The Federal Trade Commission’s (FTC) comment period for a rulemaking to promulgate a trade regulation titled “Rule on the Use of Consumer Reviews and Testimonials” concluded on September 29. This proposed regulation is part of the broader regulatory battle against false advertising and consumer deception.

If approved, the proposed rule will prohibit certain unfair or deceptive acts involving consumer reviews and testimonials, which have become increasingly prevalent as artificial intelligence (AI) continues to grow. The 29-page notice of proposed rulemaking highlighted each issue to be addressed by this potential new FTC rule, citing the many lawsuits filed in connection with this form of false advertising by the FTC, state attorneys general, and private actors.

Fake Consumer Reviews

One of the primary issues the FTC aims to address is the use of fake and false consumer reviews, as well as consumer and celebrity testimonials hosted on seller websites. This includes consumer product reviews or endorsements by individuals who do not exist, did not actually use the product, or misrepresented their experience with the product. For context, in 2020 alone, Amazon stopped more than 200 million suspected fake reviews, and Tripadvisor reported that roughly 3.6% of submitted reviews were fraudulent. Additionally, in 2022, Google removed millions of fake, inorganic, or otherwise malicious Google Play reviews. A report published by BrightLocal indicated that 42% of Facebook reviews and 50% of Google reviews in 2022 were fake.

Frequently, AI tools such as chatbots are utilized to write fake product reviews, and the emergence of AI chatbots worldwide have undoubtedly simplified the process for those looking to produce fake reviews. The FTC, state attorneys general, and many private actors have already brought numerous lawsuits against purportedly fabricated consumer reviews. Importantly, these issues are not limited to the United States. Regulators from countries including Canada, Germany, and the United Kingdom as well as international bodies such as the Organisation for Economic Co-operation and Development (OECD) have stated that fake reviews are a substantial marketplace problem.

The proposed rule would prohibit businesses from creating, writing, selling, purchasing, procuring for a third-party site, or disseminating consumer or celebrity reviews and all testimonials that are offered by “someone who does not exist,” did not use or experience the product or service, or who misrepresents the experience.

Review Hijacking

Primarily problematic for online marketplaces with third-party sellers, such as Amazon, “review hijacking” occurs when sellers repurpose previously provided customer reviews to endorse other, separate products or services. For instance, some vendors and sellers might repurpose a listing page for a product with positive reviews and use it to sell a completely unrelated product, thereby inflating the “star rating” for the unrelated product. According to the FTC, this review hijacking implicitly misrepresents that the repurposed reviews are genuine for specific products, when, in actuality, no such reviews were ever made by consumers in connection with the products.

The FTC’s first case targeting the issue of review hijacking was filed earlier this year against The Bountiful Company for abusing a feature on Amazon.com. This abuse deceived consumers into believing that certain newly introduced supplements had more product ratings and reviews than it actually had. This case highlighted parallels between review hijacking and false advertising. As a result, The Bountiful Company was required to pay purchasers $600,000 for manipulation of product pages and consumer deception.

The proposed rule would prohibit repurposing reviews by businesses.

Buying Positive or Negative Consumer Reviews

The FTC is also looking to hold sellers accountable for incentivizing consumers to post positive reviews by offering them rewards, such as money or free merchandise, in exchange for these reviews. One study by the University of California, Davis revealed that online marketplaces solicited incentivized five-star reviews for hundreds of thousands of products. Actions have been brought against such conduct both by the FTC and by private actors. Additionally, the University of California, Los Angeles conducted an academic study, the findings of which showed that the market for fake reviews is significant and the practice of buying and selling such reviews is widespread.

Guidance on the issues of buying positive or negative consumer reviews has been published by other countries, such as Denmark and Australia, as well as the OECD.

The proposed rule would prohibit a business from offering compensation or other incentives in exchange for writing or creating specific reviews “expressing a particular sentiment, whether positive or negative.”

Insider Reviews and Company-Controlled Review Websites

In 2021, Trustpilot completed a study that revealed over 8,000 reviews for US businesses were written by their own owners, employees, and/or family members. Notably, it appears to be a common practice for such individuals to write consumer reviews or testimonials regarding their own products or services.

These insider reviews have been challenged by private actors, state attorneys general, and the FTC as deceptive and misleading, and as improperly influencing consumers to make or select certain product purchases or services.

The FTC has also asserted that the practice of marketers setting up purportedly independent websites to review or endorse their own products is prevalent. Importantly, the FTC has filed a number of cases challenging sellers who allegedly misrepresented on their websites that they provided so-called independent reviews of products under their control. In these instances, sellers create and/or operate a website on which they post reviews of their own products, but present these reviews as if they were posted by actual consumers of the relevant products or services.

The proposed rule seeks to limit such practices by prohibiting certain individuals within a business from reviewing that business or disseminating certain consumer testimonials written by the officers, managers, employees, or agents (or any of their relatives) unless there is a clear and conspicuous disclosure of those relationships to the business.

Suppression of Reviews

The FTC notice of public comment addressed two types of review suppression and seeks to prohibit practices, including: (1) when seller websites represent that the consumer reviews displayed account for most or all of the reviews, when in fact some reviews are being suppressed based on their negativity; and (2) when seller reviews are made as a result of unjustified legal or physical threats, wherein one is essentially “bullied” into posting a certain review.

State attorneys general and the FTC are well aware of these seller tactics and have brought actions challenging alleged review suppression. Additionally, countries other than the United States are addressing these issues, including the European Union (EU), where an EU Directive expressly prohibits “publishing only positive reviews and deleting the negative ones.”

Misuse of Fake Indicators of Social Media Influence

It is no secret that individuals and businesses, in order to misrepresent their social media influence as being greater than it truly is, buy fake followers and subscribers. Particularly in light of the rise of AI, the FTC and the online advertising industry have made special efforts to design bot detection systems and to remove or disable inauthentic social media accounts. TikTok, for example, reported removal of 1.4 billion fake followers in the second quarter of 2022. Despite these efforts, however, the use of social media bots remains a major issue, and the FTC’s proposed rules are aimed at reducing and curbing their prevalence by prohibiting anyone from “selling fake indicators of social media influence that can be used . . . to misrepresent their influence for a commercial purpose.”

Takeaways

The FTC is more committed now than ever to protecting consumers against the above deceptive practices, particularly in the wake of AI. Overall, the FTC received 105 comments during the 60-day comment period, the majority of which supported the rulemaking. That being said, some called the rulemaking premature and/or unnecessary.

Navigating around the FTC’s enforcement radar will likely include avoiding practices such as review hijacking and implementing bot-detection programs to shield customers from fake reviews. Companies are well-advised to consult with advertising counsel to avoid unintentionally engaging in deceptive practices, and should altogether refrain from altering consumer reviews or using reviews, testimonials, or endorsements that are geared to deceive consumers in their purchasing decisions.

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