FTC Issues Final Rule on Reviews and Testimonials

On August 14, the FTC announced a final rule that, according to the FTC, is intended to "combat fake reviews and testimonials." The rule will go into effect on October 21, 2024. This final rule is the culmination of the FTC's issuance of an advance notice of proposed rulemaking (ANPRM) in November 2022 and notice of proposed rulemaking (NPRM) in June 2023. We previously analyzed the draft rule presented in the NPRM.

In response to public comments, the FTC made several substantive changes in the final rule. Many of these changes narrow the rule in helpful ways for businesses concerned about the breadth of the proposed rule, although a few changes arguably expand the rule. We have outlined some of the major differences between the draft and final rules below:

• Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials. This provision of the final rule largely retains the draft rule's prohibitions on writing, creating, selling, purchasing, disseminating, or procuring so-called "fake or false" reviews and testimonials, but clarifies that they are limited to reviews/testimonials that "materially misrepresent" that the reviewer/testimonialist exists, the reviewer/testimonialist has experience with the product, service, or business reviewed, or that the reviewer's/testimonialist's review is based on their experience with the product, service, or business reviewed. Additionally, the final rule introduces two new exceptions to this provision: prohibitions on "purchasing," "disseminating," and "procuring" "fake or false" reviews/testimonials do not apply to "(1) reviews or testimonials that resulted from a business making generalized solicitations to purchasers to post reviews or testimonials about their experiences with the product, service, or business; or (2) reviews that appear on a website or platform as a result of the business merely engaging in consumer review hosting." The FTC further explained that this provision "will not prohibit an online business that hosts reviews from prompting the submission of reviews from the general public or from organizing, moderating, or aggregating them." The final rule also narrows the provision on "procuring" reviews by revising it to only apply to the procuring of reviews from company insiders.
• Consumer Review Repurposing.The proposed rule had sought to prohibit the use or repurposing of consumer reviews written for one product so that they appeared to have been written for a substantially different product, so-called "review hijacking." This section was eliminated from the final rule.
• Buying Positive or Negative Consumer Reviews.The final rule retains the draft rule's prohibition on providing compensation or other incentives in exchange for or conditioned on writing a review with a specific sentiment, and expanded the scope of this provision by specifying that it applies to both express and implied conditions. The FTC's commentary accompanying the rule indicates that statements like, "Tell us how much you loved your visit to John's Steakhouse and get a $5 coupon" would violate this provision.
• Insider Consumer Reviews and Consumer Testimonials. The FTC narrowed the scope of this provision, which deals with writing, disseminating, or soliciting reviews written by a business's own employees or immediate relatives, so that the prohibitions apply only when the connection to a so-called "insider" is "material." The final rule also introduces a new exception to this provision, clarifying that businesses will not be held liable for disseminating insider testimonials or soliciting insider reviews if they merely make a "generalized solicitation to purchasers" to post about their experiences.
• Company-Controlled Review Websites or Entities. This provision prohibits a business from materially misrepresenting that a website/organization/entity that it controls or owns provides independent reviews or opinions about a category of businesses, products, or services including the business or its products/services. The final rule narrowed this provision by specifying that there must be a "material misrepresentation" and that the provision does not apply to websites that provide consumer reviews.
• Review Suppression. This provision prohibits threatening "unfounded or groundless" legal action, physical threats, intimidation or public false accusations in an attempt to prevent consumer reviews from being written or to cause a consumer review to be removed. It also prohibits a business from materially misrepresenting that consumer reviews on its website or platform represent most or all reviews submitted when reviews are being suppressed based on ratings or negative sentiment. The final rule's version of this provision specifies that it applies to reviews that are "not displayable" rather than "not displayed" as proposed. The FTC explained that this will only cover reviews that consumers are "unable to view even if they were to sort or filter the reviews differently." The language of the final rule also makes clear that the legitimate reasons to suppress reviews enumerated in the rule is not exhaustive.
• Misuse of Fake Indicators of Social Media Influence. This provision prohibits selling or distributing fake indicators of social media influence that can be used to materially misrepresent influence or importance for a commercial purpose. It also prohibits purchasing or procuring fake indicators of social media influence to misrepresent influence or importance for a commercial purpose. The final rule defines "fake indicators of social media influence," a previously undefined term, as "indicators of social media influence generated by bots, purported individual accounts not associated with a real individual, accounts created with a real individual's personal information without their consent, or hijacked accounts, or that otherwise do not reflect a real individual's or entity's activities, opinions, findings, or experiences." This is a helpful change for businesses, as the FTC confirmed that "if a company awards legitimate indicators of influence to certain users upon satisfaction of objective criteria reflecting the influence of the users, the company would not be selling 'fake' indicators, even if bad actors were able to deceive the company." The final rule also introduces a "knew or should have known" knowledge standard.

If you have any questions about the final rule and compliance strategy, please reach out to Laura Kim, Ali Remick, or Jessica Ke.