After a public comment period, the Federal Trade Commission (FTC) has approved a final agreement with Sunday Riley Modern Skincare, LLC, and its CEO, Sunday Riley, settling charges that Ms. Riley—and employees acting at her direction—misled consumers by posting fake reviews of the company’s products online and by failing to disclose that the reviewers were company employees.
According to the FTC’s complaint, issued in October 2019, Sunday Riley Modern Skincare managers, including Ms. Riley, posted reviews of their branded products on the Sephora website using fake accounts created to hide their identities and requested that other Sunday Riley Modern Skincare employees do the same thing. The FTC alleged that after Sephora removed fake reviews written by Sunday Riley Modern Skincare employees, the company obtained an ExpressVPN account in an attempt to hide its online activity.
The final order prohibits Sunday Riley Modern Skincare and Ms. Riley from misrepresenting the status of any endorser or person reviewing a product they are selling, including misrepresentations that the endorser or reviewer is an independent or ordinary user of the product. The order also requires that they clearly and conspicuously disclose any unexpected material connections between endorsers and Sunday Riley Modern Skincare, Ms. Riley or any entity affiliated with the products.
The Commission vote approving the final consent order was 3-2, with Commissioners Rebecca Kelly Slaughter and Rohit Chopra voting no. The majority and Commissioner Chopra each issued separate statements. Commissioner Slaughter joined in Commissioner Chopra’s statement.
The majority statement of Chairman Joseph J. Simons and Commissioners Noah Joshua Phillips and Christine S. Wilson defended the settlement. They pointed out that the Commission’s order holds Ms. Riley personally liable, prohibits both Ms. Riley and Sunday Riley Skincare from making future misrepresentations (including through fake reviews), and requires them to instruct employees and agents about their legal responsibilities. Each violation of the order could result in a civil penalty of up to $42,530. They stated: “There is no reason to believe that the Commission’s order will not protect consumers from further misconduct or that the potential for civil penalties will not deter future violations.”
Commissioner Chopra’s dissenting statement criticized the settlement because it does not impose monetary relief. “The settlement includes no redress, no disgorgement of ill-gotten gains, no notice to consumers[] and no admission of wrongdoing. Instead, Sunday Riley is merely being ordered to not break the law again.”
Commissioner Chopra stated that the Commission “should formally signal that it is terminating its no-money, no-fault settlement approach for dishonest or fraudulent conduct” by:
- Publishing a Policy Statement on Equitable Monetary Remedies. “At a minimum, it should establish a rebuttable presumption that the Commission will not pursue no-money settlements in cases involving dishonesty or fraud.”
- Issuing rules to codify basic tenets of the FTC Endorsement Guides—in particular, the requirement that endorsers disclose material connections to sellers. This would permit the FTC to seek civil penalties when advertisers fail to comply with the rules, including when they fail to disclose material connections with endorsers.
Designating specific conduct as penalty offenses, such as failing to disclose material connections. Commissioner Chopra stated: “The Commission has authority under Section 5(m)(1)(B) of the FTC Act to seek penalties against parties who engage in conduct known to have been previously condemned by the Commission. The practice of endorsing products without disclosing material connections was condemned decades ago, and the Commission can act almost immediately to trigger substantial penalties against the worst violators.”