A 2021 study by Fakespot, a company specializing in detecting fraudulent reviews, found that about 30% of online reviews on major platforms like Amazon are fake or unreliable. Other studies suggest that up to 10-15% of reviews on Yelp and 4-6% on TripAdvisor may be fraudulent.
To combat the proliferation of fake online reviews, the Federal Trade Commission (FTC) announced a new rule aimed at combating fake reviews and testimonials, prohibiting their sale or purchase, and allowing the agency to pursue civil penalties against those who knowingly violate the regulations.
Protecting Consumers and Honest Businesses From Fake Reviews
“Fake reviews waste people’s time, money, and undermine fair competition,” said FTC Chair Lina M. Khan. “This new rule enhances our ability to fight deceptive advertising, protect consumers from being misled, and promote a fair and honest marketplace.”
Key Provisions of the Final Rule
The rule, finalized after a series of public comments and hearings, outlines strict prohibitions to curb the use of deceptive reviews:
- Fake or Misleading Reviews and Testimonials: The rule bans fake reviews, such as those generated by AI or created by individuals who have not actually used the product or service. It also prohibits businesses from buying or selling such reviews and from using testimonials that misrepresent the experience of the reviewer.
- Paid Reviews: Companies are prohibited from offering any form of compensation or incentives in exchange for reviews that express a specific positive or negative sentiment, whether the offer is explicit or implied.
- Insider Reviews: The rule bans reviews from company insiders—like officers, managers, employees, or agents—unless their connection to the business is clearly disclosed. This includes reviews solicited from insiders’ family members or employees.
- Deceptive Review Sites: Businesses are prohibited from falsely presenting websites or platforms they control as independent sources of reviews, especially when these sites include reviews of the company’s own products.
- Review Suppression: The rule prohibits businesses from using threats, intimidation, or false legal claims to suppress negative reviews. It also prevents companies from misrepresenting the overall sentiment of reviews on their websites when they have selectively suppressed negative feedback.
- Misuse of Social Media Metrics: The rule bans the sale or purchase of fake social media indicators, like followers or views, when these metrics are used to misrepresent a business’s influence or popularity.
Strengthening FTC’s Enforcement Abilities
This final rule addresses the limitations of case-by-case enforcement and enhances the FTC’s ability to penalize violators. The Supreme Court’s decision in AMG Capital Management LLC v. FTC had restricted the FTC’s capacity to seek financial relief for consumers, making this new rule an essential tool for deterrence.
The rule will take effect 60 days after publication in the Federal Register.