FTC Fake Review and Deceptive Endorsement Rule Could be on Horizon
According to the FTC, research shows that consumers rely on reviews when shopping for a product or service, and that bogus 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, the FTC states in its recent announcement.
The Advance Notice of Proposed Rulemaking seeks comment on the costs and benefits of a potential rule, as well as the potential harms to consumers and competition from deceptive or unfair reviews and endorsement advertising practices, including:
- Fake reviews: Reviews and endorsements by people that do not exist, have not used the product or service, or who lie about their experiences.
- Review reuse fraud: Sellers that hijack or repurpose reviews posted about another product or service.
- Paid reviews: Marketers that pay for positive reviews about their products or negative reviews about competitors’ products.
- Insider reviews: Reviews written by a company’s executives or solicited from its employees that fail to disclose material connections to the company.
- Review suppression: Companies that claim 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: When a seller sets up a purportedly independent website or organization to review or endorse its own products.
- Buying followers: Purchasing or selling followers, subscribers, views or other social media influence indicators.
The FTC has aggressiely policed deceptive reviews and endorsements. The ageny has provided guidance to businesses on acceptable practices through the agency’s Endorsements Guides and other public materials.
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. In August 2022, the FTC charged the rental listing platform Roomster and its owners with duping consumers seeking affordable housing by paying for fake reviews.
The FTC voted 3-1 at an open meeting to publish the Advance Notice of Proposed Rulemaking in the Federal Register. Commissioner Christine S. Wilson voted no and issued a dissenting statement. Chair Lina M. Khan issued a separate statement.
After the ANPR is published in the Federal Register, the public will have 60 days to submit comments.
Richard B. Newman is an FTC advertising compliance attorney at Hinch Newman LLP.
Informational purposes only. Not legal advice. May be considered attorney advertising.
Topics
Archives
About This Blog and Hinch Newman’s Advertising + Marketing Practice
Hinch Newman LLP’s advertising and marketing practice includes successfully resolving some of the highest-profile Federal Trade Commission (FTC) and state attorneys general digital advertising and telemarketing investigations and enforcement actions. The firm possesses superior knowledge and deep legal experience in the areas of advertising, marketing, lead generation, promotions, e-commerce, privacy and intellectual property law. Through these advertising and marketing law updates, Hinch Newman provides commentary, news and analysis on issues and trends concerning developments of interest to digital marketers, including FTC and state attorneys general advertising compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.