Group website stated that it had a “4.8 Yellow Pages Rating”.
The Court found this statement was a false representation which contravened sections 18(1) 29(1)(e) and (f) of the Australian Consumer Law because it was based on one or more false reviews. Further, Star Plus Group contravened section 29(1)(b) of the Australian Consumer Law by falsely representing that its services were of a particular standard, quality, value or grade.
The Court Orders
The Court made these orders:
Declaratory relief
The Court declared that the Star Plus Group (the old company being in liquidation and the new one which was trading) had contravened the Australian Consumer Law (ACL). The Court said:
The making of declarations will serve to formally record the outcome of the proceeding, will publicise why the conduct amounts to a contravention of the ACL and is likely to facilitate the primary objective of the proceeding being to deter the respondents, and other persons, from engaging in the same or similar conduct in the future.
Injunctive relief
The Court granted an injunction to restrain Star Plus Group “from making a false or misleading representation that purports to be a genuine testimonial from a customer who had engaged its services” for a period of 3 years. The Court said:
It is … common knowledge … that almost every commercial business in Australia has a website in order to promote the goods and services on offer and to attract customers. … many websites employ a ratings system the same as, or similar to, the ratings that were manipulated by the false testimonials and generated by the third party Product Review website. The obvious inference that is … that businesses with higher ratings are likely to attract more customers than businesses with lower ratings. There is a strong public interest in the framing of relief in this case that is designed to protect the public from this type of manipulative misconduct.
Advertisements
The Court ordered that a corrective notice be published on the Star Plus Group (SPG) website which summarised the findings and the orders made, and that it was to remain for 60 days.
Pecuniary penalties
The Court summarised the relevant factors it considered in setting the penalty as follows:
The conduct was deliberate, planned and required a degree of sophistication. It was dishonest. It was intended to gain for SPG a financial advantage and, correspondingly, cause financial detriment to its competitors. . SPG is not a large business and doubtless is likely to suffer commercially once these orders are pronounced and become publicly available.
The importance of genuine customer reviews, testimonials and corresponding star ratings is obvious in a competitive environment where consumers are entitled to expect truth and honesty by business proprietors and which section 29 of the Australian Consumer Law emphatically requires as the standard of business conduct in Australia.
Business proprietors must understand that severe consequences are the likely outcome of false product or service testimonials and ratings. This type of conduct is corrosive of fair competition, insidious and likely difficult to detect.
Star Group was self-represented. It said that all it could afford to pay was $25,000. It produced financial accounts which showed it was not profitable. The previous trading company was in liquidation and the penalty was imposed only for fake reviews and ratings by the current trading company from 13 November 2019 to 15 May 2020.
The Court ordered a total penalty of $125,000, consisting of $15,000 for each of 5 fake testimonials, $20,00 for the fake review and invoice on the Product Review website and $30,000 for the false rating on the Star Plus Group website. The penalty was set high enough to prevent it from being treated as the cost of doing business.
Conclusion
Reviews should be independent and reflect the genuine opinion of the person who experienced the product or service.
Fake reviews are illegal marketing practices, which the consumer regulator – the Commissioner for Consumer Affairs (South Australia) (as in this case) or the Australian Competition and Consumer Commission (in other cases) will prosecute as breaches of the Australian Consumer Law in the public interest.
It’s smarter for a business to leave marketing strategy to the professionals, who know how to keep on the safe side of the Australian Consumer Law.