UPDATE: In an effort to discover how the FTC was able to uncover Reverb's illicit App Store reviews, I spoke with Stacey Ferguson, a Staff Attorney at the FTC in the division of Advertising Practices in the Bureau of Consumer Protection. Ferguson worked on the Reverb case and while she wasn't able to go into specifics, she did mention that the FTC "got reports from press that Reverb was involved in these fake postings and we decided to look into it some more, so we opened an investigation."
Once the investigation began, Ferguson explained that the FTC "reviewed internal Reverb materials and documents, so we were able to determine that part of [Reverb's] marketing campaign was to post these fake reviews on behalf of their client."
In closing, Ferguson gave some suggestions for ways companies can avoid running into the same issues:
"I would just encourage companies to make sure that their advertising agencies and PR firms are aware of the FTC act and are making the proper disclosures. Companies should understand that the goal should be consumer understanding and transparency. And consumers might want to take online postings with a grain of salt, because you never know who is actually making the posting."
UPDATE 2: Just received Reverb's official statement on the matter, which you can read right here:
During discussions with the FTC, it became apparent that we would never agree on the facts of the situation. Rather than continuing to spend time and money arguing, and laying off employees to fight what we believed was a frivolous matter, we settled this case and ended the discussion because as the FTC states: "The consent agreement is for settlement purposes only and does not constitute admission by the respondents of a law violation."
ORIGINAL STORY: The Federal Trade Commission has settled charges with Reverb Communications which state that the PR company had its employees post positive reviews of iPhone games in the App Store without disclosing that they were employed by the game's developer or that they received a portion of the game's profits.
In a press release, Mary Engle, the Director of the FTC's Division of Advertising Practices, said that companies, "including public relations firms involved in online marketing need to abide by long-held principles of truth in advertising...Advertisers should not pass themselves off as ordinary consumers touting a product, and endorsers should make it clear when they have financial connections to sellers."
By settling with the FTC, Reverb was required to remove all of the reviews its employees posted which don't explicitly state that the reviews were from partial reviewers. The settlement also bars Reverb from posting reviews in the future which don't make the source of the review clear.
In the end, the settlement was relatively toothless, given that Reverb suffered not much more than a wrist-slap and a "Don't do it again!" from the FTC.
So why should you care? The App Store has shown time and time again that positive reviews can drive sales for a game, and the fact that there may be bogus reviews on there call the starred rating system into question as a valid determinate for quality.
That being said, there are limits to the extent to which review scores can be "faked" on the App Store. Only those who have purchased a game can review it, so unless a mega corporation gives download codes to all their employees, you're never going to see fake five-star reviews in the thousands. So yeah, "Fruit Ninja" is legitimately awesome.