FTC Ruling on the Use of Consumer Reviews and Testimonials 

QUICK SUMMARY:

• – The FTC passed a new law on 8/14/204 on the use of consumer reviews and testimonials. It goes into effect on 10/21/2024.

– The 163-page document includes extensive contextual detail, considerations from public commentary and some review-related topics that did not make it into the final ruling.

– The new law prohibits selling or purchasing fake consumer reviews or testimonials, buying positive or negative reviews, certain insiders creating reviews without a clear disclosure of connection, creating company-controlled review sites falsely claiming to provide independent reviews, some review suppression practices, selling or purchasing fake social media indicators and more.

NOTICE: This article does not attempt to provide legal advice, nor should it be used as legal advice. This article is provided for informational purposes only. Reference the full FTC ruling here: Trade Regulation Rule on the Use of Consumer Reviews and Testimonials. A summary article published by the FTC is available here: Federal Trade Commission Announces Final Rule Banning Fake Reviews and Testimonials

 

THE DEEPER LOOK:

If this new law feels like a titlewave that came out of nowhere, you’re right about the titlewave part. This significant piece of legislation has the potential to dramatically enhance the reliability of reviews for consumers and hold bad actors accountable for a wider breadth of specific actions.

 

However, the FTC didn’t launch this out of nowhere. Back in November 2022, the FTC announced an advanced notice about exploring new laws to combat deceptive reviews. Then in June of 2023, they published an additional statement of proposed rulemaking. Along the way they accepted comments from the public and received input from review platforms, trade associations, consumer advocacy organizations, academic researchers, individual consumers and more. Most comments were in favor of the legislation.

 

If you don’t have time to read the 163-page document, here are the takeaways that impressed us the most.

 

Why did the Federal Trade Commision publish a new law about reviews?

It is well known that fake reviews and deceptive review practices are prevalent in the marketplace. The FTC conducted a thorough evaluation prior to exploring the creation of new laws. In this evaluation, they considered FTC, state and private legal cases, statistics from review platforms, academic studies, consumer surveys and more. They also researched “consumer review rings” facilitating buying, selling and exchange of fake reviews as well as the use of AI for creating reviews and the experience of other regulating bodies in other countries.

 

Ultimately, they determined that $341.05 billion of $1.461 trillion in estimated sales of goods and services are impacted by review manipulation. Approximately $111.9 billion of that impact is in the e-commerce sector alone.

 

They believe the new legislation will allow them to substantially improve their ability to combat specific unfair and deceptive practices that involve consumer reviews and/or testimonials. The document also lists the law will “help the vast majority of American consumers who rely on such reviews and testimonials to make better-informed purchase decisions.”

 

Although this law “contains no reporting or recordkeeping requirements”, it is in your best interest to understand what is allowable and ensure your operations are compliant.

 

What was approved in the final ruling and how could it affect your review management efforts?

Section-by-section summaries

 

• 465.2 Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials.

Essentially, businesses cannot do the following 3 things:

 

• Write, create, or sell a consumer review 
• Purchase a consumer review, disseminate or cause the dissemination of a consumer review
• Procure a consumer review from its officers, managers, employees, or agents, or any of their immediate relatives,

 

…About the business or for it’s products or services, when the review materially misrepresents, expressly or by implication: 

 

• that the reviewer or testimonialist exists;  (aka the review has to be from a real person)

 

• that the reviewer or testimonialist used or otherwise had experience with the product, service, or business that is the subject of the review or testimonial (aka, the reviewer must have had a real experience with the company, product or service)

 

• the reviewer’s experience with the product, service, or business that is the subject of the review or testimonial. (aka, the reviewer’s experience can not be misrepresented in ways like summarizing or misquoting)

 

• 465.4 Buying Positive or Negative Consumer Reviews. 

Businesses cannot provide compensation or other incentives in exchange for, or conditioned expressly or by implication on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative, regarding the product, service, or business that is the subject of the review.

The key here is the phrase “expressing a particular sentiment”. Keep reading and we’ll answer how it is possible to legally purchase a consumer review.

The FTC defines “Purchase a consumer review” as: to provide something of value, such as money, gift certificates, products, services, discounts, coupons, contest entries, or another review, in exchange for a consumer review.

Looking into this further, we found a seemingly new disclaimer tag on Walmart.com reviews, syndicated from the review provider Home Tester Club. Let’s evaluate it as an example.

Both a positive and a negative review have a disclosure tag, informing consumers both of these reviews are “purchased reviews”. Is that enough? Likely not.

It is possible that these disclaimer tags will not be sufficient for the FTC’s new legislation for the following reasons:

• Is a labeled disclosure at the bottom of a review “easily noticeable (i.e., difficult to miss)” as the FTC outlines? Perhaps not. If it were at the top of the review, that would be better.
• The FTC also states: “A disclosure is not clear and conspicuous if a consumer must take any action, such as clicking on a hyperlink or hovering over an icon, to see it.”  Only when you click on the little “i” icon does this more detailed disclosure appear. Clearly this is not enough to be considered “clear and conspicuous” by the FTC.

