What rule has the FTC brought in?
In a significant move to protect consumers and promote fair competition, the Federal Trade Commission (FTC) has implemented a new ruling that directly targets fake reviews and deceptive testimonials. This landmark decision has far-reaching implications for businesses of all sizes, from small online retailers to tech giants like Amazon.
The problem with fake reviews
The scale of fake reviews is staggering. Industry research indicates that 30%–40% of online reviews are not genuine, and consumer confidence is at an all-time low.
In our 2022 consumer survey, only 8% of people felt confident they could identify a false review. These fabricated reviews do more than just mislead consumers – they:
- Provide inaccurate information about product quality
- Artificially manipulate product ratings
- Create false perceptions of a product's performance
- Distort fair competition between businesses
What the FTC's new rule covers
Announced in August 2023 and effective from October 2024, the FTC's rule comprehensively addresses deceptive review practices. The regulation prohibits:
- Selling or obtaining fake consumer reviews
- Repurposing reviews for different products (review hijacking)
- Buying positive or negative reviews
- Publishing undisclosed insider reviews
- Creating company-controlled review websites
- Illegally suppressing negative reviews
- Selling fake social media indicators
The FTC's ruling also acknowledges the growing role of AI in review generation. The inclusion of AI-enabled platforms in recent enforcement actions signals that the agency is closely monitoring technological developments in the review ecosystem.
Businesses can face substantial penalties of up to $51,744 per violation. Recent enforcement actions demonstrate the agency's commitment, including:
- A proposed order against Roomster in August 2023 for deceptive reviews
- An order against AI-enabled review platform Sitejabber in November 2024
Key takeaways for businesses
To comply with the new ruling, businesses must:
- Avoid encouraging employees to write company reviews
- Refrain from leaving negative reviews about competitors
- Be transparent about review sources
- Stop making false claims about review independence
- Discontinue paid review generation
- Eliminate financial incentives for reviews
- Allow genuine negative feedback
Building trust through authentic feedback
Contrary to what some might believe, negative reviews aren't inherently bad. The key is to respond constructively and use feedback as a tool for growth. They provide an opportunity to build consumer trust by demonstrating transparency and a commitment to improvement.
Why does this matter?
Reviews have become the cornerstone of modern shopping experiences. An incredible 93% of consumers consult reviews before making a purchase. Ensuring these reviews are genuine isn't just a regulatory requirement – it's a critical strategy for building consumer trust and driving sales.
The solution: verified review platforms
Companies like Feefo offer a compelling solution for businesses navigating these new regulations. Such platforms provide:
- 100% verified reviews from genuine customers
- Automated review invitation processes
- Transparent review pages
- Opportunities for businesses to respond to feedback
- Advanced analytics for understanding customer sentiment
Feefo's commitment to authentic feedback
As a pioneer in verified customer feedback, Feefo wholeheartedly welcomes the FTC's ruling. Our platform has long been dedicated to collecting 100% verified reviews from genuine customers, supporting over 6,500 brands in creating transparent and loyal relationships.
We've consistently believed that authentic customer insights are the most valuable currency for businesses. By supporting only genuine, confirmed customer experiences, we've been ahead of the curve in combating fake reviews.
The FTC's new ruling validates our approach and reinforces our commitment to providing businesses with meaningful, trustworthy feedback that drives real improvement and builds consumer confidence.
Looking ahead
As e-commerce continues to evolve and AI technologies advance, we can expect the FTC to remain vigilant. Businesses that prioritize authenticity and transparency will not only comply with regulations but also differentiate themselves in an increasingly competitive marketplace.
Regulation is either already in place, or being rolled out across the globe, to ensure consumers can fully trust the reviews that have become so integral to a validating a purchase decision.
Want to learn more?
Interested in understanding how to effectively manage your online reviews while staying compliant? We’d be delighted to have a chat with you.
