“Five-star ratings”, “10 out of 10”, “Two Thumbs Up” – they’re the accolades every business wants to hear or see written on their website and social media pages. What better way to advertise your business than to have your customer’s first-hand reviews conveying to others their stamp of approval and personal recommendation.
Online reviews are a powerful marketing tool for businesses – regulated under the Australian Consumer Law (ACL) and enforced by the Australian Competition and Consumer Commission (ACCC). It is a breach of the ACL for businesses to promote their business through testimonials or reviews which are false or misleading.
The ACCC as the consumer watchdog is now looking into the review policies of the sharing economy platforms to ensure that the policies are compliant with the ACL requirements relating to online reviews and endorsements. The ACCC’s assessment is part of a wider international initiative driven by the International Consumer Protection and Enforcement Network (ICPEN). Below, we unpack the importance of online reviews as well authentic review policies for businesses operating in the sharing economy.
Who is ICPEN and What do They Do?
ICPEN includes over 50 consumer protection agencies including Australia’s ACCC. Each year they initiate an ‘internet sweep’ with the purpose of enabling the various authorities to share information and engage in resolving consumer problems relating to cross-border transactions.
ICPEN’s sweep focus this year is on online reviews and endorsements, and the ACCC is specifically looking into how reviews operate in the sharing economy. The ACCC will then share its findings with the other members of ICPEN, and other consumer protection agencies will do the same.
Online Reviews Under the ACL
Misleading reviews are a breach of the ACL, so the ACCC helpfully summarises the principles of publishing online reviews or endorsements in three key points:
- Be transparent about any commercial relationship;
- Do not post or publish misleading reviews; and
- Omitting or editing reviews can be considered misleading.
The underlying principle is that reviews should be authentic or genuine. If there is a commercial relationship or if the reviewer could be considered biased (e.g. friend of the business owner), you should disclose this information so that the reader has a full picture and can read the review in light of the reviewer’s relationship with the business.
Similarly, reviewers should not be offered financial or non-financial benefits in exchange for reviewing your business if they have not actually experienced your goods or services, and if what they are writing is not true. Again, it stands on the principle of ensuring impartiality from the review and not misleading consumers to have the wrong impression of your business.
Sharing Economy Platforms and Online Reviews
These principles apply to a business’ own website and to review platforms, where users can review the products or services of various providers. The guidelines also apply to sharing economy platforms, where there are a number of providers on the one site who are connected with the users through the platform.
Given that a sharing economy platform makes it very easy for users to compare the products or services, the reviews and ratings of providers can have a large impact on whether a user chooses to proceed. Sellers on eBay with less than five stars are likely to attract fewer buyers than sellers with a 98% satisfaction rate.
It is, therefore, the responsibility of the platform provider to regulate the reviews that are published on the site and to have policies in place to avoid misleading consumers. The ACCC’s sweep will be investigating sharing economy platform policies to make sure that they are compliant with the ACL. A platform business should include policies relating to how they will ensure published reviews comply with the guidelines the ACCC has set out for online reviews.
Online reviews are one of many steps to strengthen the ACCC’s engagement with the sharing economy. The ACCC is also planning to publish its guidelines for individuals and businesses involved in the sharing economy, which will assist in understanding responsibilities under the ACL. Watch this space for updates.