The Federal Trade Commission (FTC) is cracking down on fake reviews and testimonials and considering a new rule to combat this issue. The proposed rule includes strict penalties for businesses caught engaging in these deceptive practices. If the rule takes effect as it stands, companies would also be prohibited from using phony followers and views to inflate their social media metrics.
This is not the first time the FTC has taken action against fake reviews. In past cases, the agency fined a third-party Amazon seller for paying for fake reviews, and it levied a $600,000 penalty against the owner of a vitamin brand for review hijacking on Amazon listings. With the new rule, the FTC aims to impose significant fines on businesses involved in buying, selling, and manipulating online reviews, potentially reaching up to $50,000 per phony review, including each instance it is viewed by a consumer. This could lead to penalties totaling millions of dollars for companies found guilty of such practices.
Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, stated that the proposed rule demonstrates their commitment to combat deceptive advertising in the digital age. He believes that implementing the rule will trigger civil penalties for violators and level the playing field for honest companies. The rule is meant to prohibit businesses from writing or selling consumer reviews or testimonials by fictitious individuals or those who have no experience with the product or service. Companies will also be barred from obtaining or disseminating reviews and testimonials that they knew or should have known were fake or false.
The proposed rule also targets review hijacking, where existing reviews are repurposed to falsely appear as if they were written for a different product. It will forbid companies from offering payments or compensation in exchange for positive or negative reviews. However, companies can still encourage users to leave reviews, as honest feedback is crucial for small businesses to enhance their reputations.
Related Post
Moreover, the FTC proposes clear regulations regarding managers and officers posting reviews of their own products. They must provide disclosures, and in certain circumstances, they cannot ask family members or employees to post reviews. The rule also prohibits companies from running websites that claim to offer independent reviews of product categories including their own offerings.
Additionally, the FTC aims to ban review suppression tactics employed by companies to intimidate customers into removing or avoiding negative reviews. This includes using legal threats and false accusations. The proposed rule further extends its scope to cover fake followers and views on social media. Buying such indicators to misrepresent their importance for commercial purposes would be prohibited. Influencers, in particular, may need to ensure that bots are not factored into their social media metrics when pursuing brand deals.
The proposed rule acknowledges the rise of AI chatbots being employed to create fake reviews. The FTC recognizes that widespread usage of AI chatbots could facilitate the proliferation of fake reviews. This finding emphasizes the need to address this emerging technology in the fight against deceptive practices.
Although the rule is not immediate, the FTC plans to open it to public comments for a 60-day period. After considering potential changes, the agency will then finalize the directive. While the provisions outlined in the rule make sense for ensuring transparency and honesty in business practices, enforcing them may prove challenging. The FTC does not anticipate receiving additional resources to tackle the issue of fake reviews. However, having a codified rule will strengthen their legal position. Additionally, confronting overseas companies involved in the sale and distribution of fake reviews could present a difficult task. Nonetheless, the formal ban and the threat of substantial fines may dissuade some businesses from engaging in these deceptive practices.
