FTC Finalizes Rule to Combat Fake Online Reviews

The Federal Trade Commission (FTC) has finalized a new rule to combat the widespread issue of fake online reviews, including those generated by artificial intelligence (AI). The rule, unanimously approved with a 5-0 vote, will come into effect 60 days after it is published in the Federal Register.

This move is part of the FTC’s broader effort to clean up the online review landscape, which has been plagued by deceptive practices, particularly on major e-commerce platforms like Amazon.

The new rule explicitly prohibits several key practices:

• Fake and AI-Generated Reviews: Businesses are banned from creating or using fake reviews, including those generated by AI, or allowing reviews from individuals who haven’t actually used the product or service.
• Buying and Selling Reviews: It’s now illegal to buy or sell reviews, whether they are positive or negative.
• Undisclosed Insider Reviews: Company insiders, such as managers or officers, must clearly disclose their connection to the business if they write reviews. They are also prohibited from asking employees to get family members to write reviews.
• Fake Independent Review Sites: Companies cannot create or control websites that falsely claim to offer independent opinions on products or services they actually own or are affiliated with.
• Intimidation Tactics: The rule bans businesses from using legal or physical threats, or any form of intimidation, to remove or suppress negative reviews. It also prevents companies from falsely claiming that their review sections include all or most customer opinions while hiding negative feedback.
• Fake Social Media Engagement: The rule also addresses the buying and selling of fake social media engagement, such as followers, likes, or views, especially when these are generated by bots or hacked accounts.

The FTC’s crackdown on fake reviews has been long in the making. The Commission first proposed this rule in June 2023, following an advanced notice of proposed rulemaking in November 2022. This new rule is expected to be a crucial tool in improving the reliability of online reviews, which have become increasingly unreliable due to practices like paid reviews and AI-generated content.

The problem of fake reviews is particularly acute on platforms like Amazon. In 2020, Amazon reported blocking more than 200 million suspected fake reviews. Similarly, Yelp identified over 950 suspicious groups and individuals engaging in deceptive review practices in 2021. These issues have been exacerbated by the rise of generative AI, which makes it easier for bad actors to create convincing but fake reviews.

FTC Chair Lina Khan emphasized the importance of this rule, stating, “Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors.” The rule is designed to create a fairer and more transparent online marketplace, protecting consumers from being misled by deceptive reviews.

Violations of this new rule can result in significant penalties, with fines up to $51,744 per infraction. However, the final amount could vary depending on the specifics of each case, as determined by the courts.