What’s Next for the FTC’s Proposed Rule Banning Fake Reviews and Testimonials?

Advertising Law

The Federal Trade Commission (FTC or Commission) received 105 comments from the public on its proposed trade regulation rule to prohibit marketers from using unfair or deceptive practices involving consumer reviews and testimonials. After the comment period ended on September 29, 2023, the comments were posted on the FTC’s website. 

The proposed rule, titled Trade Regulation Rule on the Use of Consumer Reviews and Testimonials, would prohibit the creation, purchase, dissemination or sale of fake consumer reviews and testimonials; repurposing reviews; buying positive or negative reviews; not disclosing insider consumer reviews and testimonials; misrepresenting company-controlled websites; suppressing reviews; and the sale, distribution or purchase of false indicators of social media influence. Our article “FTC’s Proposed New Rule Prohibiting Fake Reviews and Testimonials” summarized the proposed rule.

The proposed rule is highly significant for marketers and consumers. Violation of a trade regulation rule enables the FTC to seek civil penalties of up to $50,120 per violation. The FTC could take the position that each fake review or testimonial is a separate violation, which would add up to substantial civil penalties. If a marketer were to use 1,000 fake reviews, the civil penalties could be over $50 million. The FTC can also seek monetary redress for consumers and others injured by fake reviews and testimonials. In the Notice of Proposed Rulemaking (NPRM), the FTC stated:

Because fake reviews and the other unfair or deceptive review and testimonial practices described here are so prevalent and so harmful, the unlocking of additional remedies through this rulemaking, particularly the ability to seek civil penalties against violators and obtain redress for consumers or others injured by the conduct, will allow the Commission to more effectively police harmful review and testimonial practices that plague consumers and honest businesses.

The FTC will now review the comments to the proposed rule and determine next steps. The comments raise a number of important issues.

Are Fake Reviews and Testimonials Prevalent?

Congress granted the FTC rulemaking authority under Section 18 of the FTC Act to prohibit unfair or deceptive practices. Under Section 18, the FTC is authorized to prescribe “rules which define with specificity acts or practices which are unfair or deceptive acts or practices in or affecting commerce.” These rules are known as trade regulation rules. Before commencing a rulemaking proceeding, the FTC must have reason to believe that the practices to be addressed by the rulemaking are “prevalent.” Section 18 states: “The Commission shall make a determination that unfair or deceptive acts or practices are prevalent under this paragraph only if—(A) it has issued cease and desist orders regarding such acts or practices, or (B) any other information available to the Commission indicates a widespread pattern of unfair or deceptive acts or practices.”

In the NPRM, published on July 31, 2023, the FTC stated that the comments it had received from online platforms after issuing its Advance Notice of Proposed Rulemaking (ANPR) on November 8, 2022, support a finding that fake consumer reviews are prevalent. According to the NPRM, Amazon stated that in 2020, it proactively stopped more than 200 million suspected fake reviews. Google stated that in 2021, it blocked or removed more than 95 million Google Maps reviews for policy violations, and in 2022, it removed millions of fake, inorganic or otherwise malicious Google Play reviews. Yelp commented that in 2021, its recommendation software identified about 19% of reviews as “not recommended.” In 2021, Tripadvisor reportedly flagged 3.6% of reviews submitted (or about one million reviews) as fraudulent. Trustpilot stated that in 2021, accounts deemed to be review sellers submitted more than 60,000 reviews of U.S. businesses; it identified and filtered the reviews and blocked the accounts associated with them. The U.S. Public Interest Research Group cited findings by industry observers that 30%–40% of online reviews are not genuine and stated that consumers have no way of knowing which reviews are legitimate.

The FTC stated that “[m]ore recently, concerns have been raised that generative artificial intelligence (AI) tools can be used to write product reviews. It has been reported that an AI chatbot is being used to create fake reviews. As the reporting notes, the widespread emergence of AI chatbots is likely to make it easier for bad actors to write fake reviews.”

With respect to consumer testimonials, the FTC noted that it “has challenged many advertisements that allegedly misrepresented endorsers’ experiences.” The FTC also stated that “[t]he use of fake celebrity endorsements is widespread . . . . The FTC has challenged numerous allegedly false claims that specific celebrities endorsed certain products, services, or businesses.”

In its comment in response to the NPRM, the Association of National Advertisers (ANA) took issue with the FTC’s belief that fake reviews and testimonials are prevalent. The ANA argued: “There is evidence in the record that the major commercial platforms experience fake reviews as a small percentage of the total volume of reviews, which contradicts the FTC’s basic premise that the problem is so prevalent that regulation is required.”  

