Effective on October 21st of this year, the Federal Trade Commission (FTC) issued a new final rule that is intended to better combat ​“fake” reviews and testimonials by prohibiting the sale or purchase of “fake reviews” as well as granting the agency the opportunity to seek civil penalties against ​willful violators.

The FTC made only one major change from its June 2023 proposed rule – eliminating a provision that would have imposed violations on businesses for using “highjack reviews,” i.e. substituting a consumer review written for one product and applying it to a substantially different product. The rule notes that the FTC commission could not agree about the definition of “substantially different product” and, as such, opted not to finalize that provision.

The final rule prohibits six categories of conduct that the FTC considers deceptive to consumers including:

• Fake or False Consumer Reviews, Consumer Testimonials, and Celebrity Testimonials: The final rule addresses reviews and testimonials that misrepresent that they are by someone who does not exist, such as AI-generated fake reviews, or who did not have actual experience with the business or its products or services, or that 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 such reviews, procuring them from company insiders, or disseminating such testimonials, when the business knew or should have known that the reviews or testimonials were fake or false.
• Buying Positive or Negative Reviews: The final rule prohibits businesses from providing compensation or other incentives conditioned on the writing of consumer reviews expressing a particular sentiment, either positive or negative. It clarifies that the conditional nature of the offer of compensation or incentive may be expressly or implicitly conveyed.
• Insider Reviews and Consumer Testimonials: The final rule prohibits certain reviews and testimonials written by company insiders that fail to clearly and conspicuously disclose the giver’s material connection to the business. It prohibits such reviews and testimonials given by officers or managers. It also prohibits a business from disseminating such a testimonial that the business should have known was by an officer, manager, employee, or agent. Finally, it imposes requirements when officers or managers solicit consumer reviews from their own immediate relatives or from employees or agents – or when they tell 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 prohibits a business from using unfounded or groundless legal threats, physical threats, intimidation, or certain false public accusations to prevent or remove a negative consumer review. The final rule also bars a business 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.
• Misuse of Fake Social Media Indicators: The final rule prohibits anyone from selling or buying fake indicators of social media influence, such as followers or views generated by a bot or hijacked account. This prohibition is limited to situations in which the buyer knew or should have known that the indicators were fake and misrepresent the buyer’s influence or importance for a commercial purpose.

The final rule alludes to the changing role of AI in generating content that could mislead consumers, adds a layer of new complexity to compliance for agencies and communications companies. The regulations note that they must not only ensure that their practices are transparent and authentic, but also safeguard against the misuse of emerging technologies.

Noncompliance with the rule could result in severe financial penalties of up to $51,744 per violation and lead to lengthy, burdensome investigations that disrupt operations. FTC’s aggressive stance underscores the need for all advertisers to audit and update their review practices. Agencies can help their clients navigate their customer review programs and make necessary changes to bolster compliance.

For questions or more information about the final FTC rule regarding fake reviews and testimonials, please contact Jim Potter, CHC Executive Director at jpotter@cohealthcom.org.