FTC and States take on “testi-phony-als” in action against housing platform Roomster and operation that posted bogus reviews on its behalf

Reviews and endorsements can be highly influential when consumers are shopping for widgets and gadgets. But when they’re looking for the right platform to use in a rental search, the personal experience of other people takes on even more significance. A complaint filed by the FTC and six States alleges that room finder platform Roomster and its owners used thousands of fake reviews – we call them “testi-phony-als” – to lure consumers to its site and pay for access to information about listings that often turned out to be equally fake. The FTC and States also announced a settlement with the operator of AppWinn, the entity that posted thousands of glowing multi-star reviews about Roomster’s services.

Let’s start with what Roomster Corp., John Shriber, and Roman Zaks promise about the Roomster platform. They represent that the service – available on the Roomster website and through apps with subscription fees – allows users to post and search listings for living arrangements, including home or apartment rentals, room rentals, sublets, and roommate requests. They also claim to “mak[e] sure the Roomster profiles and the listings on the site are complete, accurate, updated and yes . . . authentic.”

But according to the FTC and California, Colorado, Florida, Illinois, Massachusetts and New York, the Roomster defendants don’t verify listings or ensure their authenticity. As long as the platform recognized the street address, Roomster allegedly posts the listing immediately without determining whether it’s the real deal – and the complaint cites the eye-opening results of an undercover investigation to back up that allegation. Further, despite the promises of “verified” and “authentic” listings, consumers complain that Roomster is riddled with bogus listings.

That’s not the only way the lawsuit alleges the defendants have deceived consumers. The FTC and the States say that either on their own or with the help of affiliates, the Roomster defendants have posted bogus listings – many of which included attractive photos – on sites like Craigslist with links that direct people to the Roomster platform. Once there, consumers are encouraged to pay a fee to get access to information about the listing that drew them to Roomster in the first place. Only after signing up do many people learn that the listing doesn’t exist.

Some duped consumers posted negative reviews in an effort to warn others about Roomster’s tactics. As one person reported:

Worst app ever waste of money. If I could give a negative 100 star I would. Idk of all those good reviews are fakes too or what. But I literally reach out to at least 50-60 people and I received few msg offering a place. And all of them just fake. Same exact email you give the deposit and first month rent and they will mail you the key. Cause they “at funeral, in different country, traveling, blah blah blah blah” . . . .

The customer who wondered if “all those good reviews are fakes too” was on to something as evidenced by additional complaint allegations against the Roomster defendants and Jonathan Martinez, operator of AppWinn. According to the FTC and the States, to lend credence to their deceptive claims, the Roomster defendants, often with help from Martinez, have saturated the internet with tens of thousands of 4- and 5-star fake reviews for their platform. One key location for those testi-phony-als: the app stores where Roomster gets most of its customers.

You’ll want to read the complaint to see some candid behind-the-scenes conversations between Roomster and Martinez about what they were doing to manipulate the market by posting thousands of phony glowing reviews. For example, defendant Shriber allegedly instructed Martinez to produce “lots of 5 star IOS app reviews” because Roomster “would like to be #1” for people searching for roommates – an illegal marketing tactic that Martinez used 2,500 fake iTunes accounts to implement. Even after receiving notice of the FTC’s investigation, the complaint alleges that the Roomster defendants told Martinez, “Just as a reminder, please make sure it’s always a random number of reviews, so it looks more natural.”

The complaint charges all the defendants with violating state and federal law by falsely claiming that certain reviews of the Roomster platform represented the experience of actual users. The Roomster defendants are also charged with misrepresenting that listings are verified, authentic, or available.

The case against Roomster is pending in federal court in New York. Defendant Martinez has signed a proposed settlement that will require him – among other things – to notify the Apple and Google app stores that Roomster paid him for posting reviews, to identify those reviews, and to pay a total of $100,000 to the six States that brought the case with the FTC. The proposed settlement also will ban him for life from selling consumer reviews or consumer endorsements.

What’s the preliminary takeaway? Of course, phony testimonials are nothing new, but the ubiquity of consumer reviews and the explosion of platforms like Roomster demonstrate the injury inflicted by bogus endorsements. What’s more, honest businesses that work hard to earn positive reviews from actual customers shouldn’t have them drowned out by deception.