We’ve written a lot about Federal Trade Commission (FTC or the Commission) Rulemaking recently, but that doesn’t mean there can’t still be new and interesting things that occur. Take, for example, the FTC’s recent announcement concerning its proposed rule to ban fake reviews and testimonials. The FTC Act requires the Commission to provide an opportunity for an informal hearing to any interested party, and a few parties have been taking the Commission up on that offer of late. In this case, three parties expressed an interest in participating in such a hearing. These hearings don’t pose much of a threat to the Commission’s efforts to streamline – and speed up – the rulemaking process unless and until a disputed issue of material fact arises in the course of the round of comment submissions. If that happens, cross-examination, additional submissions and even compelled discovery are on the table, threatening to slow down the process considerably. Until now, the Commission had dodged the disputed issue bullet, but it appears the Agency’s luck has run out.
In its recent announcement regarding the informal hearing for its proposed fake reviews rule, the Commission shot down several arguments regarding disputed issues but couldn’t quite get there on one proposed provision. Section 465.3 would have banned “review hijacking” – using or repurposing a review written or created for one product so that it appears to have been written or created for a substantially different product. (This provision arose out of the Bountiful settlement in early 2023.) In turn, “substantially different product” was defined as a “product that differs from another product in one or more material attributes other than color, size, count or flavor.” Several commentators jumped on this definition, pointing out that there were numerous other ways in which two products could differ for which hijacking reviews would not be deceptive. These included an e-book versus a hardcover book, a V-neck versus a crew neck T-shirt, scents of soap, individual golf clubs of the same set and a ceramic bowl with or without a handle. No doubt you, dear reader, could think of others. Of course, some of you might also take issue with whether some or all of these examples belong on the list; maybe the scent of soap is a materially different attribute. Faced with all of these examples, and no doubt realizing that figuring out exactly how to carve out the exception was more complicated than initially thought, did the FTC acknowledge that this was a disputed issue of material fact, so now we are going to see a full-blown hearing? Well, not exactly. Instead, the Commission said it was dropping the provision so it doesn’t need to address the argument that it would have been a disputed issue of material fact. Of course, although the FTC has tossed review hijacking out of the proposed rule, the agency can still challenge such practices under Section 5 of the FTC Act.
Future submitters of comments seeking to derail one or more proposed rule provisions, take note – use special care when writing up an argument that the provision raises a disputed issue of material fact.
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