The ANA contended that many of the technologies and strategies used by the major platforms that feature consumer reviews to address the issues raised by fake reviews are working, as evidenced by the data on Trustpilot, Google and Tripadvisor previously collected pursuant to the ANPR. The ANA noted that Trustpilot in 2021 hosted about 46.7 million reviews globally, and it removed about 2.7 million fake reviews, indicating that the incidence level of detectable fake reviews was about 5.7%. Of the 46.7 million global reviews, less than 0.001% were deemed to be fake reviews in the United States. Google reported in 2021 that less than 10% of the reviews on its platform violated its policy regarding fake reviews. Tripadvisor found in 2021 that just 3.6% of the reviews violated its policy.

The ANA argued that to the extent there is an incidence level of fake reviews between 4% and 10%, this level does not show that fake reviews are prevalent. The ANA stated that although it did not support the proposed rule as currently drafted, it would support a narrower rule that focuses on brokers that buy and sell fake reviews.

The Interactive Advertising Bureau (IAB) also argued that the proposed rule “sweeps in practices that are not prevalent.” For example, the IAB stated that to support its determination that consumer review repurposing is prevalent, the NPRM cited only one prior Commission case and a handful of online news articles describing the practice. The IAB contended: “This evidence does not satisfy the prevalence standard. The Commission has cited one cease and desist order, but the statute clearly references multiple ‘cease and desist orders.’” The IAB critiqued other sections of the proposed rule with similar arguments.

Other comments submitted to the FTC in response to the NPRM argued that fake reviews and testimonials are highly prevalent and harmful to consumers. The National Consumers League stated that research shows that in 2021, fraudulent reviews cost consumers an estimated $152 billion globally, with $28 billion in losses in the United States alone. The research found that by deceiving buyers into purchasing lower-quality and potentially unsafe products, fake reviews led to $0.12 of consumer welfare lost for every $1 spent online.

Tripadvisor commented that it recently released its 2023 Review Transparency Report, which reviewed 73 million reviews and opinions shared on its platform. Due to a diligent approach to moderation, 1.3 million total reviews were identified as fake and removed from the platform in 2022. The vast majority—72%—were caught before they were posted, compared to 67.1% in 2020.

Consumer Reports stated that respondents to the ANPR cited statistics suggesting that a substantial portion of reviews consumers encounter are fake, with estimates ranging between 8.5% and 40%.

Yelp noted that recent polling conducted after comments closed in response to the Commission’s ANPR continues to show the importance of mitigating deceptive information in online consumer reviews. A new survey commissioned by Yelp and conducted by Material, a market research company, polling 2,000 Americans found that more consumers than ever consider online consumer reviews before patronizing a business. More than nine out of ten respondents (93%) say they read online reviews to inform their purchasing decisions. The survey also found that a majority of respondents (76%) say they read more online reviews now than they ever have and that it’s rare for them to visit an unfamiliar business without checking online first (70%). Yelp stated: “Given these findings and the widespread use of consumer reviews that Yelp described in its earlier comments, there is no reasonable doubt that the proposed Rule prohibiting certain deceptive review practices will help protect consumers.”

A bipartisan group of attorneys generals (AGs) from 21 states and the District of Columbia stated that they “commend the FTC for its comprehensive review of the use of deceptive reviews and testimonials in the online marketplace, and support the FTC’s stated objective in proposing this Rule,” observing that review suppression “is prevalent in the online marketplace.”

Should the Rule Apply to Third-Party Review Platforms?

The proposed rule does not apply to third-party review platforms unless they purchase the reviews or the reviews concern their own products, services or business. The FTC stated in the NPRM:

Google’s comment said a proposed rulemaking should not apply to review platforms. Proposed § 465.2 accounts for this concern. The provision does not apply to businesses, like third-party review platforms, that disseminate consumer reviews that are not of their products, services, or businesses. Neither does it apply to any reviews that a platform simply publishes and that it did not purchase.

Section 465.2 states: “It is an unfair or deceptive practice and a violation of this Rule to purchase a consumer review, or to disseminate or cause the dissemination of a consumer testimonial or celebrity testimonial, about the business or one of its products or services, which the business knew or should have known.”

Consumer Reports criticized the exemption of third-party review platforms in its comment. It stated that “because the Rule does not place any explicit restrictions on review platforms (such as Google, Yelp, Trip Advisor [sic]) that host reviews of third-party businesses, the Rule falls short of its potential. Review platforms benefit greatly from serving as the central repository for reviews about products and services other than their own.”

