The reputation of a product on the Internet is critically important to the success of the product. Product reviews and, in particular, consumer reviews can make or break a product. Favorable reviews will also frequently factor greatly in how the product is placed by search engines and product marketplaces.
At the same time, however, consumer reviews are subject to manipulation. They can be falsified – good or bad – promoted, suppressed or misidentified, hijacked and purchased. The Federal Trade Commission does at times step in, but its enforcement authority is often piecemeal and the ability to secure financial penalties in addition to injunctions is limited.
We often see our clients, particularly those in e-commerce, struggling with the effects of consumer reviews, good and bad, and how to incorporate them into their business model. These issues can arise in disputes between competitors or with the Federal Trade Commission or other regulators.
The FTC is seeking to strengthen its ability to pursue financial penalties for the abuse of consumer reviews and has proposed a new rule for combating deceptive reviews on the internet.
The proposed regulation aims to prevent advertisers and marketers from using fraudulent review and endorsement practices, including the use of false reviews, the purchase of positive reviews, and the suppression of negative reviews.
In justifying the proposal, the Commission cited the pervasive emergence of generative artificial intelligence (AI), which it believes might give rise to a dramatic increase in the frequency of fake reviews. With this new rule, the FTC intends to “level the playing field for honest companies”
The proposed FTC rule would prohibit a number of deceptive practices.
Although the FTC contends these practices are already prohibited the broad ban on deceptive or unfair practices, contends that these rules would it would discourage these practices further and enable the commission to pursue civil penalties against violators. Civil penalties, the FTC says, allow the Commission to obtain monetary compensation for victims of false reviews.
Here are the key provisions of the proposed rule:
The practice of selling or acquiring fake consumer testimonials or review would be prohibited. Fake reviews are consumer reviews or testimonials by a person who does not exist, who has not used the product or service, or who has misrepresented their experiences. The rule would also prohibit businesses from soliciting or distributing such testimonials if they knew or should have known that they were fabricated, fraudulent, or deceptive.
The proposed rule would prohibit the use of a consumer review written for one product so that it appears to have been written for a substantially different product.
Businesses would be prohibited from offering incentives in exchange for positive or negative consumer evaluations expressing a particular sentiment.
The proposed rule would prohibit officers and managers of a company from writing reviews or testimonials of its products or services unless they disclose their relationships in a transparent manner. It would also prohibit the dissemination of endorsements by insiders without clear reporting of their relationships, as well as reviews by managers of a company from the company’s employees or their the employee’s relatives.elationships.
Businesses will be barred from creating or controlling review websites that claim to offer impartial opinions about a category of products or services that includes their own.
Businesses would have no right to use unjustifiable legal threats, intimidation, or fraudulent accusations to prevent or remove negative consumer reviews. The proposed rule would also prohibit businesses from falsely claiming that the reviews on their website are representative of all reviews submitted when negative reviews have been removed.
Businesses would be prohibited from marketing fake social media influence indicators, such as fake followers or views.
The FTC has asked for public comment on the proposal through September 29, 2023.