FTC bans fake online reviews, testimonials

The Federal Trade Commission (FTC) announced Wednesday a final rule that bans online fake reviews and testimonials and allows the agency to seek civil penalties from known violators.

The rule seeks to curb the volume of reviews generated by artificial intelligence or written by someone who misrepresents their experience with the product or service in exchange for compensation. It also targets the practice of inconspicuously suppressing negative reviews.

“Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors,” FTC Chair Lina Khan said in a news release.

“By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive,” she added.

The agency proposed the rule in June 2023 and held an informal hearing in February 2024. Since then, the agency has incorporated public comments into the provisions of the final rule released on Wednesday.

The final rule prohibits businesses from creating, selling or buying reviews that do not disclose that they were generated by artificial intelligence or that do not disclose that they were written by someone who has never actually used the product or falsely purports to have a positive experience.

Businesses may not compel company insiders to write these reviews, nor can they disseminate them when they “knew or should have known that the reviews or testimonials were fake or false.”

The final rule prohibits businesses from offering users any kind of incentive, including compensation, to write reviews that express a particular sentiment — positive or negative. The new final rule also specifies that the “conditional nature” of the compensation could be “expressly or implicitly conveyed.”

 The new rule prohibits reviews from officers or managers that do not make clear the connection to the business. Similarly, officers and managers face certain disclosure requirements when soliciting reviews from relatives.

The final rule prohibits businesses from making up false reasons to suppress negative reviews. It also bars anyone from “selling or buying fake indicators of social media influence, such as followers or views generated by a bot or hijacked account.”

This provision has been updated to specify that it’s limited to situation in which the buyer “knew or should have known” that the indicators were fake.