The Federal Trade Commission (FTC) is exploring potential rules to combat deceptive or unfair review and endorsement practices. The FTC issued an advance notice of proposed rulemaking (ANPR) seeking public comment on potential harms stemming from deceptive or unfair review and endorsement practices and whether a rule would help consumers and level the playing field.
“Companies should know by now that fake reviews are illegal, but this scourge persists,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “We’re exploring whether a rule that would trigger stiff civil penalties for violators would make the market fairer for consumers and honest businesses."
The FTC cited research showing that may consumers rely on reviews when they’re shopping for a product or service, and that fake reviews drive sales and tend to be associated with low-quality products.
The ANPR seeks comment on the costs and benefits of a potential rule, as well as the pervasiveness and potential harms to consumers and competition from certain clearly deceptive or unfair practices involving reviews and endorsements including:
- Fake reviews: These include reviews and endorsements by people who do not exist or have not used the product or service or who lie about their experiences.
- Review reuse fraud: Some sellers hijack or repurpose reviews posted about another product or service.
- Paid reviews: Marketers may pay for positive reviews about their products or negative reviews about competitors’ products.
- Insider reviews: These include reviews written by a company’s executives or solicited from its employees that don’t mention their connections to the company.
- Review suppression: Companies might claim that 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: This is when a seller sets up a purportedly independent website or organization to review or endorse its own products.
- Buying followers: This involves buying or selling followers, subscribers, views, or other indicators of social media influence.
The commission voted 3-1 at an open meeting to publish the ANPR in the Federal Register. Commissioner Christine Wilson was the only one who voted no. In her dissent, she criticized the FTC’s decision to act so quickly after authorizing additional tools to address these issues.
“The commission already has a multi-pronged strategy in place to combat this issue,” Wilson wrote. “While the ANPR now downplays their likely impact, the agency invested non-trivial resources in drafting the Notice of Penalty Offenses, identifying potential recipients, and serving it on more than 700 entities. Rather than churning out another proposed rule, perhaps we should stay the course on these initiatives and devote the incremental resources to enforcement in other critical areas.”
The public will have 60 days to submit a comment after the notice is published in the Federal Register.
To learn more about ongoing marketing compliance issues, download the Marketing Compliance for Lenders special report. The report discusses marketing discrimination, the limitations of handling how consumers review your business online, efforts from the Consumer Financial Protection Bureau to expand its enforcement authority to address discrimination in advertising and the Federal Trade Commission’s plans to update the way businesses advertise.