The US Federal Trade Commission (FTC) has announced a final rule aimed at combating fake or false consumer reviews and testimonials.
This announcement comes after the FTC proposed a new rule in July 2023, that would ban fake online reviews.
This new regulation prohibits the sale or purchase of fraudulent endorsements and enables the agency to impose civil penalties on those who knowingly violate the ban.
The ban specifically targets reviews and testimonials that falsely represent the experience of non-existent individuals, such as those generated by artificial intelligence, or those who have not actually interacted with the business or its products or services.
It also extends to misrepresentations of genuine experiences.
Businesses are now prohibited from creating, selling, or buying such deceptive reviews or testimonials.
This includes obtaining them from company insiders or spreading them if the business was aware or should have been aware of their falsity.
The rule further restricts the sale or purchase of fake social media influence indicators, including followers or views produced by bots or compromised accounts.
Additionally, it bars businesses from falsely claiming that a website or entity they control offers independent reviews or opinions about a category of products or services, including their own.
The FTC's rule also targets reviews and testimonials from company insiders that do not transparently disclose the reviewer's material connection to the business.
This includes testimonials from officers or managers, and businesses are prohibited from disseminating such testimonials if they should have known the source was an insider.
Violators of the new rule could face substantial penalties, with the FTC authorised to seek up to approximately $51,744 per violation, as reported by Reuters.
FTC chair Lina 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.”
The announcement follows a series of regulatory actions, including an advance notice of proposed rulemaking in November 2022.
An informal hearing on the proposed rule was also held in February 2024.
