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Digital Business Lawyer
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Airbnb agrees to amend its online customer review system after intervention by the UK’s CMA

The Competition and Markets Authority (‘CMA’), the UK’s primary competition and consumer authority, has recently pushed Airbnb, the world’s fastest growing online marketplace and hospitality service, to remedy a major loophole in its online review system. The change means that guests who decide not to stay at a property for the full duration will be able to leave reviews. Airbnb has committed to implement the changes by 31 August 2017 and it is understood that the changes will be made worldwide. Farhana Khanom of Shoosmiths LLP provides insight into the CMA’s concerns and the importance of online reviews.

Currently guests who cancel their Airbnb stay upon arrival (or leave early because they are unhappy with the condition of the property) cannot leave reviews through the automatic online system. Instead, such customers have to go through the long process of contacting Airbnb’s customer service department to leave a negative review. If this is not done, the booking will simply show as ‘cancelled’ on Airbnb’s website and future customers will be unaware of the negative feedback received for the property in question. The CMA considered this process difficult and following enquiries, Airbnb has agreed to rectify this loophole.

The CMA has confirmed that guests will now be able to leave feedback with important information, such as the suitability of the host or the accommodation, or the reason they chose not to stay or to cut short their stay, regardless of whether they cancelled on the day of check-in or during their visit. Gordon Ashworth, CMA Project Director, said: “Airbnb is a popular platform used by people searching for accommodation, and the online reviews and opinions left by other guests are an important source of information. It’s therefore imperative that customers are able to access the complete picture about a property they are considering booking. We were concerned that, if someone cut short their stay, it was too hard for them to leave a review under the Airbnb’s existing reviews system and so we are pleased that Airbnb engaged constructively with us and committed to making the necessary changes.“

The CMA’s involvement

The CMA’s intervention into Airbnb’s online review policy is part of its ongoing work into online reviews and endorsements. The CMA has a particular interest in looking at these sectors as online reviews and endorsements play an important role in helping consumers to make shopping decisions. The CMA however had been made aware of a number of concerns about the potential for reviews and endorsements to mislead and distort consumer decisions, which could lead to detriment for both consumers and businesses.

The CMA therefore launched a call for information on 26 February 2015 to understand the online reviews and endorsements sectors better and to consider whether further action, including potential consumer enforcement action, might be needed. The CMA’s findings can be found in its report dated 19 June 2015. It raised a number of concerns including:

1. The use of fake negative and/or positive reviews. This is used to boost a business’s ratings on review sites compared to rivals. Several sites reported to the CMA that they estimated the figure of fake reviews was around 1 to 2%. Other sources suggest however the proportion of fake reviews is much higher.

2. Suppressing genuine negative reviews and sites ‘cherry picking’ positive reviews. Some review sites distort the picture presented to consumers (whether intentionally or not) by failing to publish genuine negative reviews and without making it clear to consumers that they are only looking at a selection of reviews.

3. Incentivised reviews. Some review sites identify consumers who are interested in writing reviews and hand out free samples in return for positing reviews. Some businesses offer rewards for consumers who post five star reviews on specialist review sites.

4. Use of paid endorsements not clearly identifiable. Some businesses pay for advertorials and sponsored content in blogs and other online articles but do not ensure that this is clearly identifiable to consumers.

The CMA found many instances of practices that have the potential to breach consumer law and that could mislead consumers about the merits of a product or service. These practices may prevent consumers from choosing the product or service that best suits their needs because the information available does not show the whole picture - with some businesses losing custom as a result. In 2016, the CMA took action against an online marketing company for writing fake online reviews for small businesses and posting them on different websites. The CMA is continuing to investigate the areas of concern identified.

Importance of online reviews

Online reviews are crucial to any business and have become very popular among consumers. The popularity of online reviews has increased significantly since the internet became a household convenience. Consumers today are more empowered than ever because they have a staggering number of businesses to choose from and online reviews help them quickly reject businesses that they feel are not suitable.

Online reviews are particularly important for smaller businesses where driving growth is the main aim. For many, it can mean the difference between success and failure. Where larger businesses can distance themselves from negative reviews, a smaller business cannot afford this luxury. Results from the consumer survey commissioned by the CMA as part of its ongoing investigation suggest that 54% of UK adults read online reviews. Across the sectors that the CMA looked at, it estimates that £23 billion a year of UK consumer spending is influenced by online reviews.

Moreover, it appears that many consumers trust online reviews. Between 76 and 80% of consumers who have used reviews before making a purchase thought it was either ‘very likely’ or ‘fairly likely’ that the reviews they read were written by genuine consumers. It is clear that reviews form an important part of the consumer’s decision-making process which further increases the need for regulation and consistency in the market to ensure that the information portrayed is accurate. This is necessary not only to ensure compliance with consumer law but also to protect the role that online reviews play in helping consumers to make shopping decisions.

The rise of social media marketing

The marketing landscape has changed extensively since the introduction of social media. It is estimated that almost 2 billion people are active on social media. Sites such as Facebook and Twitter are no longer simply used to encourage you to stay in contact with friends and family; these platforms are one of the most powerful tools for reaching new audiences and generating and interacting with current and new business opportunities.

Businesses now embrace social media as part of their marketing strategy and spend a large chunk of their annual budget investing in the same. There are a number of ways a business can use social media marketing to promote their products/services including:

1. Pointing customers towards positive reviews. As mentioned above, consumers may trust online reviews more than a business marketing its own products/services.

2. Improve credibility. A business can improve its credibility by responding and engaging in conversation with consumers.

There has also been a recent surge of businesses using well known bloggers to promote and review their products/services. It has become a popular way for businesses to connect with a larger audience. British blogger Zoella, for example, has over 10 million YouTube followers and is reported to have earned millions from brand reviews and endorsements. The mixture of entertainment and interaction with a real person is seen by the audience to be an authentic way to voice an opinion. Initially, there was a lack of regulation in this area which led to a growing backlash in respect of transparency.

The Advertising Standards Authority has however recently set out guidelines which highlight that bloggers should be transparent when reviewing or writing positively about a product/service they are being paid to promote.

Conclusion

As online reviews and social media marketing become more important to pre-purchase research, businesses of all sizes need to ensure that they are fully compliant with the CMA and consumer law. It is more important now than ever that businesses allow consumers to see the true picture as the CMA is cracking down on improper practices. This can include the instigation of criminal and/or civil action against a business.

Farhana Khanom Solicitor

farhana.khanom@shoosmiths.co.uk

Shoosmiths LLP, UK

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