Best yogurt ever! Fake online reviews targeted by N.Y. attorney general.

Nineteen companies have agreed to pay more than $350,000 in penalties for breaking laws against false advertising and deceptive business practices, New York Attorney General Eric Schneiderman announced Monday.

Those with a discerning ear for huckster-speak may have always suspected that some of the gushing praise for online products was probably posted by company partisans.

It’s an online technique sometimes called “astroturfing,” or laying down fake grass-roots excitement to help build a better online ranking for a business or product.

It’s even become a full-blown racket when companies have hired freelance writers – sometimes paid up to $10 for every fake gush they tap out – to go to sites such as Citysearch, Google Local, or Yelp and praise products and businesses they've never seen, let alone tried.

New York Attorney General Eric Schneiderman announced Monday that 19 local companies have fessed up to using such techniques, agreeing to pay more than $350,000 in penalties for breaking laws against false advertising and deceptive business practices.

"Consumers rely on reviews from their peers to make daily purchasing decisions on anything from food and clothing to recreation and sightseeing," Mr. Schneiderman said in a statement. "This investigation into large-scale, intentional deceit across the Internet tells us that we should approach online reviews with caution. And companies that continue to engage in these practices should take note: ‘Astroturfing’ is the 21st century's version of false advertising, and prosecutors have many tools at their disposal to put an end to it."

In 2010, a California marketing company settled charges brought by the Federal Trade Commission under guidelines for Internet endorsements. New York appears to be the first state to try to police astroturfing, going back to 2009.

For the current crackdown, Schneiderman had even set up a fictitious Brooklyn yogurt store. It was part of a year-long undercover investigation into the reputation management industry, which includes those who offer “search engine optimization” (SEO) services to improve a business’s Google ranking.

The “owners” of the yogurt store called leading SEO companies in New York, complaining about negative reviews and wondering if they could do anything to improve their online image. Many of them offered to write fake reviews for the shop and post them on consumer-based search engines, according to the attorney general’s announcement Monday.

The investigation also found that some of these SEO companies used sophisticated “spoofing” techniques to hide the IP addresses of the fake reviews – and also set up hundreds of fake online identities in which to write reviews.

In addition, the SEO companies outsourced reviews to writers in Bangladesh, the Philippines, and Eastern Europe, the attorney general’s investigation found.

Local companies have themselves searched for fake reviewers, posting ads on Craigslist and other freelancer sites. Many of these are like the want ad posted by a spa in New York, according to the investigation:

“I need someone who is a YELP expert to post positive reviews for a spa that will not be filtered using legitimate existing yelp accounts must have at least 10 friends on Yelp. Please be a yelp expert!! I will pay $10 per-review after 3 days they must meet the criteria above.”

As alluded to in the ad, consumer search sites like Yelp have already set up their own filters designed to detect spoofing and astroturfing techniques, thus engaging in a game of online cat and mouse with companies who employ such techniques.

"More than 100 million visitors come to Yelp each month, making it critical that Yelp protect the integrity of its content," said Aaron Schur, Yelp's senior litigation counsel, in the announcement Monday. "We take many steps to do this, including the use of automated filtering software, leveraging our vast user community for tips about suspicious content, undercover sting operations, legal action, and cooperation with law enforcement.”

The investigation cited a Harvard Business School study of the relationship between online ratings and business success – and which used Yelp’s restaurant ratings as the case study. It found that even the boost of a single star on Yelp’s five-star rating scale would increase restaurant revenues by 5 to 9 percent.

A similar study by Cornell’s School of Hotel Administration found that a one-star jump in the five-star-based rating of a hotel on a site like Travelocity could lead to an 11 percent rate hike for the hotel’s rooms, without affecting its occupancy rates.

As studies show consumers relying more and more on such online reviews before they make a purchase or decide to visit a restaurant or hotel, the integrity of such reviews, experts say, is becoming a significant issue for consumer protection. The New York attorney general's investigation focused only on local businesses.

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