FTC Announces Final Rule Banning Fake Reviews
The new rule will make it easer to go after and punish egregious offenders but many players in the "fake review economy" will still fall under the radar.
Today, the FTC announced the final details of their new rule against fake reviews. The final rule prohibits:
- Fake or false consumer reviews, consumer testimonials, and celebrity testimonials
- Buying positive or negative reviews
- Insider reviews and consumer testimonials
- Company-controlled review websites
- Review suppression
- Misuse of fake social media indicators
Incentives remain acceptable as long as they're not predicated on the "reviews expressing a particular sentiment" and it "clarifies that the conditional nature of the offer of compensation or incentive may be expressly or implicitly conveyed."
Why Is There Now a 'Rule'?
The FTC has been getting more aggressive toward fake reviews. Part of that effort was to go through the many steps, hearings and public comments needed to implement a rule that removes any ambiguity. This process started in late 2022 and just concluded.
You would be correct in noting that the FTC has long had a guideline prohibiting these sorts of unethical practices and review manipulation. But an FTC guideline requires that each and every time a new business violates it, the agency must prove the details of the case. And because of recent Supreme Court rulings rolling back regulatory authority, they might not be able to easily impose fines. In many situations the FTC was required to advise the business and give them a second chance to avoid penalties.
With a rule, the business is expected to know the details of the prohibition and if the FTC identifies a violation, it can move straight to the penalty phase with no additional hearings.
Incentives Survive, Free Pass for Platforms
The continued allowance of incentives is problematic. Most businesses do not understand the nuances of the rule and what types of incentives would cross the line. Both the guideline and the rule ultimately should be updated to prohibit incentives of any kind.
Also, the rule looks exclusively at the behaviors of the businesses on the ground buying and selling fake reviews or followers. The platforms (Google et al.) were largely given a pass and have no additional obligations under the rule. Without formal enforcement responsibility, or consequences, at the platform level the problem is likely to continue. Fake reviews often come from overseas; who actually purchased them will not be obvious the FTC. Without significantly better platform enforcement review fraud will continue despite their illegal status.
Increased Exposure for Businesses
The rules are now clear. As such, they're now much easier for the FTC and State Attorney Generals to enforce. That might lead to increased enforcement against the biggest and most obvious offenders but most cases will still to fall under the enforcement radar.
While I don't think most individual businesses will be targeted, they should recognize their increasing liability risk.
Better Than Nothing
The rule streamlines the FTC process, so large and egregious offenders will be easier to punish. Perhaps if these prosecutions are well publicized and visible enough they may deter some participants in the fake review economy. But all of that will depend on more aggressive enforcement.