FTC Finalizes Rule Prohibiting Fake Reviews And Testimonials

Today, the Federal Trade Commission (FTC) published its final Trade Regulation Rule on the Use of Consumer Reviews and Testimonials (16 CFR Part 465). This rule is effective 60 days after date of publication in the Federal Register.

1. The Rule at a Glance

Key provisions of the rule include:

• A prohibition against reviews and testimonials that falsely claim to be from a real person, including those generated by AI or from someone who doesn't have actual experience with the business or its products/services, or that misrepresents their experience.
• A prohibition against businesses creating, selling, or distributing deceptive reviews or testimonials, as well as against the purchase of such reviews, obtaining them from company insiders, or publishing these testimonials if the business knew or should have known they were fake or false.
• A prohibition against businesses giving compensation or incentives in exchange (explicitly or implicitly) for reviews that express a specific sentiment, whether positive or negative.
• A prohibition against certain reviews and testimonials written by an officer or manager of a business that fail to clearly and conspicuously disclose their material connection to the business.
• A prohibition against a business disseminating reviews or testimonials by an officer, manager, employee, or agent without a clear and conspicuous disclosure of the their material relationship to the business (when the relationship is not otherwise clear to the audience and the business knew or should have known about their relationship to the business).
• Establishing rules for when officers or managers request consumer reviews from their own immediate relatives or from employees or agents, as well as when they instruct employees or agents to seek reviews from their relatives, which then lead to reviews being provided by the immediate relatives of those employees or agents.
• A prohibition against a business falsely claiming that a website or entity it controls offers independent reviews or opinions about a category of products or services that includes its own offerings.
• A prohibition against businesses employing baseless legal threats, physical threats/intimidation, or false public accusations to stop or remove negative consumer reviews.
• A prohibition against businesses falsely claiming that the reviews on their site reflect all or most of the reviews submitted when, in reality, some reviews have been hidden due to their low ratings or negative content.
• A prohibition against sale or purchase of fake social media indicators, such as followers or views generated by a bot or hijacked account (where the buyer knew or should have known that the indicators were fake and misrepresent the buyer's influence or importance for a commercial purpose).

2. What Does This Mean For Your Business?

Here's are a few things to consider based on this new rule:

• Money damages are back on the table: As many may remember, the U.S. Supreme Court's decision in AMG Capital Management, LLC v. FTC made it much more difficult for the FTC to get equitable monetary relief, including consumer redress. By issuing the final rule, the Commission can obtain such redress based on violations of the rule in one proceeding, which will be significantly faster than the two-step process for obtaining redress, and also enable the Commission to seek civil penalties against violators. What does this mean? Money damages are back on the table, as Jeff Greenbaum explains here, at whopping $51,744 per violation.
• Review Practices: It's time to should take steps to ensure compliance by:
  • Conducting audits of current review and testimonial practices to identify and rectify any non-compliant activities.
  • Educating employees and third-party partners about the requirements of the new rule.
  • Implementing clear policies for the solicitation, management, and disclosure of consumer reviews and testimonials.