The U.S. Federal Trade Commission (FTC) has finalized a new rule that makes the sale and purchase of fake consumer reviews illegal. The rule, which took effect on Monday (October 21), is part of the FTC’s initiative to strengthen the regulation of online advertising and promote fair, honest, and competitive markets. The rule also includes instructions on appropriate disclosures for online reviews written by company insiders.
The rule prohibits businesses from using deceptive endorsement and review practices, including using fake reviews, suppressing honest negative reviews, and paying for positive reviews. It also adds several definitions for terms used in the regulations, including for “consumer review hosting” and “fake indicators of social media influence.”
The FTC states that the rule will enhance its ability to pursue civil penalties for companies violating the regulations. Violation of the rule entitles the FTC to seek significant penalties in the amount of up to $51,744 per violation or per day for ongoing violations.
The FTC has also clarified that the rule applies to content generated by AI tools. The rule does not specifically refer to AI, but the FTC has stated that the prohibitions cover situations when someone uses an AI tool to generate the deceptive content at issue.
The FTC has urged companies selling goods and services to end customers, as well as businesses that promote, market, or otherwise assist such companies, to review their current marketing strategies, websites, and advertisements to identify potential variances with the rule and swiftly implement remedial measures as needed. A forward-looking compliance plan should then be implemented.
According to the FTC, “No honest business should be worried about the rule, as it only reflects what we believe is already illegal under Section 5 of the FTC Act. If you’re a dishonest business and don’t want to give our new rule five stars, that’s okay. We guarantee you won’t be getting a good review from us either.”
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