• by Wendy Davis  @wendyndavis, July 5, 2023

Apartment finding service Roomster has reached a tentative settlement with the federal government and six states over allegations that the company duped consumers with phony reviews, according to papers filed late last month with U.S. District Court Judge Colleen McMahon in New York.

The proposed settlement would include a monetary component and an injunction requiring Roomster to follow certain conditions in the future, according to a letter sent to McMahon by Federal Trade Commission attorney Angeleque Linville. Further details have not yet been disclosed.

Linville added that the deal hasn't yet been approved by the FTC or state attorneys general, but that she hopes they will consider the settlement before the end of August.

If finalized, the deal will resolve a complaint filed last year by the FTC and six states (California, Colorado, Florida, Illinois, Massachusetts and New York), which alleged that Roomster used fake reviews to lure customers into paying for information about apartment listings -- which often were themselves phony.

The complaint alleged 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 initially said the lawsuit was meritless, and that AppWinn's Martinez was “the sole individual responsible for the fake reviews.”

Earlier this year, McMahon rejected Roomster's bid to dismiss the lawsuit at an early stage. The company raised numerous arguments, including that it was protected by Section 230 of the Communications Decency Act, which immunizes web companies from liability for content posted by a third party.

McMahon disagreed with Roomster's argument, writing that the FTC and states sought to hold Roomster liable for its own alleged conduct, not AppWin's.

The FTC and attorneys general “charge that defendants themselves advertising on their platform that all listings are 'verified and authentic,' when they are not,” McMahon wrote.

She added that Roomster allegedly was involved in “hiring the creators of the reviews, paying them to create the reviews ... and specifically instructing how and when the reviews should be posted.”