FTC to Impose Heavy Penalties on Companies for Utilizing False Reviews

If the proposed rule by the Federal Trade Commission (FTC) is implemented, it would formally prohibit the use of fake reviews and testimonials. Additionally, companies would be barred from artificially boosting their social media metrics by employing fake followers and views.

This is not the first time that the agency has become familiar with false reviews. In its first such case in 2019, it fined a third-party Amazon seller for paying for fake reviews (Amazon itself has sued providers of fake reviews). Earlier this year, the FTC fined the owner of a vitamin brand $600,000 for “review hijacking” on Amazon.

The new rule, which the agency announced it was working on in October, is soon to be finalized and will include stiff penalties for those caught trading fake reviews and testimonials. As The Washington Post notes, the FTC plans to hit companies that “buy, sell and manipulate online reviews” up to $50,000. Not only is it great for every false review, but every time a consumer sees it. So if the FTC finds out that one fake review has only been viewed 20 times, the company that bought it could be on the hook for a million dollars.

“Our proposed rule on fake reviews demonstrates that we are using every means available to attack misleading advertising in the digital age,” Samuel Levine, director of the FTC’s Office of Consumer Protection, said in a statement. “The rule triggered civil penalties for violators and should equally help honest businesses.”

The FTC specifically seeks to prohibit “companies from writing or selling consumer reviews or endorsements from a person who does not exist, has no experience with the product or service, or has misrepresented their experience.” Similarly, companies may not acquire or distribute reviews and statements that they “knew or should have known to be fake or false.”

Reusing an existing review to make it appear as if it was written for another product (i.e. review hijacking), as well as offering payment or other types of compensation for positive or negative reviews, is prohibited. The FTC says companies can still ask users to leave a review because it’s an important way for small businesses to improve their reputation.

Directors and officers may not post reviews of their company’s products without clear notice, and may not ask family members or employees to do so under certain circumstances. Under the proposed rule, companies would not be allowed to use websites that claim to offer independent reviews of product and service categories that include their own offerings.

Blocking reviews is also prohibited. Businesses should not use intimidation tactics, such as legal threats and false accusations, to force customers to remove or avoid leaving a negative review.

Additionally, the FTC seeks to prohibit companies from using fake followers and views to manipulate their social media numbers. “The proposed rule would also prevent anyone from purchasing such indicators to misrepresent their importance for a commercial purpose,” the agency said. This is a provision that could have far-reaching implications beyond commerce – influencers may need to ensure they don’t consider bots when trying to secure brand deals.

The proposal for the rule takes into account the popularity of generative artificial intelligence. “It has been reported that an AI chatbot is being used to create fake reviews,” it reads. “As the report notes, the proliferation of AI chatbots is likely to facilitate the ability of bad actors to write false reviews.”

The rule will not take effect immediately. It will be open to the public for comment for 60 days, after which the agency will consider changes before finalizing the directive.

Many of these regulations make sense. Basically, the FTC tries to make sure that companies and brands are transparent and honest with consumers. However, the actual implementation of these measures is a different matter. The agency told the Post that it won’t get additional resources to fight fake review editors, but the codified rule could strengthen its hand in court. Also, using overseas companies that sell and post fake reviews can be a difficult task. Still, an official ban on these practices and the threat of eye-popping fines may be enough to deter some businesses from using fake reviews.