Online reviews play a key role in consumer’s purchasing decisions. Unfortunately, the rise of fake reviews has undermined the credibility of many products and services, making it harder for honest businesses to compete.
In response, the FTC’s new rule to crack down on deceptive and fake reviews went into effect on October 22, 2024, following the standard period of comment and review. While the final rule aims to provide clarity, please note that some questions may remain unanswered or require further interpretation.
Understanding the FTC’s New Rule
The final rule grants the FTC the authority to seek civil penalties from businesses or individuals who knowingly violate the rule. This applies to businesses that actively engage in deceptive practices, such as hiring people to create fake reviews, but also those who look the other way when there are clear signs of fake reviews. Businesses are responsible if they “knew or should have known” a review was fake.
Red flags, such as bulk reviews, rapid submissions after purchase, or reviews that mention the wrong product, should prompt an investigation. While companies aren’t required to monitor every review, they must take action when there’s reasonable suspicion of deception. Ignoring such indicators can lead to penalties and erosion of consumer trust and loyalty.
Key Provisions of the Rule
Ban on Fake Reviews and Testimonials
At the heart of the new rule is a strict prohibition against the creation and dissemination of fake or misleading reviews. This includes any review or testimonial that misrepresents the identity of the reviewer or the nature of their experience with a product or service. Specifically, the rule outlaws:
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Fake identities: reviews attributed to individuals who do not exist, such as those generated by artificial intelligence or fabricated personas.
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False experiences: testimonials from individuals who have not actually used the product or service in question.
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Misleading claims: reviews that exaggerate or fabricate the benefits of a product.
Ban on Buying or Selling Reviews
The rule prohibits businesses from providing compensation or other incentives that are conditioned on the content or sentiment of a consumer’s review. In other words, while it is not unlawful to incentivize honest reviews, businesses cannot offer rewards in exchange for positive reviews or a specific sentiment. For example, offering a customer one month of free service if (and only if) they leave a positive review is prohibited. Similarly, businesses cannot reward someone for leaving a negative review of a competitor’s product. The crux is that the incentive cannot influence the type of feedback the reviewer will leave, and all incentives must be fully disclosed.
Insider Reviews Must be Disclosed
Transparency is key. If a business insider, such as an employee or family member, writes a review, that relationship must be clearly disclosed. This includes reviews written by officers, managers, employees, or agents of a business. Reviews from immediate family members of company insiders also require disclosure to avoid misleading consumers about the independence of the reviewer.
Misrepresentation by Company-Controlled Review Websites
The FTC’s rule also focuses on businesses that run or control review websites or platforms. It specifically prohibits companies from pretending that a review site is independent when it is actually owned or managed by a business with a direct interest in the reviews. If a business has control over a platform, it must clearly disclose this information.
Suppression of Negative Reviews
The new rule also addresses the suppression of negative reviews. Businesses are prohibited from:
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Unfounded legal threats: using groundless legal threats to intimidate consumers into removing or refraining from posting negative reviews.
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Physical threats and intimidation: employing any form of intimidation or coercion to suppress honest negative feedback from consumers.
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Selective review display: misrepresenting that the reviews displayed on a platform represent all or most of the submitted reviews when negative reviews have been hidden or suppressed based on their content.
Misuse of Social Media Metrics
Businesses often use social media metrics such as followers, likes, and views to demonstrate popularity or influence. The FTC’s rule prohibits artificially boosting these indicators through deceptive means, like buying followers, likes, or views that come from bots, automated programs, or hijacked accounts. Importantly, the rule applies if a business knew or reasonably should have known that these metrics were fake or misleading.
Steps Businesses Should Take to Ensure Compliance
To comply with the FTC’s rule on fake reviews, businesses should establish thorough practices to prevent and address deceptive reviews. Start by conducting a full audit of current review practices across all platforms, including an assessment of any third-party services used to generate reviews. Look for any signs of incentivized, undisclosed, or potentially deceptive reviews and take corrective action where needed. Clear policies on review authenticity and transparency should be established as part of a comprehensive compliance program. This program should include regular audits, review protocols, and approval processes for marketing content, with routine compliance checks.
Training employees is also essential. All staff involved in marketing, sales, and customer service should understand the FTC regulations, the importance of transparency, and the potential consequences of violating the rule. Employee education helps ensure that everyone involved in review management is vigilant and adheres to ethical practices.
Businesses should also stay alert to suspicious activity in reviews. For example, inconsistent content or reviews that don’t match a product’s details should prompt further investigation. While review platforms generally don’t allow business owners to edit or remove reviews, they often provide dispute options for flagged reviews.
Finally, ongoing monitoring is key to identifying issues before they escalate. Regularly review your online presence, including third-party platforms and social media channels, to ensure compliance. Tools that track and flag unusual patterns, such as sudden spikes in reviews or social media engagement, can be helpful in maintaining a trustworthy reputation and staying compliant with the FTC’s standards.
Staying Informed
This overview highlights the key aspects of the FTC’s new rule on fake reviews, but it does not cover all details or legal nuances. Now that the rule is in effect, further clarification or guidance may emerge, answering additional questions businesses may have about staying compliant.
We provide this information to help businesses stay informed about regulations that could impact their operations, helping them avoid potential penalties and financial setbacks. For those seeking deeper insights or specific guidance on adapting their practices, consider speaking with a legal professional.