Government Prohibits False Online Appraisals and Personal Endorsements
New Article:
The Federal Trade Commission (FTC) has taken a hard stance against fake online reviews with a fresh regulation. This new rule, announced on Wednesday, aims to put an end to fraudulent reviews and testimonials, and it even goes as far as prohibiting AI-generated reviews and testimonials from individuals without actual experience with the product being reviewed.
The FTC cranked up the process for this crackdown way back in November 2022, and they've been working tirelessly on it since. A recent hearing in February 2024 allowed them to hear feedback and make necessary changes, clarifying many aspects that may have been confusing for both consumers and businesses.
This new rule will ban buying reviews, whether positive or negative, in any form. It will also prohibit so-called "insider" reviews, not just from employees but also from anyone with a "material connection" to the business, including the immediate relatives of employees.
This rule will take effect 60 days after it's published in the Federal Register, and any violations will be met with civil penalties. The vote for the new rule was unanimous, with a 5-0 decision.
According to FTC Chair Lina M. Khan, "Fake reviews not only waste people's time and money, but also pollute the marketplace and divert business away from honest competitors." The new rule is intended to protect consumers, put dishonest businesses on notice, and promote fair, honest, and competitive markets.
The FTC has been on a roll during the current administration, beefing up enforcement of consumer protection rules, attempting to crack down on scams, and keeping companies in check. In fact, they've even had Big Tech in their crosshairs, which has earned Chair Lina M. Khan some strong criticisms from the business world.
Some big-time Democratic donors to Kamala Harris' presidential campaign against Donald Trump have reportedly been pushing for Khan's ousting. However, if Harris does win, it's uncertain what she might decide to do. Interestingly, Trump's vice presidential candidate JD Vance has praised Khan for her anti-Big Tech stance, as the New York Times recently reported.
Additional Insights:
- Rules Evolution: The FTC has been making strides in the evolution of rules regarding consumer reviews. A recent action against a business opportunity scheme is one example of their continued efforts to stop deceptive practices[5].
- Disclosure Requirements: While specific disclosure requirements for reviews are not detailed in the current rule, the FTC generally emphasizes transparency. In broader regulations like the Negative Option Rule, they mandate clear and conspicuous disclosure of material terms related to consumer transactions[3].
- Prohibitions: The rule does not explicitly outline specific prohibitions on online reviews in current literature. However, the FTC generally prohibits deceptive advertising practices, which include fake or manipulated reviews[1][2].
- Effective Date: The exact effective date for the new rule on reviews is not explicitly stated in current reports. For other FTC regulations like the Negative Option Rule, additional requirements are set to become effective on May 14, 2025[3].
- The new FTC rule prohibits AI-generated reviews and testimonials from individuals without actual experience with the product being reviewed, aiming to eradicate fake online reviews.
- The rule will also prohibit the buying of reviews, whether positive or negative, in any form, and restricts so-called "insider" reviews from employees and their immediate relatives.
- The new rule intends to put dishonest businesses on notice, protect consumers, and promote fair, honest, and competitive markets, but it does not explicitly outline specific prohibitions on online reviews in current literature.
- Any violations of the new FTC rule will be met with civil penalties, and tech companies are among those being closely watched due to the FTC's increased enforcement of consumer protection rules and attempts to crack down on scams.
