Last week, the Federal Trade Commission (FTC) published its final Trade Regulation Rule on the Use of Consumer Reviews and Testimonials (the “Rule”).
This Alert provides a general overview of the new Rule but can’t cover all of the details. Whether you operate a business or work as an influencer, you should ensure that you understand the new Rule in its entirety, as well as other FTC resources relating to reviews, testimonials, and influencers.
Fake/False Reviews and Testimonials
The Rule prohibits businesses from writing, creating, or selling consumer reviews, consumer testimonials, or celebrity testimonials that materially misrepresent:
• that the person giving the review or testimonial exists;
• that the person giving the review or testimonial used or otherwise had experience with the product, service, or business that is the subject of the review or testimonial; or
• the experience of the person giving the review or testimonial with the product, service, or business that is the subject of the review
The prohibition against misrepresentation applies to both express misrepresentations and those that are merely implied.
Businesses are also prohibited from obtaining (whether by purchase or otherwise) or disseminating reviews if they know or should know those reviews involve any of the above-described types of misrepresentations.
While it might not be immediately obvious, this portion of the Rule bans reviews and testimonials created by AI if it is not clear that they were created by AI rather than by real people.
Buying Positive or Negative Customer Reviews
It’s also a violation of the Rule for a business to pay money or provide other incentives contingent on reviews being positive or negative. Even implying that a review should express a particular sentiment is prohibited.
Insider Reviews and Testimonials
In nearly all situations, if an officer, manager, employee, or other agent of a business creates a consumer review or testimonial about the business or one of the products or services it sells, that review or testimonial must have a “clear and conspicuous” disclosure of the fact that the person reviewing or providing the testimonial has a material connection to the business.
Further, officers and managers of businesses are prohibited from soliciting or demanding reviews from their immediate relatives or from employees or other agents of the business unless they instruct the reviewer to include the appropriate disclosure. Nor may they ask employees and other agents of the business to request reviews from their relatives that don’t include the proper disclosure.
Company-Controlled Review Websites or Entities
Businesses are not permitted to materially misrepresent (whether expressly or by implication) that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions, other than consumer reviews, about a category of businesses, products, or services that include the business or any of the products or services it sells.
Review Suppression
Not surprisingly, the Rule prohibits knowingly making unfounded or groundless legal threats or public false accusations or using physical threats or intimidation to try to keep a review from being created or to try to have a review removed or replaced.
Businesses are also banned from suppressing the display of certain types of reviews while stating or implying that all reviews are included. For example, your website can’t have a reviews section that displays only 5-star reviews unless it makes clear that this is only a subset of reviews and that you’ve excluded all non-5-star reviews from that section.
Misuse of Fake Indicators of Social Media Influence
Finally, the Rule prohibits the sale or other distribution of “fake indicators of social media influence,” as well as the purchase or other procurement of such indicators. This includes the sale of followers or views generated by a bot.
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This new Rule will become effective 60 days after date of publication in the Federal Register. While the exact date is not yet known, it’s likely to become effective in mid to late October.
You’ll want to make sure to comply with this new Rule, since you may be fined up to $51,744 per violation. If you’re operating a business, make sure you conduct an audit of the business’s current review and testimonial practices, draft policies for your staff and other agents, and educate your staff, other agents, and any third-party partners about the new Rule.
If you’re an influencer or if someone asks you to create a review or testimonial, you should ensure that you comply with the Rule since you, too, can be fined for violations.
Please feel free to contact us if you have any questions about the above or if you need assistance in drafting policies for your business’s handling of reviews and testimonials.
Zuko.io Images, CC BY 2.0, via Wikimedia Commons
