FTC introduces new rule to eliminate fake online reviews

In a significant development for consumers and businesses alike, the Federal Trade Commission (FTC) has introduced a robust rule to eliminate fake online reviews that have long plagued the digital marketplace. This new regulation aims to protect consumers from misleading information and support honest businesses affected by fraudulent review practices.

In recent years, the authenticity of online reviews has been a pressing concern, with an estimated 40% of reviews believed to be fake. The FTC’s comprehensive rule addresses various forms of review manipulation. It prohibits the creation, sale, or purchase of false reviews, specifically targeting those generated by artificial intelligence tools. The rule also regulates companies that incentivise positive reviews or punish customers for negative feedback.

Central to this regulatory framework is the mandate for transparency in affiliations. Reviews written by company insiders must clearly disclose their connection to the business. This measure is designed to address deceptive practices such as paid or incentivised reviews, fictitious endorsements on supposedly independent websites, insider reviews, suppression of negative feedback, and the purchasing of social media influence.

The growing use of AI technologies to generate fake reviews has added complexity to the issue. The FTC has recognized this trend, noting that AI tools can produce large volumes of realistic yet false reviews quickly and inexpensively. The new rule explicitly covers AI-generated reviews, reinforcing the FTC’s commitment to maintaining the integrity of online information.

Specific prohibitions under the new rule include the writing, creation, or sale of false consumer reviews, testimonials, and celebrity endorsements. Furthermore, the regulation forbids any business from engaging in these activities if aware that the reviews materially misrepresent the company or its products.

The rule also prevents business insiders, such as officers, managers, their relatives, and employees, from crafting reviews about their own company or its offerings without a clear and conspicuous disclosure of their association. Moreover, businesses are prohibited from presenting websites as independent review platforms if the site is owned, operated, or controlled by the business itself.

Further stipulations restrict the sale or dissemination of fake social media influence indicators for commercial purposes. Any purchase or procurement of such indicators for business objectives is also forbidden.

To enforce this new rule, the FTC can file lawsuits against alleged violators directly in federal court. Those found guilty can face substantial civil penalties, with fines reaching up to $51,744 per violation.

The finalised rule is anticipated to take effect 60 days following its publication in the Federal Register. This timeframe allows businesses to adapt their practices to comply with the new requirements.

Source: Noah Wire Services