FTC Takes On Phony Online Reviews

The FTC has banned fabricated online reviews to enhance transparency and trust in digital advertising.

At a Glance

The FTC announced a final rule against fake reviews and testimonials, allowing for civil penalties against violators.
The rule mainly targets deceptive practices like purchasing positive or negative reviews and undisclosed insider reviews.
The rule is set to take effect 60 days after publication, likely in mid-October.
FTC Chair Lina M. Khan highlighted the importance of the rule in promoting fair competition.
Violators could face fines of up to $51,744 per occurrence.

FTC Steps Up Against Fake Online Reviews

In a strong move to protect consumers, the FTC has announced a ban on fabricated online reviews and testimonials. The new rule, finalized recently, targets deceptive practices that have plagued the digital marketplace. This prohibition extends to buying or selling fake reviews and manipulating consumer opinions through dishonest means. Companies are now required to ensure all online endorsements are genuine and reflect actual user experiences.

The rule aims to tackle the widespread issue of false reviews, which can significantly distort consumer decisions and create an unlevel playing field for honest businesses. Major online platforms like Yelp have shown support for the new rule, indicating it will enhance the review landscape and promote fairness among competitors. The rule will become effective 60 days after it is published in the Federal Register, with mid-October being the anticipated date.

Protecting Consumers and Promoting Fair Competition

FTC Chair Lina M. Khan noted, “Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors.” She emphasized that by fortifying the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated and encourage a marketplace that is fair and honest.

Quote: “Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors,” said FTC Chair Lina M. Khan

This rule tackles not just human-generated fake reviews but also those created by nonhumans, such as bots and AI, which have become more prominent as technology evolves. Violations of the new rule could lead to hefty fines, amounting to $51,744 per instance. This initiative is part of the FTC’s broader strategy against deceptive digital marketing practices.

1. People rely on online reviews to make informed purchases and compare products.

When companies use fake reviews, consumers get misled and honest businesses lose out.

Today @FTC finalized a rule to prohibit fake reviews. https://t.co/llOOBvPRHY

— Lina Khan (@linakhanFTC) August 14, 2024

Support and Compliance from Major Platforms

Companies like Yelp, which already prohibit such practices, are optimistic about the impact of the FTC’s new rule. They believe it will not only improve consumer trust but also ensure that businesses can compete fairly. Yelp’s general counsel, Aaron Schur, expressed support, stating that the enforcement of this rule will help level the playing field for businesses.

Quote: “While Yelp’s policies have long prohibited practices outlined in the FTC’s final rule, we believe the enforcement of this new rule will improve the review landscape for consumers and help level the playing field for businesses,” said Aaron Schur.

As the FTC prepares to implement this rule, businesses will need to rethink their marketing strategies to ensure compliance or face significant financial penalties and reputational damage. The enhanced oversight capabilities granted to the FTC will streamline the enforcement process, making it easier to hold violators accountable.

Adapting to the New Regulatory Landscape

The FTC cites several factors, including past cases and the rise of generative AI, which have made it easier to create fake reviews. This rule attempts to mitigate these advances, ensuring that the online review ecosystem remains credible. Key points within the revised Endorsement Guides include clear prohibitions against manipulating consumer reviews and guidelines for incentivized reviews, along with definitions for “clear and conspicuous” disclosures.

Quote: “Our proposed rule on fake reviews shows that we’re using all available means to attack deceptive advertising in the digital age,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.

Moving forward, businesses will need to adhere to the new guidelines to maintain consumer trust and avoid penalties. Compliance tips include making disclosures clear and conspicuous, managing reviews honestly, and disclosing connections for employee and insider reviews. The FTC’s rule is expected to reshape the digital marketplace, encouraging more ethical advertising practices and ultimately benefiting consumers and honest businesses alike.