The good, the bad and the ugly: businesses dealing with reviews
27 July 2021 04:20
Dr William van Caenegem
Take away tips
- Defamatory review posts that cause economic loss can generate substantial damages awards, which in circumstances of aggravation can exceed otherwise applicable statutory limits
- Establishing that visits to a business’s website fell off steeply after a defamatory posting shows a causal link between a defamatory post and subsequent economic loss.
- The Australian Competition and Consumer Commission (ACCC) website prescribes in detail how a business should deal with reviews to stay on the right side of the Consumer Law.
It is important to a level playing field in business to ensure the integrity of reviews and ratings — that they represent consumer opinions honestly and independently formed and conveyed.
This article examines the topic of reviews from apparent third parties from two angles: what legal recourse a trader has in relation to false and dishonest reviews that denigrate their person and/or their business; and on the other hand, the obligations traders have in relation to falsely complementary reviews. The ACCC explanation of the requirements of the Consumer Law in this regard, “Managing online reviews”1 states that traders in the latter context must take a more proactive role than may commonly be thought.
Policing damning reviews
There are a number of recent cases that have considered the posting of false and denigratory reviews online, in particular by those who have in reality never experienced the services reviewed. They concern “customers” who have posted false reviews on various platforms,2 but what is interesting is that it is the posters not the platforms who have become the target for legal action by the “reviewed” trader.
Getting catty: lies about a wedding planner
In Moy v Isaac,3 a recent Queensland decision (Magistrate’s Court), an Australian wedding planner based in Bali was the target of false Facebook posts by two posters, Isaac and Smith, the latter in fact never having dealt with Ms Moy in person. The posts falsely accused Moy of having attempted to ruin Smith’s own wedding by causing the wedding venue to be cancelled. There was no truth to this. It was possible on the facts that the false reviews were motivated by one of the poster’s desire to see her own wedding planning business in Bali flourish at the expense of Moy’s.
The action was brought in defamation, under the Defamation Act 2005 (Qld), not for misleading and deceptive conduct under the Australian Consumer Law (ACL). There are a number of possible reasons for this, including that the ACL provisions are limited to comments made by those engaged in trade or commerce. A comment made by a competitor might trigger the ACL, but one made by a customer would not.
Magistrate Smith held that the posts were defamatory. The award he granted was in compensation for “injury to [Moy’s] feelings, the stress, embarrassment, humiliation and the damage to her reputation”. The amounts were set at $100,000 against Isaac for general and aggravated damages and $50,000 against Smith for general damages. The aggregation of harm from the multiple posts was taken into account (including the so-called “grapevine effect” referred to in the original social media defamation matter, Mickle v Farley4). Moy had also attempted repeatedly to settle the matter, Isaac and Smith refusing to come to the party. There was no separate quantification of damages in relation to economic losses sustained by Moy’s business.
“Gordon [Cheng] brings shame to all lawyers”
In Cheng v Lok5 an apparent client falsely posted on “Google My Business” that Mr Cheng, a solicitor, brought shame to all lawyers and was:
…only concerned about how to get most of your money by giving you false and misleading advices, and convincing you to go to court when it is clear that he doesn’t have a case to win.6
This review was also published in Chinese. In reality Mr Cheng was a well-regarded and respected solicitor in the Adelaide community. Lok posted further reviews and also engaged in further exchanges with Mr Cheng via Google My Business where she denied the reality of certain facts.
Lok had in fact never met Cheng who had not acted for her. Google removed the false review on the request of Mr Cheng, an initial complaint being lodged on 12 March 2019, a further complaint on 24 April, and the review finally being deleted on 30 April. However, Lok posted two more such reviews under other names (including of her father). Mr Cheng brought proceedings under the Defamation Act 2005 (SA), which came into effect on 1 January 2006 as did the “Uniform Defamation Laws” of New South Wales, Victoria, Western Australia, Queensland and Tasmania.
The Supreme Court awarded $750,000, the sum being substantial because of the evidence of an immediate impact caused on Mr Cheng’s business — a drop-off of 80% in the number of his clients that coincided relevantly with the defamatory posts, which had been observed by an analyst retained for the purpose. The income of the practice itself fell precipitously in the months immediately after the postings by Lok: evidence was tendered by an accountant that:
In the four month period immediately preceding publication, the business made a net pre-tax profit of $193,801. In the four month period immediately after publication, the business made a net trading loss of -$60,618. This equates to a loss of average monthly gross income of -$51,000 as a result of the publication.7
After the posting of the concerns notice, the summons and the statement of claim on Google My Business, income lifted again. Additionally, and separately from the assessment of the damage to Mr Cheng’s personal reputation, damages were awarded for a loss of the value of goodwill of his business.
