On August 14, 2024, the Federal Trade Commission (“FTC”) released its Final Rule, which intends to regulate the selling and/or purchasing of “fake” consumer reviews and testimonials. The FTC contends that the Rule will combat fake reviews and testimonials by prohibiting their sale or purchase. The Rule also allows the FTC to take action and seek civil penalties against violators.
KingSpry’s Employment Law Chair, Avery E. Smith, Esq., reviews the FTC’s Rule and emphasizes the key takeaways for businesses.
Recap
On November 8, 2022, the FTC published an Advance Notice of Proposed Rulemaking (“ANPR”) to address deceptive and unfair practices involving consumer reviews and testimonials.
Months later, on July 31, 2023, the FTC published a Notice of Proposed Rulemaking (“NPRM”), stating that it has reason to believe that deceptive and unfair acts involving consumer reviews and testimonials was prevalent.
Following an informal hearing, the FTC released the Rule on August 14, 2024. The Rule amends 16 CFR Part 465 as detailed below.
Consumer Reviews, Consumer Testimonials, and Celebrity Testimonials
Businesses cannot write, create, or sell a consumer review, consumer testimonial, or celebrity testimonial that materially misrepresents, expressly or by implication:
- That the reviewer exists;
- That the reviewer used or otherwise had experienced with the product, service, or business; or
- The review’s experience with the product, service, or business.
This principle also applies to (1) the purchasing or disseminating of a consumer or celebrity testimonial and (2) the procurement of a consumer review from an officer, manager, employee, agent, or immediate relative for posting on a third-party platform.
Exceptions
The prohibitions listed above do not apply to:
- Reviews or testimonials that resulted from a business making generalized solicitations to purchasers to post reviews or testimonials; and
- Reviews that appear on a platform as a result of the business merely engaging in consumer review hosting.
Purchasing Reviews
Business are prohibited from offering compensation or other incentives in exchange for consumer reviews of a particular sentiment. This prohibition includes both positive and negative reviews.
Insider Reviews and Testimonials
The Rule also requires reviews or testimonials created by an officer or manager of a business to have a clear and conspicuous disclosure of their material relationship to the business.
Company-Controlled Websites
Businesses cannot misrepresent that a website it controls provides “independent” reviews or opinions about its products or services.
Review Suppression
The Rule prohibits businesses from using unfounded or “groundless” legal threats to prevent or remove negative consumer reviews.
Social Media Influence
Lastly, the Rule prohibits “anyone” from selling, distributing, purchasing, or procuring fake indicators of social media influence. For example, this prohibits the purchasing of followers or viewers.
Effective Date
The Rule is scheduled to take effect on October 21, 2024.
Moving Forward
As discussed in our previous Employment News, the Supreme Court’s decision in Loper Bright Enterprises, et al., v. Gina Raimondo, Secretary of Commerce, et al. is likely to trigger significant change in administrative law.
We expect legal challenges to be filed against regulations enacted by federal agencies, including the FTC, the United States Department of Labor (“DOL”), the Internal Revenue Service (“IRS”), the Securities and Exchange Commission (“SEC”), among other federal agencies.
For now, the FTC’s Rule is schedule to take effect on October 21, 2024. As such, we encourage employers to review their current business practices to ensure compliance with the Rule.
