The United States Federal Trade Commission (FTC) announced a final rule this week aimed at combating the increasingly prevalent practice of selling or purchasing fake online reviews and testimonials for goods or services. While such unfair or deceptive acts are already unlawful, the final rule is aimed at increasing deterrence by allowing courts to impose civil penalties against violators and to seek orders requiring violators to compensate consumers for the harm caused by their conduct.
The FTC's final rule takes aim at the following:
- Purchasing Reviews – In addition to prohibiting the outright purchasing of reviews, the rule prohibits a business from providing compensation or other incentives in exchange for a review. The rule also prohibits misrepresentations regarding celebrity endorsements, such as falsely claiming that a review or testimonial is based on the celebrity's actual experience with a given product or service.
- Fake or False Reviews – The rule prohibits AI or bot generated reviews from individuals who do not actually exist or where the reviewer has no experience with the subject matter of the review.
- Insider Reviews and Consumer Testimonials – Reviews or testimonials from business insiders are also prohibited, unless their connection with the business is clearly disclosed. The rule also includes disclosure and other requirements when a business seeks reviews from immediate relatives, employees or agents of the business.
- Company-Controlled Review Websites – Given the increasing consumer reliance on independent, third-party review websites, the rule makes it unlawful for a business to falsely represent that a website or other company-controlled business provides independent reviews or testimonials when they, in fact, are influenced and controlled by the business.
- Review Suppression – It will be forbidden to use unfounded legal threats, physical threats, or other acts of intimidation to either prevent the posting of a review or to coerce the removal of an existing review. Notably, the rule also prohibits a business from misrepresenting that reviews displayed on a website accurately reflect all or most customer reviews, when other negative reviews have been suppressed by the business.
- Fake Social Media Influence – In addition, the rule prohibits the sale or distribution of fake "indicators of social media influence" (such as follower or subscriber counts, post shares, or likes) which could then be used to misleadingly increase the perceived significance of a given review or testimonial. This aspect of the rule could have a large impact on the social influencer industry.
As noted by FTC Chair Lina M. Khan – "By strengthening the FTC's toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest and competitive."
The final rule will go into effect sixty days after being published in the Federal Register and should go into effect later this year.
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