• by Wendy Davis  @wendyndavis, June 30, 2023

The Federal Trade Commission on Friday proposed a new set of regulations aimed at stamping out phony reviews.

Among other restrictions, the proposed rules broadly would prohibit companies from creating or promoting fake reviews, suppressing negative reviews by consumers, and offering people incentives to write positive posts. 

“The Commission has reason to believe that certain unfair or deceptive practices involving consumer reviews or testimonials are prevalent and that proceeding with this rulemaking is in the public interest,” the FTC wrote Friday in the 100-page notice of proposed rulemaking.

The proposed regulations come one day after the FTC issued updated guidance addressing a similar topic -- online endorsements.

Regulations, unlike guidance, would be legally binding, and would enable the FTC to obtain monetary penalties from first-time violators. While the FTC has previously obtained restitution from first-time violators that allegedly duped consumers, those companies have typically agreed to pay in order to settle allegations.

Attorney Daniel Kaufman, who previously served as deputy director and acting director of the FTC's Bureau of Consumer Protection, suggests that the ability to obtain monetary sanctions is critical to the agency.

Kaufman, now a partner with the law firm Baker Hostetler, says online reviews have been a major issue for the FTC for at least the last several years, but that quantifying the harm caused to consumers is challenging.

“If a bunch of fake reviews were posted, it's difficult to tell how many consumers bought products based on fake reviews,” he says.

Should the rules go through, the FTC will be able to seek up to $50,120 per violation. 

The agency stated Friday that a rule allowing for civil penalties “could strengthen deterrence and FTC enforcement actions.”

In its official notice of the proposal, the FTC pointed to filings by Amazon, Google and other companies that host reviews to support the conclusion that phony reviews are widespread online.

“In 2020, Amazon asserted it proactively stopped more than 200 million suspected fake reviews,” the FTC wrote. “In 2021, according to the company, Google blocked or removed more than 95 million Google Maps reviews for policy violations; in 2022, it removed millions of fake, inorganic, or otherwise malicious Google Play reviews.”

The proposed rules take aim at numerous specific practices that the FTC says currently occur, including offering consumers free merchandise or payment in exchange for five-star reviews, and attempting to suppress bad reviews.

The federal Consumer Review Fairness Act already invalidates standardized contract provisions that restrict consumers' ability to post reviews, but the FTC's proposed rules would go further by prohibit anyone from making “unjustified” threats in an attempt to remove or prevent a bad review.

Another proposed rule would prohibit “review hijacking,” which occurs when sellers make it appears as if a review about a particular item was actually written for a “one item was actually written for a “substantially different” one.

The proposed rules also would prohibited businesses from selling fake followers or views, and from writing or selling phony reviews. 

The FTC will accept comments on the rules for 60 days after they're officially published in the Federal Register.