White & Case Tech Newsflash

Nearly two years after announcing its plan to explore a new rule to address the deceptive and unfair use of consumer reviews, the Federal Trade Commission ("FTC") issued the final rule on the use of consumer reviews and testimonials (16 CFR Part 465, the "Rule").

Background and Objectives of the Rule

This Rule represents the FTC's continuous efforts to protect consumers from injury caused by fake reviews and testimonials and promote fair market competition.¹

Complementing an existing framework with the FTC's Endorsement Guides (16 CFR Part 255) and Guidance on Soliciting and Paying for Online Reviews, the Rule is an additional tool at the FTC's disposal to regulate deceptive and unfair practices related to the use of reviews, testimonials, and endorsements. The Rule enhances the FTC's ability to combat fake reviews by enabling courts to impose civil penalties on violators and allowing the FTC to seek court orders for compensation for affected consumers.²

Summary of the Rule’s Provisions

The activities prohibited under the Rule include:

• Writing, selling, or buying fake or false consumer reviews, consumer testimonials, and celebrity testimonials. Businesses are prohibited from creating, selling, buying, procuring, or disseminating fake or false consumer reviews or testimonials if they know or should have known that the reviews misrepresent the reviewers' experience, the reviewer has no experience with the product or service, or the review is attributed to someone who does not exist. Notably, in its press releases announcing the issuance of the Rule, the FTC expressly mentioned that the Rule, and this provision in particular, contemplates AI-generated reviews.
• Buying positive or negative reviews. Businesses are prohibited from providing consumers compensation or other incentives that are expressly or impliedly conditioned on creating a review with a particular sentiment, either positive or negative.
• Failing to make clear and conspicuous disclosures about insider reviews and testimonials. Reviews written by company insiders (e.g., employees) must include a clear and conspicuous disclosure of their material connection to the company. Companies may not solicit or demand reviews/testimonials from relatives, employees, or agents without clearly disclosing the reviewer's material connection.
• Deceptive use of company-controlled websites. A business is prohibited from misrepresenting that a website it controls provides independent reviews or opinions when it includes its own products or services.
• Illegally suppressing negative reviews. Businesses are prohibited from using threats, intimidation, or false accusations to prevent or remove negative consumer reviews. Businesses are also prohibited from misrepresenting that reviews represent all or most of the reviews submitted when in fact reviews have been suppressed based on their ratings or negative sentiment. However, businesses are allowed to suppress reviews if they apply consistent criteria to all submissions, regardless of their sentiment. This includes suppressing reviews that contain trade secret or confidential information, defamatory or harassing content, discriminatory or vulgar remarks, false or misleading statements, or personal information or likeness of another individual.
• Selling and buying fake social media indicators. Businesses are prohibited from selling or buying fake social media indicators such as followers, or views generated by a bot or hijacked account. This provision is limited to situations in which the marketer knew or should have known that the indicators were fake.

Notably, the FTC declined to finalize the proposed provision on review hijacking, defined as the reuse or repurposing of a consumer review written for one product so that it appears to have been written for a substantially different product. Specifically, the FTC commented that it did not have sufficient time to address comments expressing concerns regarding the definition of the proposed provision's key term "substantially different product."

Key takeaways

With its history of related enforcement actions and a previous penalty offense notice, this Rule is signaling that combating the use of deceptive consumer reviews and testimonials in marketing is a top priority for the FTC. Marketers should take note that:

• Consumer reviews and endorsements should be from real people (not AI) who have actual experiences with the product or service. Marketers should ensure that reviews by insiders include a clear and conspicuous disclosure of the connection within the review.
• There should be no restrictions on consumers' ability to leave negative reviews and honest feedback. All reviews, regardless of star rating or opinion should be published unless the review includes offensive, harassing, or confidential content.
• No incentives (e.g., coupons, sweepstakes, free products, etc.) should be used to entice consumers to submit reviews expressing specific opinions.
• No website affiliated with the advertiser should pose as an impartial, unaffiliated source, and the affiliated website should disclose its material connection with the marketer.

Jane Li (White & Case, Contract Attorney, Boston) contributed to the development of this publication.

1 See https://www.ftc.gov/news-events/news/press-releases/2024/08/federal-trade-commission-announces-final-rule-banning-fake-reviews-testimonials.
2 See Section VI.A, 16 CFR Part 465.