Botched surgery claims “plainly untrue”
In Tavakoli v Imisides (No 4) a doctor sued for defamation and for injurious falsehood in relation to some surgical procedures.8 Tavakoli was a plastic surgeon. The defamatory imputations arose:
…from a Google review that alleged that the plaintiff charged the first defendant for a buccal fat procedure that he did not perform; that the plaintiff acted improperly in relation to a buccal fat procedure for the first defendant; and the plaintiff acted incompetently in relation to a buccal fat procedure for the first defendant. 9
The allegations were shown to be “plainly untrue”.
As indicated, the plaintiff sued for injurious falsehood as well as defamation, the court defining the latter as “the malicious publication of a false statement that causes damage to the plaintiff”.10 Both can be pleaded together but there seems to be little advantage in pleading injurious falsehood. Naturally, defamation law now imposes limits on amounts that can be recovered, although this does not apply in circumstances where aggravated damages are justified. It is commonly thought that companies cannot sue for defamation although injurious falsehood might be open. However, in fact there are instances where defamation is available, for instance where a company has fewer than 10 full-time employees.
Injurious falsehood concerns effects not so much on reputation as on the ability of an individual to sell their goods or services. It requires:
- a false statement of or concerning the plaintiff’s goods or business;
- publication of that statement by the defendant to a third person;
- malice on the part of the defendant; and
- proof by the plaintiff of actual damage (which may include a general loss of business) suffered as a result of the statement.11
Malice in these circumstances is the acting for a dishonest or improper purpose, “including a desire to injure the plaintiff without just cause or excuse”.12
The court found that the element of malice was present in this case. Actual damage was also proven, as indicated above, by the drop in website traffic from which it could be inferred. It should also be noted that injurious falsehood requires proof of economic loss, whereas defamation does not, although consequential economic loss may well be recovered. That is so, in particular, where, as in this matter, personal and professional (and thus trade) reputations are very closely interwoven.
However, here there was no award made for injurious falsehood. The court speculated that the claim for injurious falsehood was only included to enable the plaintiff to obtain an injunction more easily. The award was thus for defamation only and, most significantly, took into consideration that the defamation affected Dr Tavakoli’s professional reputation which to that point had been unsullied:
The allegations contained in the publication are extremely serious and go to the heart of the reputation of the plaintiff in his profession. Damage in defamation is presumed in Australia, but, in this case, the overwhelming inference is that actual damage has been effected. No special damage (for loss in income or earning capacity) has been sought.13
There was evidence that after publication of the defamatory material, visits to Dr Tavakoli’s website fell off steeply: the plaintiff’s local business listings after the posting of the defendant’s first Google review showed that “the rate of visitors to the plaintiff’s website had dropped by 23.61% in less than one week”.14
The damages award was substantial not only because of the close connection between personal and professional reputation, but also because of the egregious conduct of one of the defendants (the other having settled). Whereas damages for non-economic loss are capped at $398,500 in the uniform defamation legislation, this does not extend to circumstances of aggravation.15 The court found that the defendant had deliberately published the factually untrue review to punish Dr Tavakoli, refused to apologise and published a second untrue review in contravention of court orders. In the result the award including aggravated damages was for the substantial sum of $530,000 to Dr Tavakoli even though no special damages for loss of income had been claimed.
The risks of trolling
Other cases of online defamation have also resulted in long legal battles, very high costs and substantial damages awards. Whereas individuals may be under the impression they can post with impunity, there is thus a high risk attached to posting fake reviews on social media (Facebook, Google and other platforms), certainly where they have severe economic consequences. Businesses should actively police social media to find troll posts, identify who is behind them, and have them removed and seek compensation for resulting loss of business. However, one of the common objections to “trolling” is that in cyberspace the troll can hide behind a shield of anonymity. They know how to keep their identities hidden, by for instance giving false email addresses when posting comments, using proxies to hide IP addresses and so on. However, obvious troll posts are not necessarily as damaging as the type of fake reviews considered here, where they give an impression of genuineness and honesty coming from somebody who has really experienced the goods or services concerned. The flip side is that those who post fake reviews might be easier to identify than pure “trolls”.
Facebook requires users to use their real name, and where they suspect an account is “fraudulent” they may require you to provide identification.16 This may not appeal to trolls but it is also a concern for honest users as Facebook has not always managed data in total security. Google has systems in place to verify accounts.17 However, releasing data concerning a poster’s identity to their target is not likely to happen. Some detective work may be required.
