Summary
- FTC’s ban hammer is finally tackling fake reviews in the US, protecting consumers and promoting fair competition.
- New ruling prohibits AI-generated reviews, fake social media indicators to promote commerical purposes, and biased reviews for compensation.
- Companies or businesses offering rewards or compensation for favorable reviews or suppressing negative feedback can face civil penalties.
Customer reviews and ratings are the primary metrics one looks at before heading to a new restaurant, ordering something off of Amazon, or booking hotels and accommodations. However, with the surge in fake reviews in the last half decade, fraudulent star ratings and customer testimonials have become the norm, with many choosing to ignore the metrics and research the place, product, or service by themselves.
Now, in what might be a major win for consumers, the FTC’s ban hammer has finally struck, and it has announced that it will tackle the fake review epidemic head on.
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“Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors,” said FTC Chair Lina M. Khan in a press release. “By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive.”
The ‘final rule’ was announced on Wednesday, August 14, and it follows previous proposals announced in 2022 and 2023. As part of the new ruling, which came as a unanimous 5-0 decision, the FTC now prohibits fake or false consumer reviews, buying positive or negative reviews, insider reviews, company-controlled review websites, review suppression, and the misuse of fake social media indicators.
The rule will tackle AI-generated fake reviews, or, as the FTC puts it, reviewers “who did not have actual experience with the business or its products or services.” This can include consumer and celebrity testimonials. Sellers or businesses can no longer create, buy, or spread such deceptive testimonials when they know “or should have known” that they’re fake.
Offering compensation for reviews might result in a civil penalty
Elsewhere, the rule also prohibits companies from offering rewards (think Amazon Gift Cards and such) in return for favorable reviews that rig the system. To prevent bias, the FTC ruling also prohibits those with an immediate connection to the business in question from leaving undisclosed reviews. This could entail business insiders and even their immediate relatives.
Other metrics, which, according to the FTC, the business in question should know are fake, are bought social media followers and views. According to the commission, engagement via a fraudulently inflated social media following for commercial purposes, which can include using bots, purchasing followers, or buying accounts with large followings outright, might result in civil penalties, and the same goes for suppressing unfavorable reviews by means of intimidation and threats.
“The maximum civil penalty is currently $51,744 per violation,” reads the FTC’s statement of basis and purpose. The new ruling will become effective two months, or 60 days, after it is published in the Federal Register.
