New FTC Rules Regarding Online Reviews: 5 sketchy practices are officially considered fraud

Buying reviews, using AI-generated testimonials, and suppressing negative feedback are among the practices that could land you in hot water with the Feds.

Lina Khan, chair of the Federal Trade Commission (FTC), announced on Monday that a new ban on fake online reviews and testimonials has now gone into effect. The rules are aimed at protecting consumers from unscrupulous reviews, which could misleadingly influence their decision to purchase a product.

In an August press release announcing the finalization of the rules, Khan said, "Fake reviews not only waste people's time and money, but also pollute the marketplace and divert business away from honest competitors. 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."

These are some of the most prominent scenarios that are now forbidden under the new rule:

• Businesses can't buy reviews: Businesses are now forbidden from buying reviews, either via monetary compensation or other incentives. This includes both positive and negative reviews.
• Businesses can't misuse social media indicators: Businesses can no longer try to game social media to promote their products by buying followers or inflating views by using bots or hijacked accounts.
• Business-owned websites can't misrepresent their reviews: Businesses now also can't misrepresent that the reviews for their products on one of their websites are independent when the website is, in fact, owned by the business.
• Negative review suppression is a no-no: Businesses can no longer use groundless legal threats to get a person to remove or not post a negative review of the business's product.
• No AI testimonials: A business cannot use an AI-generated persona to give a testimonial for its products.

Of course, just because the new rules are in place doesn't mean unscrupulous businesses won't still try to use some of these tactics, but at the very least, they give businesses firm guidelines about what is and isn't permissible in today's online economy.

Under the new FTC rule, review gateways and soliciting reviews from friends or family members who have not used the product or service would likely violate guidelines against fake and deceptive reviews. The rule prohibits creating or encouraging misleading testimonials and reviews, aiming to ensure that only genuine, customer-based reviews influence consumers' purchasing decisions. Here's how the rule affects both scenarios:

• Review Gateways: These often involve selectively soliciting positive reviews or diverting negative ones to avoid public posting. This practice could be interpreted as "suppressing negative feedback," which the new FTC rule explicitly forbids.
• Soliciting Reviews from Friends/Family: Asking friends or family who are not actual customers to write reviews is now considered deceptive, as it misrepresents the testimonial as coming from a genuine customer. The FTC's new guidelines classify this as a fraudulent activity that can mislead consumers and create unfair competition.
• Fake Reviews: Prohibited from creating, selling, or buying reviews that misrepresent the reviewer’s identity or experience.
• Incentivized Reviews: Bans providing compensation for reviews that express a particular sentiment.
• Insider Reviews: Prohibits undisclosed reviews from company insiders.

Conclusion

Violating these practices could lead to penalties, and the FTC encourages consumers to report such activities on their fraud page. There will always be unsavory businesses doing whatever it takes to get reviews. Eventually, they will be caught and penalized. For most of us honest folk it can't come soon enough.

Source Information

The full rule, officially known as 16 CFR Part 465: Trade Regulation Rule on the Use of Consumer Reviews and Testimonials, can be found here (https://www.ftc.gov/system/files/ftc_gov/pdf/r311003consumerreviewstestimonialsfinalrulefrn.pdf).