Policing laudatory reviews
The law requires businesses to actively police reviews posted even if those reviews have not been generated or caused by the business itself. The ACCC guidelines are quite strict: a business cannot generate falsely positive reviews, nor is it permissible to ignore such reviews even if the business did not have a hand in them. The ACCC guidelines are considered further below after consideration of an illustrative recent decision.
Service Seeking and mock third party reviews
The Australian Competition and Consumer Commission (ACCC) v Service Seeking Pty Ltd (Service Seeking) decision provides an illustration of what can transpire if a business is involved with the publication of falsely positive reviews.18 In that matter, a “fast feedback” feature was basically set up by the platform, which was established to connect potential clients with contractors (eg for domestic plumbing or electrical jobs). The automated fast feedback feature sent positive review pro forma to clients who had used a service they had located via Service Seeking and if no response was received within a certain time simply published that review in the form that was in reality generated by the platform, and the accompanying star rating.
More specifically, the business that had performed the service was offered a number of pre-defined options to say that the job was completed “on time”, “on budget”, “to a professional standard”, or “with good communication”. The business could select one or more of these options. It could also give itself a star rating out of five. Hence, the reviews and the star rating “purported to have been given by customers … but ... were created by the businesses themselves through the Fast Feedback feature”19. Effectively, the poster (the client who had used a service located through Service Seeking) did not know anything about the post which was invariably positive (even if expressed in bland terms).
The question confronting the court was whether that misconception could be attributed to ordinary or reasonable members of the class of users of the website: it cited Campomar Sociedad, Limitada v Nike International Ltd in aid of this proposition.20 Perhaps some reasonable users would read the statement carefully and understand it only conveyed the view of the business about its own performance. However, the court held that users who did not read the statement carefully and understood it as representing the actual views of actual customers did not react in an extreme or fanciful way, nor failed to take reasonable care of their own interests.
Crucially, in relation to might be held responsible for the misrepresentations, the court found that liability attached to the platform which had in reality generated the reviews although they falsely appeared to have been written by users. Service Seeking had thus in trade or commerce, in connection with the supply or possible supply of services and in connection with the promotion of the supply or use of services, made false or misleading representations that purport to be testimonials by customers who have used the services of businesses on the website relating to the services provided by those businesses (breaching s 29(1)(e) of the ACL).21
The effect of the decision is that a platform-type business whose systems generate overly positive reviews ascribed to others and giving the appearance of independent evaluation is likely to face legal consequences. This only reflects a broader responsibility for the veracity of reviews posted about a business.
The ACCC’s strong guidance on how to manage reviews and stay within the law
In fact, the ACCC website makes it very clear that a business has an active responsibility of this kind: to ensure the veracity and independence of reviews that appear on its “social media pages”. The ACCC website contains the bold statement that: “Businesses and review platforms that do not remove reviews that they know to be fake risk breaching the Competition and Consumer Act 2010.”22
The ACCC states that reviews might be deceptive if they are presented as impartial but were written by:
- the reviewed business;
- a competitor;
- someone paid to write the review who has not used the product;
- someone who has used the product but written an inflated review to receive a financial or non-financial benefit.23
The ACCC website also states that it considers conduct to be misleading in the following circumstances:
- where the business has encouraged family and friends to write reviews about it without disclosing their personal connection
- (a) written reviews when the writer has not experienced the good or service reviewed or the writings do not reflect a genuinely held opinion
- solicited others to write reviews about the business or a competitor’s business if they have not experienced the good or service
Offering incentives is also liable to result in misleading and therefore actionable reviews, certainly where they are not disclosed to readers, the same being the case in relation to existing commercial relationships that are not revealed. The ACCC also points out that businesses and review platforms that:
…selectively remove or edit reviews, particularly negative reviews, for commercial or promotional reasons may be misleading consumers. If the total body of reviews doesn’t reflect the opinions of consumers who have submitted the reviews consumers may be misled.24
The ACCC recommends that consumer review platforms make their policy for publishing and removing consumer content accessible to platform users.
The result of all this is that a business these days needs to take a proactive approach to managing its pages and any reviews that are posted about it. That is clearly sensible for commercial purposes but is underpinned by legal obligations and responsibilities. Active policing serves both the purpose of ensuring that false, dishonest and damaging reviews are removed, in the first instance through the systems established by the platforms concerned, but ultimately also through court action, in particular for defamation. The benefit of the latter course of action is that substantial damages may be available, as well as resulting in the removal of abusive reviews and damaging content from view in cyberspace. However, active policing systems and a clear policy of honesty relating to beneficial reviews that can be effectively put in place are also essential, so that a business is not itself fixed with liability in relation to falsely positive reviews posted by others (or apparently by others but actually generated in-house).
|Dr William van Caenegem|
Professor, Faculty of Law, Bond University
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