• Lastly, Home Tester Club states in this pop-up message that “incentives are not conditions on the provision of positive reviews”. Although that may feel good, the FTC specifically states that purchased reviews “expressing a particular sentiment” (meaning positive or negative) are not allowable. Why? Just provisioning positive reviews means you could still require negative sentiment reviews of competitor products. This is a specific element of review manipulation that the FTC is fighting and will be able to prosecute.

For a complete list of all requirements for your disclaimers to be FTC-compliant, reference pages 154-155 of the FTC’s Trade Regulation Rule on the Use of Consumer Reviews and Testimonials.

• 465.5 Insider Consumer Reviews and Consumer Testimonials. 

• Officers and managers of businesses cannot create consumer reviews of the business, it’s products or services without a clear and conspicuous disclosure of the material relationship to the business…unless:
  • The review from an officer or manager comes from a generalized solicitation to purchasers (aka, an automated review request that goes to all customers, one of which goes to an officer or manager who leaves a review unsolicited from the business.)
  • The business merely engages in consumer review hosting.
• A business cannot disseminate (aka, use in advertising) a review from an insider (officer, manager, employee or agent) without a clear and conspicuous disclosure of the material relationship to the business.
• Officers and managers of a business cannot solicit or demand consumer reviews about the business, it’s products or services of immediate relatives, employees/agents or solicit or demand that employees/agents seek such reviews from their relatives when:
  • The reviews created do not have a disclosure of the reviewer’s material relationship to the business, and
    • The officer or manager:
      • Encouraged the prospective reviewer to omit the disclosure
      • Did not instruct the prospective reviewers to disclose their relationship to the business.
      • Knew or should have known that such a review appeared without a disclosure and failed to take remedial steps.

 

Definitions to consider from the FTC:

Officers include owners, executives, and managing members of a business. 

 

Manager means an employee of a business who supervises other employees or agents and who either holds the title of a “manager” or otherwise serves in a managerial role.

 

Immediate Relative means a spouse, parent, child, or sibling. 

 

Clear and conspicuous means that a required disclosure is easily noticeable (i.e., difficult to miss) and easily understandable by ordinary consumers. 

• NOTE there are several additional and specific requirements about what is “clear and conspicuous” for different media applications that should be considered in detail.

 

• 465.6 Company-Controlled Review Websites or Entities. 

Essentially, a business cannot operate an independent review website or platform if they sell products and services that are being compared on the platform.

 

• 465.7 Review Suppression. 

• Essentially, businesses and individuals cannot use unfounded legal threats, physical threats, intimidation or a public false accusation in response to a consumer review in an attempt to prevent a review from being created or cause a review to be removed.
• A business claims most or all of submitted reviews on a website/platform when reviews are being suppressed (i.e. not displayable) based on the rating or negative sentiment.
  • There are some caveats here. If the business moderates all reviews equally regardless of sentiment, reviews are not considered suppressed if they are withheld for the below criteria 

 

• The review contains:
  • trade secrets or privileged or confidential commercial or financial information
  • defamatory, harassing, abusive, obscene, vulgar, or sexually explicit content
  • the personal information or likeness of another individual
  • content that is discriminatory with respect to race, gender, sexuality, ethnicity, or another intrinsic characteristic
  • content that is clearly false or misleading;
• the seller reasonably believes the review is fake; or 
• the review is wholly unrelated to the products or services offered by or 
• available at the website or platform.

 

Realize that these reasons for allowable suppression of reviews must be applied equally to all reviews. Allowing positive reviews with any of these to be posted while withholding reviews with negative sentiment for the same reason could still violate these exceptions.

But wait…Are incentivized reviews still legal?

This is the big question everyone is asking. By definition, an incentivized review is the “Purchase a consumer review”. The answer is yes, there are legal ways to purchase a consumer review, under very specific conditions.

 

1. The business may only request an honest review from the prospective reviewer for the business, product or service in question. (Asking for a specific sentiment, positive or negative would violate the new FTC legislation.)

 

1. The prospective reviewer must have an actual experience to represent of the business, product or service in question. (They can’t just write a review for something they were told about.)

 

1. The business must request that the prospective reviewer include a “clear and conspicuous” disclosure of material connection. (For example, a text review on Amazon would include a statement like “I received a discount in exchange for sharing this review.” at the very top of the review.)

 

1. The business must take “remedial steps” if they find reviews without the “clear and conspicuous” disclosure of material connection.

 

1. If the prospective reviewer is an “insider”, a “clear and conspicuous” disclosure of material connection of that relationship to the business must also be included. See 465.5 above for details.

 

There’s one more big consideration here. Even if you follow all of these conditions with exactness, some review platforms, such as Amazon strictly prohibit the purchase of consumer reviews with any form of incentive. So perhaps your review is legal according to the FTC, but it still breaks the terms of service you legally agreed to as a seller on certain platforms such as Amazon. For this reason it is important to also understand the terms of service for each review platform.

What do you think?

• How will businesses respond to this legislation?
• Will consumer trust in reviews improve? If so, how long will it take?
• Will bad actors persist? If so, how?

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