In this post DirectPayNet examines fake reviews, especially in the beauty and supplements industry, and the impact this has on merchant processing.
Heading into 2020, fake reviews would be the last thing on your mind. But for us, it’s an issue that could affect a significant number of our clients if they aren’t careful.
Business owners, Amazon sellers, marketers, influencers all understand the power of reviews. This has, unfortunately, led to the increasing use of fake reviews online. And with it, an increase in government penalties for online marketing violations.
So, if you have considered adding fake reviews to your website, we recommend that you think twice.
User reviews influence sales
When it comes to e-commerce platforms, reviews are the lifeblood of sales. Think about it. How often do you buy anything online without first looking at the reviews?
This is especially the case for certain high-risk products. Think beauty and health supplements industries. The use of social media influencers is rampant and people prefer to check reviews. With an industry that’s expected to be worth over $800 billion by 2023, the marketing stakes are high. After all, research shows how much online reviews influence sales.
For example, the Spiegel Research Center shows that conversion rates rise rapidly as soon as products begin to display reviews. In fact, just five reviews can make a difference. The purchase likelihood of that service or product increases by a whopping 270%.
But, this impact of reviews has led to people trying to game the system, which has in turn spurred several developments across industries.
More businesses are focusing on reviews
E-A-T… YMYL. By now, you should be familiar with Google’s recent website requirements. Google ranks sites that show a high level of expertise, authority, and trustworthiness. Plus, websites that deal with health (e.g., in the supplements industry) fall in the “Your Money or Your Life” category. These, too, must show a high level of credibility.
So, in addition to publishing credible information, these updates also look at reviews. If you’re using reviews, then your reviews must be authentic. Plus, positive reviews on external sites can go a far way in improving your website’s trustworthiness in the eyes of Google.
Encourage legitimate buyers to leave reviews on sites like Better Business Bureau, Google My Business, Yelp and TripAdvisor. Displaying reviews directly on your site? One way to boost their credibility is to allow only reviews from verified buyers, similar to what Amazon.com does.
You want to focus on your reviews because they can now be checked for authenticity using artificial intelligence (AI). Two websites that offer this service are Fakespot.com and ReviewMeta.com. They both use AI to analyze reviews on e-commerce and hospitality websites.
More importantly, these reviews are also examined during the merchant account application process. So, you need to manage your reviews to manage your online reputation.
Facebook too has gotten in on the act of focusing on reviews. Facebook has indicated that it will be holding authentic user reviews in higher regard. Abuse of the Facebook reviews system could lead to loss of your Facebook ad account. Misleading ads can also put your account in jeopardy. (We discussed Facebook reviews in our two-part series on Facebook Ad compliance: Part 1 and Part 2).
Once you lose that ad account, you lose access to millions of potential customers across the world on both Facebook and Instagram.
Understanding the application process for a merchant account can be daunting. If you operate in the beauty, cosmeceutical, info product, and supplements high-risk niches, then we can help you in the process. Contact DirectPayNet and we will discuss getting you on the right track.
FTC rulings on fake reviews
In the US, the Federal Trade Commission (FTC) governs what people say online about products and services. The agency’s Endorsement Guides outlines the requirements. As such, the FTC may charge businesses and owners. This can be for misrepresenting information or outright falsehoods, including fake reviews.
The FTC brought its first charges for fake paid reviews against Cure Encapsulations, Inc and its owner. They were apparently for Amazon.com product listings. Allegedly, Cure Encapsulations paid a third-party company to post positive Amazon reviews. The reviews were for its products’ fat loss capabilities. They were also judged to have made false and unverifiable claims about the product.
The FTC imposed a judgment of $12.8 million on the company. It would be suspended upon the payment of $50,000 to the Commission. But, if the defendants breach terms in the future, the balance of the $12.8M will immediately become due.
A more recent incident in the beauty industry is the case of Sunday Riley. This is a cosmetics brand that sold products through Sephora. Allegedly, Sunday Riley’s owner and employees created fake accounts. They then used these accounts to post fake reviews online. Their aim was to boost the brand’s credibility in the eyes of its consumers. They were also accused of downvoting negative reviews.
The decision against Sunday Riley wasn’t an unanimous one. That’s because two of the five Commissioners wanted a monetary fine levied against the company. We can only assume that as the issue of fake reviews become more rampant, the FTC will start issuing financial penalties as part of its rulings. This would surely discourage abuse of the system with these acts.
How fake reviews and a government ruling can affect your business
If you’re using or thinking about using fake reviews, the FTC is not the only thing you should be worried about. You could be in line to lose your merchant account thus, limiting your ability to accept credit card payments.
1. Your business is MATCH-listed
High chargeback ratios aren’t the only reason that can get you on the MATCH list or the TMF (terminated merchant file).
Other payment processors such as Stripe and PayPal do not enjoy working with high-risk businesses. They are not afraid of MATCH-listing companies if they deem they are misleading consumers. So, you have to be extra careful about how you operate. If you breach FTC regulations, you can rest assured that you just may find yourself on MATCH or TMF.
2. You lose access to future merchant processing
Or you won’t be approved for an account at all.
As we indicated, background checks is always run on you and your business. So, having a stellar reputation is important. If you already have an account, dubious practices of using fake reviews will land you in hot water with your merchant processor. If you’re applying for a new account, a merchant processor will look at your business’ online reputation and reviews, which may hurt your chances of getting approved.
Your Online Reputation Matters
As a high-risk business, you already have higher hurdles to overcome to access a merchant account. There are well-known requirements, such as PCI Compliance for consumer data security. But, there are other matters you have to take into consideration. So, you need to focus on the areas that you can actively control that will help you improve your chances of approval.
A negative reputation online and deceptive practices like fake reviews will get your business in trouble with the FTC and merchant processors. Instead, focus on building positive experiences with your customers. Encourage loyal customers to leave you a review and encourage them at responding to surveys by adding perks for their participation. This will go far in encouraging user reviews that benefit your company.