The Federal Trade Commission (FTC) is planning to impose significant fines on companies that engage in the use of fake reviews. The proposed ban on fake reviews and testimonials would also prohibit the use of artificial followers and views to artificially boost social media metrics.
The FTC has previously taken action against fake reviews, with notable cases including the fining of a third-party Amazon seller in 2019 and the imposition of a $600,000 penalty on the owner of a vitamin brand for “review hijacking” on Amazon earlier this year.
The new rule, which has been under development since October, is nearing completion and includes harsh penalties for those found guilty of promoting fake reviews and testimonials. According to The Washington Post, the FTC intends to levy fines of up to $50,000 on businesses involved in “buying, selling, and manipulating online reviews.” This fine would be imposed for each fake review and would apply for each instance in which a consumer views the review. Consequently, if a fake review has been seen 20 times, the purchasing business could be liable for a fine of $1 million.
Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, stated, “Our proposed rule on fake reviews shows that we’re using all available means to attack deceptive advertising in the digital age. The rule would trigger civil penalties for violators and should help level the playing field for honest companies.”
The FTC’s explicit aim is to prohibit businesses from writing or selling consumer reviews and testimonials by non-existent individuals, those without relevant product or service experience, or those misrepresenting their experiences. Similarly, companies will not be allowed to solicit or distribute reviews and testimonials that they knew or should have known to be fake or false.
Other banned practices include repurposing existing reviews to falsely appear as if they were written for different products, offering compensation for positive or negative reviews, and managers or officers posting reviews of their company’s products without clear disclosures. Additionally, companies will be prohibited from operating websites that claim to provide independent reviews of product categories that include their own offerings.
The proposed rule also tackles the issue of using fake followers and views to inflate social media numbers. Companies will be barred from purchasing such indicators to misrepresent their importance for commercial purposes. This provision could have broader implications beyond commerce, affecting influencers who will need to ensure that bots are not factored into their efforts to secure brand deals.
The FTC acknowledges the increasing use of generative AI in creating fake reviews and the potential challenges it poses. The rule proposal will undergo a 60-day public comment period before any final changes are made.
While the provisions of the rule are logical and aim to promote transparency and honesty between businesses and consumers, enforcing these measures may present challenges. The FTC has stated that it will not receive additional resources to address purveyors of fake reviews. Additionally, dealing with companies based overseas that engage in the sale and posting of fake reviews may prove to be a difficult task. Nevertheless, the formal ban on such practices and the threat of substantial fines may serve as a deterrent to some companies from employing fake reviews.
Frequently Asked Questions (FAQs) about fake reviews
What is the purpose of the proposed FTC rule on fake reviews and testimonials?
The purpose of the proposed FTC rule is to ban the use of fake reviews and testimonials by businesses. It aims to promote transparency and prevent deceptive advertising practices in the digital age.
What penalties could businesses face for engaging in fake reviews?
Under the proposed rule, businesses caught peddling fake reviews could face fines of up to $50,000 per fake review. This fine applies not only for each review but also for every instance a consumer sees the review. Therefore, a business could potentially be liable for significant fines if multiple people view their fake reviews.
How does the FTC plan to enforce the ban on fake reviews?
While the FTC does not anticipate receiving additional resources, a formalized rule can strengthen their legal position when taking action against purveyors of fake reviews. The proposed rule also undergoes a public comment period before finalization, ensuring public input and potential adjustments based on feedback.
Will the proposed rule affect companies based overseas?
The proposed rule would apply to any company, regardless of its location, if they engage in the sale or posting of fake reviews in the United States. However, enforcement against overseas companies may present challenges for the FTC.
What other practices does the proposed rule address?
In addition to fake reviews, the proposed rule also targets practices such as review hijacking, offering compensation for reviews, generating fake followers and views, and intimidating customers to remove or avoid negative reviews. It aims to create a level playing field for honest businesses and enhance consumer trust in online reviews.
More about fake reviews
- FTC Press Release: Proposed Rule to Ban Fake Reviews
- The Washington Post: FTC plans hefty fines for businesses using fake reviews
- FTC Consumer Information: Spotting Fake Reviews
- FTC: Fighting Deceptive Reviews on Social Media
- FTC Business Center: Advertising and Marketing
- FTC: Consumer Information – Online Reviews and Recommendations