FTC Proposes New Rule to Prohibit Fake Reviews
On June 30, 2023 — only a day after issuing its final revised Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Endorsement Guides or Guides) — the Federal Trade Commission (FTC or Commission) announced it was proposing a new trade regulation rule on the use of consumer reviews and testimonials. The Notice of Proposed Rulemaking (NPR) follows the agency’s Advanced Notice of Proposed Rulemaking (ANPR) announced in October 2022, which sought public comment on the proposed rule to address deceptive or unfair consumer review and endorsement practices. The proposed rule, entitled “The Trade Regulation Rule on the Use of Consumer Reviews and Testimonials,” seeks to prohibit the following practices:
- The creation, purchasing, procurement, or dissemination of fake consumer reviews and testimonials
- Repurposing of reviews for substantially different products, also referred to as “review hijacking”
- Buying positive or negative reviews
- Use of insider reviews without clear disclosures of material connection
- Use of misleading company-controlled review websites or entities
- Use of illegal or misleading review suppression practices
- Misuse of indicators of fake social media influence
The NPR largely aligns with the FTC’s guidance relating to consumer reviews in its newly finalized Endorsement Guides, which are addressed in a separate Advisory. The proposed rulemaking and the final revised Endorsement Guides are reflective of the FTC’s increasing concern related to illicit consumer review practices, particularly in light of emerging technologies, such as generative artificial intelligence, that may facilitate such practices.
The proposed new rule would allow the agency to impose civil penalties, which the FTC has indicated may deter parties from engaging in prohibited acts involving consumer reviews. Notably, both in its ANPR and the new proposed rulemaking, the FTC cited the U.S. Supreme Court’s decision in AMG Capital Management LLC v. FTC — which severely limited the agency’s ability to obtain monetary relief — as one of the key factors for pursuing the rulemaking.
Against this backdrop, it is increasingly important for companies to evaluate, and if necessary, update, how they collect and manage consumer reviews to ensure they are in line with the FTC’s position. To help companies stay abreast of the FTC’s new proposed requirements for consumer reviews, this Advisory provides a summary of the main provisions of the NPR and addresses key considerations for companies to keep in mind as they evaluate their consumer review practices.
Overview of the FTC’s Proposed New Rule on the Use of Consumer Reviews and Testimonials
The FTC’s new proposed rule, codified under 16 C.F.R. Part 465, would prohibit the following practices relating to consumer reviews:
- Creating, purchasing, or procuring fake or misleading consumer reviews and testimonials (§ 465.2). Under proposed Section 465.2, it would be unfair or deceptive for a business to write, create, sell, purchase, or disseminate consumer reviews or testimonials that are created by individuals or entities that do not exist, did not use or otherwise have experience with the product, or materially misrepresent (expressly or by implication) their experience with the product. Perhaps in acknowledgment of the inherent difficulty of identifying and removing fake reviews, the NPR is careful to note that this provision does not apply to third-party review platforms, like Google or Amazon, that disseminate consumer reviews that are not for their own products or services.
- Using or repurposing consumer reviews, otherwise known as “review hijacking” (§465.3). Proposed new Section 465.3 would prohibit a business from using or repurposing a consumer review written or created for one product so that it appears to have been written or created for a substantially different product. The new rule would define a “substantially different product” as a “product that differs from another product in one or more material attributes other than color, size, count, or flavor.”
- Buying positive or negative reviews (§ 465.4). New Section 465.4 would prohibit a business from providing compensation or other incentives in exchange for, or conditioned on, creation of a consumer review that expresses a particular sentiment, whether positive or negative. The FTC has made clear that this prohibition does not cover the mere solicitation of positive reviews without compensation, including by way of “review gating,” which occurs when a business asks past purchasers to provide feedback and only invites those who provide positive feedback to post online reviews. The proposed rule also does not address incentivized reviews where the incentive is not conditioned on expressing any particular sentiment (positive or negative).
- Writing, disseminating, or soliciting insider reviews or testimonials that fail to include adequate disclosures (§465.5). Proposed Section 465.5 would prohibit three practices involving insider reviews: (1) where an officer or a manager of a business creates a consumer review or testimonial that fails to have a clear and conspicuous disclosure of the reviewer’s relationship to the business; (2) where a business disseminates a consumer testimonial by one of its officers, managers, employees, or agents, or any of their relatives, which fails to have a clear and conspicuous disclosure of the consumer’s relationship; and (3) where an officer or manager solicits or demands a consumer review from an employee, agent, or relative of any such officer, manager, employee, or agent.
- Representing a company-controlled website or entity as providing independent reviews or opinions (§465.6). Under this rule, a business would be prohibited from representing, expressly or by implication, that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions about a related category of businesses, products, or services. This prohibition appears to stem largely from the FTC’s recent enforcement actions, such as a complaint the FTC filed against marketers of trampolines that allegedly operated purportedly independent websites that touted positive reviews of their own trampolines.
- Suppressing reviews through unjustified threats or misleading display of reviews (§465.7). Proposed Section 465.7 addresses two types of review suppression that would be considered deceptive or unfair practices. The first is using unjustified legal or physical threat, intimidation, or false accusation to prevent the creation of a consumer review or cause the removal of a review. The second is misrepresenting that the consumer reviews displayed on one's website represent most or all the reviews submitted if reviews are being suppressed based on their ratings or negativity. The rule would expressly exempt suppression of reviews based on specific criteria (e.g., vulgar content), so long as those criteria are applied to all reviews, whether positive or negative. Removing fake or unrelated reviews would be permitted.
- Misusing fake indicators of social media influence (§ 465.8). Proposed new Section 465.8 would prohibit anyone from selling or purchasing fake indicators of social media influence that are used to misrepresent their influence for a commercial purpose. The new rule extends to selling or purchasing followers, likes, reposts, bots, etc.
In addition to the above prohibitions, the proposed new rule would also incorporate several key definitions including a definition of “clear and conspicuous” that is consistent with that used in the Endorsement Guides and the FTC’s recent Health Care Products Compliance Guidance. The proposed rule would also define “consumer review” broadly to include, among other things, consumer ratings (e.g., star ratings), regardless of whether they include any text.
As noted throughout the NPR, the FTC has filed numerous actions over the past few years involving the use of consumer review practices that it seeks to prohibit by the new rule. While the new rule would strengthen and facilitate the FTC’s ability to bring enforcement actions, the agency does not need to wait for the rule to be finalized in order to file actions to stop conduct it alleges is deceptive or unfair under Section 5 of the FTC Act. Notably, the FTC has identified many of the proposed prohibited practices in its final Endorsement Guides as practices that are misleading or deceptive. For example, Examples 12 and 13 of Section 255.0 in the Endorsement Guides identify purchasing fake negative reviews and buying fake indicators of social media influence as potentially deceptive practices. Therefore, companies should take heed of the practices identified in the Commission’s proposed rulemaking and take steps now to ensure compliance.
With this in mind, companies should consider the following actions to help mitigate risk with respect to their use of consumer reviews:
- Develop a robust policy for collecting and managing consumer reviews that aligns with the FTC’s requirements
- Ensure employees and relevant third parties are properly trained on the FTC’s consumer review requirements
- Consider participating in the rulemaking process by submitting comments
The FTC has invited the public to comment on its proposed rules and has published a series of questions inquiring about particular aspects of the rules, such as the circumstances under which a business should know that a review is fake. Comments are due within 60 days of the publication of the Notice of Proposed Rulemaking in the Federal Register. If you are interested in submitting comments, please consider contacting the authors of this Advisory to inquire as to whether they may be able to assist you.
© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.