Locke Lord QuickStudy: FTC Proposes New Rule Prohibiting ‎Fake Reviews

On October 20, 2022, the Federal Trade Commission announced a new proposed rule intended to regulate unfair review and endorsement practices in digital marketing. The proposed rule would address several types of practices involving reviews that the FTC considers unfair or deceptive, including the following:

• Paying for fake reviews by people who do not exist or have not used the product;
• Reusing reviews posted about a different product or service;
• Paying for positive reviews about their products or for negative reviews about competitor products;
• Publishing insider reviews by a company's executives or employees without disclosing the relationship;
• Suppressing negative reviews on a company's own websites or attempting to suppress reviews on other platforms;
• Creating a website or organization that claims to be independent to review or endorse a company's own products;
• Buying or selling followers, subscribers, views, or other social media influence.
  

For several years, the FTC has been concerned with digital marketing practices that pay for positive reviews, suppress negative reviews, fake the volume of social media influence, or otherwise create a false impression of a product or service. In the past, the FTC has taken administrative action against companies that use these types of unfair marketing practices, but the administrative process does not allow the FTC to recover civil fines in the first instance. If the proposed rule takes effect, the FTC would be able to pursue immediate civil fines against offending companies through court action.

Notably, Commissioner Christine Wilson dissented from the decision to propose a new rule. The dissent’s position is that proposing these new rules will delay the FTC in finalizing amendments to its Endorsement Guides, which included rules regarding the same types of conduct listed above. The comment period for the Endorsement Guides, closed on September 26, 2022, but it now appears the final version of those guidelines will be delayed. The dissent also sees little value in a proposed rule because the consumer harm resulting from deceptive reviews is difficult to calculate. If the FTC cannot easily calculate the actual consumer harm, then a new rule will not add significant enforcement value.