Google, Facebook, Yelp, etc. Estimates vary, but at least 50% of American consumers consider online reviews before deciding where to spend their hard-earned money. Before making dinner reservations at Oggi Italian in Tampa last week, I checked out the reviews online. The reviews were excellent, making my decision to go there an easy one.
Positive reviews are drivers of new business while negative reviews can have the opposite effect. Businesses must be acutely aware of their online reputation and how it measures up to their competition. In an effort to improve their competitive positions, however, it’s not uncommon to see some businesses use unscrupulous tactics such as posting fake reviews.
Fighting False Advertising and Unfair Competition
Many people, some attorneys included, think that the Lanham Act applies only to trademark-related claims. However, with the right guidance, the Lanham Act can serve as a powerful tool in fighting against unfair competition; specifically, false advertising claims.
Consider the following example: There’s a new Mexican fast casual restaurant in town; let’s call it Taco Heaven. In an effort to gain traction, Taco Heaven launches a campaign of fake online reviews hailing its restaurant as, well, heavenly. Five stars. “Best tacos in town! Can't wait to go back! The guac was unreal!” Simultaneously, Taco Heaven launches a campaign of fake, negative online reviews against its biggest competitor, Taco Temple. One star. “My tacos were cold. There was a fly in my food. I even got sick from eating there!!”
Scholars estimate that 15 to 30% of online reviews are fake, impacting billions of dollars in consumer spending across nearly every industry. A few years ago, the idea of litigating against fake online reviews was often considered more trouble than it was worth. However, today it’s a critical business decision that should be on every company’s radar.
False Advertising Basics
You can use the Lanham Act to sue for false advertising even when there’s no trademark at issue.
The Supreme Court, in Lexmark, gives very broad standing to plaintiffs in false advertising claims.
You can sue a competitor for advertising that is literally false.
You can sue a competitor for advertising that is literally true but misleading.
You can sue a competitor for false statements they make about their own products/services, whether comparative or non-comparative.
You can sue a competitor for false statements they make about your products/services, whether comparative or non-comparative.
Comparative false advertising claims are strongest due to damages.
Winning Your False Advertising Claim
Circling back to the Taco Heaven example, it’s clear that Taco Heaven has a problem. Under the Lanham Act, any competitor could sue Taco Heaven for making false statements about its own restaurant (i.e. the fake five-star reviews). However, the strongest case belongs to Taco Temple, the competitor that Taco Heaven disparaged. Taco Temple will likely survive a motion to dismiss with the biggest challenge coming at summary judgment, when Taco Heaven will attack proximate causation and damages.
While a defendant's false statements provide a strong start, the plaintiff must also show that the false statements proximately caused it harm. It’s important to keep in mind that there isn't a universal framework for evaluating damages in Lanham Act false advertising cases. Rather, the framework depends on the nature of the advertising (i.e. literally false, comparative, or non-comparative, etc.). Simply put: literally false comparative advertising gives rise to the strongest type of Lanham Act claim due to having the most readily provable damages.
Fake online reviews are an ever-growing multi-billion-dollar problem. If a business is using fake online reviews to bolster its own reputation or tarnish the reputations of its competitors, those impacted by this sort of misconduct should consider their rights under the Lanham Act. At a minimum one can obtain a preliminary or permanent injunction - under ideal circumstances one can even recover damages.
Rick Duarte is the owner of The Duarte Firm, P.A., where he focuses his practice on business law. He received his law degree from the Emory University School of Law and has been named a “Rising Star” in Business Litigation by Florida Super Lawyers for 2016 – 2018. Rick also serves as outside general counsel to emerging and medium-sized businesses, guiding clients through corporate governance, risk management issues, and strategic decisions where business and law intersect.