FTC seeks to crack down on fake reviews in the digital age

10-Jul-2023 - Last updated on 04-Oct-2023 at 04:05 GMT

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The Commission noted the proliferation of generative AI will likely make it easier for bad actors to write fake reviews. However, the FTC's plan to impose hefty fines may be enough to deter deceptive practices.

The Federal Trade Commission recently proposed a new rule to stop marketers from using illicit review and endorsement practices such as fake reviews, suppressing honest negative reviews, and paying for positive reviews.

“The rule would trigger civil penalties for violators and should help level the playing field for honest companies,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Our proposed rule on fake reviews shows that we’re using all available means to attack deceptive advertising in the digital age.”

In its notice of proposed rulemaking, the Commission cited examples of deceptive practices involving consumer reviews and testimonials from its past cases, and noted the widespread emergence of generative AI, which is likely to make it easier for bad actors to write fake reviews.

“With the rapid advancement of generative AI technology, the landscape of reviews and testimonials is evolving. The FTC's ability to enforce in this area becomes even more critical to combat emerging challenges effectively,” noted John Whipps, Principal at Vitician, a regulatory compliance consulting firm. “This is a positive development for the dietary supplement industry as it helps protect consumers and ensures fair and transparent marketing practices.”

According to consumer advocacy groups US PIRG, as many as 30-40% of online reviews are bogus, though the rate of fakes can vary widely by type of product and website.

Reviews are not a new target

Lauren Aronson, Advertising and Consumer Protection Partner at Amin Talati Wasserman LLP, said the FTC has been focused on consumer reviews for several years now because consumers regularly consult online reviews before making purchases. “As a result, we have seen the FTC take action against companies that encourage employers to post fake reviews and downvote negative reviews - for example, Sunday Riley; provide the means and instrumentalities for fake influence - for example, Devumi; or who alter their overall star rating by manipulating when and how critical reviews are posted to their websites - for example, Fashion Nova,” explained Aronson.

“The Commission has been fairly active and shown interest in online reviews, with the most recent example being when they went after the Bountiful Company,” noted Attorney Marc Ullman of Rivkin Radler. Indeed, the FTC levied a $600,000 penalty against the Bountiful Company earlier this year for “review hijacking" on Amazon.

“The purpose of the new proposed rule is to create an easier way to enforce against bad behavior around reviews and obtain monetary penalties. The FTC is concerned that its case-by-case approach isn’t percolating down to marketers and consumers cannot trust that the reviews they see online are real,” he added.

The FTC wants to tackle deceptive practices such as selling or obtaining fake consumer reviews and testimonials, review hijacking, buying positive or negative reviews, insider reviews and consumer testimonials, company controlled review websites, illegal review suppression, and selling fake social media indicators.

Fake social media indicators includes using fake followers and views to augment their social media numbers, which could result in influencers verifying they don't use bots when securing deals with brands. Another practice that could would be considered a violation is samples in exchange for reviews. “Try it, and if you post a review we’ll send you stuff – that’s out. In the supplement industry, that’s likely to be a big thing," said Ullman.

Consumer trust

According to the Council for Responsible Nutrition (CRN) 2022 Consumer Survey on Dietary Supplements, trust in the dietary supplement industry remains high, with 77% of Americans reporting that they find the dietary supplement industry trustworthy. That number is even higher among supplement users, at 84%.

“Deceptive practices surrounding reviews and testimonials have a significant impact on consumer purchasing decisions. Unfortunately, our industry is not immune to these misleading marketing tactics, said Whipps. “The FTC's proposed rule to ban fake reviews and testimonials is a crucial step towards addressing these issues. When the rule is finalized, it will enhance the FTC's enforcement capabilities and allow them to take decisive action against these illegal practices. This is a positive development for the dietary supplement industry as it helps protect consumers and ensures fair and transparent marketing practices.”

The rule will be open to public comments for a 60-day period, after which the agency will consider changes before finalizing the directive. If the rules are approved, violators could face fines up to $50,000 for each fake review, for each time a consumer sees it.

“Dietary Supplement marketers must make sure that they are not engaging in deceptive practices around reviews. Not only must they make sure that the reviews they share are adequately [vetted], they must also ensure that star ratings and reviews are presented fairly, and that the companies do not engage in practices that manipulate reviews,” said Aronson. “Overall, the FTC's proposed rule signifies a significant move towards promoting integrity and trust in the dietary supplement industry–which we certainly need because of mainstream media’s negative perception of us.”