FTC and Six States Take Action Against Fake Reviews and Claims

The FTC and six states just announced that they had filed a lawsuit against Roomster – a platform through which people can find rooms and roommates – along with its owners, alleging that they had inundated the internet with tens of thousands of fake positive reviews to bolster their false claims that properties listed on their Roomster platform are real, available, and verified.” At the same time, the regulators announced a settlement with an individual who allegedly sold Roomster many of the fake reviews.

Roomster advertised that its platform had millions of verified listings” in a safe community with real members worldwide.” To test how well Roomster verified the listings, the regulators listed a room for rent on the platform at an attractive price. Had Roomster attempted to verify the review, it would have learned that the address of the listing was actually a US Postal Office commercial facility. According to the complaint, though, Roomster never asked any questions.

To bolster its marketing campaign, the company allegedly flooded the internet and app stores with tens of thousands of 4- and 5-star reviews, many of which were fake. In fact, Roomster bought over 20,000 reviews from AppWinn alone. (More on them later.) Emails between Roomster and AppWin show a detailed plan addressing how and when the reviews should be posted. According to the complaint, the number of positive fake reviews diluted the real reviews, many of which warned of scams on the platform.

Although the case against Roomster is pending, the owner of AppWin agreed to sign a proposed settlement with the FTC and six states. Under the settlement, he has agreed – among other things – to notify the Apple and Google app stores that Roomster paid him for posting reviews, to specifically identify those reviews, and to pay a total of $100,000 to the states. The proposed settlement also bans him from selling consumer reviews or consumer endorsements.

Although our regular readers would never engage in the type of practices alleged in this complaint, the case is worth noting for a number of reasons. Among other things, the case demonstrates that the FTC and state AGs continue to focus on the integrity of reviews. This case involves fake reviews, but regulators have applied similar principles in cases that involved legitimate reviews, when those reviews were incentivized, but the incentives weren’t clearly disclosed. If nothing else, hopefully we’ve saved you from renting a fake room in a post office.