FTC Exploring Rule To Combat Fake Reviews on Online Commerce Platforms
The Federal Trade Commission (FTC) is exploring a potential rule to combat deceptive or unfair review and endorsement practices.
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This rule could address such practices as posting fake reviews, suppressing negative reviews, and paying for positive reviews.
“Deceptive and manipulated reviews and endorsements cheat consumers looking for real feedback on a product or service and undercut honest businesses,” the agency said in a statement.
Research has shown over and over again that consumers rely on reviews when shopping for a product or service, and fake reviews drive sales of low-quality products or services.
Yet, shoppers are also leery of fake reviews. A study from Trustpilot found that 47 percent of consumers believe companies use fake reviews online to make their products stand apart from competitors.
Unfortunately, the explosive growth of online marketplaces and platforms has made it easier for some companies and sellers to fabricate and use fake reviews to drive sales.
The FTC said this makes it extremely difficult for anyone, from consumers to platforms, to distinguish real testimonials from fake ones, giving bad actors all the incentives to use this already illegal practice.
“Companies should know by now that fake reviews are illegal, but this scourge persists,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.
“We’re exploring whether a rule that would trigger stiff civil penalties for violators would make the market fairer for consumers and honest businesses.”
Fake Review Problem Keeps Vexing Online Marketplaces, Platforms, and Watchdogs
Marketplaces are aware of this problem, but the problem is so widespread that platform rules are difficult to enforce.
Amazon has banned Chinese sellers over 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 the owner of a company offering to boost Facebook Customer Feedback Scores on the social media platform.
The problem of fake reviews is also being investigated by other government watchdogs.
The UK’s Competition and Markets Authority (CMA) previously urged Meta and eBay to crack down on the problem, and this year, the agency received the legal power to take criminal action against bad actors in the UK, a process the CMA started in 2021.
How Can an FTC Rule on Fake Reviews Help US Consumers?
The FTC’s Advance Notice of Proposed Rulemaking (ANPR) seeks public comment on the potential harms from deceptive or unfair review practices and whether a rule would help consumers.
The ANPR seeks comment on the costs and benefits of such a rule that would address the following practices:
- Fake reviews: Reviews and endorsements by people who do not exist; have not used the product or service; or who lie about their experiences.
- Review reuse fraud: The hijacking or repurposing of reviews posted about another product or service.
- Paid reviews: The practice by companies or sellers to pay for positive reviews about their products or induce buyers to post negative reviews about a competitor’s products.
- Insider reviews: Reviews written by a company’s executive or employees that do not disclose their connections to the business.
- Review suppression: Companies may claim their websites display all reviews submitted by customers but actually suppress negative reviews. This practice also may include an attempt to suppress reviews on other platforms by threatening the buyer (reviewer).
- Fake review websites: This practice involves a company or seller setting up a supposedly independent website or organization to review its own products.
- Buying followers: This method involves buying or selling followers, subscribers, or views, as an indicator of social media influence.
The FTC said it has been cracking down on deceptive reviews practices and has provided guidance to businesses on acceptable practices through the agency’s Endorsements Guides and other public materials.
However, case-by-case enforcement without civil penalty authority may not be sufficient to stem the rise of deceptive reviews.
A decision by the Supreme Court in AMG Capital Management LLC v. FTC in 2021 has made it more difficult for the agency to seek monetary relief for consumers under the FTC Act.
This week, FTC Commissioners voted 3-1 to consider a rule change that would clearly outline prohibited practices that could strengthen and simplify enforcement by enabling 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 published.
In addition, this month, the FTC also posted a blog post on how to evaluate online reviews offering some fundamental tips for consumers to help them consider the validity of online reviews about products and services.
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Richard is co-founder of eSeller365. He has over 17 years of experience on eBay which includes tens of thousands of sales to buyers in over 100 countries and even has experience with eBay’s VeRO program enforcing intellectual property rights for a former employer. And for about two years Richard sold products on Amazon using Amazon FBA in the US.
To “relax” from the daily business grind, for a few weekends a year, he also works for IMSA as a professional race official.