Playing any role in the creation or publication of inauthentic or deceptive consumer reviews will soon constitute a violation of an FTC Rule and could subject you to significant financial penalties. This article explains the history of the Rule, what the Rule prohibits, and what you should do to comply.

History

If you’ve been following the Federal Trade Commission over the last few years, you’ve no doubt seen how aggressively the Commission has pursued efforts to promote “fair, honest and competitive” markets (quoting current FTC Chair Lina Khan). In the wake of the U.S. Supreme Court’s 2021 decision in the AMG Capital Management case, which took away a significant enforcement tool the Commission had been using for four decades – the ability to sue in federal court for money damages under Section 13(b) of the FTC Act – the Commission has taken steps to fill the void left by AMG and find ways to hold deceptive actors accountable. 

In addition to issuing updates to the Endorsement Guides last summer, the Commission simultaneously sought to codify specific principles from the Endorsement Guides pertaining to the deceptive solicitation, collection, and publication of reviews into a formal rule, which it has now finalized. This Trade Regulation Rule on the Use of Consumer Reviews and Testimonials, published by the Commission on August 14, will constitute binding law 60 days from the date it is published in the Federal Register.

The new Rule was first proposed via an Advance Notice of Proposed Rulemaking in November of 2022, which was followed by a Notice of Proposed Rulemaking in June of 2023, both of which elicited significant commentary from affected stakeholders – platforms, organizations dedicated to fighting fake reviews, consumer advocacy organizations, academics, and trade associations. Now in its final form, this Rule will add significant teeth to the FTC’s investigative and enforcement powers by providing a basis for the Commission to sue alleged violators directly in federal court and seek civil penalties of up to $51,744 per violation. 

What the Rule Prohibits

The six topline practices outlawed by the Rule can be summarized as follows:

• Fake Reviews: The writing, purchase, sale, procuring, or publication by a business of consumer or celebrity reviews or testimonials – including from officers, managers, employees, or agents, or their immediate relatives (collectively, “Insiders”) – that are “fake”, either because the reviewer doesn’t actually exist, the reviewer didn’t actually use or otherwise have experience with the product or service, or the review materially misrepresents the reviewer’s actual experience.
• Buying Sentiment: Providing compensation or other incentives in exchange for reviews that express a particular sentiment (i.e., conditioning incentives on a review being positive or negative.)
• Disclosure by Insiders of Material Connections: Insiders posting reviews that do not contain a clear and conspicuous disclosure of the reviewer’s relationship to the business.
  • (Note: The Endorsement Guides require proper disclosure by anyone with an unexpected material connection, but this Rule is only violated if the offender is an Insider and certain conditions are met.)
• Deceptive Websites: Setting up sites that appear to be independent review sites when, in fact, they are controlled by a business whose products or services are reviewed.
• Review Suppression: Suppressing reviews, either by intimidation or by only publishing certain reviews (e.g., only positive reviews) and misrepresenting that those reviews represent most or all of the reviews submitted.
  • (Note: It is permissible to suppress reviews that include confidential information, are defamatory or harassing, that contain personal information or someone’s likeness, are discriminatory, or that are clearly false.)
• Fake Indicators: Misusing fake indicators of social media influence, such as buying or selling fake followers, likes, subscribers, views, shares, saves, etc.

While Artificial Intelligence (AI) is not specifically called out in the Rule, the generation of fake reviews through the use of AI, and the use of AI or bots to boost the appearance of social influence, are directly covered.

The Commission explains how and to what extent public comments influenced its final draft in the text of the lengthy Statement of Basis and Purpose published as the introduction of the final Rule, but some of the most interesting changes or clarifications include:

