Five stars. Two thumbs up. 100 percent.

As consumers, we rely on product reviews to steer us in the right purchasing decision. It’s easy to see why we, the buyers, might need positive reviews. After all, if you have a great experience at a particular restaurant, your positive review encourages others to visit the restaurant.

Hungry patrons and restaurant owners alike are thrilled about every positive review. The same can be said for movies, video games, books, service and virtually any other experience.

But what about the experiences that aren’t very good? Do we need negative reviews just as much as positive ones?

The consumers of the world - especially the ones who have been burned by bad service or bad products – argue that yes, we absolutely need negative reviews. How else will the disgruntled consumer be able to share his experience with others? How can those looking for a good experience avoid wasting money?

On the other side of that, however, companies are wary. They certainly don’t want negative reviews. Those one star, no thumb, 15 percent rankings run off would-be customers and can destroy businesses. There are, in fact, companies who have tried to penalize consumers who dare leave a bad review – even if it’s an honest review.

Negative online reviews

Avoiding Bad Reviews at All Costs

Companies have struggled with the burden of bad reviews over the years, trying to find the best way to discourage negative reviews on consumer websites while staying at least a little bit legal. While a few practices raise a few eyebrows, others fall off that fine line right into the fully illegal side of things.

Yelp, a popular review website, is one who raises a few eyebrows. Customers write reviews about their experiences in restaurants, hotels and other businesses. With the popularity of a website like Yelp, even a single negative review can have a significant impact on the business and its reputation.

Naturally businesses are leery of review sites like this because there is often no way to check and see if a review is actually true or perhaps just a malicious attack, perhaps even an attack by a competing restaurant. One hotel bad mouths another online and business grows, let’s say. It begs the question, how do websites like Yelp prevent fake reviews, especially those that might damage a business without cause?

It turns out that Yelp does have policies in place to deal with fraudulent reviews both good and bad. Unfortunately nobody outside the company seems to know what those policies are. Even a lawsuit against the company did “not raise more than a mere possibility that Yelp has authored or manipulated content related to Plaintiffs in furtherance of an attempt to ‘extort’ advertising revenues.”

What exactly was the question of manipulating content? According to the lawsuit and many other frustrated customers, Yelp is removing reviews according to their own policies. Policies that nobody knows. This is annoying, but not illegal. What took the eyebrow-raising actions to court was that some customers believed there was a financial basis in what reviews where removed and which stayed.

One realtor called the company to figure out why a legitimate positive review was removed by the Yelp team as being fraudulent. She learned that the company seemed “to be wary of first-time reviewers”. She claimed:

“If your first review is negative then they let you post other reviews, but if your first review is positive then they remove it. The same goes if all your reviews are positive.”

But the kicker came when the slighted realtor realized, “They hinted that if I advertised on Yelp this may not have occurred.”. This realtor appeared to insinuate, as the lawsuit filed against the company claimed, that Yelp would leave good reviews in place, or even remove bad ones, if you paid for advertising on the website.

The lawsuit against Yelp was dismissed by a judge back in 2011 not because it was clear Yelp wasn’t doing anything wrong, but because the class-action suit couldn’t show enough evidence to prove it. That’s a thin line to walk, indeed.

Going Over the Line

Other companies have tripped well over questionable behavior into the big leagues. Jen Palmer ordered items from the website KlearGear.com. She never received the items and couldn’t get anyone on the phone to discuss the missing delivery. Finally she did a charge back on PayPal and left a negative review about the company on a popular complaint website before moving on in her life.

Three years – more than 1,000 days – later, she was contacted by KlearGear and told that she had violated a non-disparagement clause buried in the terms of service. Not only had she violated the clause, claimed the company, she would “immediately be billed $3,500 USD for legal fees and court costs until such complete costs are determined in litigation.”

Shocked to learn that she was going to be billed $3500 in legal fees that didn’t even exist yet from a potential future suit, she also read that after thirty days her “unpaid invoice would be forwarded to our third party collection firm and will be reported to consumer credit reporting agencies until paid.”

In short, KlearGear had a statement buried in the fine print “to ensure fair and honest public feedback, and to prevent the publishing of libelous content in any form” telling customers they couldn’t post negative feedback if they purchased products from the site.

In short, three years after the company failed to deliver a product or answer the phone, Jen Palmer was told, post a negative review and be ready to pay $3500 for the coming lawsuit. Or battle collections agents while your credit score drops if you don’t pay. Your call.

When the news story broke in 2013, it went viral and the internet jumped into the fray. Tim Cushing at TechDirt dug through the internet archives to learn that the non-disparagement clause didn’t even exist on KlearGear’s website at the time that Jen Palmer ordered the item that was never delivered.

