Trade Regulation Rule on the Use of Consumer Reviews and Testimonials

AGENCY:

Federal Trade Commission.

ACTION:

Notice of proposed rulemaking; request for public comment.

SUMMARY:

The Federal Trade Commission (“FTC or “Commission”) commences a rulemaking to promulgate a trade regulation rule entitled “Rule on the Use of Consumer Reviews and Testimonials,” which would prohibit certain specified unfair or deceptive acts or practices involving consumer reviews or testimonials. The Commission finds such practices to be prevalent based on the comments it received in response to an advance notice of proposed rulemaking and other information discussed in this publication. The Commission now solicits written comment, data, and arguments concerning the utility and scope of the proposed trade regulation rule to prohibit the specified unfair or deceptive acts or practices.

DATES:

Comments must be received on or before September 29, 2023.

ADDRESSES:

Interested parties may file a comment online or on paper by following the instructions in the Comment Submissions part of the SUPPLEMENTARY INFORMATION section below. Write “Reviews and Testimonials NPRM, R311003” on your comment and file your comment online at https://www.regulations.gov. If you prefer to file your comment on paper, mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex F), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Michael Ostheimer, Attorney, Federal Trade Commission, Bureau of Consumer Protection, Advertising Practices Division, (202) 326–2699, mostheimer@ftc.gov.

SUPPLEMENTARY INFORMATION:

The Commission invites interested parties to submit data, views, and arguments on the proposed Rule on the Use of Consumer Reviews and Testimonials (“proposed Rule”) and, specifically, on the questions set forth in Section X of this notice of proposed rulemaking (“NPRM”). The comment period will remain open until September 29, 2023. To the extent practicable, all comments will be available on the public record and posted at the docket for this rulemaking on https://www.regulations.gov. If interested parties request to present their position orally, the Commission will hold an informal hearing, as specified in Section 18(c) of the FTC Act, 15 U.S.C. 57a(c). Persons interested in making a presentation at an informal hearing must file a comment expressly requesting a hearing in response to this publication, containing a statement identifying their interests in the proceeding and any proposals to add disputed issues of material fact necessary to be resolved during an informal hearing. The comment should describe why the person thinks the informal hearing is warranted and how they would participate, and include a summary of their expected testimony. Interested persons' comments may also, without requesting an informal hearing, expressly request to speak at any informal hearing that is held, which may happen if another commenter requests an informal hearing or if the Commission on its own elects to hold one. If an informal hearing is held, the Commission will publish a separate notice in accordance with 16 CFR 1.12(a) (“initial notice of informal hearing”).

I. Background

The Commission published, on November 8, 2022, an advance notice of proposed rulemaking (“ANPR”) under the authority of Section 18(a)(1)(B) of the FTC Act, 15 U.S.C. 57a(a)(1)(B); which authorizes the Commission to promulgate, modify, or repeal trade regulation rules that define with specificity acts or practices that are unfair or deceptive in or affecting commerce within the meaning of Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

The ANPR described the Commission's history of educating industry and consumers about the use of deceptive reviews and testimonials and of taking law enforcement action against certain unfair or deceptive acts or practices involving consumer reviews or testimonials. Specifically, the ANPR discussed: (a) the use of reviews or endorsements by people who do not exist, who did not actually use or test the product or service, or who were misrepresenting their experience with it; (b) review hijacking, where a seller steals or repurposes reviews of another product; (c) marketers offering compensation or other incentives in exchange for, or conditioned on, the writing of positive or negative consumer reviews; (d) owners, officers, or managers of a company (i) writing reviews or testimonials of their own products or services, or publishing testimonials by their employees or family members, which fail to provide clear and conspicuous disclosures of those relationships, or (ii) soliciting reviews from employees or relatives without instructing them to disclose their relationships; (e) the creation or operation of websites, organizations, or entities that purportedly provide independent reviews or opinions of products or services but are, in fact, created and controlled by the companies offering the products or services; (f) misrepresenting that the consumer reviews displayed represent most or all of the reviews submitted when, in fact, reviews are being suppressed based upon their negativity; (g) the suppression of customer reviews by physical threat or unjustified legal threat; and (h) selling, distributing, or buying followers, subscribers, views, and other indicators of social media influence. The ANPR also asked a series of questions to inform the Commission's determination about whether it has reason to believe that such practices are prevalent and, if so, whether and how to proceed with an NPRM. During the 60-day comment period, the Commission received 42 responsive comments.

