What Online Business Owners Must Know About the FTC’s New Rules for Reviews

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Written By Brian T. Edmondson, Esq.

Hi, I'm Brian. I'm an internet entrepreneur & lawyer. I write about all things internet business & law.

Hey, it’s Brian. This article is for informational purposes and is NOT legal advice, cool? Onto the article…

When you go on Amazon to buy something, you’ve probably checked out the reviews before making your final decision.

Maybe you’re trying to decide between different manufacturers, sizes, models, etc. Or you’re simply trying to confirm whether the product works as advertised.

Trouble is, there are often an overwhelming number of positive reviews – and not because the product is that great…

Often, it’s really hard to find reviews you can identify as genuine and authentic. It’s difficult to get an objective opinion to help you make your decision.

It’s no secret that reviews and feedback on platforms like Amazon, app stores, and the like can’t necessarily be trusted. You’ve probably seen some pretty suspect customer testimonials on social media, e-commerce sites, and websites too.

Heck, I’ve even heard of physician rating sites being packed with fake reviews on sites like Yelp.

The prevalence of fake reviews is backed up by research. According to consumer groups, an estimated 30% to 40% of reviews online are fake. 

A company might have its own employees write positive reviews, posing as customers. They might take reviews for another product – and post them for another product.

Often, an onslaught of fake reviews is created by “review farms” from overseas. And with the proliferation of AI services like ChatGPT, it’s easier than ever to pump out these fabricated five-star ratings.

This practice has always been illegal because it is misleading to consumers.

But now, the Federal Trade Commission is proposing new rules to crack down even more on fake reviews for products and services. As they put it:

“The proposed rule on fake reviews shows that we’re using all available means to attack deceptive advertising in the digital age.”

And these news rules have teeth, with fines of up to $50,000 for each fake review – for each time a consumer sees it!

Plus, who is on the hook for these violations is finally specified. Those who write fake reviews can get in trouble, as well as those companies that pay for them.

In addition, the FTC could go after companies to get money for the consumers harmed by fake reviews.

In the past, the FTC has handled deceptive reviews on a case-by-case basis with lawsuits. Now they are taking a more comprehensive and proactive approach to help stop consumers from being misled.

What is a “Fake Review” Under the New FTC Rules?

I think it would be helpful at this point to lay out exactly what is covered under these new guidelines.

  • They will prohibit a business from creating or obtaining reviewers or testimonials from reviewers who do not exist or from those who did not use the product or service they are reviewing. Neither can they falsify a review to misrepresent a person’s experience with the product or service.
  • A company cannot repurpose a review done for one product or service for a substantially different product.
  • Buying positive or negative reviews is banned.
  • A company’s managers or officers are prohibited from writing reviews or testimonials without clearly disclosing their relationship to the company.
  • A business cannot operate a review site, organization, or other entity that pretends to be independent. This is very commonplace with tech products.
  • A company cannot intimidate consumers to remove negative reviews with legal action.

What You Should Do With This Information

This all does not sound too bad, right? 

Ethical business owners would not be engaged in these activities anyway. And importantly, you can still ask your customers for reviews and testimonials. 

The FTC does recognize that this can be an essential part of running a successful business. 

And, by the way, if you aren’t asking for testimonials or reviews, you should definitely do so. It’s a critical part of creating social proof for your product or service among prospects.

Testimonials are a key part of marketing copy, too. Reviews are great for credibility… when they are credible.

Just keep in mind that when they send them in or post them, just leave them as is and don’t violate any of the rules in the bullet points I listed above. 

A bit of editing for clarity or brevity is fine, as long as you don’t change their intent or the meaning. 

And although it’s a bit of a grey area, these new rules should allow you to offer an incentive like a gift card or discount for a review. But it’s probably a good idea to disclose that.

With these new rules, the FTC should have enhanced abilities to go after fake review violators. But keep in mind that it could have problems enforcing these rules with overseas companies.

It’s also important to note that review platforms and e-commerce retailers, such as Yelp, Google, and Amazon, or social media sites like Facebook, will not be held liable for fake reviews or testimonials that appear on their sites.

And they have no responsibility to verify that reviewers or reviews are real. (This is part of the Communications Decency Act, which maintains that online forums are responsible for content others publish on them.)

That said, these sites do say they are enforcing fake review policies on their own. For example, Amazon claims to have removed 200 million fake reviews in 2022. We’ll take their word for it. And Google did sue a company that posted 350 fake business profiles, with more than 14,000 related fake reviews.

Given the rise of AI, which will make generating fake reviews even easier, and the determination of bad actors to use bad reviews to prop up businesses, this all may seem like a losing battle.

But the FTC’s actions are a good step toward helping consumers stay informed when making buying decisions.

Currently, the FTC’s proposed rules on reviews are still in, well, the review stage and open to public comment. Once this period ends these new guidelines, with any revisions, will be enshrined in law.

Stay tuned.

Update: The FTC has finalized its guidelines on reviews, you can see them here.

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