FTC proposal would spank influencers for posting fake reviews

By Nick Heyman On Jul 2, 2023

How many of you turn to the internet to help you decide which dentist to call, where to go for dinner, or even decide which car to buy? Maybe this won’t come as quite a shock to you considering how everyone is cynical these days, but some influencers and social media reviewers are not always honest. And some influencers and social media stars are not only paid to promote what they say are the good qualities of a product, they are also paid to knock the competition’s product.

The Federal Trade Commission (FTC), the U.S. agency involved in policing these things, has published a list of proposed rules and fines (via The Register) titled “Rule on the Use of Consumer Reviews and Testimonials,” which the agency says “would prohibit certain specified unfair or deceptive acts or practices involving consumer reviews or testimonials.” If the rules are passed, those posting fake reviews would face a fine of up to $50,120 each time a fake review was viewed by a consumer.

The FTC says that 4% of reviews are fake

Fake reviews are those that hold themselves out as being independent of the company making or selling a product in an attempt to persuade consumers to buy the product. Instead, these reviews are posted by the company itself or someone working on behalf of the company. This would be considered a misleading advertisement and subject to a fine.

Review found on Google Maps. In 2021, Google removed 95 million reviews on Maps for violating its policies

The FTC issued a statement in which it said, “Companies that use deceptive endorsements and reviews inflict an injurious double whammy. They harm consumers with misleading tactics that subvert their choices at check-out. And they take business away from honest competitors that work hard to comply with the law.” The FTC says that 4% of reviews are fake although a third-party firm called Fakespot concluded two years ago that the number was higher for Walmart.com (37.6%) and Amazon.com (27.6%).

Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said,” Our proposed rule on fake reviews shows that we’re using all available means to attack deceptive advertising in the digital age. The rule would trigger civil penalties for violators and should help level the playing field for honest companies.”

The proposed rule changes include:

Selling or obtaining fake consumer reviews and testimonials.
Review hijacking, which is repurposing a legit review or rating.
Buying positive or negative reviews.
Undisclosed insider reviews – no more “it’s great!” from chief marketing officers.
Company-controlled review websites.
Illegal review suppression – threatening reviewers or hiding “fly-in-soup” stories.
Selling fake social media indicators – likes, stars, follower counts, and so on.

One site that is known for offering crowd-sourced reviews is Yelp. The FTC documentation notes that Yelp supports civil penalties for “businesses and individuals who author, arrange
for or pay for deceptive reviews.” It also said that its own studies indicate that 83% of consumers trust online reviews about local businesses and 71% would no longer do business with a company that paid for fake online reviews. Yelp says that it uses a software system to help it detect fake reviews and it recently flagged 19% of reviews as “not recommended.”

The FTC says that it can’t police every social media platform

Yelp says that there are groups found on certain social media platforms that make it easy to buy, sell, or exchange fake reviews. Besides Yelp, Google is another company supporting the FTC’s proposed rules. The company says that part of the problem is that businesses have too much incentive to purchase positive reviews. Last year, Google removed millions of reviews from the Play Store. In 2021, Google removed more than 95 million out of 1 billion reviews posted on Google Maps for violating its policies.

The FTC admits that it won’t be up to the agency to scour every social media site looking for infractions committed by individuals. Instead, the agency’s focus will be on advertisers and their agencies. Despite this, the FTC does say, “action against an individual endorser might be appropriate in certain circumstances – for example, if the endorser hasn’t made required disclosures despite warnings.”

So the next time you decide on ordering a burger to be delivered from some no-name joint because of a five-star review on social media, you might want to make sure that you have some Imodium on hand.

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