New FTC Rule: What the Ban on Fake Reviews Means for Consumers and Businesses

Online reviews are so important in our digital-first world, but it can be frustrating for consumers and businesses alike, when they run up against fake reviews.

If you have spent any time at all looking through Google, Facebook, Amazon, Yelp, Tripadvisor and other sites reviews, you know the suspicious feeling you get when you start to spot some of the following:

• The beach vacation hotel that has 10 reviews in a row that basically mention how "wild and crazy" the pool activity coordinator is … and not much else!
• The local Mexican restaurant that has an amazing rating, but more than half the reviews all mention the “flan to die for” and in those exact words! And when you stop by the restaurant, there's more flies than customers at the tables!

After time, you can spot the fake reviews for many reasons from their timing (rapid fire reviews all posted in a short time frame), their strange spelling or poor grammar (a sign it may have come from a “review farm”), and a reviewer with only 1 or 2 reviews and no personal photos or information.

“Fake reviews are a blight upon the online community because not only are they misleading, they’re also everywhere,” says the company Reputation. “Knowing how to tell if reviews are fake is essential because they can also be used to destroy the competition. Businesses may falsely bolster their reputations while slaying legitimate businesses in the online reviews arena. It’s one of the most sinister sides of business, and there are countless tales of honest business owners losing everything due to fake reviews.”

Federal Rule Banning Fake Online Reviews Took Effect in October

The good news is there may be a little help on the way in combating fake reviews as a federal rule banning fake online reviews took effect in October 2024.

“The Federal Trade Commission issued the rule in August banning the sale or purchase of online reviews. The rule, which went into effect Monday, allows the agency to seek civil penalties against those who knowingly violate it,” reported ABC News on Oct. 21.

The final rule announced in August followed an advance notice of proposed rulemaking and a notice of proposed rulemaking announced in November 2022 and June 2023, respectively. The FTC also held an informal hearing on the proposed rule in February 2024. In response to public comments, the Commission made numerous clarifications and adjustments to its previous proposal.

“Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors,” said FTC Chair Lina M. Khan. “By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive.”

What the New Fake Review Rules Prohibit

Here is what businesses need to know about the new federal rules on fake reviews. They specifically prohibit:

• Fake or False Consumer Reviews, Consumer Testimonials, and Celebrity Testimonials: The final rule addresses reviews and testimonials that misrepresent that they are by someone who does not exist, such as AI-generated fake reviews, or who did not have actual experience with the business or its products or services, or that misrepresent the experience of the person giving it. It prohibits businesses from creating or selling such reviews or testimonials. It also prohibits them from buying such reviews, procuring them from company insiders, or disseminating such testimonials, when the business knew or should have known that the reviews or testimonials were fake or false.
• Buying Positive or Negative Reviews: The final rule prohibits businesses from providing compensation or other incentives conditioned on the writing of consumer reviews expressing a particular sentiment, either positive or negative. It clarifies that the conditional nature of the offer of compensation or incentive may be expressly or implicitly conveyed.
• Insider Reviews and Consumer Testimonials: The final rule prohibits certain reviews and testimonials written by company insiders that fail to clearly and conspicuously disclose the giver’s material connection to the business. It prohibits such reviews and testimonials given by officers or managers. It also prohibits a business from disseminating such a testimonial that the business should have known was by an officer, manager, employee, or agent. Finally, it imposes requirements when officers or managers solicit consumer reviews from their own immediate relatives or from employees or agents – or when they tell employees or agents to solicit reviews from relatives and such solicitations result in reviews by immediate relatives of the employees or agents.
• Company-Controlled Review Websites: The final rule prohibits a business from misrepresenting that a website or entity it controls provides independent reviews or opinions about a category of products or services that includes its own products or services.
• Review Suppression: The final rule prohibits a business from using unfounded or groundless legal threats, physical threats, intimidation, or certain false public accusations to prevent or remove a negative consumer review. The final rule also bars a business from misrepresenting that the reviews on a review portion of its website represent all or most of the reviews submitted when reviews have been suppressed based upon their ratings or negative sentiment.
• Misuse of Fake Social Media Indicators: The final rule prohibits anyone from selling or buying fake indicators of social media influence, such as followers or views generated by a bot or hijacked account. This prohibition is limited to situations in which the buyer knew or should have known that the indicators were fake and misrepresent the buyer’s influence or importance for a commercial purpose.

Why Fake Reviews Matter to Consumers and Businesses

Fake Reviews matter because it is almost impossible to overestimate the importance these reviews play in consumer decisions and the bottom line, especially for small businesses.

“Online reviews and testimonials are a key way that small businesses can attract new customers and boost sales of products,” reported the Associated Press. “But fake reviews and testimonials have been a persistent problem for small businesses, many of whom rely on recommendations for business. Fake reviews can make it harder for people to trust what they read online and ultimately hurt businesses. In addition, small businesses can find themselves targeted by bad actors who leave negative reviews.”

The folks at WiserNotify rounded up these statistics on the importance of reviews:

• 95 percent of consumers read online reviews.
• 81 percent of people check Google reviews before visiting a business.
• 85 percent of users trust online reviews as much as personal recommendations.
• Studies show that a one-star increase can lead to a 5 to 9 percent rise in revenue.
• 30 percent of online reviews are fake!

That last state may be hard to comprehend but WiserNotify’s deep dive on fake reviews found that on Amazon 43 percent of reviews on top products were fake.

“Many reviews found online are fake, posing significant challenges for consumers trying to identify genuine feedback and for businesses striving to maintain trust and integrity,” said WiserNotify.

Let's hope that the FCC’s new rule will start to make a dent in the fake review culture, but the reality is we have a long, long way to go before we can start trusting most of the things we read online.

Oh, and that flan, it wasn’t that good … go figure!