The Federal Trade Commission has issued a final rule aimed at combating the rampant issue of fake reviews and testimonials. This new rule prohibits the sale or purchase of fraudulent reviews and allows the FTC to seek civil penalties against those who knowingly violate the regulation.
Why it matters: Fake reviews have long been a thorn in the side of both consumers and honest businesses. They distort the market, waste consumer time and money, and divert business from companies that play by the rules, according to the FTC. FTC Chair Lina Khan emphasized that the new rule strengthens the agency’s ability to fight deceptive advertising practices, protecting Americans from being misled and promoting fairness in the market.
The big picture: The rule, which becomes effective 60 days after publication in the Federal Register, prohibits various deceptive practices related to reviews and testimonials.
Key prohibitions:
- Fake Reviews: The rule targets reviews and testimonials that misrepresent the identity or experience of the reviewer, including those generated by artificial intelligence. Businesses are prohibited from creating, buying, or disseminating such reviews.
- Incentivized Reviews: It bans businesses from offering compensation for reviews that express specific positive or negative sentiments. This applies even if the incentive is implied rather than explicitly stated.
- Insider Reviews: Reviews by company insiders, such as officers or managers, must clearly disclose any material connection to the business. The rule also addresses reviews solicited from employees’ relatives.
- Controlled Review Sites: Businesses cannot misrepresent that a website they control offers independent reviews or opinions about their products.
- Review Suppression: The rule prohibits using threats or false accusations to suppress negative reviews and misrepresenting the comprehensiveness of reviews on a site.
- Fake Social Media Influence: The sale or purchase of fake social media indicators, like followers or views, is banned when used to misrepresent commercial influence.
What they’re saying: Khan emphasized that “fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors.”
