New York's attorney general set up a fake yogurt shop in Brooklyn in a sting operation to trap fake online review companies.
Eric Schneiderman announced agreements with 19 firms Monday that commissioned fake reviews and several reputation-enhancement companies that helped place reviews on sites like Citysearch, Google, Yahoo and Yelp. They were fined a total of $350,000.
As part of a year-long investigation, dubbed Operation Clean Turf, officials posed as the owners of a Brooklyn yogurt shop that had garnered negative reviews online. Fake reviews, written in Bangladesh, the Philippines and Eastern Europe, were commissioned from reputation management firms for as little as a dollar a piece. The investigation found reputation companies even wrote fake reviews of their own businesses denying that they wrote fake reviews.
"Consumers rely on reviews from their peers to make daily purchasing decisions on anything from food and clothing to recreation and sightseeing," Schneiderman said. "This investigation into large-scale, intentional deceit across the Internet tells us that we should approach online reviews with caution. And companies that continue to engage in these practices should take note: "Astroturfing" is the 21st century's version of false advertising, and prosecutors have many tools at their disposal to put an end to it."
He said that 90% of consumers claim online reviews influence their buying decisions. Schneiderman cited a Harvard Business School study from 2011 that estimated that a one-star rating increase on Yelp translated to an increase of 5% to 9% in revenues for a restaurant.
Schneiderman said some so-called search engine optimization (SEO) companies routinely offered fake reviews as part of their services. When Schneiderman's office called leading SEO companies in New York to request assistance in combating negative reviews for their fake yogurt shop, representatives from some of these companies offered to write fake reviews and post them on consumer-review websites.
The investigation found that SEO companies were using advanced IP spoofing techniques to hide their identities, and had set up hundreds of bogus online profiles on consumer review websites to post the reviews. Companies advertised for fake reviewers on listing site Craigslist and Freelance.com. One SEO firm required fake reviewers to have set up a Yelp account that was at least three months old and to have written at least 15 reviews before they were commissioned to write fake posts.
Aaron Schur, Yelp's senior litigation counsel, said the company was taking "many steps" to ensure the integrity of its reviews including legal action and sting operations. "We applaud NY attorney general Schneiderman for his willingness to tackle the issue of illegal fake reviews head on, and for his success in shutting down these operators. We look forward to continuing to cooperate with the New York attorney general's office and any other interested law enforcement office or regulator to protect consumers and business owners from efforts to mislead," he said.
Agreements were reached with a charter bus operator, a teeth-whitening service, a laser hair-removal chain and an adult entertainment club. Schneiderman's office found evidence that dentists, lawyers and an ultra-sound clinic had all commissioned fake reviews.
One company that reached an agreement with Schneiderman was Staten Island bus company US Coachways. The company currently has one and half stars on Yelp, one being the lowest possible rating. "NEVER, NEVER USE THESE GUYS!!!" one reviewer wrote in 2012.
According to Scheiderman Edward Telmany, US Coachways's chief executive, wrote to staff in 2011 warning them that online criticism was hurting their business. "We get bashed online," Telmany wrote. "We are loosing [sic] money from this." Telmany told his employees to write favorable reviews and posted a five-star review himself on Yelp that began: "US Coachways does a great job!" He commissioned freelance writers to write other positive reviews
The company agreed to pay $75,000 in fines and stop writing fake reviews. The fake reviews have been removed. Telmany did not return a call for comment.
Original headline: New York crackdown on fake online reviews sees 19 companies fined
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