FTC Issues Rule to Crack Down on Fake Consumer Reviews
The Federal Trade Commission recently published rules regarding consumer endorsements and testimonials which take effect in less than two months. The rules are wide ranging and cover: relationships , compensation, prohibitions, misrepresentation or far more. Violators will be fined under the new rules.
by Al Lorman, Legal Counsel, AAHP
The Federal Trade Commission (FTC) has issued a new rule designed to crack down on the use of fake, false, or misleading consumer endorsements and testimonials. The rule was adopted unanimously by the Commission on August 14, 2024, published in the Federal Register on August 22, 2024, and takes effect on October 21, 2024. The rule and the FTC’s explanation of its basis and purpose are available here.
The new rule was adopted as a trade regulation rule, a specific type of rule authorized by the Federal Trade Commission Act, in order to permit the FTC to impose fines on violators after the Supreme Court unanimously rejected the FTC’s claimed authority to impose monetary restitution orders in the course of ordinary enforcement proceedings. See AMG Capital Management v. FTC, 593 U.S. ---- (2021).
The new rule was adopted in response to the perceived widespread use of false and misleading reviews on the Internet. Amazon alone has said that it proactively blocked some 200 million suspected fake reviews in 2022.
The key provisions of the new rule prohibit both consumer and celebrity reviews and testimonials from falsely implying that the reviewer or testimonialist exists (i.e., is not really AI) or that the review is based on actual experience with the reviewed product, service or business. Similarly, a business may not solicit a consumer review from its own officers, managers, employees or agents, or their immediate families, for posting on a third-party web site, if the business knew or should have known that the reviewer does not exist or had no experience with the product reviewed.
The rule also bars purchasing either positive or negative reviews. Any review written by an officer or manager of a business must carry a clear and conspicuous disclosure of the writer’s relationship to the business.
The FTC is also prohibiting a business from materially misrepresenting that a website, organization or entity that it owns, controls, or operates provides independent reviews, other than consumer reviews, about products or services the business sells. The rule also bars the use of various tactics, including the threat of unfounded legal action, to attempt to suppress unfavorable reviews.
This is a review of some of the high points of the new rule. Anyone involved in the management of reviews and testimonials should take the time to read the full rule and the FTC’s explanation available here.