FTC settles its first case over fake paid reviews on Amazon

The Federal Trade Commission said Tuesday it's settled its first action against a marketer who used fake paid reviews to boost sales of its product on Amazon .

The FTC had accused Cure Encapsulations of paying AmazonVerifiedReviews.com to write and post fake reviews to maintain an average Amazon rating of 4.3 out of 5 stars for the company's garcinia cambogia weight-loss supplement. The agency had also accused the company of making false and unsubstantiated claims, including reviews that said the product caused weight loss of two or more pounds each and "literally blocks fat from forming."

Customer reviews have been a critical part of Amazon's business for more than 20 years, with the written reviews and 5-star rating system providing buyers and sellers with a helpful form of accountability and sign of popularity and quality of products. But, like with any rating system, people try to work around it.

Amazon says it has invested heavily with automated and manual controls to monitor the hundreds of millions of reviews on its site to maintain their authenticity and prevent reviews that may deceive customers. The company has been filing legal actions to fight against scams since 2015 and has already sued more than 1,000 registered sellers involved in allegedly creating fake product reviews on its sites.

"People rely on reviews when they're shopping online," Andrew Smith, director of the FTC's Bureau of Consumer Protection, said in a statement. "When a company buys fake reviews to inflate its Amazon ratings, it hurts both shoppers and companies that play by the rules."

Under the terms of the proposed settlement, Cure Encapsulations is barred from making claims about the health benefits of dietary supplements without supporting clinical evidence. The defendants are also required to notify its customers of the allegations against it and identify for Amazon which reviews it purchased.

A $12.8 million judgment was levied against Cure Encapsulations, but it will be suspended when the company pays $50,000 to the FTC and fulfills other tax obligations. The full amount of the judgment will be immediately due if the commission finds the company misrepresented its financial condition.

Amazon applauded the FTC action against Cure Encapsulations.

"Amazon invests significant resources to protect the integrity of reviews in our store because we know customers value the insights and experiences shared by fellow shoppers," an Amazon spokesperson said in a statement. "Even one inauthentic review is one too many. We have clear participation guidelines for both reviewers and selling partners and we suspend, ban, and take legal action on those who violate our policies."

The operators of Cure Encapsulations and AmazonVerifiedReviews.com, which is no longer a viable website, couldn't immediately be reached for comment.