Based on the substance of these comments, as well as the Commission's history of enforcement and other information discussed below, the Commission is now exercising its authority under Section 18(a)(1)(B) of the FTC Act to propose a trade regulation rule that defines conduct that, in the context of consumer reviews or testimonials, constitutes unfair or deceptive acts or practices. The Commission has reason to believe that certain unfair or deceptive practices involving consumer reviews or testimonials are prevalent and that proceeding with this rulemaking is in the public interest.

After reviewing the comments and because the Commission believes it would be in the public interest to move forward expeditiously with this rulemaking proceeding, the Commission has decided to issue this NPRM without holding the public workshops originally contemplated in the ANPR. Upon reviewing the ANPR comments, the Commission determined that conducting public workshops at that stage of the proceeding would not provide additional unique viewpoints or issues. Instead, by issuing this NPRM and analyzing the comments submitted in response, the Commission will be able to further develop the record, receive comments on potential alternatives, and decide whether additional events or methods are needed to facilitate public participation in the rulemaking process.

Below, after discussing the comments, setting out the evidence of prevalence, and explaining its considerations in developing the proposed Rule, the Commission poses specific questions for comment and provides the text of the proposed Rule.

II. Summary of Comments to ANPR

The Commission received 42 responsive comments in response to the ANPR. Twenty-nine comments supported the Commission proceeding with a rulemaking. Four comments expressed the view that a rulemaking was unnecessary, premature, or should not apply to the commenter's constituents. One commenter expressed skepticism about the utility of a rulemaking. The remaining commenters did not express a clear view on the merits of proceeding or did not address the question. Fifteen comments came from individual consumers. Seven comments were submitted by trade associations, five by review platform operators and one by an employee of one such operator, three by small businesses and one by a small business employee, three by consumer advocacy organizations, three by entities dedicated to fighting fake reviews, one by a public interest research center, one by a think tank, one by academic researchers, and one by an insurance marketing organization.

The 15 individual consumers expressed significant concerns about fake consumer reviews and testimonials. One consumer comment declared: “this rule to extend the FTC power over fraudulent and paid for testimonies and reviews is a necessity. I think . . . protection against these types of scams is an integral need to the people of the United States.” Consumer commenters wrote about the difficulty that many consumers have in identifying fake reviews. One consumer who selected an auto repair shop based upon misleading reviews written by the shop's employees or their spouses spoke of having been personally harmed by deceptive reviews. Two consumer comments said that truthful negative reviews are valuable and should not be suppressed. Two additional consumer commenters spoke of the need to punish and deter bad actors.

The four comments from small businesses or a small business employee were from Ubiquitous Advising, LLC, (“Ubiquitous Advising”), Patrick's Pet Care, an anonymous small business that sells products through a particular online marketplace, and Tammy Provencal, who is a small business employee. Ubiquitous Advising supports the rulemaking, and commented that fake reviews cause more damage than anyone can imagine. It also said that review suppression is just as bad, with businesses threatening, bullying, or suing consumers who are trying to warn other consumers, even when there is zero chance of those businesses winning such a lawsuit. Ubiquitous Advising described a company in its local area that is constantly threatening and bullying reviewers. Patrick's Pet Care did not indicate clearly whether it supports the rulemaking but complained about being attacked with negative reviews. It suggested that people should not be able to post anonymous, non-traceable reviews and that platforms should disclose the names of reviewers. The anonymous small business that submitted a comment did not address the proposed rulemaking and asserted that a particular online marketplace was manipulating the placement of negative reviews. The small business employee supports the rulemaking and stated that a competitor is giving incentives for 5-star reviews.

