Rental Review Roundup: FTC Targets Deceptive ‘testi-phony-al’ Scheme To Lure Renters To Paid Housing Platform | Venable LLP
Last week, the Federal Trade Commission and six states sued rental listings platform Roomster, Corp. as well as its owners for allegedly charging consumers for access to fake ads enhanced by fake reviews they purchased. The agency also announced another settlement with the operator of AppWinn, which is an online review provider that generated and posted thousands of fake 4 and 5 star reviews on Roomster’s platform.
Roomster, which is based in New York City, operates a website and mobile app where users pay fees to access housing, rental and other lifestyles, such as sublease applications and flatsharing. According to complaint, rather than the millions of “authentic” and “verified” ads it claimed to offer, Roomster allegedly failed to verify ads or guarantee their authenticity, and also used fake reviews to lure users to its platform. in order to pay for access to ads that often turned out to be fake. The FTC alleges that Roomster and its landlords earned tens of millions of dollars off the backs of mostly low-income renters and college students looking for reliable, affordable housing.
The complaint further alleges that Roomster purchased more than 20,000 reviews from AppWinn that were generated through more than 2,500 fake iTunes and Gmail accounts. Dubbed “testi-phony-als” by the FTC, these fake reviews were part of “drip campaigns” that involved a “steady stream of reviews” that were used to lure potential users to the Roomster platform.
The complaint recounts several telling exchanges between Roomster owners and AppWinn to lead Roomster to the top search result for people looking for roommates. The sheer volume of fake reviews has also served to dilute the negative reviews from real users.
While the case against Roomster is pending in federal court in New York, the AppWinn operator separately entered into a proposed order in which it agreed to pay $100,000, to identify the fake store reviews of Apple and Google apps and to be permanently banned from selling consumer reviews and recommendations.
This case is the latest chapter in the FTC’s campaign against false claims. In October last year, the agency targeted fake online reviews and other misleading endorsements when it sent out a Notice of criminal offenses to more than 700 businesses, ranging from retailers and product companies to advertising agencies.
The notice warned companies that they could face significant civil penalties of up to $43,792 per violation (the current amount is $46,517) if they use false reviews and misleading endorsements to mislead consumers. misleading consumers. While the practices at the center of the Roomster case, if true, are particularly egregious, advertisers should keep in mind that federal and state regulators can and will review legitimate reviews, especially when the inducement is improperly disclosed or the notice is misrepresented. .