FTC rolls out new rule to end fake reviews and protect consumers

TL;DR

• The FTC has introduced a new rule banning the sale or purchase of fake reviews and testimonials, with the power to impose civil penalties on violators.
• The rule also prohibits businesses from offering incentives for specific types of reviews and mandates clear disclosure of any insider connections in reviews.
• It addresses issues like fake social media metrics and review suppression, aiming to ensure a fairer and more transparent marketplace.

FTC Chair Lina M. Khan highlighted the importance of the rule, saying:

“Fake reviews not only waste people’s time and money but also pollute the marketplace and divert business away from honest competitors… 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.”

Here’s what you need to know about the new rule:

• Ban on fake reviews: The rule prohibits the creation or distribution of fake reviews — whether they’re generated by AI or not. This includes reviews that don’t accurately reflect a person’s actual experience with a product or service. Businesses can’t create, purchase, or spread these misleading reviews if they know or should know they’re false.
• No incentives for reviews: Companies are now banned from offering rewards or incentives in exchange for specific types of reviews, whether those are glowing or critical. This applies whether the offer is made directly or subtly.
• Disclosure for insider reviews: If a company insider writes a review, it must clearly state their connection to the business. The rule also restricts officers and managers from soliciting reviews from employees or their relatives.
• Transparency on company-controlled review websites: Businesses cannot mislead consumers into thinking that review sites they control provide independent opinions. This rule ensures transparency about which reviews are genuine.
• Protection against review suppression: Companies are now prohibited from using threats or intimidation to remove negative reviews. They also can’t misrepresent the number of reviews on their site by suppressing unfavorable ones.
• Fake social media metrics: The sale or purchase of fake social media metrics, such as followers or views, is banned when the intent is to deceive consumers about the buyer’s influence.

The Commission’s decision to approve the rule was unanimous, with a 5-0 vote. We can expect this rule to have a major impact on online marketplaces and social media platforms, where fake reviews and testimonials have become rampant. The FTC’s ability to seek civil penalties against violators will hopefully serve as a strong deterrent against such practices.