The FTC plans to slap companies with hefty fines for using fake reviews

The Federal Trade Commission (FTC) has proposed a formal ban on fake reviews and testimonials. Companies would also be prohibited from using phony followers and views to inflate their social media metrics if the rule takes effect as it stands.

This isn't the first time the agency has trained its sights on fake reviews. In its first such case in 2019, it fined a third-party Amazon seller for paying for fake reviews (Amazon itself has sued phony review providers). Earlier this year, the FTC levied a $600,000 penalty against the owner of a vitamin brand for “review hijacking" on Amazon.

The new rule, which the agency said it was working on in October, is close to being finalized and it includes steep penalties for those caught peddling fake reviews and testimonials. As The Washington Post points out, the FTC plans to slap businesses that "buy, sell and manipulate online reviews" up to $50,000. Not only is that fine for each phony review, it's also for every time a consumer sees it. So, if the FTC finds out that one fake review has been viewed just 20 times, the business that bought it could be on the hook for $1 million.

“Our proposed rule on fake reviews shows that we’re using all available means to attack deceptive advertising in the digital age,” Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, said in a statement. “The rule would trigger civil penalties for violators and should help level the playing field for honest companies.”

Explicitly, the FTC aims to ban "businesses from writing or selling consumer reviews or testimonials by someone who does not exist, who did not have experience with the product or service, or who misrepresented their experiences." Similarly, companies won't be allowed to obtain or disseminate reviews and testimonials that they "knew or should have known that they were fake or false."

Repurposing an existing review to make it appear that it was written for a different product (i.e. review hijacking) will be outlawed, as will offering payments or other kinds of compensation for positive or negative reviews. The FTC says companies can still ask users to leave a review, as that's an important way for small businesses to enhance their reputations.

Managers and officers won't be allowed to post reviews of their company's products without clear disclosures and nor can they ask family members or employees to do so in certain circumstances. Under the proposed rule, companies won't be allowed to run websites that claim to offer independent reviews of categories of products and services that include their own offerings.

Review suppression will be banned as well. Companies won't be allowed to use intimidation tactics, such as legal threats and false accusations, to push customers to remove or avoid leaving a negative review.

In addition, the FTC seeks to ban companies from using fake followers and views to fluff up their social media numbers. "The proposed rule also would bar anyone from buying such indicators to misrepresent their importance for a commercial purpose," the agency said. This is a provision that could have far-reaching consequences beyond commerce — influencers may have to ensure they don't factor in bots when they try to secure brand deals.

Meanwhile, the proposed notice for the rule takes note of the popularity of generative AI. "It has been reported that an AI chatbot is being used to create fake reviews," it reads. "As the reporting notes, the widespread emergence of AI chatbots is likely to make it easier for bad actors to write fake reviews."

The rule won't take effect immediately. It will be open to public comments for a 60-day period, after which the agency will consider changes before finalizing the directive.

A lot of these provisions make sense. In essence, the FTC is trying to ensure that businesses and brands are transparent and honest with consumers. Actually enforcing these measures, however, is a different matter. The agency told the Post that it won't be getting extra resources to tackle purveyors of fake reviews, but a codified rule can strengthen its hand in court. Taking on companies based overseas that sell and post phony reviews might be a difficult task too. Still, a formal ban on these practices and the threat of eye-popping fines may be enough to deter some companies from using fake reviews.