Sunday (Riley) Scaries
Last night as I was putting the final touches on two new scary stories regarding influencers and the Federal Trade Commission (FTC), a different FTC news story broke that was so interesting, I decided to push back the release of ”The Influencer’s Revenge” and ”Brand Pay Back.” (Yes, those are the titles of the two upcoming Scary Stories. One is a mini-legal primer for brands on what to look for when choosing an influencer to work with and what details should be included in the parties’ working agreement. The other is a mini-guide for influencers that highlights what they should include in their sponsorship agreements as well as updates on the FTC’s guidelines regarding sponsored social media posts.) Somewhat ironically, all three stories deal with the violations of the exact same law: Section 5 of the Federal Trade Commission Act (FTC Act).
The Story
In October 2018, a Reddit user claiming to be a former Sunday Riley employee, posted an internal company email on the site. In that email employees and interns of the brand were told by the company that they needed to go online and create fake Sephora profiles so they could post numerous “glowing” reviews of Sunday Riley products. The idea being, the fake 5-star reviews would boost the overall ratings of the products from about a 4.2-star rating to a 4.8-star rating. Thus, the higher the rating on Sephora, the more likely consumers were to purchase the expensive products. The email was extremely detailed in how staff was to go about doing so and with the subject line, “Homework time - Sephora.com Reviews” it was clear the company meant business in having employees be complicit in their deception.
Ironically, the email started out by emphasizing, “Credibility is key to the reviews!” and requested everyone at the company write “at least 3 reviews” over the next week and the following week for two different Sunday Riley products. (Note: I did not add the emphasis cited in this sentence. This is how they appeared in the original email which you can see in its entirety here.) The staffers were encouraged to create Sephora.com profiles “ASAP” and they were first instructed to write a few makeup, hair or nail product reviews (all product categories Sunday Riley does currently doesn’t sell in) so as to build a credible profile history. The company’s next instructions are what make this story truly next level.
The staff was specifically told to log on to the company’s virtual private network (VPN) when creating the profiles and writing the reviews. The reason being, a VPN hides a computer’s IP address. Thus, one person could write a series of fake reviews under many different profiles because the IP address is different every time. Presumably, this is something Sephora looks for when determining the legitimacy of an online profile or review. The staff was also told to create Sephora profiles that were a mix of different identities, ages, locations etc. They were told their reviews for Sunday Riley products should be “glowing” and effective in trying to “sell the product to someone who may relate” to what they say about it. For instance, “[i]t helps to make yourself seem relatable - - like you know how hard acne is and you’ve tried everything, and this one actually works” the email read. Employees who needed help with coming up with things to say were encouraged to speak to the brand’s CEO, Sunday Riley, herself. Completed reviews were then to be screenshot and sent to a specific brand staffers. Employees were also told that if they saw a negative review, they were to DISLIKE it because “…after enough dislikes, it is removed. This directly translates to sales!!” It should be noted that this didn’t happen just one time. This happened numerous times over a two year period.
The Law
Through a myriad of both federal laws and government agencies, the US tries to protect American consumers from free market issues such as false or misleading product claims, unsafe products, and harassment by telemarketers and spammers. Section 5 of the FTC Act expressly prohibits brands from partaking in unfair methods of competition and from committing unfair or deceptive acts or practices in the marketplace. In addition to providing the law, Section 5 also provides the FTC the power to investigate and prosecute businesses whose conduct is believed to be deceptive and/or anticompetitive. Thus, should a claim be made that a business is violating the FTC Act, Section 5 gives the commission the power to hold administrative hearings to determine what is going on.
Here it was the Reddit post that triggered the FTC to take action. The FTC’s initial complaint accused Sunday Riley of making false or misleading endorsement claims and deceptive failure to disclose material connections with endorsers- both violations of Section 5. In other words, Sunday Riley (both the company and the CEO herself), were charged with making false or misleading claims that the fake reviews reflected the opinions of ordinary users of the the products. And, that Sunday Riley deceived the public by not disclosing that the reviews were actually written by Ms. Riley or her staff.