The five review platforms that submitted comments, Yelp, Inc. (“Yelp”), Trustpilot A/S (“Trustpilot”), Google LLC (“Google”), Tripadvisor LLC (“Tripadvisor”), and Amazon.com, Inc. (“Amazon”), wrote of the importance of reviews to consumers and the lengths to which they go to stop and combat fake reviews. These comments conveyed information both about the prevalence and harm caused by fake review practices.

Yelp, which supports civil penalties for “businesses and individuals who author, arrange for or pay for deceptive reviews,” said that an overwhelming majority of consumers who read reviews (83 percent) say they trust online reviews about local businesses. In one Yelp survey, 71 percent of respondents said they would no longer visit a business if they learned the business has fake or compensated online reviews. As a first line of defense, Yelp uses automated software systems in order to detect biased reviews and “flags a significant percentage of reviews—about 19% based on Yelp's most recent . . . figures—as `not recommended.' ” Yelp said that groups to facilitate the buying, selling, or exchange of fake reviews exist on various online platforms ( e.g., Facebook, Instagram, Twitter). In 2021, Yelp made more than 1,000 reports to online platforms warning them of nearly 950 suspicious groups, posts, or individuals found on their sites. Yelp also wrote that “abusive and questionable or unjustified legal threats are another form of review suppression that Yelp constantly confronts” and that its 2021 data shows a majority of such threat alerts “stemmed from beauty and health categories—businesses consumers often turn to when making critical life decisions or that can otherwise be sensitive in nature.”

Trustpilot, a Danish company operating a website that hosts reviews of businesses worldwide, did not appear to support or oppose the rulemaking. It said that of the 46.7 million Trustpilot reviews written globally in 2021, it removed 2.7 million fake reviews. In 2021, Trustpilot identified and took action against more than 60,000 reviews about United States businesses that were submitted by accounts it deemed to be companies or individuals who offered fake reviews for sale online. It noted that it is appropriate for consumers to review a service provider with which they have had an experience even if they did not make a purchase. In 2021, Trustpilot detected and removed as biased just over 8,000 reviews for United States businesses written by owners, officers, or employees of the company reviewed, or their family members. Trustpilot stated that such behavior does not necessarily reflect intentional fraud. It commented that it is aware of cases outside of Trustpilot in which the suppression of negative reviews has occurred on retailer or business websites. It has seen some cases, mostly outside of the US, in which businesses have threatened reviewers if they do not delete a negative review. In response to the ANPR, Trustpilot said it is possible that, before moving to regulation, there may be benefits in seeking to maximize the effects of other steps, such as educating businesses and consumers or developing codes of conduct. It noted that while regulation could send a strong signal, it may face the challenge of being quite static in a dynamic and fast-paced environment.

Google supports the rulemaking. It said that fake reviews undermine users' confidence in the information available on its platform. Google uses both automated systems and human operators to monitor compliance with its policies and identify and remove fake reviews. Spammers constantly evolve their tactics, so distinguishing between fake and authentic reviews is an ongoing battle. For example, in response to advances in Google's detection and mitigation capabilities, bad actors have adapted, such as by using Virtual Private Networks (“VPNs”) to evade routine detection. Google said that businesses may also have strong incentives to buy positive reviews, which exacerbates the problem. In addition, many reviews displayed on its platform are sourced or surfaced from third parties ( e.g., from the merchant website where consumers purchased the product or service), and it can be more difficult to detect when such reviews are fake because Google lacks access to some signals of inauthentic activity, such as the account that created the review being used to post duplicate content. In 2022, Google removed millions of reviews from Google Play that it determined to be fake, inorganic, or otherwise malicious. In 2021, users submitted around one billion Google Maps reviews and Google blocked or removed more than 95 million of them for violating its policies. Google also removed another one million reviews that were reported directly to it, and it disabled more than one million user accounts due to policy-violating activity. Google urged the Commission to focus on those posting fake reviews rather than on the platforms.

