Deceptive Endorsements and Reviews

Deceptive endorsements and reviews not only harm consumers by misleading them during the purchasing process but also unfairly disadvantage honest competitors who comply with the law. For many years, the FTC has been actively combating these illegal practices and will continue to do so. However, it is crucial that our approach evolves alongside advancements in technology and marketing. That’s why it’s important to stay informed about three significant developments recently announced by the FTC: final revisions to the Endorsement Guides, a proposed new Rule on the Use of Consumer Reviews and Testimonials, and updates to a key staff guidance publication for businesses, endorsers, and members of the advertising industry.

Final Revised Endorsement Guides

The Guides Concerning Use of Endorsements and Testimonials in Advertising, last revised in 2009, provide guidance to businesses on how the FTC Act applies to the use of endorsements. As part of the FTC’s ongoing regulatory review efforts, they sought public input in May 2022 on proposed updates to the Guides to ensure they remain relevant to current advertising trends, including the application of long-standing legal principles to social media and review platforms.

The revised Endorsement Guides incorporate feedback received and reflect recent law enforcement experiences. Here are six notable final changes:

• Introducing a new principle that discourages the procurement, manipulation, or editing of consumer reviews to distort the genuine opinions consumers have about a product.
• Addressing issues related to incentivized reviews, employee reviews, and fake negative reviews by competitors.
• Defining “clear and conspicuous” disclosure and cautioning that a platform’s built-in disclosure tool may not be sufficient.
• Updating the definition of “endorsements” to clarify that it encompasses fake reviews, virtual influencers, and social media tags.
• Providing a clearer explanation of the potential legal liabilities faced by advertisers, endorsers, and intermediaries for violations.
• Highlighting specific concerns related to advertising directed at children.

Proposed Rule on the Use of Consumer Reviews and Testimonials

In addition to announcing the final changes to the Endorsement Guides, the FTC is proposing a new Rule on the Use of Consumer Reviews and Testimonials based on comments received in response to a November 2022 Advanced Notice of Proposed Rulemaking. The FTC received diverse perspectives from consumers, small businesses, advocacy organizations, trade associations, review platform operators, researchers, and others interested in this area. The FTC now invites public comments on the proposed Rule, which aims to combat deceptive practices involving consumer reviews and testimonials.

Why is a rule specifying certain practices as illegal necessary? By clearly defining prohibited practices and empowering courts to impose civil penalties, a rule can enhance the FTC’s enforcement actions and act as a deterrent when companies develop their marketing strategies. The Federal Register Notice provides detailed information, but the proposed Rule specifically prohibits the following practices:

• Selling or obtaining fake consumer reviews and testimonials: Businesses are prohibited from writing or selling consumer reviews or testimonials from individuals who don’t exist, didn’t have genuine experiences with the product or service, or misrepresented their experiences. Furthermore, businesses are prohibited from procuring reviews or distributing testimonials from these categories.
• Review hijacking: Businesses cannot use or repurpose a consumer review written for one product to make it appear as if it was written for a substantially different product.
• Buying positive or negative reviews: Businesses are prohibited from providing compensation or incentives contingent upon the writing of consumer reviews expressing a particular sentiment, whether positive or negative.
• Insider reviews and testimonials: Companies’ officers and managers cannot write reviews or testimonials about their products without clearly disclosing their relationship. Additionally, businesses cannot disseminate testimonials by insiders without proper disclosures, and certain solicitations for reviews from company employees or their relatives are prohibited.
• Company controlled review websites: Businesses are prohibited from creating or controlling websites that claim to provide independent opinions about a category of products that includes their own products.
• Illegal review suppression: Businesses cannot use unjustified legal threats, intimidation, or false accusations to prevent or remove negative consumer reviews. Furthermore, if negative reviews have been suppressed, businesses cannot misrepresent that the reviews on their websites represent all submitted reviews.
• Selling fake social media indicators: Businesses are not allowed to sell false indicators of social media influence, such as fake followers or views. Likewise, it is prohibited for anyone to buy such indicators to misrepresent their significance for commercial purposes.

The Federal Register Notice includes various questions that the FTC encourages the public to address. Once the Notice is published in the Federal Register, there will be a 60-day period to submit public comments.

Follow COGO! For getting automatic updates of new webinars regarding funding options, and new business trainings hosted related to SBA.