Customer feedback is a two-way street. On the one hand, positive customers reviews can inspire trust in potential new customers who might otherwise be apprehensive about purchasing products or services from an unfamiliar company. Negative reviews, on the other hand, typically have the opposite effect. As such, businesses may be tempted to stifle or “bury” negative customer feedback in order to preserve their reputation. Businesses that engage in such complaint suppression tactics, however, run the risk attracting the ire of federal enforcement agencies.
For example, just last week, a federal court ruled that the Federal Trade Commission (“FTC”) is likely to prevail in its case against World Patent Marketing, Inc. (“WPM”), a business that has marketed and sold research, patenting, and invention-promotion services to consumers since 2014. According to the FTC, WPM intimidated and threatened customers to prevent them from complaining and to compel them to retract complaints, often through cease and desist letters from WPM’s lawyers frivolously insisting that such conduct constitutes unlawful defamation or even criminal extortion.
The court agreed with the FTC that WPM’s tactics likely violate Section 5(a) of the FTC Act, which proscribes any unfair act or practice that “is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.” The court explained that complaint-suppression tactics like those employed by WPM cause substantial consumer injury “because they serve to limit the flow of truthful information” about the quality of a business’s services to prospective consumers, making it “nearly impossible for consumers to make informed decisions.”
The court also found that there are no countervailing benefits to such tactics, as “existing customers do not benefit from having their complaints suppressed and prospective consumers do not benefit from being denied access to material information.” To the contrary, suppressing customer complaints in this manner permitted WPM “to hinder competition and harm legitimate competitors in the marketplace.”
This case highlights a need for businesses to take special care when responding to customer complaints and negative online reviews. However damaging a bad Yelp review may be for your business, getting sued by the federal government is certainly worse.