Tripadvisor agrees that deceptive actions by bad actors harm consumers and honest businesses. In 2021, of the 26 million reviews submitted to Tripadvisor, it identified 3.6 percent as violating its fraud guidelines. It said that in certain scenarios it can be difficult to distinguish authentic reviews from fake. Tripadvisor also said that efforts to suppress negative reviews, including by threatening reviewers, is one of the problems that plague the online consumer review ecosystem. Finally, it believes that targeted authority for the FTC to impose financial penalties on bad actors can be an element of a comprehensive effort to improve the consumer information ecosystem, but that any provision that authorizes the assessment of a financial penalty must be appropriately targeted in both design and enforcement at those who knowingly engage in clearly deceptive and fraudulent practices.

Amazon did not state support for or opposition to the rulemaking. Amazon said that in 2021 alone, it invested more than $900 million and employed more than 12,000 people who were dedicated to protecting customers and its store from fraud and other forms of abuse. Amazon stated that it proactively stopped more than 200 million suspected fake reviews in 2020 alone. Amazon also noted that fraudsters approach its customers through their own websites and on social media and solicit them to write misleading reviews in exchange for money, free products, or other incentives. In 2021, Amazon reported more than 16,000 social media groups that were buying or exchanging misleading reviews to the social media sites that hosted them, including Facebook, Twitter, and Instagram, resulting in the removal of groups with more than 11 million members. In July 2022, Amazon sued more than 10,000 such Facebook groups. Amazon encouraged the FTC to increase the use of its existing authority to pursue fake review brokers, collaborate with other regulators to combat bad actors who facilitate review abuse, continue to provide guidance to legitimate businesses, and educate consumers about how to identify and report fake reviews.

An individual Amazon employee working in the Amazon Risk department for the past 10 years submitted a comment. The commenter personally reviewed thousands of seller and buyer accounts for review abuse and said there is no dispute that deceptive reviews are widespread and harmful to customers. The commenter is “skeptical about whether the regulation will be effective” because most online platforms and shopping websites do not require customers to register using real identities in order to leave reviews and because Section 230 of the Communications Decency Act (47 U.S.C. 230) immunizes internet service providers, like Google and Facebook, from lawsuits “based on claims related to content published by third-parties using their service[s].”

The academic researchers who submitted a comment were Rajvardhan Oak and Zubair Shafiq from the University of California Davis, who had examined reviews on online marketplaces. They infiltrated an “incentivized review service geared towards Amazon.com” and discovered solicitations for incentivized five-star reviews for 242,000 products. They found more than 250 groups on Facebook in which reviews were brokered, the largest of which had around 550,000 members. Over the six weeks that they tracked products for which incentivized reviews were sought, no reviews were removed from nearly 50 percent of those products. Although Amazon delists products suspected of seeking incentivized reviews, only 25 of the 1,600 products they were tracking were removed by Amazon during the six-week period. They also said that, in response to Amazon's lawsuits against Facebook groups, group administrators and agents simply created alternate communication channels, such as Signal/Telegram groups, and circulated the details of the alternatives.

The Commission received comments from three entities dedicated to fighting fake reviews: the Transparency Company, Fake Review Watch, and Fakespot, Inc. All three commenters asserted that the strategies that are currently being used by review platforms are insufficient.

The Transparency Company, which supports a rulemaking, said that its research suggests that the major review websites are unable to detect a majority of fake reviews online. It estimated that 8.5 percent of published reviews—for all industries—are fake, and provided a link to its fake review research, which asserted that 10.7 percent of Google reviews, 7.1 percent of Yelp reviews, and 5.2 percent of Tripadvisor reviews were fake. The comment noted that 54 percent of consumers say that they would not buy a product if they suspected it to have fake reviews and estimated that consumer injury from fake reviews is approximately $5 billion per year. It documented over 1,000 examples of fake negative reviews causing injury to competition and it estimates that thousands of lawyers are hired each year to send demand letters to and intimidate the authors of negative consumer reviews. The comment identified platform actions that have been effective in reducing consumer harm associated with fake reviews but said that ending online review fraud would require, among other things, the authentication of consumer reviewers.