The Ruling
The company “defended” their actions by saying that employees were encouraged to post fake reviews to push back against competitors who, “often post negative reviews.” It is unclear from the FTC filings whether there was any actual evidence brought by Sunday Riley to support their position. (You can read the FTC’s initial complaint against the company here and the agency’s final order and findings here.) However, even if that were true, it does not absolve Sunday Riley of their wrongdoing. The deceptive practices Sunday Riley openly admitted to committing are against Section 5, which means, they are against the law and cannot be excused by reason or purpose. As such, Sunday Riley settled with the FTC this week. Under the terms of the settlement, Sunday Riley was not forced to admit any wrongdoing. (Nor did they.) All Sunday Riley had to do was agree not to write fake reviews again in the future. Consumers will not be provided with refunds and the company was not fined nor did it receive any form of punishment. However, for two of the five FTC Commission members, Sunday Riley’s promise to never break the law again and the lack of any other form of punishment for intentional consumer deceit was not enough. Commission members Rohit Chopra and Rebecca Kelly Slaughter addressed their concerns in a separate letter (here) that said:
The Commission’s investigation confirmed the whistleblower’s claim and found that the scheme to generate fake reviews of Sunday Riley products involved Ms. Riley herself…Rather than relying on satisfied customers to generate real buzz about her products, she directed her employees to write glowing reviews and bury negative ones, while offering detailed instructions on how to avoid detection…Going forward, the FTC should seek monetary consequences for fake review fraud, even if the exact level of ill-gotten gains is difficult to measure…Today’s proposed settlement includes no redress, no disgorgement of ill-gotten gains, no notice to consumers, and no admission of wrongdoing.
Final Thoughts
Even though it is the job of the FTC to protect consumers against deceptive practices, they arguably failed to do so here. The FTC settlement with Sunday Riley lacked any teeth that would deter the brand, or any other brand for that matter, from doing the same in the future. However, while the settlement failed to punish Sunday Riley, the online beauty community is ready to make the brand pay for their misdeeds. Beauty lovers demand truth and transparency from cosmetic companies. What Sunday Riley did amounts to sacrilege for most in the industry. Consumer reviews are an important and vital form of research most purchasers use when deciding whether to buy a beauty product. (This is particularly true if the products are high-end which Sunday Riley is considered.) By having staffers routinely file fake reviews about acne and other skin care issues they don’t necessarily have, Sunday Riley really hit on a sensitive topic. Many skin care consumers are seeking products to cure issues they are self-conscious about. As a skincare expert, Ms. Riley knows this first hand. So it seems especially cruel that she would have employees create false “relatable” profiles to trick desperate people into buying her products. It is disingenuous at best and morally repugnant at worst.
The fact that the brand did this for over two years is somewhat unthinkable and their argument that two wrongs should make a right is juvenile and frankly…odd. None of the company emails discovered in the FTC investigation made mention of the the alleged acts of competitors. In fact, the emails were timed around new product launch dates. So in actuality, Sunday Riley’s goal was simply to make their newest releases high ranking on Sephora.com. Perhaps the only way the brand will truly learn from this is via the PR nightmare and social media fallout (which has been swift and strong) that has occurred since Monday’s announcement. In fact, the beauty community fury could hurt the brand more than any FTC fine ever would. Consumer trust has been lost and only time will tell how the brand will recover…if at all.
Clearly, posting fake reviews online is not a great way to garner customers. However, I am not sure brands should look at this matter and see the FTC’s reluctance to fine Sunday Riley as precedence. The fact that nearly half the commission took issue with the lack of penalties imposed upon the company, is a cautionary tale for all companies thinking of doing this. A public statement about their displeasure with the final outcome of their investigation sends the message that perhaps the next company whom violates Section 5 in a similar manner, may not get off as easily.