In today’s digital age, consumer reviews and testimonials (collectively Reviews) often inform purchasing decisions. Brands have long sought positive reviews from consumers, celebrities and, increasingly, social media influencers. However, the integrity of these Reviews has come into question due to deceptive practices such as fake reviews, undisclosed insider testimonials, and manipulated ratings. To address these issues and protect consumers, the Federal Trade Commission (FTC) has finalized the Trade Regulation Rule on the Use of Consumer Reviews and Testimonials (Rule), which enhances its ability to enforce transparency and fairness in consumer reviews and testimonials. The FTC’s emphasis on the need for deterrence and enforcement underscores its commitment to ensuring the fairness and transparency of consumer reviews, even though the practices highlighted are already unlawful under the FTC Act.
Key Provisions of the Final Rule
The new Rule by the FTC targets a broad range of deceptive practices and strengthens the FTC’s ability to respond:
Prohibition of Fake or False Consumer or Celebrity Reviews
The Rule prohibits selling or purchasing consumer, AI, or celebrity reviews or testimonials, especially where the author hasn’t used the product or service. The prohibition addresses activities (either directly by the business or which the business purchases) “to write, create, or sell a consumer review, consumer testimonial, or celebrity testimonial that materially misrepresents, expressly or by implication, that the reviewer or testimonial exists; . . . had experience with the product, service or business. . . or the reviewer’s or testimonialist’s experience with [the subject of the review]”. 16 CFR 465.2 The Commission commentary also continues to include undisclosed paid endorsements by celebrities or influencers, where the FTC emphasized the need for paid endorsers to disclose their relationship clearly and conspicuously as part of the provided
The FTC Rule also takes a firm stance against using AI to generate false or misleading reviews. As noted in footnote 35, “AI tools make it easier for bad actors to pollute the review ecosystem by generating, quickly and cheaply, large numbers of realistic but fake reviews that can then be distributed widely across multiple platforms.”
These FTC prohibitions make sense as potential purchasers want to obtain impressions from other consumers with direct experience and not otherwise have to wade through undisclosed paid content or AI-generated falsehoods.
Prohibition of Fake Social Media Influence Indicators
The Rule also prohibits the sale or distribution of “fake indicators of social media influence that [a person] knew or should have known to be fake and that can be [or are] used by individuals or businesses to materially misrepresent their influence or importance for a commercial purpose.” 16 CFR 465.8. This is designed to prevent unscrupulous social media influencers from seeking to exaggerate their influence or reach through any of these techniques, thus creating a false impression of their opinion’s influence on consumers.
Ban on Buying Positive or Negative Reviews
The Rule prohibits buying consumer reviews and considers it an “unfair or deceptive act or practice and a violation of this part for a business to provide compensation or other incentives in exchange for, or conditioned expressly or by implication on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative.” 16 CFR 465.4. The prohibition includes companies offering incentives for favorable reviews of their products or paying for unfavorable reviews of competitors’ products. Businesses attempting to incentivize reviews must not include express or implied compensation tied to influencing the Review content. On the other hand, companies may continue to ask actual purchasers to review products or services, absent a financial incentive. For example, a business may offer a discount code for repeat purchases but not tie obtaining a discount code to providing a review.
Disclosure of Insider Reviews and Website Affiliation
The Rule requires clear and conspicuous disclosure of relationships that might color the content of reviews, whether from individuals connected to the company or through company-controlled websites. The Rule prohibits ”an officer or manager of a business to write or create a consumer review or consumer testimonial about the business or one of the products or services it sells that fails to have a clear and conspicuous disclosure of the officer’s or manager’s material relationship to the business, unless, in the case of a consumer testimonial, the relationship is otherwise clear to the audience.” 16 CFR 485.5. This mandates that reviews written by individuals with a material connection to the business—such as employees, relatives, or others—must disclose their relationship and tracks with existing FTC guidance on unfair and deceptive marketing practices. Companies may continue to ask employees, friends, and relatives to say favorable things, but only when consumers know that factors beyond the product or service qualities might bias the review.
Companies must also not create or control review websites that falsely claim independence when the business “materially misrepresent[s], expressly or by implication, that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions, other than consumer reviews, about a category of businesses, products, or services including the business or one or more of the products or services it sells.” 16 CFR 465.6. If a business does control a review website related to the products or services it offers, that business must disclose the relationship while also following the other requirements of the Rule.
Ban on Review Suppression
The Rule also reminds businesses that businesses must not make an “unfounded or groundless legal threat, a physical threat, intimidation, or a public false accusation in response to a consumer review that is made with the knowledge that the accusation was false or made with reckless disregard as to its truth or falsity.” 16 CFR 465.7. Further, the business must not attempt to “prevent a review or any portion thereof from being written, or ”cause a review or any portion thereof to be removed.” 16 CFR 465.7. Reviewers must be free to express their opinions without the fear of retribution for factually accurate statements or genuinely held opinions. Consumers should see an accurate representation of positive and negative feedback, which is essential for making informed decisions. Upholding consumer trust is a key principle of the new Rule, and businesses should align their practices with this goal.
Enhancing Enforcement Powers
The Rule also enhances the FTC’s ability to enforce these regulations through several new or expanded powers. Following the Supreme Court’s decision in AMG Capital Management, LLC v. FTC, which limited the FTC’s ability to obtain equitable monetary relief in court, under Section 13(b) of the FTC Act, this new Rule restores some of that power. It allows the FTC to seek monetary fines more effectively under Section 19 for Rule violations.
The Rule should assist the FTC in obtaining civil penalties against violators who knowingly engage in unfair or deceptive practices related to Reviews. Overall, the Rule seeks to deter deceptive practices by providing notice of how such practices will not only be targeted but also penalized.
Implications for Businesses
This final Rule is not just a recommendation but a necessity for businesses. It may require businesses to re-evaluate their approach to consumer reviews and testimonials. Companies need to ensure that all reviews associated with their products are genuine, adequately disclosed, and not manipulated. Failure to comply with these regulations can result in hefty fines and damage a company’s reputation. Businesses should be prepared to invest in compliance efforts, including training, monitoring, and enforcement, to avoid potential penalties and maintain consumer trust.