Fake Review Watch, which supports a rulemaking, said that there is a robust black market for paid for (or traded for) reviews on Google, Yelp, Facebook, Trustpilot, and numerous other review sites and that many of the transactions are conducted on social media. It stated that fake reviews are commonplace and often difficult to detect without examining review profile histories across multiple businesses. Fake Review Watch has observed over 100 Facebook groups operating as review exchanges, with hundreds or thousands of members each. The comment also asserted that Google: (a) often allows profiles that posted fake reviews to remain active even after it removes those reviews, (b) provides no alerts to consumers about businesses with fake reviews, and (c) makes fake review detection more difficult by allowing profiles to choose not to display all of their reviews and by not displaying the dates of reviews. The comment also complained about reviews by Yelp Elite members, which Fake Review Watch asserted are automatically recommended and not subject to evaluation by Yelp's recommendation software, and about the inadequacy of Yelp's consumer alerts. Fake Review Watch said that regulators should require review sites to tell consumers everything they know about a business's reviews and to post notices reminding consumers that the site cannot guarantee the truthfulness and accuracy of any review.

Fakespot did not state support for or opposition to a rulemaking. In its comment, Fakespot opined that sellers posting fake reviews and fake review farms are among the malicious actors generating fake online content that, in the last five years, has led to a “dramatic deterioration” of trust between sellers, platforms, and consumers.

The three consumer advocacy organizations that submitted comments, Truth in Advertising, Inc. (“TINA”), the U.S. Public Interest Research Group (“US PIRG”), and the National Consumers League (“NCL”), all advocated for a rulemaking.

TINA said that fake reviews are an insidious problem, primarily because consumers have come to rely heavily on reviews in making their online purchasing decisions, and it provided numerous citations to publications regarding the importance of reviews to consumer decision making. It stated that incentives to generate early, positive reviews have led to a proliferation of false and fake reviews—a deceptive marketing tactic that will only continue to flourish if not effectively reined in by regulators. TINA said that, given the Supreme Court's AMG Capital Management decision, a rule would substantially improve the agency's ability to combat and deter deception and unfairness in this area.

US PIRG cited findings by industry observers that 30 to 40 percent of online reviews are not genuine, and stated that consumers have no way of knowing which reviews are legitimate. It asserted that fake reviews harm both consumers who are trying to make informed buying decisions and honest businesses, and that, when consumers lose confidence in reviews, legitimate positive reviews do not mean as much. It said that the marketplace is poisoned by outright fake reviews, reviews written in exchange for free items, fake negative reviews written about competitors, review suppression, reviews or endorsements written for consideration, and misrepresentations that a website or a certification or a seal is independent.

NCL said that millions of consumers use reviews every day to inform billions of dollars in purchasing decisions involving both online and offline businesses. It cited an estimate that in 2021, fraudulent reviews cost U.S. consumers $28 billion. NCL also cited a different study which said that, by deceiving buyers into purchasing lower quality and potentially unsafe products, fake reviews lead to $0.12 of consumer welfare lost for every $1 spent online. It said that the practices outlined in the ANPR were all unfair and deceptive, that the sellers and service providers that do not use fake reviews are at a competitive disadvantage, that the effects of a fake review may last up to a month after its deletion or detection, and that the threat of fake negative reviews is being used to extort honest businesses. NCL also asked the Commission to require platforms to implement measures to combat the unfair and deceptive uses of reviews, endorsements, and indicators of social media influence, possibly requiring purchase verification before allowing a user to leave a review and the active policing of reviews. Finally, NCL suggested that the FTC explore options for holding platforms accountable for allowing organized review fraud to flourish.

The seven trade associations that submitted comments, the North American Insulation Manufacturers Association (“NAIMA”), the American Dental Association (“ADA”), the Computer & Communications Industry Association (“CCIA”), the Travel Technology Association (“Travel Tech”), the National Automobile Dealers Association (“NADA”), the National Retail Federation (“NRF”), and the Association of National Advertisers (“ANA”), took widely divergent positions on a rulemaking.

NAIMA and ADA both support a rulemaking. With respect to reviews or other endorsements by nonexistent individuals, NAIMA said that it has challenged misleading claims that were “supported by avatars or entities that there was no chance of making real contact with.” It also asserted that testimonials by those misrepresenting their experiences with products are plentiful. Finally, NAIMA stated that it regularly challenges statements about its members' products “that appear on standalone websites which falsely claim to be independent reviewers.” ADA wants the FTC to allow dentists to disclose patient information in responding to reviews and to require that reviewers identify themselves.

