You are thinking about buying a new laptop, or you want to try a new restaurant that’s been open a few months, so what do you do first? You check the online reviews, of course. Most consumers rely heavily on online reviews to make purchases and try new services, but how can you be sure the reviews you see are actually written by a real customer? And wouldn’t you want to know if the customer was paid or given free product in exchange for that review? The proliferation of online shopping platforms and social media have increased opportunities for consumers to find information about potential products they want to buy. However, it also makes it easier for companies to manipulate reviews or endorsements to make their products look better or their competitors look worse. Luckily, the Federal Trade Commission (FTC) is currently prioritizing this issue, through regulatory channels, enforcement actions, and litigation.
For background, when an advertiser uses an endorsement or review in connection with its products or services, there are guidelines to follow set forth by the FTC (the Guides Concerning the Use of Endorsements and Testimonials in Advertising). The FTC Endorsement Guides emphasize the basic principle of truth in advertising: that endorsements must be honest and not misleading. The Guides further state that the endorsement must reflect the true opinion of the reviewer, who must actually have experience with the product or service, and that a material connection between the reviewer and the company needs to be disclosed, if that fact would matter to the purchaser. While the Guides are not regulations, and have no civil penalties for a violation, the FTC can investigate whether the practices are deceptive or unfair under the FTC Act if an advertiser does not follow the Guides.
As currently written, the Guides lack specificity on certain practices surrounding reviews. Although the Guides have not been updated since 2009, there are changes coming in this area. The FTC has proposed revisions to the Guides to specifically address misleading review practices, among other proposals. The proposed updates reflect technological changes to advertising and social media, and have stricter guidelines on posting fake positive reviews and burying negative reviews. As outlined, the revised Guides would clarify that businesses are responsible for how consumer reviews are presented, and moreover, that companies may be liable if they moderate consumer reviews in a way that emphasizes positive reviews while discouraging negative reviews. Some proposed examples of problematic conduct include deleting negative reviews, encouraging positive reviews, and buying followers or fake reviews to boost interest. These proposed revisions to the FTC Endorsement Guides were published in the Federal Register in July 2022, and the period for public comment is now closed. The updated Guides will hopefully be published sometime in 2023.
In addition to pending changes to the FTC Endorsement Guides, businesses should note that the FTC is also exploring the possibility of additional enforcement tools to combat bad actors in this area. Recently, the FTC announced that it is exploring a potential rule to combat deceptive review practices, such as suppressing negative reviews, buying followers, using fake reviews, and paying for positive reviews. Such a rule would likely have stiff penalties for violation and, therefore, companies should stay attentive to any activity in this area.
On the enforcement side, the FTC has been cracking down on reviews and endorsements it considers to be deceptive. For example, in August 2022, the FTC filed suit against a real estate listing platform and its owners, alleging that they misled customers when paying for fake reviews and charging customers to access fake listings. Relatedly, the FTC and several states are investigating the individual who allegedly sold the real estate platform thousands of fake reviews. Moreover, in January 2022, the FTC required an online fashion retailer to pay over $4 million for suppressing negative customer reviews from being posted to its website. These are just a few examples of the FTC’s focus on activity in this space.
Overall, it is clear the FTC is increasing scrutiny and enforcement related to social media and online advertising and reviews. Companies should work with their legal counsel to ensure that their advertising and social media marketing is consistent with best practices and the FTC Endorsement Guides, as currently written and with the proposed changes in mind. If your company needs assistance with this review, please contact the author or any member of the Faegre Drinker TCAM team.
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