The Federal Trade Commission’s new rule banning fake reviews and testimonials went into effect on Oct. 21. The effort from the FTC started in November 2022, with a final rule proposed and published in the Federal Register in August.
Estimates on the prevalence of fake reviews range significantly, from 4% of all reviews online to more than 30%, according to research from UCLA.
“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 Khan in a press release. “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.”
The rule was approved unanimously by the FTC’s commissioners and prohibits several practices.
The first is a ban on fake reviews and testimonials, both from customers and from celebrities. This section also targets AI-generated fake reviews, and reviews from individuals that don’t exist.
Companies are now prohibited from buying or selling false consumer reviews in addition to writing them. While this doesn’t cover companies asking former customers for a review or hosting the reviews on their website, it does ban providing compensation for specifically positive reviews.
In addition to prohibiting the buying and selling of reviews, the new rule prohibits companies from selling or buying fake social media indicators, such as likes, follows and views. But this rule is limited to when the violator reasonably should have known or knew that they were fake.
Company insiders are now banned from giving reviews or testimonials without disclosing their relationship to the company.
Similarly, companies are no longer allowed to claim that a company-controlled review website is providing independent reviews or opinions on their products, except for legitimate customer reviews.
The rule also codifies into federal regulation a ban on using unfounded threats, accusations or intimidation to prevent the posting or to remove a review. This is largely targeted at preventing the suppression of negative reviews.
The FTC promulgated the rule under the FTC Act, and companies who violate the new rule could face fines of over $50,000 in addition to other penalties.
In a press release, the FTC noted that its ability to pursue monetary relief under the FTC Act was hindered by the 2021 U.S. Supreme Court Case AMG Capital Management LLC v. FTC, but that the new rule would enhance deterrence and strengthen its enforcement actions.