It is unclear whether Travel Tech or CCIA support a rulemaking. Travel Tech commented that the integrity of reviews is essential to maintain the trust and confidence of the customers of Travel Tech members. It stated that the overwhelming majority of reviews are legitimate and that Travel Tech members have systems in place to address the minority of reviews that can be harmful to consumers or travel-related operators and providers. Travel Tech recommended that the Commission utilize its existing authority to combat nefarious paid review-generation sites, referred to as “click farms.” CCIA said that any proposed rulemaking should focus on bad actors engaging in fraudulent behavior, not legitimate endorsements that happen to occur through social media.

NADA commented that rulemaking is unnecessary because the Commission did not identify any harmful market conduct for which remedies to protect consumers do not exist under current Federal and state law and because monetary penalty authority alone is not reason enough to issue a rule. Its comment continued that, if the rulemaking proceeds, the Commission should stick to its stated goal of addressing “certain types of clear Section 5 violations involving reviews and endorsements” to “benefit consumers, help level the playing field, and not burden legitimate marketers.” With respect to any potential rule provision addressing businesses writing, soliciting, or publishing reviews by their employees or family members, NADA asked that the FTC make clear that a violation “only arises when the business, and not another entity, affirmatively writes, solicits, and publishes reviews that fail to provide clear and conspicuous disclosures of those relationships” and that the FTC define the term “relative.” The comment asserted that businesses may legitimately “seek to remove reviews or comments that are off topic or include false statements, advertisements, inappropriate language, or confidential or personal identification information” or to “remove comments or review functions on their own websites or certain social media posts.” NADA also posited other practices that they considered legitimate and did not want prohibited under a possible rule: (a) responding on a comment thread to each negative review, offering an explanation, making customers whole, and asking any successfully satisfied customers to respond on the thread with their satisfaction or update their previously negative review; (b) surveying customer satisfaction and prompting only satisfied customers to leave reviews; (c) reaching out to consumers in an effort to change reviews by addressing their issues, sometimes giving customers something of value in satisfaction of their problems; or (d) highlighting five-star reviews from satisfied customers on a dealer's websites. NADA said it understood that some third-party review websites promoted their services to businesses and if a business did not purchase those services, it would have a negative effect on the consumer reviews shown for the business. Finally, NADA said that the FTC should directly engage with review websites, e-commerce sites, and consumer brands through public workshop conferences.

NRF opposed additional regulation of retailers but not of fake review brokers. It believes that the issue of fake and misleading reviews is important but that fake review brokers are much more likely to mislead consumers and create issues for retailers given the potential for brokers to submit fake reviews in volume. NRF said that the fraudulent tactics employed by review brokers can include: (a) using “bots” and artificial intelligence tools to generate reviews on behalf of nonexistent consumers; (b) posting identical, or substantially identical, reviews for multiple different products and/or under multiple consumer accounts; (c) flooding social media platforms such as Twitter, Instagram, and Facebook with false review content, whether as standalone posts or as comments or replies to genuine reviews or consumer questions; (d) creating and operating social media groups or standalone websites that purport to offer benefits like refunds or coupons in exchange for specified types of reviews or ratings; and (e) reimbursing consumers for what would otherwise appear to be bona-fide purchases in exchange for positive 5-star reviews and ratings. NRF opposed requiring retailers to restrict consumer reviews to verified purchasers. It also opposed blanket approaches such as “requiring manual review of every consumer review and the poster's profile” or approaches that “risk inadvertent discriminatory or disparate deletion of reviews based on implicit biases towards certain consumer classes.” NRF said that if a retailer is actually acting in bad faith (whether by itself or by intentionally engaging a fake review broker to act on its behalf), the FTC can take the step of “filing a complaint and bringing formal enforcement action seeking monetary damages as it has done several times this year alone.” It accordingly believes that no new enforcement mechanism is necessary for the Commission to ensure retailers comply with existing law, or to hold them accountable for violations.

