As eCommerce store owners, we know just how important customer reviews have become when it’s time to make purchasing decisions. We’ve all been there—scrolling through endless product reviews to find out if that must-have gadget, trendy outfit, or latest tech gadget is worth our hard-earned money. But what happens when those glowing testimonials that helped seal the deal turn out to be fake? Unfortunately, it’s a reality that’s more common than you might think.
The Federal Trade Commission (FTC) is stepping in to put a stop to these deceptive practices with a new rule aimed squarely at combatting fake reviews and testimonials. The FTC’s decision to crack down on this issue is a significant move that will not only protect consumers but also ensure a fair playing field for businesses that play by the rules.
Why the Crackdown on Fake Reviews Matters
When it comes to shopping online, trust is everything. When consumers feel confident that the products or services they’re purchasing are backed by real, honest feedback, they’re more likely to complete a transaction. However, when fake reviews enter the picture, that trust is eroded, leaving consumers skeptical and, often, feeling deceived.
FTC Chair Lina M. Khan hit the nail on the head when she said, “Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors.” This sentiment echoes the frustrations of many consumers who have been misled by fake reviews and testimonials that paint an inaccurate picture of a product’s quality or a company’s reputation.
For honest businesses, the impact of fake reviews is equally detrimental. Competitors who engage in deceptive practices like buying positive reviews or fabricating testimonials can unfairly sway potential customers, leading to lost sales and damaged reputations for those who play by the rules. The new FTC rule aims to curb these practices and restore integrity to the marketplace, ensuring that businesses compete on a level playing field and consumers can make informed decisions.
The New FTC Rule: What’s Inside?
The FTC’s new rule, announced in August 2024, is the culmination of a thorough process that included public comments, a proposed rulemaking phase, and an informal hearing held in February 2024. After considering input from various stakeholders, the Commission finalized a rule that targets several specific practices that have become increasingly problematic in the digital marketplace.
Fake Reviews and Testimonials
At the core of the new rule is a strict prohibition against fake reviews and testimonials. These include reviews that are completely fabricated—such as those generated by AI—or those written by individuals who have no real experience with the product or service in question. For instance, if a company hires a content mill to churn out hundreds of glowing reviews for a product that the writers have never even seen, let alone used, this practice would now be squarely in violation of FTC rules.
This prohibition also extends to fake celebrity testimonials, where businesses might falsely claim that a well-known figure endorses their product. Such practices not only deceive consumers but also undermine the credibility of genuine endorsements.
Paid Positive or Negative Reviews
Another significant aspect of the rule is its stance on paid reviews. The FTC is drawing a clear line in the sand: businesses cannot offer compensation or other incentives to consumers in exchange for writing reviews that express a particular sentiment, whether positive or negative. This practice, which has become increasingly common in some corners of the internet, creates a distorted view of a product’s reception and can lead to consumer mistrust.
What’s important to note here is that the rule applies to both explicit and implicit offers of compensation. In other words, it’s not just about handing over cash for a five-star review; even more subtle forms of incentivization—like offering discounts, free products, or other perks—could run afoul of the new regulations if they’re tied to a specific type of review.
Insider Reviews and Testimonials
The new rule also takes aim at insider reviews—those written by employees, managers, or others with a material connection to the company that isn’t disclosed to consumers. Imagine reading a rave review about a product only to later discover that it was penned by someone on the company’s payroll. This lack of transparency can be highly misleading, and the FTC’s rule seeks to put an end to it.
Under the new regulations, businesses must clearly disclose any material connections between the reviewer and the company. This means that if a manager, employee, or even an agent of the company writes a review, it must be transparently communicated to potential consumers. Additionally, the rule places restrictions on businesses that attempt to solicit reviews from their employees’ immediate relatives or from agents, ensuring that these practices are conducted in an ethical and transparent manner.
Company-Controlled Review Websites
In an effort to provide an unbiased source of information, some businesses have gone as far as to create their own review websites, which purport to offer independent opinions about products and services—including their own. The new FTC rule takes a hard stance against this practice, prohibiting businesses from misrepresenting a review site’s independence when, in fact, it’s controlled by the company itself.
For example, if a skincare company creates a website that claims to be an impartial reviewer of beauty products, but only promotes its own lines while disparaging competitors, this would now be in violation of the FTC’s new rule. Consumers deserve to know when they’re reading reviews on a site that’s controlled by a company with a vested interest in promoting certain products over others.
Review Suppression
Another tactic that has drawn the FTC’s ire is the practice of review suppression. This involves businesses taking steps to remove or hide negative reviews, often through unfounded legal threats, intimidation, or other coercive means. Some companies may even misrepresent the reviews on their website by only displaying the positive ones, creating a false sense of product satisfaction.
The new rule specifically prohibits businesses from using these tactics to suppress honest, negative feedback. It also bars companies from misrepresenting the overall sentiment of the reviews on their site, ensuring that consumers get a true and accurate picture of what others are saying about a product.
Misuse of Fake Social Media Indicators
Lastly, the FTC’s rule addresses the misuse of social media indicators—like followers, likes, and views—that are artificially inflated through bots or hijacked accounts. In today’s social media-driven world, these metrics are often seen as a sign of a brand’s popularity or credibility. However, when these indicators are fake, they can mislead consumers into thinking a product or service is more popular or influential than it really is.
The new rule prohibits the sale or purchase of these fake indicators when the buyer knew or should have known that they were not genuine. This move is intended to clean up the digital landscape and ensure that social media influence is earned, not bought.
Implications for Businesses and Consumers
The introduction of this new rule marks a significant shift in the way online reviews and testimonials will be regulated. For businesses, the message is clear: deceptive practices will no longer be tolerated, and those who engage in them could face serious consequences, including civil penalties. The rule is designed to deter businesses from engaging in these unethical practices by making the cost of non-compliance higher than the perceived benefits of cutting corners.
For consumers, this rule is a win. It means that the reviews they rely on to make purchasing decisions are more likely to be genuine, providing a clearer picture of what they can expect from a product or service. The rule also serves as a reminder to consumers to remain vigilant and to question the authenticity of reviews that seem too good to be true.
Looking Ahead: What’s Next?
The new FTC rule will go into effect 60 days after it’s published in the Federal Register, giving businesses a short window to ensure that their practices are in compliance. Moving forward, the FTC is expected to step up its enforcement efforts, making it more important than ever for companies to play by the rules.
So, whether you’re a eCommerce store owner or a savvy shopper, keep an eye on how this new rule plays out—because in the world of online reviews, the stakes just got a whole lot higher.
Scott Sanfilippo began his eCommerce journey in 1994 by co-founding one of the Internet’s first online retailers, TheFerretStore.com, which was acquired by PetCo in 2006. In 2001, he co-founded the eCommerce design and marketing firm Solid Cactus, which was acquired by web.com in 2009. Today, Scott is the General Manager of Your Store Wizards and lives in Delray Beach, FL. Scott can be contacted at scott@yourstorewizards.com.