The Federal Trade Commission and six state attorneys general sued apartment-finding service Roomster and the online review platform AppWinn for allegedly duping customers with fake reviews.
In a complaint unveiled this week, the FTC and attorneys general say Roomster used phony reviews to lure customers into paying for information about apartment listings -- which often were themselves phony.
The complaint alleges that since at least 2016, Roomster, assisted by AppWinn, “inundated the internet with tens of thousands of fake positive reviews to bolster their false claims that properties listed on their Roomster platform are real, available, and verified.”
AppWinn founder Jonathan Martinez agreed to settle the allegations by paying $100,000 to the six states that sued -- California, Colorado, Florida, Illinois, Massachusetts and New York. Martinez also agreed to other conditions, including that he cooperate with the FTC in its lawsuit against Roomster, and that he inform Apple and Google app stores about the fake reviews.
Roomster says the lawsuit is “meritless,” and that the company will defend itself in court.
“The FTC is clearly overreaching in a performative attempt to protect consumers, when in reality there is a lack of understanding of our business,” Roomster CEO John S. Shriber said Tuesday in a post on the company's site.
"We have helped millions of subscribers find simple and safe rooming solutions and will continue to do so in a legal and ethical manner," Shriber wrote.
He also said AppWinn's Martinez was “the sole individual responsible for the fake reviews,” adding that Martinez's agreement with the FTC deprives Roomster of due process.
“As part of the agreement ... Martinez is obligated to contact major app stores to provide them the same information he provided the FTC, which could be extremely harmful to our business,” Shriber wrote. “This represents another example of the gross overreach by the FTC.”
The complaint, which was brought in federal court in the Southern District of New York, includes an allegation that an “undercover investigation” showed that Roomster “immediately accepted and published a fake listing with a U.S. Postal Office commercial facility address.”
Roomster allegedly failed to verify the listing, which was for an apartment at a below-market rate, according to the complaint.
“To lend credence to their misrepresentations that their listings are authentic and verified, the Roomster defendants, often with the help of defendant Martinez, saturate the internet with tens of thousands of 4 and 5 star fake reviews, including through app stores, where the Roomster defendants do most of their business,” the complaint alleges.