By: Rebecca Bermudez
On August 14, 2024, the Federal Trade Commission (FTC) announced a final rule to combat fake consumer reviews and testimonials, including prohibiting/deterring deceptive AI-generated reviews and allowing the agency to seek civil penalties of up to $51,744 per violation against any knowing violators of the rule. In finalizing the rule, the FTC acknowledged the prolific nature of online shopping and the significance of reviews in the modern day, citing that approximately eighty percent of Americans shop online and a study’s finding that “it only takes 50 fake reviews for a seller to pass any of its competitors in terms of visibility (e.g., via rankings or search results).” FTC Chair Linda M. Khan stated that 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 was published in the Federal Register on August 22, 2024, and will be effective October 21, 2024. The final rule prohibits the following:
- The sale or purchase of fake consumer reviews. The final rule addresses consumer reviews (defined as “a consumer’s evaluation, or a purported consumer’s evaluation, of a product, service, or business that is submitted by the consumer or purported consumer and that is published to a website or platform dedicated in whole or in part to receiving and displaying such evaluations”) that are created by someone who does not exist, such as AI-generated reviews, or by someone who has not interacted with the product or service.
- The buying of positive or negative customer reviews. The final rule defines the purchasing of a review as “provid[ing] something of value, such as money, gift certificates, products, services, discounts, coupons, contest entries, or another review, in exchange for a consumer review.”
- The use of insiders creating consumer reviews or testimonials without clearly disclosing their relationships. The final rule provides that a required disclosure must be “clear and conspicuous,” i.e., noticeable/difficult to miss and easily understandable by ordinary consumers. The definition then lists eight enumerated ways a disclosure could be considered clear and conspicuous.
- The creation of a company-controlled review website that falsely purports to provide independent reviews. Section 465.6 of the final rule provides that it is a violation of this part “for a business to materially misrepresent, expressly or by implication, that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions, other than consumer reviews, about a category of businesses, products, or services including the business or one or more of the products or services it sells.”
- Certain review suppression practices. FTC has listed under Section 465.7 of the final rule various review suppression tactics and practices that will be considered violative, including utilizing unfounded or groundless threats, such as physical, legal, intimidation, or other threats, in an attempt to prevent a review from being written or created or cause a review to be removed. It is also considered a violation for a business to materially misrepresent that consumer reviews displayed on its website or platform represent most or all the reviews submitted when reviews are being suppressed (i.e., not displayable) based upon their ratings or their negative sentiment. Notably, FTC explicitly states in 16 C.F.R. 465.7 that reviews that contain trade secrets or privileged/confidential information, defamatory or explicit content, personal information of another individual, certain discriminatory content, and content that is clearly false or misleading will not be considered suppressed if the review is suppressed for one of the aforementioned reasons and if such suppression is applied equally to all reviews submitted.
- The selling or purchasing of fake indicators of social media influence. The final rule would prevent the selling or buying of fake indicators, such as likes, follows, or views, that are generated by bots or hijacked accounts. FTC has indicated that the prohibition is limited to situations in which the buyer or seller knew or should have known that the indicators were fake and misrepresent the buyer or business’s influence or importance for a commercial purpose.
The text of the Federal Register Notice for this final rule is available here. We recommend that businesses review the provisions and applicable definitions closely to confirm compliance before the final rule’s effective date.