Medrite Agrees To Pay $100,000 Penalty And Take Measures To Increase The Honesty And Transparency Of Its Online Reviews
Car Service Company Carmel Also Agrees To Pay $75,000 Penalty And Increase Transparency
Agreements Are A Continuation Of A.G. Schneiderman’s Groundbreaking “Operation Clean Turf” Investigation Into Reputation Management Industry, Astroturfing And False Endorsements
Attorney General Eric T. Schneiderman today announced a settlement with medical emergency care service MedRite Care, LLC, d/b/a Medrite Urgent Care (“Medrite”) for paying for positive reviews on consumer-review websites. Over a 2-year period, Medrite paid thousands of dollars to internet advertising companies and freelance writers to write positive reviews of Medrite on consumer-review websites such as Yelp.com. Medrite never required that the reviewers visit its facilities and experience its services, and never required the reviewers to disclose that they were paid for the review. Medrite must pay $100,000, $50,000 of which is suspended assuming compliance with the settlement agreement, due to the financial condition of the company.
Attorney General Schneiderman also reached a separate settlement with Baron T, Ltd, d/b/a Carmel Car & Limousine Service, Svc (“Carmel”), the car-ride service, resolving an investigation into the company’s practice of extending discounts to customers for positive reviews on consumer-review websites. Carmel incentivized customers to write positive reviews of its services on consumer-review platforms Yelp, Google, Google Play, and Apple’s iTunes by offering a $10 discount off rides. As part of the settlement, Carmel will take steps to help educate the Livery Community on false advertising and consumer reviews online.
“Honesty and transparency are the hallmarks of consumer protection -- especially when it involves medical services. Consumers shouldn’t be misled when it comes to making important determinations about their health and well-being. Our investigation into Medrite sends a strong message to companies that the rules preventing deceptive advertising and practices must be upheld online,” said Attorney General Schneiderman. “Those same rules also apply to other service industries, and I appreciate Carmel’s cooperation in this investigation. Their efforts to educate other companies about unlawful incentives in customer reviews will help create a more transparent industry.”
Medrite Urgent Care
MedRite is an emergent care service with three locations in New York City. It provides individualized adult and pediatric health care on a walk-in basis. Samuel Fisch is the Chief Executive Officer of Medrite.
MedRite paid internet advertising companies thousands of dollars for reviews on several different consumer-review websites. For example, in September, 2012, Medrite paid an internet advertising company $375 to post 15 positive reviews on Yelp.com, CitySearch, Yahoo Local Page, and Google Plus. Medrite also hired several free-lance writers through the Internet, including with job postings on Craigslist.com, to write positive reviews for $10 to $15 per review. One writer responded to Medrite’s listing for Yelp reviews, “Send me your business name and I will give you a good review. I have been on yelp for 4 years and have more than 160 reviews already.” Another writer responded, “Hello I saw your ad on craiglist and I would like to post a positive 5 star review for your business… .”
In early 2014, Yelp discovered that Medrite was sending email messages to people on Yelp through their Yelp accounts to write positive reviews for Medrite. In particular, Medrite sent the following email to members of Yelp, “I see you are yelping a lot. I own a company in nyc and would like to get more reviews… would you come checkout our company and write a review? (will pay).”
In March, 2014, Yelp posted the following “Consumer Alert” on Medrite’s Yelp profile for 90 days which alerted consumers to its findings that Medrite was paying for reviews:
New York’s Executive Law§ 63(12) and General Business Law §§ 349 and 350 prohibit misrepresentation and deceptive acts or practices in the conduct of any business. Similarly, the Federal Trade Commission’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” 16 CFR Part 255 (the “FTC Endorsement Guidelines”) provides that it is a deceptive practice to provide an endorsement for a product or service that fails to disclose material connections between the endorser and the sponsoring advertiser. Medrite never required that the reviewers visit its facilities and experience its services, and never required the reviewers to disclose that they were paid for the review. Pursuant to the settlement, Medrite is prohibited from misrepresenting that an endorser is an independent user of the product or service being promoted. Medrite is also prohibited from compensating a reviewer who has not made the required disclosures.
Carmel is a well-known car service based in New York City. The investigation into Carmel found that between May 5, 2016 and July 27, 2016, the company sent 161,000 email messages to Carmel customers requesting feedback regarding their recent ride with Carmel. Customers were asked to evaluate Carmel services by clicking “Perfect” or “Good,” listed with an opportunity for ten dollars ($10) discount off the next ride, or “Bad,” which did not offer any discount. Upon clicking the “Perfect” and “Good” links, the customer was directed to a consumer-review website such as Yelp.com and provided a $10 discount off their next ride upon confirmation of the review. If a customer clicked on the “Bad” button, he or she was directed to a web portal at Carmel with the opportunity to leave feedback. However, in this case, they were not directed or otherwise told to post the review on a consumer-review website and were not offered a discount or any other form of compensation.
Paying for a positive review without disclosing the payment would lead a reasonable consumer to believe that the review was a neutral, third-party review. Incentivizing customers to provide favorable reviews without disclosing such payments is a form of false advertising and a deceptive trade practice, and it violates New York Executive Law § 63(12), New York General Business Law §§ 349 and 350, as well as the FTC Endorsement Guidelines.
Carmel cooperated in the investigation, and pursuant to the settlement, Carmel also has agreed to educate the for-hire car transportation industry on false advertising law and online consumer reviews, including without limitation, the FTC Endorsement Guidelines. Among other things, Carmel will communicate with members of the for-hire car transportation industry by email and newsletter, take out one full-page advertisement in the livery industry’s trade newspapers, and conduct educational seminars.
Ensuring honesty on the Internet is of paramount importance to consumers because of the effect that online reviews can have in influencing consumers’ purchasing decisions. According to one survey, 90% of consumers say that online reviews influence their buying decisions. Multiple studies have concluded that online reviews can make or break companies. A 2015 Nielsen Study reveals that 66% of the global consumers trust consumer opinions posted online, making it the third-most-trusted source of information about businesses after word-of-mouth and recommendations from friends and family. A highly-cited Harvard Business School study from 2011 estimated that a one-star rating increase on Yelp translated to an increase of 5% to 9% in revenues for a restaurant. Cornell researchers have found that a one-star swing in a hotel's online ratings at sites like Travelocity and TripAdvisor is tied to an 11% sway in room rates, on average.
These settlements announced today are continuation of Attorney General Schneiderman’s commitment to ensuring accurate and reliable consumer reviews. In September, 2013, AG Schneiderman announced “Operation Clean Turf,” the largest investigation into astroturfing by a law enforcement agency, resulting in settlements with 19 companies that paid over $350,000 in penalties. After an extensive undercover investigation into the reputation management industry, the office found that companies had flooded the Internet with fake consumer reviews on websites such as Yelp, Google Local, and CitySearch; used techniques to hide their identities, such as creating fake online profiles on consumer review websites; and paid freelance writers from as far away as the Philippines, Bangladesh and Eastern Europe $1 to $10 per review. In addition, in February 2016, the office announced settlements with four other companies including Machinima, Inc., regarding either the payment for positive reviews that were either fake or did not disclose the compensation.