The Federal Trade Commission On October 21, 2024 announced a final rule that will combat fake reviews and testimonials by prohibiting their sale or purchase and allow the agency to seek civil penalties of $51,744 per violation against knowing violators.
“Fake reviews waste people’s time and money and pollute the marketplace while diverting business away from honest competitors,” said FTC Chair Lina M. Khan. “The final rule will strengthen the FTC’s toolkit for fighting deceptive advertising, protect Americans from getting cheated, and put businesses on notice that unlawfully game the system while promoting markets that are fair, honest, and competitive.”
The final rule is the culmination of an advance notice of proposed rulemaking and a notice of proposed rulemaking announced in November 2022 and June 2023, respectively. Additionally, the FTC held an informal hearing on the proposed rule in February 2024. In response to public comments, the Commission has made numerous clarifications and adjustments to its previous proposal.
The final rule prohibits:
Fake or False Consumer Reviews, Consumer Testimonials, and Celebrity Testimonials:
The last rule addresses reviews and testimonials that misrepresent being from a person who does not exist, such as AI-generated fake reviews, or who did not actually have an experience with the business or its products or services, or misrepresent the experience of the person giving it. It prohibits businesses from creating or selling such reviews or testimonials.
It also prohibits them from buying those reviews, getting them from the employees of the company, or publishing that kind of testimonials, where the business knew or should have known that the reviews or testimonials were false or fake.
Incentivizing Positive or Negative Reviews:
The last rule prohibits companies from offering any kind of compensation or incentive that is contingent upon the consumer writing a review that conveys a specified sentiment, whether it be negative or positive. It explains that the conditional nature of the offer of compensation or incentive may be expressed or implied.
Insider Reviews and Consumer Testimonials:
The final rule prohibits the use of some reviews and testimonials in written form from insiders in the company when the material connection between the giver and the business is not clearly and conspicuously disclosed. It prohibits such reviews and testimonials by officers or managers. It also makes it unlawful for a business to disseminate such a testimonial that the business should have known was by an officer, manager, employee or agent.It finally imposes requirements when the officers or managers solicit consumer reviews from their own immediate relatives, or from employees or agents, or when they tell the employees or agents to solicit reviews from relatives, and such solicitations result in reviews by immediate relatives of the employees or agents.
Company-Controlled Review Websites:
The final rule prohibits a business from misrepresenting that a website or entity it controls provides independent reviews or opinions about a category of products or services that includes its own products or services.
Review Suppression:
The final rule forbids a business from using groundless or baseless legal threats, physical threats, intimidation, or certain false public accusations to suppress or eliminate a negative consumer review. The final rule also prohibits businesses from misrepresenting that the reviews on a review portion of its website represent all or most of the reviews submitted when reviews have been suppressed based upon their ratings or negative sentiment.
The final rule prohibits anyone from selling or buying counterfeit social media influence indicators, such as bot-generated or account-hijacked followers or views. The prohibition is limited to situations in which a buyer knew or should have known that the indicators were fabricated and would misrepresent its own influence or importance for a commercial purpose.