By: Pierre Zarokian
Federal Trade Commission Chair Lina Khan announced on Oct. 21 that the agency was implementing a ban on fake online reviews, with $51,744 per violation penalties.
On social media platform X, Khan urged followers to report the proscribed practices at https://reportfraud.ftc.gov. “Fake reviews not only waste people’s time and money but also pollute the marketplace and divert business away from honest competitors,” she said in announcing the rule this August.
The Public Interest Research Group reports that studies indicate a significant portion of online reviews are deceptive in some way, while online reviews play a crucial role in informing most online shoppers’ purchasing decisions.
In its final rule, the FTC states that the maximum penalty amount for each violation is $51,744, but the courts must apply the factors under the FTC Act to determine the penalties.
The final rule, among other things, prohibits deceptive consumer reviews, purchasing positive or negative reviews, and suppressing negative reviews.
The new rule also forbids buying or selling social media followers and views from bots or service providers.
“This prohibition applies only where the purchaser actually knew or should have known that the representations were false and that they would induce others for a commercial purpose,” FTC said.
Online Reputation Management specialist Pierre Zarokian, CEO of Reputation Stars, welcomed the news. “I always get asked if I can offer fake reviews. I tell people it is unethical to do so and instead, they should try to improve their businesses to reduce the negative reviews in the first place. I am glad the FTC will fine people now, and I think most people are seriously gonna reconsider getting fake reviews.”
In August, Yelp—one of the high-profile online review hosting platforms—celebrated the rule in a statement. “We believe the enforcement of this new rule will improve the review landscape for consumers and help level the playing field for businesses,” said Yelp general counsel Aaron Schur.
While some cheered the new rule, others said it doesn’t do enough and it exempts third-party review hosting sites like Yelp from liabilities. In its final rule, the FTC warned that its decision not to highlight review hosting platforms “should not be taken to signal that third-party platforms do not bear significant responsibility for combatting fake reviews.” Earlier this month, Amazon said it “invests significant resources to proactively stop fake reviews before being seen by a customer.” It said, “In 2023, Amazon pursued legal action against more than 150 bad actors attempting to engage in review abuse across the U.S., China, and Europe.”
Yelp said last year that its automated recommendation software “helps surface the most helpful and reliable content to consumers.”. Google similarly said this year that its “reviews undergo rigorous scrutiny by our moderation systems before they’re published” and that its evolving machine learning algorithms led to it blocking or removing “over 170 million policy-violating reviews from 2023.” It’s not obvious how much other businesses will have to change their practice to become compliant with the new rule from FTC. Holland and Knight, one of the nation’s large law firms in terms of revenue, said in August that the FTC rule meant “businesses must now develop and enforce stringent policies for handling consumer reviews, while also ensuring that third-party advertising and marketing partners are well-trained and monitored under the new FTC regulations.”. The FTC, meanwhile, estimated the cost of compliance to be minimal but said that if businesses engaged in a more complicated attempt at ensuring compliance, the costs in the United States could reach $871.98 million for 2024.
Published By: Aize Perez
