On October 22, 2022, the Federal Trade Commission (FTC) published an Advance Notice of Proposed Rulemaking (ANPR) on potential harms stemming from deceptive or unfair review and endorsement practices, such as using fake reviews, suppressing negative reviews, and paying for positive reviews.
Research shows that many consumers rely on reviews when they’re shopping for a product or service, and that fake reviews drive sales and tend to be associated with low-quality products. The rapid growth of online marketplaces and platforms has made it easier than ever for some companies to create and use fake reviews or endorsements to make themselves look better or their competitors look worse. It can be difficult for anyone—including consumers, competitors, platforms, and researchers—to distinguish real from fake, giving bad actors big incentives to break the law.
The ANPR seeks comment on the costs and benefits of a potential rule, as well as the pervasiveness and potential harms to consumers and competition from certain clearly deceptive or unfair practices involving reviews and endorsements including:
- Fake reviews: These include reviews and endorsements by people who do not exist or have not used the product or service or who lie about their experiences.
- Review reuse fraud: Some sellers hijack or repurpose reviews posted about another product or service.
- Paid reviews: Marketers may pay for positive reviews about their products or negative reviews about competitors’ products.
- Insider reviews: These include reviews written by a company’s executives or solicited from its employees that don’t mention their connections to the company.
- Review suppression: Companies might claim that their websites display all reviews submitted by customers when they suppress negative reviews or attempt to suppress reviews on other platforms by threatening the reviewers.
- Fake review websites:This is when a seller sets up a purportedly independent website or organization to review or endorse its own products.
- Buying followers: This involves buying or selling followers, subscribers, views, or other indicators of social media influence.
The FTC has worked to crack down on purveyors of deceptive reviews and endorsements and has provided guidance to businesses on acceptable practices through the agency’s Endorsements Guides and other public materials.
- In August 2022, the FTC charged the rental listing platform Roomster and its ownerswith duping consumers seeking affordable housing by paying for fake reviews.
- In January 2022, the FTC required online fashion retailer Fashion Nova to pay $4.2 million for suppressing negative customer reviews from being posted to its website.
Case-by-case enforcement without civil penalty authority may not be enough to stem the growth of deceptive reviews and endorsements. The Supreme Court’s decision in the AMG Capital Management LLC v. FTC has hindered the FTC’s ability to seek monetary relief for consumers under the FTC Act. A potential rule that clearly spells out prohibited practices may strengthen deterrence by allowing the agency to impose civil penalties, while simplifying FTC enforcement.
The ANPR will be published in the Federal Register shortly. The public will have 60 days to submit a comment after the notice is published. Information about how to submit a comment is included in the notice.
Note: Compliance Resource, LLC is conducting a webinar, entitled FTC Endorsement Guides on November 15, 2022, which includes a review of the ANPR. Click the link provided above for information or to register.