Man, I had just recovered from the FCC’s Artificial Intelligence Proposed Rule and the Notice of Inquiry. But, this morning the FTC dropped their Final Rule on Fake Reviews. And there’s a lot to it.

The FTC issued a Notice of Proposed Rulemaking (“NRPM”) around fake reviews and testimonials in July 2023. The FTC’s concerns around fake reviews are related to whether the fake reviews are essentially unfair or deceptive practices and therefore misleading to consumers. There were eight items in the NPRM the Commission wanted to address:

1. Fake consumer reviews and testimonials
2. Unfair or deceptive repurposing of consumer reviews
3. Giving incentives for reviews conditioned on the nature of the review
4. Company insiders writing reviews without disclosure of the relationships
5. Alleged “independent websites” for reviews
6. Review suppression to distort consumer sentiment
7. Review suppression based on threat of legal action
8. Sale and misuse of the fake indicators of social media influence

After getting comments and holding hearings, the FTC issued the Final Rule on August 14, 2024 with some changes, but most of the substance has been retained. The main changes in the Rule focus on “clarifying the scope or meaning of various rule provisions to cover the specific activities or conduct that harm consumers and avoid ambiguity or overbreadth.”

This Final Rule will go into effect sixty days after publication in the Federal Register.

Key Highlights of the Final Rule:

1. Violations of the Final Rule will be VERY fact-specific. All sections of the Final Rule rely heavily on fact based inquiries. Meaning, that investigations will be long and burdensome for businesses.
2. Clear and conspicuous disclosures must be unavoidable. While not a new definition of “clear and conspicuous”, the FTC is consistent with their description of clear and conspicuous disclosures. “The Commission believes that a disclosure is not effective when it is not seen or heard, including when the reason for it not being seen or heard is its avoidability.” The Commission does say in the commentary that a disclosure in the first line of a product review would unavoidable and therefore, it would be clear and conspicuous.
3. Customer reviews and testimonials are not the same thing. A customer review is a “consumer’s evaluation…of a product, service, or business that is submitted by the consumer…and that is published to a website or platform dedicated in whole or in part to receiving and displaying such evaluations.” A customer rating, whether numerically or through stars or other icons, is also a review. However, a consumer testimonial is different. A consumer testimonial is “an advertising or promotional message…that consumers are likely to believe reflects the opinions, beliefs, or experiences of a consumer who has purchased, used, or otherwise had experience with a product, service, or business.” It’s the “advertising or promotional” aspect which is the difference.
4. Section 465.2: Fake or False Consumer Reviews; Consumer Testimonials or Celebrity Testimonials: Materially misrepresenting the nature of a consumer review, consumers testimonial, or celebrity testimonial is an unfair or deceptive act or practice. Reviews from people that don’t exist or have not had an experience with the product are prohibited. There is a safe harbor if the business has generally solicited reviews on the products and false reviews get submitted through no fault of the business. But, this safe harbor does not apply to business that only solicit selective subsets of consumers hoping to elicit only positive reviews, for example.
5. Section 465.4: Buying Positive or Negative Consumer Reviews: Businesses are prohibited from buying positive or negative reviews by providing compensation or other things of value. It is important to note that this section “does not prohibit paid or incentivized consumer reviews. It only prohibits paid or incentivized consumer reviews when the business soliciting the review provides compensation or an incentive in exchange for a review expressing a particular sentiment”
6. Section 456.6: Company-Controlled Review Websites or Entities: This section prohibits companies from materially misrepresenting that websites or organizations owned by a business provides independent review or opinions regarding the goods or services the business sells. This is distinct from Section 465.2 because this section applies to “reviews, seals, or other opinions by purportedly independent experts, organizations or other entities.”
7. Section 456.7: Review Suppression: The Rule prohibits suppression of reviews by threats or intimidation, but also suppression of reviews “based on their ratings or their negative sentiment.” The FCC does not intend the prohibition of negative review suppression to “cover the use of consumer reviews in marketing materials” meaning a businesses does not have to put negative reviews in the marketing materials. Nor does “organizing reviews does not qualify as suppressing reviews. The Commission notes however, that organizing reviews in a way that makes it difficult for consumers to know about or find negative reviews could be an unfair or deceptive act or practice”. Companies are also not required to publish all reviews. A review is not considered suppressed “if the suppression occurs based on criteria for withholding reviews that are applied equally to all reviews submitted without regard to sentiment.”
8. Section 456.8 Misuse of Fake Indicators of Social Media Influence: The Rule also prohibits the sell or purchase “fake indicators of social media influence” in an attempt to “materially misrepresent their influence or importance for a commercial purpose”. An “indicator of social media influence” is defined in the Rule as “any metrics used by the public to make assessments of an individual’s or entity’s social media influence, such as followers, friends, connections, subscribers, views, plays, likes, saves, shares, reposts, and comments.”
9. Omissions from the NPRM: The biggest omission in the Final Rule was the removal of the prohibition on “re-use or repurposing” reviews. This practice which is known as “review hijacking” was in the NPRM, but didn’t make it to the Final Rule. This is somewhat surprising considering the FTC did have a settlement earlier this year regarding this practice.
10. Civil Penalties: Since the Supreme Court ruled the FTC did not have authorization to seek court orders requiring wrongdoers to return money under its general “unfair or deceptive” guidelines, the FTC has to create a formal rule. The violation of the rule would lead to the ability to institute civil penalties against bad actors. The maximum civil penalty is currently $51,744 per violation.

There is a lot to unpack in the Final Rule. If your business relies on reviews, then you need to spend some time with it.