The FTC barred Sunday Riley from misrepresenting the status of a person reviewing products. The commission also ruled Sunday Riley must instruct its employees and agents to disclose their connections to the company in any endorsements, according to the order.
Neither the company nor Sunday Riley, its namesake chief executive, admitted or denied wrongdoing, which drew a strong rebuke from FTC Commissioners Rohit Chopra and Rebecca Kelly Slaughter.
“Today’s proposed settlement includes no redress, no disgorgement of ill-gotten gains, no notice to consumers, and no admission of wrongdoing,” they said in a statement. “Sunday Riley and its CEO have clearly broken the law, and the Commission has ordered that they not break the law again.”
The findings of the Sunday Riley settlement are meant to send a strong message. But the two dissenting commissioners noted the FTC’s decision is unlikely to deter any other would-be wrongdoers.
Questions surrounding Sunday Riley’s ethical practices swirled last year when a former employee went to Reddit and blew the whistle on the company’s operations.
“We were forced to write fake reviews for our products on an ongoing basis, which came directly from Sunday Riley herself and her Head of Sales,” the Reddit user wrote, attaching a copy of an email showing instructions on how to post fake reviews.
The FTC said its investigation into Riley and her company confirmed the whistleblower’s allegation.
In July 2016, Riley laid out a nine-step guide on how to create three Sephora.com accounts registered as different identities to write positive reviews for its products, according to the complaint’s allegations. Some of the instructions told employees to review products every other day to build up history and to only review makeup, color and hair.
At the end of the July 2016 note to her staff, according to the complaint, she told them to dislike negative reviews because enough dislikes will have the negative reviews removed. That, she wrote, “directly translates to sales!”
“Tidal and Good Genes are 4.2 and I would like to see them at 4.8+,” she wrote about some of her most popular products, as cited by the FTC. “UFO and Martian are at 4.9 – let’s keep it that way!”
The FTC said similar reminders were sent to staff and other managers by the company’s account manager for Sephora as other products launched in December 2016 and August 2017.
“Credibility is key to the review,” the Sunday Riley Skincare account manager responsible for Sephora wrote, according to the complaint. The account manager also pointed out how powerful reviews are as people look to what others are saying to “persuade them and answer potential questions they may have.”
After Sephora removed fake reviews written by the skin-care brand’s employees, the company used a virtual private network to hide the reviewers’ IP addresses and locations, the FTC found.
Neither Sunday Riley nor Sephora responded to requests for comment.
Sunday Riley and her company deceived consumers for their own advantage, said David Vladeck, a professor of law at Georgetown University and former director of the FTC’s Bureau of Consumer Protection. The agency has the dual purpose of protecting consumers and protecting the competition of the marketplace, and it has laid out strict guidelines for companies, he said.
“This is the kind of case the FTC does because the FTC does not have the resources to go after everyone,” he said. “When they go after people, they go after people who are market players and have been abusive in the market.”
Sunday Riley’s revenue is estimated to be between $50 million to $100 million, according to Glassdoor.
The brand has gained a dedicated following thanks in part to major retailers such as Nordstrom and Bergdof Goodman offering its products. In April, United Airlines partnered with the skin-care firm to provide its business class and other elite passengers with Sunday Riley kits. The company said Sunday Riley products would also be available in shower facilities in various United Airlines lounge and club locations.
The brand’s prominence has also risen as more celebrities have given it a stamp of approval, along with beauty influencers. But the news came as no surprise to influencers in the science and skin-care space.
Comments of disreputable practices by Sunday Riley have been swirling for some years, said Victoria Fu, co-founder and chemist for Chemist Confessions, which provides ingredient breakdowns for followers seeking to know about the science in their skin care.
“It would be nice if the FTC could make Sunday Riley an example, but on the flip side they’re not the only one,” she said.
Cosmetics formulator and skin-care expert Stephen Alain Ko also has a loyal following of skin-care and science enthusiasts. He captioned a picture of a Sunday Riley product with the FTC’s findings and a lyric of the Foo Fighters hit “Best Of You.”
The company has had marketing clarity issues before, he said, but he’s more surprised that the CEO of a company would write explicit instructions to employees.
If influencers have endorsed the brand in the past, they should stand by those statements — as long as what they said was truthful, Ko said.
“They need to take it head on and just be patient,” he said of Sunday Riley’s ability to recover. “If the product is good and the company’s good, it’ll come back.”
If it doesn’t come off as authentic, he said, the path back to consumer trust will be much more difficult.