The agency had been hampered by recent court decisions
Online reviews have made it a lot easier for consumers to find products and services that do what they say they do. But human nature being what it is, the process is often misused by unscrupulous players who create fictitious or misleading reviews.
This isn't an easy problem to eliminate since the internet operates globally, making it difficult for U.S. officials to chase down offenders. U.S. courts have also, in some cases, blocked the FTC from seeking monetary damages from companies that abuse the public's trust.
A new rule finalized this week is intended to even the playing field a bit. Itwill combat fake reviews and testimonials by prohibiting their sale or purchase and allow the agency to seek civil penalties against knowing violators.
Fake reviews not only waste peoples time and money, but also pollute the marketplace and divert business away from honest competitors, said FTC Chair Lina Khan. By strengthening the FTCs toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on noticeand promote markets that are fair, honest, and competitive.
The final rule prohibits:
- Fake or False Consumer Reviews, Consumer Testimonials, and Celebrity Testimonials: The final rule addresses reviews and testimonials that misrepresent that they are by someone who does not exist, such as AI-generated fake reviews, or who did not have actual experience with the business or its products or services, or that misrepresent the experience of the person giving it.
It prohibits businesses from creating or selling such reviews or testimonials. It also prohibits them from buying such reviews, procuring them from company insiders, or disseminating such testimonials, when the business knew or should have known that the reviews or testimonials were fake or false. - Buying Positive or Negative Reviews: The final rule prohibits businesses from providing compensation or other incentives conditioned on the writing of consumer reviews expressing a particular sentiment, either positive or negative. It clarifies that the conditional nature of the offer of compensation or incentive may be expressly or implicitly conveyed.
- Insider Reviews and Consumer Testimonials: The final rule prohibits certain reviews and testimonials written by company insiders that fail to clearly and conspicuously disclose the givers material connection to the business. It prohibits such reviews and testimonials given by officers or managers.
Finally, it imposes requirements when officers or managers solicit consumer reviews from their own immediate relatives or from employees or agents or when they tell employees or agents to solicit reviews from relatives and such solicitations result in reviews by immediate relatives of the employees or agents. - Company-Controlled Review Websites: The final rule prohibits a business from misrepresenting that a website or entity it controls provides independent reviews or opinions about a category of products or services that includes its own products or services.
- Review Suppression: The final rule prohibits a business from using unfounded or groundless legal threats, physical threats, intimidation, or certain false public accusations to prevent or remove a negative consumer review.
The final rule also bars a business from misrepresenting that the reviews on a review portion of its website represent all or most of the reviews submitted when reviews have been suppressed based upon their ratings or negative sentiment. - Misuse of Fake Social Media Indicators: The final rule prohibits anyone from selling or buying fake indicators of social media influence, such asfollowers or views generated by a bot or hijacked account. This prohibition is limited to situations in which the buyer knew or should have known that the indicators were fake and misrepresent the buyers influence or importance for a commercial purpose.
The new rule is intended to strengthen the FTC's ability to seek civil penalties, which had been hindered by the Supreme Courts decision in AMG Capital Management LLC v. FTC.
The ruling followed AGM's appeal of an FTC order that it pay $1.27 billion for engaging in unfair or deceptive acts or practices, by failing to disclose the terms of payday loans.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-08-16 16:55:15