If the clause didn’t exist, it certainly can’t apply to her situation, but apparently nobody at KlearGear bothered to check this out (or they just didn’t care) before they requested $3500 for a not-yet-started-lawsuit.

As the outrage in the online world raged on, it was noted that KlearGear had misrepresented the Better Business Bureau’s rating on its website as well, which is another serious concern. Story after story was written and shared and eventually KlearGear shuttered its social media accounts.

No lawsuit was filed, no money collected, but KlearGear retreated behind a closed Facebook account and protected Twitter. This is probably not the sort of move a $47 million company makes when it is trying to show the world it has nothing to hide.

Determining the Value of Negative Reviews

In some cases when companies try the say-nice-things-and-we-won’t-sue clauses, the Federal Trade Commission takes action. After one such case, the FTC recruited a top researcher, Paul A. Pavlou, to analyze whether suppressing negative reviews would actually harm consumers in some way.

Granted, most consumers want to know about bad products and services, but do we need to know about them? That was the question posed to Dr. Pavlou.

After researching the question and drawing upon years of additional experience in the field, the answer was straightforward. In his thirty-page report, Dr. Pavlou says unequivocally that the use of non-disparagement provisions and related threats and warnings has a negative effect on consumer welfare.

Threatening consumers willing to post negative reviews does two things. It inflates the perceived value of the product and it also prevents customers from learning about possible problems with the products.

Negative reviews may not be what the company wants, but by artificially suppressing the reviews, at least one expert claims consumers are getting hurt – either in the wallet or perhaps in the stomach as well. Without real customers experiences to examine it’s hard to tell.

The Truth behind Negative Online Reviews

There are numerous studies that have shown online ratings are tied to online purchases. Researchers from Wayne University proved this easily, but went further in their research to see just what additional relationships existed between online reviews and sales.

The Wayne University researchers wanted to see what happened when companies – much like Yelp – tried to filter reviews. The experience the researchers set up filtered out reviews that would not enhance product sales, or basically bad reviews. Then, after a period of time, the filter was changed to allow all product reviews through.

Where you might assume that sales would now drop with the added negative reviews, the researchers found something else entirely. Apparently “by providing unbiased filtering, companies actually increase the positive impact of online reviews on online transactions.” By allowing a collection of both positive and negative reviews to be posted, sales actually increased online.

The Good Thing about Bad Reviews

Online reviews on PissedConsumer

Other researchers have delved into the data surrounding product reviews and unearthed some truths that companies should probably know.

Online Reviews Help Customers

The reviews others leave online help steer customers toward or away from purchases. Increasingly customer reviews are considered by other consumers to be unbiased and non-profit driven. This is obviously not the case for company-generated (or company filtered) materials.

In fact, this lack of sincere consumer posts created by the experimental filter above may be why sales increased when negative reviews started making it online again. Customers respond to honesty and unbiased opinions.

Online Reviews Can Raise Prices

Strong ratings can reduce a customer’s uncertainty about a product and actually boost demand. Higher demand often leads to higher prices, which is a huge plus for the seller. Online reviews are self-governing and allow customers to make informed decisions about online markets – often an asset for niche markets and developing businesses.

Negative Reviews Protect Customers

Literature has shown that negative reviews are an important element of the online sales community. The negative ratings warn customers about hazardous products or items that are of lower quality.

Negative Reviews Predict Sales

The vast majority of online reviews are positive. Negative reviews are fewer in number, which makes them more potent as a predictor of sales. Negative reviews are considered informative, helpful and diagnostic for would-be consumers.

Negative Reviews Harm Companies

It was found by both the pair of researchers from Wayne State University and another set of researchers from Harvard Business School that suppressing negative reviews can harm companies. A bad product can hurt a company, of course, but more indirectly, simply trying to squash neutral or negative reviews about a decent product can backfire on companies as well.

Fraud, distortion and the manipulation of product reviews damage the credibility of companies and their brand value. Manipulating online reviews lowers their value and can harm a company’s image, sales and potentially harm customer welfare as well.

The Consequences of Negative Reviews

Dr. Pavlou, who specializes in consumer behavior including online reviews and sales, had dire predictions for companies who try and suppress naturally occurring negative reviews. Suppressing negative reviews would not just hurt the company, but could prove dangerous to consumers as well who aren’t told of real problems people have experienced.

It would seem Dr. Pavlou was on the money when he claimed suppressing reviews would harm both the company and consumers. Consumers don’t stay quiet long when questionable activities come to light.

According to Dr. Pavlou, it would seem customers don’t like it when companies “allegedly made baseless claims for their products, and then threaten to enforce “gag clause” provisions against consumers to stop them from posting negative reviews and testimonials online.”

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While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal, medical, accounting, investment, or any other professional advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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