Final Rule by FTC Bans Fake Reviews and Testimonials

The Federal Trade Commission (FTC) has announced a new rule relating to consumer reviews and testimonials. This new rule, while largely consistent with the FTC’s past position, allows the FTC to seek civil penalties against violators. The following is a breakdown of the key components of the rule:

• Prohibition of Fake Reviews: The rule makes it illegal for businesses to create, sell, or disseminate fake consumer reviews, including those generated by AI or written by individuals without actual experience with the product or service. It also bans the purchase of such reviews, especially when businesses know or should have known they are fake.
• Incentivized Reviews: Businesses are prohibited from offering compensation or incentives for reviews that express a particular sentiment. This includes both positive and negative reviews, and the rule clarifies that such incentives can be communicated explicitly or implicitly. This may have a big impact on certain business practices where reviews are incentivized.
• Insider Reviews: The rule addresses insider reviews, requiring clear disclosure of any material connection between the reviewer and the business. This includes reviews by company officers, managers, or their relatives, ensuring transparency in testimonials.
• Company-Controlled Review Websites: Businesses are barred from misrepresenting that their controlled websites provide independent reviews. This measure prevents companies from misleading consumers with biased reviews presented as impartial.
• Review Suppression: The rule prohibits using threats or intimidation to suppress negative reviews. It also bans misrepresenting that all submitted reviews are displayed when negative ones have been suppressed. For example, this may impact many businesses that feature “best case” reviews and testimonials on a webpage, while omitting negative reviews.
• Fake Social Media Indicators: The sale or purchase of fake social media indicators, such as followers or views generated by bots, is prohibited when the buyer knew or should have known they were fake.

The rule will take effect 60 days after its publication in the Federal Register.

It is important for businesses—especially those marketing or advertising using consumer reviews or other endorsements—to seek compliance advice at the outset and, of course, if an action arises.

Kronenberger Rosenfeld regularly advises clients with FTC issues, including on endorsement issues, advertising, and disclosures, and defending FTC and related actions. If you need assistance for your business, you can contact our firm using our online case submission form here.