• by Wendy Davis  @wendyndavis, August 14, 2024

Taking aim at online fakery, the Federal Trade Commission on Wednesday banned businesses from purchasing phony reviews, suppressing bad critiques, and engaging in other review-related practices that could dupe consumers.

“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 stated Wednesday, adding that the new regulations will help the agency combat deceptive advertising.

The regulations come more than one year after they were proposed by the FTC.

Among other specifics, the new regulations prohibit businesses from creating or selling fake reviews generated by artificial intelligence or by people who haven't actually used the product or service they're endorsing.

The rules also include a prohibition on using “unfounded or groundless legal threats, physical threats, intimidation, or certain false public accusations” to discourage bad write-ups.

Additionally, the rules also don't allow businesses to offer discounts or other perks in exchange for a good review. (Businesses can still offer incentives to consumers who write reviews, provided the businesses don't suggest that the write-ups should be positive.)

Last year, the Association of National Advertisers objected to parts of the FTC's proposal, arguing that some provisions could chill legitimate commercial speech.

For instance, the group said a ban on offering incentives for good reviews was too broad, arguing that incentivized reviews are not necessarily deceptive, especially when companies explain the circumstances of the review.

The organization asked the FTC to consider a scenario where a business solicits reviews with “enthusiastic and positive” language such as “Tell us how much you loved your visit to John’s Steakhouse and get a $5 coupon.”

“There is nothing inherently wrong with encouraging positivity, so long as the resulting reviews are not deceptive,” the Association of National Advertisers wrote.

The organization added that “John's Steakhouse” could offer the incentive and avoid duping consumers by issuing a disclaimer like “We asked customers to tell us how much they loved their visit to John’s Steakhouse, and here’s what some of them said! (customers who submitted reviews received a $5 coupon).”

The FTC said Wednesday that it disagreed with the Association of National Advertisers.

“The problem with the enthusiastic and positive messages suggested ... is that consumers receiving them could reasonably take the message that their reviews must be positive and enthusiastic in order to obtain the reward,” the agency wrote.

The FTC also said it “believes that businesses are capable of soliciting and encouraging reviews without suggesting that the reviews must be positive to obtain an incentive.”

Other commenters, including Firefox developer Mozilla, supported the FTC's proposal. Mozilla, which recently acquired Fakespot (a company that aims to flag phony reviews), argued that online fakery is prevalent.

“E-commerce markets have been distorted for years by positive or negative reviews bought by the highest bidder, and consumers are the ones who suffer,” Mozilla said in its comments.

In the past, the FTC sought to discourage fake reviews by issuing guidance about the type of practices that could result in prosecutions. The new regulations, unlike guidance, are legally binding and enable the agency to fine first-time offenders up to $51,744 per violation.

The rules will take effect 60 days after they're published in the Federal Register.