Fashion Nova to Pay FTC $4.2M Settlement Over Product Reviews

·4 min read

The Federal Trade Commission settled with Fashion Nova on Tuesday over allegations that the California-based e-commerce company squelched bad reviews. The agreement puts the fast-fashion e-tailer on the hook for $4.2 million and under order prohibiting it from concealing negative customer reviews.

The agency accused Fashion Nova of blocking posts ranked with fewer than four out of five stars, then misrepresenting that the remaining feedback was representative of all reviews.

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According to the complaint, the e-commerce company used a third-party tool that automated the process. Apparently, it immediately posted positive reviews and filtered out low-ranking ones, pending company approval. But over a four-year period, between 2015 and 2019, the agency alleged that no approvals came for these posts, which numbered in the hundreds of thousands.

Untrustworthy online reviews dog numerous platforms, from Amazon to Yelp. They usually involve fake or disingenuous comments, as extensions of unscrupulous sellers or a vendetta against the business. But they’re not genuine impressions about products or services, and they can harm the site’s reputation — which is why tech platforms put a lot of effort and investment into fighting them.

The case against Fashion Nova marked the FTC’s first alleging that a company dishonestly handled reviews. It may not be the last.

“Deceptive review practices cheat consumers, undercut honest businesses and pollute online commerce,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “Fashion Nova is being held accountable for these practices, and other firms should take note.”

The commission also announced that it’s putting review management providers on notice. Ten such companies will receive letters notifying them that suppressing bad reviews violates the FTC Act.

In a statement emailed to WWD, Fashion Nova spokesman Terry Fahn denied any wrongdoing, but confirmed the settlement.

“The Federal Trade Commission’s allegations against Fashion Nova are inaccurate and deceptive. Fashion Nova never suppressed any website reviews, and it immediately and voluntarily addressed the website review issues when it became aware of them in 2019,” wrote Fahn. “Fashion Nova is highly confident that it would have won in court and only agreed to settle the case to avoid the distraction and legal fees that it would incur in litigation.”

He called out the company’s use of an outside software provider that offers “autopublish” and filtering features based on star ratings, which so far matches the FTC’s case. Fahn explained that Fashion Nova intended to individually evaluate and manually release reviews, but failed to complete the process because of “resource constraints during a period of rapid growth.”

Whether the argument would fly in court is moot now, but the retailer believes the complaint is outdated anyway.

“That issue was remedied several years ago and all previously unpublished reviews have now been posted,” he continued, except for unrelated messages and unlawful content such as profanity.

This case may be the first of its kind for the FTC, but it’s not its first complaint against Fashion Nova, which finds itself in the crosshairs for a second time in two years.

In April 2020, the agency accused the fashion retailer of not properly alerting customers when it failed to ship products in a timely fashion and offering appropriate remedies. Shoppers didn’t get a chance to cancel delayed orders, according to the complaint, and instead of issuing refunds for unshipped merchandise, the company used gift cards to compensate them, which is illegal under the Mail Order Rule.

The FTC became aware of the matter after an expansion of online tools allowed for more cross-border data sharing. The effort was coordinated to thwart international scams. In this case, it funneled hundreds of consumers complaints about Fashion Nova’s e-commerce practices from the U.S., Canada and more than fifty other countries.

The company agreed to pay $9.3 million to settle those allegations, and with the latest charge, the total comes to $13.5 million.

In addition, the online store must refrain from misrepresenting customer reviews or endorsements and post all reviews of current products, apart from comments unrelated to its products or services, and those containing unlawful content, such as obscene, sexually explicit or racist language.

According to Fashion Nova, it’s already doing that. But if anything goes wrong again, it seems likely that the FTC will escalate the matter — not just because the company racked up two complaints, but also because online reviews have become a sticking point for the group.

In October, the commission reached out to more than 700 businesses, warning them that handling reviews and endorsements in unlawful ways, based on previous FTC cases, could lead to stiff civil penalties.

To keep retailers and marketers in line, it also issued new guidelines. Companies can find them on the FTC website under the titles “Featuring Online Customer Reviews: A Guide for Platforms” and “Soliciting and Paying for Online Reviews: A Guide for Marketers.”

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