Consumer Reports argued:

The proposed rule should obligate review platforms to take reasonable measures to root out fraud and deceptive reviews of their services – especially given that in many cases, their own sorting policies and algorithms actively incentivize bad behavior. Such an obligation would be consistent with companies’ security obligations under Section 5 of the FTC Act to protect systems against abuse by any third party.  

Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, stated to The Washington Post that “‘Many of them [online review platforms] assert immunity under Section 230 of the Communications Decency Act,’ . . . a reference to the law that makes online forums not responsible for the content others publish on them. That would make it hard for the FTC to hold them accountable, even if it wanted to.”

Fake Review Watch stated in its comment that if “the FTC believes Section 230 prevents it from holding third-party review platforms liable for the mountains of fake reviews they push on consumers, perhaps it can require the platforms to be more transparent.” It recommended that review platforms must give users access to all reviews for a given business, even those that have been removed by the platform and no longer count toward the business’s star rating. It argued that the very fact that a business has had fake reviews removed is valuable information for consumers to know.

Other Issues Raised by the Comments

The comments to the FTC regarding the proposed rule raised a number of other issues, including the following:

  • The proposed rule will have a chilling effect on truthful speech in violation of the First Amendment.
  • The proposed rule violates Section 230 of the Communications Decency Act to the extent that its vague terms would impose liability on websites for merely hosting reviews and testimonials and by interfering with good faith content moderation policies.
  • The proposed rule should be clarified and strengthened to broaden its effectiveness against fake reviews.
  • The bipartisan group of AGs recommended that the “Review Suppression” sections of the proposed rule be revised, based on their experience from consumer protection cases. The current language prohibits an “unjustified legal threat or a physical threat, intimidation, or false accusation.” The AGs recommended that the FTC change the language from “unjustified” to “unfounded, groundless, or unreasonable” to provide greater clarity through a more objective standard.
  • The proposed rule is overbroad, and the FTC has failed to consider the negative consequences of that overbreadth and reasonable alternatives that might avoid them.
  • If the FTC attempts to regulate review hosting in the rule, it should adopt an actual knowledge standard and create a safe harbor for review hosting when the company has reasonable processes in place to identify and remove fake reviews.
  • The proposed rule should explicitly include saves and shares in its definition of indicators of social media influence.
  • The National Federation of Independent Business cautioned the FTC “to tread lightly and carefully in issuing a federal regulation on how businesses, including small and independent businesses, may obtain, create, and use reviews and testimonials about their businesses and what they may say in response to others who denigrate their businesses.”

Additional comments recommended many other changes to the proposed rule.

Next Steps

The FTC will review the comments and determine next steps.

The FTC could finalize the proposed rule either as is or with revisions based on the comments. Section 18 of the FTC Act states that the Commission is authorized to “promulgate, if appropriate, a final rule based on the matter in the rulemaking record . . . together with a statement of basis and purpose.”

Alternatively, the FTC could decide not to issue a final rule (although this is highly unlikely).

The FTC could also hold an informal hearing. Under Section 18 of the FTC Act, the FTC is authorized to “provide an opportunity for an informal hearing . . . .” The FTC’s Rules of Procedure state: “The Commission will provide an opportunity for an informal hearing if an interested person requests to present their position orally or if the Commission in its discretion elects to hold an informal hearing.” In their comments, the IAB and Fake Review Watch requested an informal hearing to present their views.

Why It Matters

Fake reviews are “a billion-dollar industry, where people and businesses pay marketers to post fake positive reviews to Google Maps, Amazon, Yelp and other platforms, and deceive millions of customers each year,” according to a recent article in The New York Times. Google said it had blocked or removed over 115 million policy-violating reviews from Google Maps in 2022, an increase of 20% from 2021.

It is likely that the FTC will find that fake consumer reviews and testimonials are pervasive. It is also likely that the FTC will finalize the proposed rule, most likely with revisions based on the comments that it received. Before it finalizes the rule, the FTC will most likely hold an informal hearing to allow interested persons to present their positions.

Many of the practices prohibited by the proposed rule are already covered by the FTC’s newly revised Guides Concerning the Use of Endorsements and Testimonials. Unlike the Guides, the proposed rule, if finalized, would enable the FTC to seek monetary penalties against marketers that engage in prohibited practices. In light of the substantial civil penalties and other sanctions that the FTC could seek against marketers that violate the rule, marketers should carefully examine their consumer review and testimonial practices and make sure that they are in compliance. 



pursuant to New York DR 2-101(f)

© 2024 Manatt, Phelps & Phillips, LLP.

All rights reserved