A company marketing guitar and other instructional DVDs will pay US$250,000 for allegedly fake reviews posted by the company's affiliate marketers, the U.S. Federal Trade Commission said Friday.
Legacy Learning Systems of Nashville, Tennessee, and owner Lester Gabriel Smith advertised the Learn and Master Guitar program through online affiliate marketers who posed as ordinary consumers or independent reviewers, the FTC said in a press release. The affiliates did not clearly disclose the "substantial" commissions they received from the company for every sale they generated, the FTC said.
The failure to disclose the relationship between the reviewers and the company is a violation of FTC rules and is an unfair or deceptive business practice, the FTC said in a complaint. In October 2009, the FTC published guidelines for paid reviews and endorsements that required reviewers and endorsers, including bloggers, to disclose the payments.
Legacy Learning Systems didn't immediately respond to an e-mail and a phone message seeking comment on the FTC settlement.
One affiliate review called Learn and Master Guitar the "undisputed No. 1 training product for someone wanting to learn how to play the guitar," the FTC said in its complaint. Another called it the "best home study DVD course for guitar I have ever seen." Twenty-five affiliates running reviews have led to $5 million in sales of Legacy's products, the complaint said.
In some cases, Legacy's affiliates endorsed the company's instructional courses without any disclosure of their relationship to Legacy, and in other cases, disclosures were accessible "only through inconspicuous hyperlinks," the FTC said in its complaint.
The FTC-approved settlement requires Legacy and Smith to pay $250,000 and maintain a system to review and monitor their affiliate marketers.
Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.
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