WASHINGTON, D.C. — The Federal Trade Commission (FTC) recently announced a decisive new rule aimed at curbing the spread of fake reviews and deceptive testimonials in the marketplace. This rule, which follows extensive public commentary and review, seeks to enhance transparency and honesty in online advertising and marketing by imposing strict prohibitions and enabling the FTC to seek civil penalties against violators.
FTC Chair Lina M. Khan emphasized the significance of this new rule, stating, “Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors. By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive.”
The final rule, developed after an advance notice of proposed rulemaking and an informal hearing, addresses several key areas of concern in online advertising:
Prohibition of Fake or False Consumer Reviews and Testimonials: This rule targets reviews and testimonials that misrepresent authenticity, such as those generated by AI or individuals without real experience with the product or service. Businesses are barred from creating, selling, or disseminating such misleading reviews.
Ban on Buying Positive or Negative Reviews: Businesses can no longer offer compensation or incentives for reviews expressing a specific sentiment. This rule ensures that reviews remain genuine reflections of consumer experiences.
Insider Reviews and Consumer Testimonials: The rule forbids reviews written by company insiders without clear disclosure of their connection to the business. This includes officers, managers, employees, or agents. It also covers reviews solicited from immediate relatives of employees or agents, ensuring transparency in the source of testimonials.
Control over Company-Controlled Review Websites: Businesses must not misrepresent websites they control as independent review platforms. This rule aims to prevent deceptive practices where companies disguise their promotional content as unbiased reviews.
Review Suppression: The rule prohibits businesses from using threats or intimidation to suppress negative reviews. It also bars misrepresentation of review collections on company websites by selectively displaying positive feedback.
Misuse of Fake Social Media Indicators: The sale or purchase of fake social media indicators, such as followers or views generated by bots, is prohibited. This rule targets the commercial misrepresentation of influence or importance on social media platforms.
The implementation of this rule is a response to the limitations placed on the FTC’s ability to seek monetary relief following the Supreme Court’s decision in AMG Capital Management LLC v. FTC. The new rule aims to enhance deterrence and strengthen the FTC’s enforcement capabilities by enabling civil penalties for clear violations.
With this rule, the FTC aims to maintain integrity in the digital marketplace. It sends a strong message to businesses that deceptive practices will not be tolerated and aims to restore consumer trust in online reviews and testimonials. This move is expected to significantly impact the landscape of online advertising and marketing, promoting a healthier and more transparent environment for both consumers and businesses.
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