The Federal Trade Commission (FTC) announced the adoption of a final rule aimed at curbing the sale, purchase, and dissemination of fake reviews and testimonials. This rule, which will become effective 60 days after its publication in the Federal Register, marks a decisive step in the agency’s ongoing efforts to address deceptive advertising practices that undermine trust in the marketplace.

Addressing Deceptive Reviews and Testimonials

The final rule targets a range of deceptive practices, including the creation and distribution of fake or false consumer reviews, testimonials by individuals who did not have an actual experience with the business, and the misuse of AI-generated fake reviews. According to the FTC, such practices not only deceive consumers but also create an uneven playing field, disadvantaging honest businesses.

FTC Chair Lina M. Khan emphasized the significance of the rule, stating, “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.”

Key Provisions of the Final Rule

The final rule, which follows an extensive public comment period and an informal hearing earlier this year, contains several critical prohibitions designed to combat deceptive practices:

1. Fake or False Consumer Reviews and Testimonials: The rule prohibits businesses from creating, selling, or disseminating reviews or testimonials that are fake, involve fictitious individuals, or misrepresent the experience of the reviewer. This includes AI-generated fake reviews and testimonials from individuals who have not interacted with the business.
2. Buying Positive or Negative Reviews: The rule prohibits businesses from offering compensation or other incentives for consumer reviews that express a specific sentiment, whether positive or negative. The FTC clarified that this prohibition applies to both explicit and implicit offers of incentives.
3. Insider Reviews and Testimonials: The rule bans reviews and testimonials written by company insiders, such as officers or managers, without clear and conspicuous disclosure of the reviewer’s connection to the business. It also prohibits businesses from disseminating such reviews if they should have known the reviewer was an insider.
4. Company-Controlled Review Websites: The rule prohibits businesses from misrepresenting that a website or entity they control provides independent reviews or opinions when, in fact, the website promotes the business’s own products or services.
5. Review Suppression: The rule prohibits businesses from using threats, intimidation, or other deceptive practices to suppress negative consumer reviews. It also bars businesses from misrepresenting that the reviews displayed on their website represent all or most reviews when negative reviews have been suppressed.
6. Misuse of Fake Social Media Indicators: The rule targets the sale and purchase of fake social media indicators, such as followers or views generated by bots or hijacked accounts, when used to misrepresent the buyer’s influence or importance for commercial purposes.

Strengthening FTC Enforcement

The adoption of this rule is particularly noteworthy in light of the challenges the FTC has faced in seeking monetary relief for consumers following the Supreme Court’s decision in AMG Capital Management LLC v. FTC. That decision limited the FTC’s ability to obtain financial restitution under the FTC Act, making the need for stronger deterrents against deceptive practices more urgent.

By allowing the FTC to seek civil penalties against violators, the new rule enhances the agency’s ability to enforce consumer protection laws effectively. It sends a clear message to businesses that deceptive practices, particularly those involving fake reviews and testimonials, will not be tolerated.

Implications for Businesses and Consumers

The FTC’s final rule represents a significant step forward in promoting transparency and honesty in the marketplace. For consumers, it offers increased protection against misleading reviews that can influence purchasing decisions. For businesses, it underscores the importance of adhering to ethical practices in advertising and marketing.

As the rule takes effect, businesses will need to carefully review their marketing strategies to ensure compliance. Failure to do so could result in substantial penalties and damage to their reputation.

The FTC’s action serves as a reminder of the agency’s commitment to safeguarding consumer rights and promoting fair competition. As the marketplace continues to evolve, the FTC’s role in enforcing these standards remains crucial in maintaining a level playing field for all.

For more information on consumer protection and to stay informed about the latest developments, visit the FTC’s website at consumer.ftc.gov and follow their updates on social media.