ANA asserted that a rulemaking is premature, while making clear that “ANA does not take the position that fake reviews may not produce economic injury.” It asserted that the “FTC has not demonstrated evidence of prevalence and has not identified a particular industry that would justify embarking upon rulemaking that would be sufficient, clear, narrowly tailored, easy to enforce, and not burdensome to legitimate marketers.” ANA appeared to agree that some of the practices challenged in past FTC cases involving the offering of compensation or other incentives in exchange for, or conditioned on, the writing of positive consumer reviews are problematic and deceptive. It sought to distinguish such practices from other practices that, according to ANA, do not obviously cause consumer harm, such as review gating or the “mere solicitation of positive reviews.”

The Commission also received a comment from an insurance marketing organization, Family First Life LLC (“Family First Life”), which supported “a narrowly tailored rule [that] would benefit consumers, help level the playing field, and not burden legitimate marketers.” It recommended that any regulation “be tailored to exclude situations where an employee or independent contractor is leaving a review of their experience working with their employer or principal.” Family First Life pointed out that when someone “writes a review of her own personal experience working with a company on workplace-review platforms, such as Glassdoor or Indeed,” concerns about the reviewer's undisclosed relationship to the company are absent because, on such platforms, “there is an obvious and assumed relationship between the reviewer and the company.” Family First Life commented that the “FTC should not write a rule that sweeps in and penalizes any review just because the reviewer was offered an incentive to write it—without otherwise dictating what the review says.” Family First Life also stated that the “FTC should include in any proposed regulation it promulgates a safe harbor for truthful reviews that are incentivized but not influenced, controlled, or conditioned by the entity offering the incentive.” Finally, it asserted that the FTC should not treat platforms' determinations of policy violations as evidence of rule breaking.

The Commission also received a comment from a non-partisan think tank, the Center for Data Innovation (“CDI”). As part of its comment, CDI asserted that regulation is premature because there are no widely accepted best practices for platforms and platforms are still experimenting with solutions. CDI acknowledged that researchers studying deceptive reviews found that fake reviews do have a large presence online and a significant impact on commerce, citing research and reports that included the following findings, among others: (a) “around five percent of reviews left for a private-label apparel company were posted by individuals who did not purchase products”; (b) “around 4 percent of online reviews [we]re fake in 2021”; (c) fake reviews impact nearly $152 billion in global e-commerce revenue; (d) Yelp flagged and filtered out around 16 percent of reviews in 2016; and (e) 20 percent of 41,572 reviews on Tripadvisor were suspicious. It noted that an artificial intelligence (“AI”) system is able to write reviews that are nearly indistinguishable from reviews written by people. CDI commented that fake review brokers help facilitate the creation of fake reviews by connecting bad actors with reviewers, often using “large groups on websites such as Facebook to find reviewers willing to write reviews in exchange for free products or compensation.” The comment asserted that the review broker dictates the rating and what the review should say and then pays the reviewer only once the review is accepted and posted. CDI proposed that, instead of engaging in a rulemaking, the FTC should establish partnerships with review companies, e-commerce platforms, and social media companies to establish voluntary best practices to detect and prevent fake reviews.

III. Prevalence of the Consumer Review and Testimonial Practices at Issue

A. Fake or False Consumer Reviews or Testimonials

Comments from the platforms support a finding that fake consumer reviews are prevalent. In 2020, Amazon asserted it proactively stopped more than 200 million suspected fake reviews. In 2021, according to the company, Google blocked or removed more than 95 million Google Maps reviews for policy violations; in 2022, it removed millions of fake, inorganic, or otherwise malicious Google Play reviews. Yelp commented that, in 2021, its recommendation software identified about 19 percent of reviews as “not recommended.” In 2021, Tripadvisor reportedly flagged 3.6 percent of reviews submitted (or about one million reviews) as fraudulent. Trustpilot stated that in 2021, accounts deemed to be review sellers submitted more than 60,000 reviews of U.S. businesses; it identified and filtered the reviews and blocked the accounts associated with them.

