Cengage Advantage Books: Business Law Today, The Essentials 11th Edition by Roger LeRoy Miller

Exercise 1

ADAPTING THE LAW TO THE ONLINE ENVIRONMENT
The FTC's Guideline Regulating Astroturfing
A stroturfing is a term that was first used in politics. Long before the Internet existed, the preferred way of influencing legislation was to "write your congressperson." Groups opposed to or in favor of particular legislation would send out a call for letters to be sent to members of Congress. In that way, it appeared that there was a "grass roots" campaign to initiate, approve, or oppose the legislation. AstroTurf is artificial grass. Hence the term astroturfing.
Today, the term also refers to posting fake reviews of products and services online in return for payment. Some have argued that Microsoft is one of hundreds of companies that engage in astroturfing to promote their products.
Astroturfing may take the form of tweets, blog posts, Facebook comments, and Amazon.com reviews, among others. This modern-day version of word-of-mouth advertising is popular because consumers tend to trust reviews written by other consumers. An estimated 60 percent of consumers read online reviews before making a purchase.
Astroturfing Is Everywhere
It has been estimated that from 20 to 40 percent of all online reviews are fake. Indeed, among social media reviews alone, more than 15 percent are undercover promotions, according to the technology research and advisory company Gartner.
A plethora of online reviewing companies pay their reviewers. These reviewers may use a company-written review, which is then posted on several online forums under the writers' own user names or e-mail addresses. It is certainly legal to write such reviews, but failing to disclose the connection between the writer and the employer is illegal.
The FTC Steps In
The act that created the Federal Trade Commission (FTC) states, "Unfair methods of competition and dissemination of false advertisements are illegal." c Nonetheless, the FTC did not at first actively pursue online astroturfers. State attorneys general, however, began to sue companies that created fake reviews. One of the first cases occurred in New York in 2009 when that state's attorney general sued Lifestyle Lift, a cosmetic surgery company. Its employees were posting fake consumer reviews online.
Finally, for the first time in over twenty-nine years, the FTC amended its guidelines in an effort to crack down on false reviews posted online. By the time you read this, these guidelines will be in effect. They require full disclosure of all payments to bloggers and consumer reviewers. For instance, anyone who is on a company's payroll must disclose that information when posting online comments, testimonials, or reviews about the company's products or services.
Consumer advocates believe that the new guidelines include blogs by average consumers. If a consumer blogger has received free product samples, the blogger must disclose this fact when reviewing the product. The FTC also can now require proof to support claims about a product. Many companies will have to revise their marketing strategies to ensure compliance with the new FTC rules.
Critical Thinking
In the long run, is astroturfing likely to benefit a company that is selling an inferior product Why or why not