FTC’s new rule to combat fake reviews starts this fall

Top 3 Key Points:

1. Fake Reviews Ban: The FTC’s new rule prohibits companies from creating or selling fake reviews, including AI-generated ones.
2. Strict Penalties: Violators of the rule may face fines up to $51,744 per infraction.
3. Global Impact: Enforcement challenges remain for global platforms like Amazon.

The Federal Trade Commission (FTC) has finalized a new rule aimed at cracking down on fake reviews, including those generated by AI. This rule, which goes into effect this fall, will allow the FTC to take legal action against companies that engage in deceptive review practices.

The rule addresses a range of fraudulent activities, such as:

• Offering rewards to customers for writing biased reviews.
• Employees or insiders write reviews without disclosing their connection to the company.
• Companies controlling review sites that falsely claim to offer independent opinions.
• Threatening customers to remove negative reviews.
• Buying or selling fake followers or views on social media.

This rule could be particularly significant for online marketplaces like Amazon, where fake reviews are a persistent problem. Although Amazon has implemented AI to identify inauthentic reviews, many fraudulent businesses operate from outside the U.S., making enforcement a global challenge. For instance, in 2022, Amazon acted against thousands of Facebook groups involved in selling fake reviews, and the FTC fined an Amazon seller for manipulating reviews.

FTC Chair Lina Khan emphasized the importance of this rule, stating that fake reviews not only mislead consumers but also undermine honest competition. The finalized rule was unanimously approved and will take effect 60 days after its publication in the federal register. Companies that violate this rule could face fines of up to $51,744 per violation.

This new rule marks a significant step in ensuring that online reviews are trustworthy, protecting consumers, and maintaining fair competition in the marketplace.