Federal Trade Commission chair Lina Khan is accused of abuse of power and bias against big tech as the last remaining Republican resigns from the FTC
FTC Chair Lina Khan said fake consumer reviews are polluting the marketplace. AFP

KEY POINTS

  • The rule bans marketers from using 'certain insiders' to come up with testimonials without clarifying their relationships
  • Fake celebrity testimonials are also prohibited, as well as the 'suppression' of negative customer reviews
  • FTC Chair Lina Khan said fake reviews are a waste of people's time

The Federal Trade Commission on Wednesday announced that it has finalized a rule that bans marketers from using fake reviews and other practices that mislead consumers about products and services offered.

Businesses are prohibited from selling or purchasing fake consumer reviews or testimonials, the final rule states. Marketers are also banned from buying both positive and negative reviews, and they are prohibited from "creating a company-controlled review website that falsely purports to provide independent reviews."

Among several other banned practices, the FTC's final rule states that businesses cannot make use of "certain insiders" to create consumer reviews or testimonials without disclosing their relationships clearly.

Regarding negative reviews on products that consumers may find defective or ineffective, marketers are also banned from engaging in "suppression practices" to manipulate negative comments from real consumers.

The rule puts the influencer industry in the spotlight as it also bars businesses from using fake celebrity testimonials, citing an "in-depth Better Business Bureau investigative study that examined fake celebrity endorsements." The FTC also cited an FTC consumer alert regarding fake Shark Tank celebrity testimonials.

Notably, the FTC prohibits the use of "generative artificial intelligence (AI) tools" to come up with product or service reviews. The rule further reiterates that fines may be issued for each violation, meaning e-commerce websites with thousands of reviews can easily see penalties add up if their reviews are determined to have violated the rule.

The rule will take effect 60 days after its publication in the Federal Register.

"Fake reviews not only waste people's time and money, but also pollute the marketplace and divert business away from honest competitors," FTC Chair Lina M. Khan said in a statement.

"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," she added.

Read more