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Has a Competitor Posted a False Yelp Review? It May Violate Federal Law

5 Jun, 2012 By: Arthur Yoon, Jeffrey Richter


False business reviews posted by an unscrupulous competitor on customer recommendation websites, such as Yelp, are becoming an increasing problem for advertisers. Such malicious attacks, however, may be a violation of federal law. In Colonial Marble & Granite (Colonial) v. AAA Hellenic Marble (Hellenic), a U.S. District Court in Eastern Pennsylvania considered whether an alleged “smear campaign” directed against Colonial could constitute false advertising by a competitor that is actionable under the federal Lanham Act.

Colonial filed a complaint against unknown defendants claiming violations of the Lanham Act after it discovered a high number of negative reviews of its marble and granite installation business posted on websites such as Citysearch, Insider pages, YellowBot and Google in a very short timeframe, criticizing its customer service, on-site performance and employment practices. The filing of the complaint permitted Colonial to issue subpoenas to the websites in order to aid Colonial in discovering the authors of the reviews. Colonial retained a computer forensic expert who determined that several reviews came from computers having IP addresses belonging to Hellenic’s business office and the residence of one of its alleged directors.

To make out a false advertising claim under the Lanham Act, a plaintiff generally must establish that the defendant made false or misleading statements regarding the defendant's or another's product or service, there is actual deception or a tendency to deceive the audience, the deception is likely to influence purchasing decisions, interstate commerce is involved, and there is likelihood of reduced sales to the plaintiff. A message is commercial advertising if it is commercial speech disseminated to the purchasing public made by a party in commercial competition with another to influence customers to buy one party's goods or services over the other party’s goods or services. If a party proves the message is false and deceitful or ambiguous but with a tendency to deceive, and the deception will influence the public's purchasing decisions, the Lanham Act has been violated.

The court concluded that a jury could determine the reviews constitute “false advertising” under the Lanham Act. The reviews were disseminated over the Internet and warned potential customers of Colonial's purported poor quality goods and workmanship. The reviews also suggested that customers take their business elsewhere to more reputable marble and granite installation businesses. Although the reviews did not identify Hellenic by name, the court determined that the Lanham Act does not require this. A Lanham Act violation may be found where the speech is commercial, refers to a specific product or service, and is motivated by economic interests. Given that there was evidence submitted by Colonial from which a jury might conclude that the reviews affected Colonial's business, the court permitted Colonial to proceed with its false advertising claim against Hellenic.

In addition to a false advertising claim under the Lanham Act, an advertiser concerned that false reviews are negatively affecting its business may be able to assert a defamation claim under state law. An advertiser that suspects its competitor is writing disparaging internet reviews about it should consult with legal counsel to consider its legal options and protect its business reputation.

Jeffrey Richter and Arthur Yoon are partners at Los Angeles-based Finestone & Richter. They can be reached at (310) 575-0800, or at jrichter@frlawcorp.com and ayoon@frlawcorp.com.


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