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The Federal Trade Commission today announced that it plans to issue new rules to “address deceptive or unfair review and approval practices, such as using false reviews, removing negative reviews, and payment for positive reviews”. In a Notice of Proposed Rulemaking, the FTC seeks public comment on whether the FTC should, in fact, issue a trade regulation rule on the use of reviews and approvals that would allow the FTC to obtain civil penalties from advertisers who break the law. .
Announcing the ANPR, Samuel Levine, Director of the FTC’s Consumer Protection Bureau, said, “Companies should know by now that fake reviews are illegal, but this scourge persists. We are examining whether a rule that would trigger heavy civil penalties for violators would make the market fairer for honest consumers and businesses.”
The FTC’s Guides to the Use of Endorsements and Testimonials in Advertising, which has guided marketers for decades on how to use endorsements and testimonials in a manner that complies with Section 5 of the FTC law, are also under review by the FTC. The approval guides are advisory only, and if an advertiser violates them, the FTC generally has no right to seek civil penalties. While the FTC acknowledged in the ANPR that endorsement guides are “well-established” and “apparently remain very helpful to legitimate market players”, the FTC said it believes “truly bad players will only be not deterred by Commission guidance, but the possibility of substantial civil penalties changes economic incentives and may provide greater deterrence for both legitimate and malicious actors.”
In the ANPR, the FTC said it does not intend to propose a rule covering all of the issues discussed in the approval guides. Rather, it contemplates a rule that would address the following concerns:
- Reviews of recommendations by people who do not exist, who have not actually used or tested the product or service, or who misrepresent their experience with it;
- Review hijacking, where a seller steals or reuses another product’s reviews;
- Merchants offering compensation or other incentives in exchange or conditional on writing positive or negative consumer reviews;
- Owners, officers, or managers of a business writing reviews or testimonials about their own products or services, or posting testimonials from their employees or family members, who do not provide clear and visible disclosure of such relationships;
- Owners, officers, or managers of a business soliciting opinions from employees or relatives without asking them to disclose their relationships;
- The creation or operation of websites, organizations or entities that purport to provide independent reviews or opinions about products or services, but are, in fact, created and controlled by the companies offering the products or services;
- Falsely stating that the consumer reviews displayed represent most or all of the reviews submitted when, in fact, the reviews are removed due to their negativity;
- The deletion of customer reviews by physical threat or unjustified legal threat; and
- Sell, distribute or buy followers, subscribers, views and other indicators of influence on social networks.
The ANPR will soon be published in the Federal Register, and then the public will have 60 days to submit comments. The FTC said it also plans to hold public workshops on the proposed rule.
The FTC voted 3 to 1 to release the ANPR, with Commissioner Christine S. Wilson voting no. In a dissenting statement, she explained that “I do not believe that bringing in new regulation under Article 18 is the best use of our limited resources, particularly given the nature of the harm at issue. here”. In her own statement in support of ANPR, Chairwoman Lina M. Khan said, “These practices not only harm consumers who trust fake reviews. They also pollute the market and disadvantage honest businesses.”
Although this regulation is still in its infancy, the FTC has already made its views clear on how to properly seek and use reviews and approvals. And, through numerous enforcement actions, the FTC has also shown that it intends to punish traders who violate FTC standards. What is particularly interesting about the ANPR, however, is that it highlights, very specifically, the practices that the FTC considers to be the most problematic.
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