New FTC Rule Bans Fake Reviews and Social Media Metrics: What You Need to Know
The Federal Trade Commission (“FTC”) announced this week that they have finalized a new rule aimed at tackling the issue of fake reviews and testimonials. This rule is designed to prevent the sale or purchase of deceptive reviews and allows the FTC to impose civil penalties on those who knowingly violate these regulations.
The FTC had proposed rulemaking last summer, and the final rule remains largely consistent with that proposal. Below is a summary of the rule’s main points:
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Prohibition on Fake Reviews. Businesses cannot create or sell reviews from non-existent individuals, AI-generated fake reviews, reviews from those without actual experience with the business or its products, or those that misrepresent someone’s experience. There is also a prohibition on “celebrity testimonials” that are fake or false, expanding on the general prohibition against misrepresentation. This also extends to purchasing or disseminating such reviews, including those from employees or their relatives.
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Incentive Restrictions. Businesses are barred from offering incentives in exchange for reviews that must convey a specific sentiment, whether positive or negative, and regardless of whether this sentiment requirement is explicit or implied.
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Company-Controlled Review Websites. The final rule prohibits businesses from falsely claiming that a website or entity they control offers unbiased reviews or opinions on products or services, including their own.
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Disclosure Requirements. Businesses and their staff are generally prohibited from writing, soliciting, or distributing reviews from insiders or their family members unless these reviews clearly disclose their relationship to the business.
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Misrepresentation of Independent Reviews. Businesses cannot falsely claim that a website or entity provides unbiased reviews or opinions about products or services, including their own.
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Suppression of Negative Reviews. The rule prohibits businesses from using tactics such as threats, intimidation, or false accusations to suppress negative reviews. If a business’s website filters reviews based on their sentiment, it must not misrepresent that these filtered reviews reflect the majority of all submitted reviews.
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Fake Social Media Metrics. The rule also bans the sale or purchase of fake social media metrics, including followers and views.
One provision from the initial proposal, which would have prohibited repurposing consumer reviews from one product to make it appear as though they were for a different product, was not finalized. The FTC was unable to resolve the specifics of what constitutes a “substantially different product.”
Violations of this rule can result in civil penalties of up to $52,000 per incident. While the exact definition of a violation may be determined by courts, the FTC plans to use this rule to address deceptive practices that mislead consumers and give unfair advantages to businesses.
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This article is for information purposes only. It is not intended to be and should not be relied on as legal advice for any particular matter.