FTC Issues Final Rule Banning Fake Reviews and Testimonials

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On August 14, the Federal Trade Commission issued a new rule banning fake reviews and testimonials. Among other things, the Rule:

• Prohibits buying or selling fake consumer reviews or testimonials;
• Prohibits buying or incentivizing either positive or negative reviews;
• Prohibits insiders from creating consumer reviews or testimonials without clearly disclosing their relationships;
• Prohibits businesses from creating websites that falsely claim to provide independent reviews;
• Prohibits the use of groundless legal threats to suppress reviews;
• Prohibits the purchase or sale of fake indicators of social media influence.

The Rule largely codifies existing FTC policy concerning testimonials and reviews. It takes effect October 13, 2024. 

The new rule makes clear that the use of false or misleading reviews and testimonials is unfair and deceptive under Section 5 of the FTC Act. First, the rule provides that it is unfair or deceptive for a business to write, create, sell, purchase, solicit or disseminate a consumer review, consumer testimonial, or celebrity testimonial that materially misrepresents:

• The existence of the reviewer or testimonialist;
• The fact that the reviewer or testimonialist used or had experience of the with the product or service;
• The nature of the reviewer or testimonialist’s experience with the product.

Second, the rule prohibits a business’s officers or managers from soliciting or demanding consumer reviews from immediate relatives, employees, or agents without disclosing the reviewer’s material relationship to the business. This rule assumes that reasonable consumers would find it important to know if a reviewer has a relationship with a business that sells a product. Accordingly, the rule prohibits the solicitation of even honest and candid reviews of a product from relatives, employees, or agents without a disclosure.

Third, the rule states that it is unfair and deceptive for a business to misrepresent that a website, organization, or entity it controls or owns provides independent reviews about products that the business sells. In other words, a business cannot establish an allegedly independent website in order to publish glowing reviews of a product.

Fourth, it is unfair and deceptive for a business to make an “unfounded or groundless legal threat, a physical threat, intimidation, or a public false accusation” in an attempt to suppress a review or cause a review to be removed. Over the years, some bad actors have made it a practice to suppress negative reviews by threatening legal action. This rule is intended to prevent such conduct. In practice, though, it may difficult to determine whether a legal threat is “unfounded or groundless.”

Fifth, it is unfair and deceptive for a business to misleadingly curate reviews on a portion of its website dedicated to displaying consumer reviews. In other words, a business cannot have a portion of its website dedicated to receiving and displaying consumer reviews, but then delete all of the negative reviews.

Finally, it is unfair and deceptive for businesses to knowingly purchase, procure, sell, or distribute “fake indicators of social media influence.” These “indicators” are defined to include metrics the public uses to assess an entity’s social media influence, including, followers, friends, connections, subscribers, views, plays, likes, shares, reposts, and comments. Thus, a business cannot seek to create extra cachet for its product by purchasing followers on X.

Those who violate these rules are subject to civil penalties of up to $51,744 for each violation. The FTC tends to liberally count violations, so that civil penalties quickly accumulate to millions of dollars. For this reason, it is imperative that all businesses who use customer reviews and testimonials evaluate their practices before this new rule goes into effect.