Credible Effects: The Impact of Disclosure of Material Connections Within Online Product Reviews:

Online product reviews are an influential source of information for consumers. With pressures to have readily available reviews, businesses must determine the best strategy for obtaining them. In 2009, for the first time in 29 years, the Federal Trade Commission (FTC) updated endorsement guidelines to address concerns over possible deception within online reviews. Since that time, the FTC has issued four additional statements underlining its concerns and providing additional examples of how to comply. In 2017, the first action of enforcement was made against individuals failing to adhere to these guidelines. In light of the FTC's guidelines and pressures to have reviews, businesses must ask which type of affiliated reviewers, if any, are the most influential. As to reviewer credibility, the literature offers contradictory predictions. Through three experiments with a total of 1,077 consumers, the authors examine effects of reviewer affiliation. The findings affirm the spirit of the FTC's updated guidelines. However, affiliation comes at a cost. Depending on the competitive context, the cost may be worth the benefits.