The Federal Trade Commission (FTC) has proposed a new rule aimed at curbing deceptive review and endorsement practices used by many companies and the marketing firms that the companies employ. These practices include using fake reviews, suppressing negative reviews, paying for positive reviews, and buying social media followers, all of which mislead consumers seeking genuine feedback and unfairly disadvantage honest businesses.

The proposed rule seeks to combat these deceptive practices and ensure a level playing field for companies. It would impose civil penalties on violators, with fines of up to $50,000 for each instance of a fake review or endorsement, and for each time a consumer sees it.

In its notice of proposed rulemaking, the FTC highlighted past cases involving deceptive consumer reviews and testimonials and acknowledged the growing use of generative AI, which could facilitate the creation of fake reviews by malicious actors.

The FTC is inviting public comments on the proposed measures to address these deceptive practices. The rule would include the following prohibitions:

• Selling or Obtaining Fake Consumer Reviews and Testimonials: Businesses would be prohibited from creating or selling consumer reviews or testimonials written by non-existent individuals, those without relevant experience, or those misrepresenting their experiences. Similarly, businesses would be prohibited from procuring or disseminating such fake reviews or testimonials if they knew or should have known they were false.

• Review Hijacking: Companies would be prohibited from repurposing a consumer review written for one product to make it appear as if it was written for a different product. The FTC has recently taken action against review hijacking.

• Buying Positive or Negative Reviews: Businesses would be prohibited from offering compensation or incentives contingent on the expression of a specific sentiment in consumer reviews, whether positive or negative.

• Insider Reviews and Consumer Testimonials: The proposed rule would prohibit officers and managers of a company from writing reviews or testimonials for their own products or services without disclosing their relationships. It would also require clear disclosure of relationships for testimonials from insiders. Additionally, solicitations of reviews from company employees or their relatives would be restricted depending on the businesses' knowledge of these relationships.

• Company Controlled Review Websites: Businesses would be barred from creating or controlling websites that claim to provide independent opinions about a category of products or services, including their own.

• Illegal Review Suppression: Unjustified legal threats, intimidation, or false accusations used by businesses to prevent or remove negative consumer reviews would be prohibited. Misrepresentation of the completeness of reviews on a website, with the suppression of negative reviews, would also be barred.

• Selling Fake Social Media Indicators: Businesses would be prohibited from selling false indicators of social media influence, such as fake followers or views. Likewise, purchasing such indicators to misrepresent their significance for commercial purposes would be prohibited.

The proposed rule addresses the need for clearer guidelines and civil penalties to deter deceptive review and testimonial practices effectively. The recent Supreme Court decision in AMG Capital Management LLC v. FTC limited the FTC's ability to seek monetary relief for consumers under the FTC Act. By better defining prohibited practices and allowing for judicial imposition of civil penalties, the proposed rule can enhance deterrence and FTC enforcement actions.

The FTC's proposed rule follows an earlier announcement seeking public input on the matter. Comments were received from various stakeholders, including individual consumers, trade associations, review platform operators, small businesses, consumer advocacy organizations, organizations fighting fake reviews, and academic researchers.

The FTC has included questions for public comment in the notice to inform their decision-making on the proposal. These questions focus on the proposed rule's provisions and whether additional provisions should be included or excluded. Following the review of comments received, the FTC will determine the necessary next steps to issue a final rule.

The FTC vote to approve the Notice of Proposed Rulemaking (NPRM) was unanimous. The NPRM will soon be published in the Federal Register, and instructions for filing comments will be provided.

More Information

• Federal Trade Commission Announces Proposed Rule Banning Fake Reviews and Testimonials

• Federal Trade Commission - Text of Proposed Online Review and Endorsement Regulations