FTC is cracking down on fake reviews and social media engagement

Ever get the feeling that 5-star review is not all that real? Sounds auto-generated or too similar to the rest of them? Well, the Federal Trade Commission has taken notice too, as consumer complaints pile up in the age of generative AI and e-commerce popularity. New rules are set to combat fake reviews and testimonials, while the agency will be allowed to seek civil penalties against knowing offenders.

Quote: “Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors,” FTC Chair Lina Khan declared. “By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive.”

Besides bans on false reviews and testimonials, prohibitions will be applied to the censorship of negative reviews or compensating third parties for positive feedback. The rules also target deceptive practices surrounding AI-generated reviews or offering incentives to customers in exchange for writing specific comments. Buying or selling fake engagement such as likes, followers, or views on social media will be outlawed as well, and clarity about business connections or ties will be required if engaging in the review of a product.

What it means: Businesses will have to be more careful about how they manage reviews and may need to implement stricter guidelines or disclosures. That could translate into great responsibility for companies like Amazon (NASDAQ:AMZN), Facebook (NASDAQ:META), Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Tripadvisor (NASDAQ:TRIP) and Yelp (NYSE:YELP). While false advertising is already illegal, the new ruling allows the FTC to seek up to $51,744 per violation, but it will ultimately be left to enforcement and the courts, which can impose much lower penalties depending on the case or size of a business.