On August 14, 2024, the Federal Trade Commission (FTC) announced a final rule banning fake reviews and testimonials. The rule follows a notice and comment process that began in November 2022, and covers a wide range of consumer reviews and testimonials including "consumer ratings regardless of whether they include any text or narrative." Notable provisions from the rule are summarized here.
First, the rule makes it a violation for a business to "write, create, or sell a consumer review, consumer testimonial, or celebrity testimonial" if the business "knew or should have known" that such review or testimonial "materially misrepresents" the reviewer's existence or experience. 16 C.F.R § 465.2(a). This rule applies to reviews (1) by someone who "does not exist," (2) by someone "who did not use or otherwise have experience with the product, service, or business that is the subject" of it, or (3) "that materially misrepresents, expressly or by implication, the [person's] . . . experience with the product, service, or business."
Second, the rule addresses "compensation or other incentives in exchange for, or conditioned expressly or by implication on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative, regarding the product, service, or business that is the subject of the review." 16 C.F.R § 465.4. The rule explains that neutral prompts to review the company are deemed compliant (e.g., "Write a review and save 10% next time"), whereas prompts implying that reviews need to be positive in order to receive an incentive are not permitted (e.g., 'Tell us how much you loved your visit to John's Steakhouse and get a $5 coupon').
Third, the rule prohibits undisclosed insider reviews and testimonials, including those solicited by officers or managers. 16 C.F.R § 465.5. Officers or managers are prohibited from demanding a review from their relatives, employees, or agents or demanding that their "employees or agents seek such [consumer] reviews from their relatives." Only non-solicited reviews are permitted from employees and immediate family members. However, the rule does not prohibit generalized solicitations to purchasers which happen to include immediate relatives or employees (e.g., mass e-mail blasts to past consumers seeking testimonials).
Fourth, the rule prohibits a business from materially misrepresenting, expressly or by implication, that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions about the business. 16 C.F.R § 465.6. For example, a cookware retailer with a cookware review media subsidiary is not allowed to imply that its media subsidiary provides independent reviews. Only independent reviews are covered by this rule; the rule does not apply to consumer reviews. As a result, websites are allowed to host consumer reviews of their own company or sector, such as Amazon hosting consumer reviews on its Amazon Basics product line.
Fifth, the rule prohibits two different types of consumer review suppression. 16 C.F.R § 465.7(a). The first type of review suppression is the use of an unjustified legal threat or a physical threat, intimidation, or a public false accusation in an attempt to prevent a consumer review. "Intimidation" can include abusive communications, stalking, character assassination, and sexual harassment. The second type of review suppression is the misrepresentation "expressly or by implication," that consumer reviews displayed on a website or platform are representative of most or all of the reviews submitted to that website or platform when, in reality, reviews are being suppressed (i.e., not displayed) based upon their ratings or their negative sentiment. Websites are allowed to suppress reviews which contain trade secrets, abusive or discriminatory content, fake reviews, or reviews of unrelated products.
Sixth, the rule prohibits businesses from selling, distributing, purchasing, or procuring indicators of social media influence that they know or should have known to be fake. 16 C.F.R § 465.8(a), (b). "Fake indicators of social media influence" is defined as "social media influence derived from bots, purported individual accounts not associated with a real individual, accounts created with a real individual's personal information without their consent, hijacked accounts, or that otherwise do not reflect a real individual's or entity's activities, opinions, findings, or experiences."
Under the rule, the FTC may seek court orders requiring violators to compensate consumers for the harms caused by their unlawful conduct as well as civil money penalties against knowing violators based on authority from Section 5 of the FTC Act. 15 U.S.C. § 45(m)(1)(A). The rule will become effective 60 days after the date it's published in the Federal Register, which took place on August 22, 2024.
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