One of Amazon's (NASDAQ: AMZN) key assets is the millions of product reviews on its website. These reviews and their associated rankings from zero to five stars can help consumers decide to buy or not buy an item. It's crowdsourcing at its best, where a community of users provide useful information that actually helps people make purchasing decisions.
The problem with crowdsourcing anything is that crowds can be unpredictable, unreliable, or in some cases, downright dishonest. In a broad sense, the sheer volume on Amazon tends to drown out the small amount of impossible-to-please malcontents who simply dislike anything popular, or the people who just like to be contrarian. It's also possible in many cases to spot reviews with less value.
For example, my mother's glowing, five-star write-up of my last book may not carry much weight with the retailer's audience because of our shared last name. In other cases, the bias is less obvious, and for less-popular products, it's possible to game the system.
That's a problem for Amazon, and the company has decided to take legal action against people being paid to write fake positive reviews.
What has Amazon done?
Earlier this year, the online retailer filed a lawsuit against four websites selling reviews on their sites. Now the company has filed an additional suit against 1,114 unnamed defendants who were peddling reviews on the website Fiverr, Consumerist reported. That site sells an array of products -- everything from logo design to coding, writing, and more -- starting at $5.
Amazon's lawsuits come after the company used investigators to actually hire the reviewers to create reviews for hire, according to the consumer news site.
"Defendants are misleading Amazon's customers and tarnishing Amazon's brand for their own profit and the profit of a handful of dishonest sellers and manufacturers," according to the complaint filed in a Seattle court.
"Our goal is to make reviews as useful as possible for customers," Amazon spokeswoman Julie Law told MarketWatch. "We continue to use a number of mechanisms to detect and remove the small fraction of reviews that violate our guidelines."
The lawsuit is only one tactic Amazon is using to weed out people violating its review policy, which specifically outlaws "reviews written for any form of compensation other than a free copy of the product."
It's also worth noting that Amazon is not alone in dealing with this issue. Restaurant review site Yelp (NYSE:YELP) has also faced the issue, and it lacks Amazon's resources to battle it. By setting the precedent, Amazon could help Yelp and other sites with crowd-sourced review content find justice.
Why this matters?
Positive reviews can push a consumer to buy a product or help him or her decide between two competing choices. There's a pretty clear line between biased reviews (I assume my mother really did like my book) and someone with no opinion being paid to deliver a positive write-up.
Amazon likely does not have any interest in punishing the 1,000-plus people it's suing; the company is instead looking to dissuade people from selling fake reviews. In some ways, that's like trying to use a sponge to clean up the ocean; but the retailer has to try, and it should be able to make things better.
Consumers likely already take any crowdsourced reviews with a grain of salt, but Amazon must do everything it can to show its customers that it's trying to weed out clear frauds. The threat of a lawsuit may lead an awful lot of people to decide that $5 is not worth the risk. That won't stop the problem entirely, but it could significantly cut down on it.
Amazon isn't going after the little guy -- it's sending a message about the integrity of its site. It's needed, and it could have a powerful impact that helps keep the reviews credible, albeit not perfect.
Daniel Kline has no position in any stocks mentioned. His book also has reviews from a number of his friends. The Motley Fool owns shares of and recommends Amazon.com. The Motley Fool recommends Yelp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.