• Exclusion of Review Hijacking: The Commission removed the originally proposed prohibition on “review hijacking” (i.e., using a review written or created for one product or service for a substantially different product or service) in light of protestations that the prohibition was too vague and unsupported by the record.
• Audio/Visual Disclosure: Regarding what constitutes an acceptably clear and conspicuous disclosure of a material connection within an endorsement, the Commission has backtracked from its previous direction that if a piece of content that qualifies as an endorsement has both audio and visual elements, then the disclosure must be both audio and visual. It has adopted the more reasonable approach that if the endorsement message is only in the audio portion or only in the visual portion, then the disclosure must only occur in that portion.
• “Unavoidable”: The Commission provided some texture around what qualifies as “unavoidable” for purposes of meeting the “clear and conspicuous” standard, confirming that in a text-only product review, a material connection disclosure in the first line of the review would be considered “unavoidable”.
• Application to Websites: The Rule applies to reviews posted on any website that has at least some portion dedicated to receiving and displaying reviews. This means that it includes reviews posted on review platforms like Yelp, and also on a marketer’s own website (if that website has a place for reviews) but would not apply to websites like Reddit that are not dedicated in any part specifically to displaying reviews.
  • (Note: Reviews posted on Reddit could still be considered deceptive under the FTC Act, but would not be considered a violation of this Rule, if they lack sufficient transparency or otherwise do not comply with the principles espoused by the Endorsement Guides.)
• Express and Implied: Soliciting reviews that express a particular sentiment – positive or negative – such as by conditioning an incentive on the tone of the review, or by only asking for positive or negative reviews, need not be done expressly in order to violate the Rule. The Commission uses the example, “Tell us how much you loved your visit to John’s Steakhouse and get a $5 coupon,” as a solicitation that implies the review must be positive in order to receive a coupon, which makes it problematic under the Rule.
• Neutral is Okay: Conversely, the Commission expressly took the position that a request that is neutral on its face should not be presumed to be impliedly requesting a positive review. So a solicitation like, “Write a review and receive a discount off your next purchase,” would be acceptable.
• Non-Website Use of Reviews: Singling out positive reviews for use in marketing materials could be deceptive if those reviews misrepresent the universe of reviews, but that practice is outside the scope of the Rule, which only covers the way reviews are displayed on that portion of a business’s website dedicated in whole or in part to receiving and displaying consumer reviews.

What the Rule Means for You

Given that a significant portion of purchases are made online on sites which feature reviews that can materially influence purchase decisions, reviews are where the rubber meets the road in e-commerce, and it is not surprising that protecting the integrity of that process is a fundamental goal of the Commission that this Rule is clearly intended to advance.

With regard to the role reviews play in our economy, the promulgation of this Rule is as meaningful to businesses as anything the Commission has done in decades. Where we arguably once had a fuzzy gray area that was in constant flux due to new technologies and behaviors, the FTC has drawn clear lines in the sand – nay, in the concrete – and it is absolutely critical for businesses to understand and assess how this Rule overlaps and impacts tactics and approaches that may have always felt acceptable or at least tolerable based on the lack of precedent or guidance.  

We should brace ourselves for a steep increase in enforcement in this space. The days of flying under the radar or blending in with the crowd by mimicking the bad behavior of others in the marketplace because everyone is “getting away with it” are coming to a close. The need for implementing controls across your organization (or reassessing and possibly improving the controls you currently have in place) is now essential. No business whose products or services are reviewed – either on the business’s own site or on third-party sites – can afford to take a hands-off approach or stick its head in the sand.

Below are some specific questions/concepts that might not be obvious but which you should consider as you tighten up the processes your business uses to solicit, collect, organize, filter, and publish reviews.

Is your business incentivizing positive reviews? 

This is a dangerous proposition, and while it may be okay to incentive reviews so long as you don’t influence the sentiment (positive or negative) and you ensure that proper disclosures of the incentive are included in the reviews themselves, both individually and in the aggregate, if you are offering incentives only for positive reviews you should revisit that tactic because it clearly violates the Rule.

Is your business suppressing negative reviews?

Do you even know how your business is managing reviews? It is not uncommon for a group outside of Marketing to manage a business’s website, including the review section, and to use review management tools. Be sure you have visibility into what your business is doing in that regard, because it may not be the Marketing team at the helm.

Be clear what the reviews you publish represent. 

Is it a small subset of the most positive ones? Users who see the reviews should understood what they’re looking at, so if you don’t publish the bad reviews, or if the reviews you do publish include a mix of organic and incentivized reviews, you need to be clear about that.

Educate your workforce.

Employees oftentimes have the best of intentions when posting reviews about your products or services that might embellish the truth and/or which don’t disclose their connection to the business. Given the specific inclusion of reviews by Insiders within the prohibitions of the Rule, your business is responsible for putting guidance in place for compliance. 

Use real metrics. 

Is your business engaged in any sketchy tactics to boost its ratings, such as using bots or using AI to generate false reviews? That should not be permitted.

This is truly a new chapter in this space, and while the above is not exhaustive, it does highlight some of the rocks you should be looking under to identify and resolve issues that could hinder your ability to comply with the FTC’s mandates.