Sunday Riley has reached a settlement with the Federal Trade Commission (FTC) regarding fake product reviews the brand asked employees to write between November 2015 and August 2017. While the intent of the settlement is to ensure the brand doesn't engage in the behavior again, there was no fine imposed and the brand is not required to notify customers regarding the misinformation.

This outcome led two FTC commissioners, Rohit Chopra and Rebecca Kelly Slaughter, to dissent to the agreement. "Sunday Riley and its CEO have clearly broken the law, and the Commission has ordered that they not break the law again," Chopra wrote in his dissent. "Unfortunately, the proposed settlement is unlikely to deter other would-be wrongdoers."

“This settlement sends the wrong message to the marketplace,” he continued. “Dishonest firms may come to conclude that posting fake reviews is a viable strategy, given the proposed outcome here. Honest firms, who are the biggest victims of this fraud, may be wondering if they are losing out by following the law. Consumers may come to lack confidence that reviews are truthful.”

The Background: 

• A Reddit thread by a user claiming to be a Sunday Riley employee "broke the story."  The post read "Sunday Riley Employee: We Write Fake Sephora Reviews" back in October 2018, in which the user said Sunday Riley is "an awful place to work" and claimed that employees "were forced to write fake reviews for our products on an ongoing basis, which came directly from Sunday Riley herself and her Head of Sales." The email addressed to Sunday Riley employees was made public.
• @EsteeLaundry further amplified the scandal in a post.
• Sunday Riley admitted to the wrongdoing on the Estee Laundry feed.

The FTC Complaint:

1. Between November 2015 and August 2017, Sunday Riley Skincare managers, including Ms. Riley herself, posted reviews of their branded products on the Sephora site using fake accounts created to hide their identity and requested that other Sunday Riley Skincare employees do the same thing.
2. After Sephora removed fake employee-written reviews, Sunday Riley Skincare employees suspected this was because Sephora recognized the reviews as coming from their IP addresses. Sunday Riley Skincare then allegedly obtained, according to one of the company’s managers, “an Express VPN account [to] . . . allow us to hide our IP address and location when we write reviews.” VPN (a virtual private network) lets users access the internet privately, by using separate servers to hide their online activity.
3. The FTC complaint also quotes from a July 2016 email that Ms. Riley wrote to her staff directing each of them to “create three accounts on Sephora.com, registered as . . . different identities.” The email included step-by-step instructions for setting up new personas and using a VPN to hide their identities, and directed employees to focus on certain products, to “[a]lways leave 5 stars” when reviewing Sunday Riley Skincare products, and to “dislike” negative reviews. “If you see a negative review – DISLIKE it,” Ms. Riley wrote, “After enough dislikes, it is removed. This directly translates into sales!!”
4. The FTC’s complaint charges Sunday Riley Skincare and Ms. Riley with two violations of the FTC Act: 1) making false or misleading claims that the fake reviews reflected the opinions of ordinary users of the products; and 2) deceptively failing to disclose that the reviews were written by Ms. Riley or her employees.

The FTC Settlement Order: 

1. Prohibits the respondents, in connection with the sale of any product, from misrepresenting the status of any endorser or person reviewing the product. This includes misrepresentations that the endorser or reviewer is an independent or ordinary user of the product.
2. Prohibits the respondents from making any representation about any consumer or another product endorser without clearly and conspicuously disclosing any unexpected material connection between the endorser and any respondent or entity affiliated with the product. Such disclosures must be made in close proximity to the product review or endorsement.
3. Requires the respondents to instruct their employees and agents about their responsibilities to clearly and conspicuously disclose their connections to the respondents’ products in any endorsements.

“Dishonesty in the online marketplace harms shoppers, as well as firms that play fair and square,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “Posting fake reviews on shopping websites or buying and selling fake followers is illegal. It undermines the marketplace, and the FTC will not tolerate it.”