FTC explores rule to tackle fake reviews on e-commerce platforms

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The Federal Trade Commission (FTC) is investigating a potential rule to combat deceptive or unfair review and approval practices.

This rule could address practices such as posting fake reviews, deleting negative reviews, and paying for positive reviews.

“Misleading and manipulated reviews and recommendations mislead consumers looking for genuine feedback on a product or service and undermine honest businesses,” the agency said in a statement.

Research has repeatedly shown that consumers trust reviews when purchasing a product or service, and fake reviews drive sales of poor quality products or services.

Yet buyers are also wary of fake reviews. A A Trustpilot study found that 47% of consumers think companies use fake online reviews to differentiate their products from competitors.

Unfortunately, the explosive growth of online marketplaces and platforms has made it easier for some companies and sellers to manufacture and use fake reviews to drive sales.

The FTC said this makes it extremely difficult for anyone, from consumers to platforms, to tell real testimonials from fake ones, giving bad actors every incentive to use this already illegal practice.

“Businesses should know by now that fake reviews are illegal, but the scourge persists,” said Samuel Levine, director of the FTC’s Consumer Protection Bureau.

“We are studying whether a rule that would trigger stiff civil penalties for violators would make the market fairer for honest consumers and businesses.”

The problem of fake reviews continues to plague online marketplaces, platforms and watchdogs

Marketplaces are aware of this problem, but the problem is so widespread that the platform’s rules are difficult to enforce.

Amazon has banned chinese sellers on fake reviews, and just a few days ago the company took legal action in Italy and Spain to shut down fake review brokers.

Earlier this year, Meta (Facebook) filed a lawsuit in California against a business owner offering to boost Facebook customer feedback scores on the social media platform.

The issue of fake reviews is also being investigated by other government watchdogs.

The UK Competition and Markets Authority (CMA) has previously urged Meta and eBay to crack down on the problemand this year the agency was given the legal power to take criminal action against bad actors in the UK, a CMA process launched in 2021.

How can an FTC rule on fake reviews help US consumers?

FTCs Notice of Proposed Rulemaking (ANPR) invites public comment on the potential harms of deceptive or unfair review practices and whether a rule would help consumers.

ANPR is seeking comments on the costs and benefits of such a rule which would address the following practices:

  • Fake reviews: Opinions and recommendations by people who do not exist; have not used the product or service; or who lie about their experiences.
  • Examine reuse fraud: The diversion or reassignment of opinions published on another product or service.
  • Paid reviews: The practice of businesses or sellers paying for positive reviews of their products or inducing buyers to post negative reviews of a competitor’s products.
  • Insider Opinion: Reviews written by the officer or employees of a company that do not disclose their connection to the company.
  • Deletion of review: Companies may claim that their websites display all reviews submitted by customers, but in fact remove negative reviews. This practice may also include attempting to remove reviews on other platforms by threatening the buyer (the reviewer).
  • Fake review sites: This practice involves a company or seller creating a supposedly independent website or organization to review their own products.
  • Buy followers: This method involves buying or selling followers, followers, or views, as an indicator of social media influence.

The FTC said it cracked down on deceptive review practices and provided guidance to businesses on acceptable practices through the agency. Guides and other public documents.

However, case-by-case enforcement without civil sanction authority may not be enough to stem the rise in misleading reviews.

A Supreme Court decision in AMG Capital Management LLC v FTC in 2021 made it more difficult for the agency to seek monetary relief from consumers under the FTC Act.

This week, FTC Commissioners voted 3-1 to consider a rule change that would clearly define prohibited practices that could strengthen and simplify enforcement by allowing the agency to impose civil penalties.

The FTC said the ANPR will be published in the Federal Register shortly, and the public will have 60 days to submit a comment after the notice is posted.

Additionally, this month the FTC also published a blog post on how to evaluate online reviews offering some basic tips for consumers to help them assess the validity of online reviews of products and services.

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