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FTC settling case over 'fake' iTunes reviews

PR firm Reverb is settling with government over charges that its employees posed as customers to write fake game reviews on iTunes.

A PR firm accused of writing phony iTunes reviews of its clients' iPhone apps is settling the case with the Federal Trade Commission.

As part of the proposed settlement (PDF), PR firm Reverb Communications and owner Tracie Snitker must remove any iTunes reviews that were written by Reverb employees posing as ordinary customers and who failed to disclose a relationship between Reverb and its game developer clients. The agreement also bars Reverb and Snitker from posting further reviews on iTunes that pretend to be from independent consumers or that neglect to disclose any connection between the company and its clients, according to the FTC.

Screenshot by CNET

"Companies, including public relations firms involved in online marketing, need to abide by long-held principles of truth in advertising," Mary Engle, director of the FTC's Division of Advertising Practices, said Thursday in a statement. "Advertisers should not pass themselves off as ordinary consumers touting a product, and endorsers should make it clear when they have financial connections to sellers."

Based in Twain Harte, Calif., Reverb handles PR, marketing, and sales services for video game developers. The FTC had charged that the firm posted reviews of mobile gaming apps on iTunes on behalf of its clients between November 2008 and May 2009. Reverb got itself into hot water with the government (PDF) by allegedly giving the impression that the reviews came from independent consumers and failing to reveal that it was hired to promote those games and that it took in a percentage of any sales. The FTC's complaint alleged that such disclosure would have been crucial to consumers deciding whether or not to buy the games.

In response to a request for comment on the FTC settlement, Snitker e-mailed CNET the following statement on behalf of Reverb:

"During discussions with the FTC, it became apparent that we would never agree on the facts of the situation. Rather than continuing to spend time and money arguing, and laying off employees to fight what we believed was a frivolous matter, we settled this case and ended the discussion because as the FTC states: 'The consent agreement is for settlement purposes only and does not constitute admission by the respondents of a law violation.'"

According to Snitker, the issue was specific to a small number of independent iTunes apps that several Reverb employees had installed on their own iPhones using their own money and accounts. The posts were not mandated by Reverb, added Snitker, nor were they part of any company policies.

"Seven out of our 16 employees purchased games which Reverb had been working on and to this the FTC dedicated an investigation," she said in her statement.

"The FTC has continuously made statements that the reviews are 'fake reviews,' something we question," continued Snitker in her statement. "If a person plays the game and posts one review based on their own opinion about the game should that be constituted as 'fake?' The FTC should evaluate if personal posts [from] these employees justifies this type of time, money, and investigation. It's become apparent to Reverb that this disagreement with the FTC is being used to communicate their new posting policy."

The posting policy (PDF) mentioned by Snitker was issued by the FTC last year. Under these guidelines, people who post reviews online are required to disclose any relationship with the seller, especially if money changes hands. The guidelines apply to employees of the seller as well as to those of the seller's ad agency.

Stacey Ferguson, a staff attorney with the FTC's division of advertising practices, spoke to CNET about the case. Responding to Snitker's question over the use of the term "fake reviews," Ferguson said that the FTC defined such reviews as giving the appearance that they were written by ordinary consumers when they were not and were in fact employees of Reverb. But she added that the agency was less concerned with the content of the reviews and more about the failure of Reverb to reveal the relationship with its clients.

"We're most concerned about the disclosure of the connection," explained Ferguson. "So whether or not the employee actually did love the game or not, that wasn't really of consequence to us. We want them to disclose that they did have an affiliation with Reverb and the client when they're making those endorsements."

The FTC hasn't revealed which mobile game apps were involved or whether any of the developers were included in the investigation. Ferguson said that the FTC made the decision not to charge the game developers in this particular case, but beyond that she couldn't divulge any further details.

Reverb's Web site indicates that it has worked on iPhone games for at least two game developers, including Publisher X (maker of such titles as Beer Bounce, Real Deal Blackjack, and Zen Pinball Rollercoaster) and Pangea Software (known for such games as Billy Frontier, Enigmo, and Cro-Mag Rally).

Pangea CEO Brian Greenstone said Friday in an e-mail that he had just learned of the settlement the previous day.

"We haven't done anything with Reverb in ages, so I'm not really sure what goes on over there these days," he said.

The agreement won't be binding until September 24 during which time it will be viewable online for comments by the public. Making such agreements available to consumers and businesses is standard operating procedure for the FTC as an agency serving the public, according to Ferguson. Though public comments wouldn't prevent the order from being finalized, they can sometimes prompt the agency to modify some of the details. But Ferguson said that the current agreement will likely stand as it is now.

Updated 12:30 p.m. PDT: Added comments from FTC staff attorney Stacey Ferguson.