Several comments spoke about the prevalence of consumer review rings on various online platforms ( e.g., Facebook, Instagram, Twitter) that facilitate the buying, selling, or exchange of fake reviews. In 2021, Amazon reported more than 16,000 abusive review-related groups to social media sites, leading to the removal of groups with more than 11 million members. In July 2022, Amazon sued administrators of more than 10,000 Facebook groups that attempted to orchestrate fake reviews on Amazon.com in exchange for money or free products. In 2021, Yelp reported almost 950 suspicious groups, posts, or individuals to online platforms. Fake Review Watch has accessed more than 100 Facebook review exchange groups, each with hundreds or thousands of participants.

The comment from the Amazon employee who reviewed thousands of accounts for review abuse said that deceptive reviews are widespread.

Other comments suggest the platforms may be underestimating the extent of the fake review problem. The Transparency Company estimated 8.5 percent of published consumer reviews are fake. The Fake Review Watch comment explained reviews written by Yelp Elite members are not subject to evaluation by Yelp's automatic software and there is a robust market for Yelp Elite Reviews. US PIRG asserted 30 to 40 percent of online reviews are fabricated or otherwise not genuine. The UC Davis researchers found that nearly 50 percent of the products sold on Amazon.com by those seeking incentivized reviews did not have any of their reviews removed during the six-week period the researchers tracked them. CDI cited research regarding the prevalence of fake reviews, including findings that “around five percent of reviews left for a private-label apparel company were posted by individuals who did not purchase products,” “around 4 percent of online reviews [we]re fake in 2021,” and, based on a third-party analysis of 41,572 reviews, around 20 percent of Tripadvisor reviews were suspicious.

Numerous research reports, several of which are cited in the comments, further establish the prevalence of fake reviews. For example, in 2020, the Department of Homeland Security issued a report that focused on counterfeit and pirated goods but also found that “the ratings systems across platforms have been gamed, and the proliferation of fake reviews and counterfeit goods on third-party marketplaces now threatens the trust mechanism itself.” An Uberall report from 2021 estimated 10.7 percent of Google reviews, 7.1 percent of Yelp reviews, and 5.2 percent of Tripadvisor reviews were fake. A 2021 joint report by the University of Baltimore and CHEQ AI Technologies Ltd., a company that provides online security services, described the “booming market” for fake reviews and estimated, based on self-reporting from several major platforms, four percent of global reviews are fake. Also in 2021, Fakespot released a report finding that, in 2020, nearly 37.6 percent of reviews on Walmart.com were unreliable, with the figure at 27.6 percent for Amazon.com. Further, in its most recent annual local consumer review survey, BrightLocal reported 54 percent of consumers were confident they saw fake reviews on Amazon.com in 2022, with the figures being 50 percent for Google and 42 percent for Facebook.

Academic research—some of which, again, is cited in the comments—has also repeatedly confirmed the prevalence of fake reviews. Numerous journalists, including from The Washington Post, The Wall Street Journal, CBC News, and CNBC, have also reported on such prevalence, sometimes having undertaken their own investigations. Further, Which?, a consumer advocacy group based in the United Kingdom, has issued several reports documenting fake and manipulated reviews across multiple platforms.

More recently, concerns have been raised that generative artificial intelligence (“AI”) tools can be used to write product reviews. It has been reported that an AI chatbot is being used to create fake reviews. As the reporting notes, the widespread emergence of AI chatbots is likely to make it easier for bad actors to write fake reviews.

The Commission has brought numerous cases involving allegedly fabricated consumer reviews. S ee, e.g., Complaint at 9–17, FTC v. Roomster Corp., No. 1:22–CV–07389 (S.D.N.Y. Aug. 30, 2022) (alleged purchase and sale of fake app store and other reviews for room and roommate finder app and platform); Complaint at 2–4, Sunday Riley Modern Skincare, LLC, No. C–4729 (Nov. 6, 2020) (company personnel allegedly created fake accounts to write fake reviews of company's products on third-party retailer's website); Shop Tutors, Inc., 169 F.T.C. 476, 487–89 (2020) (reviews of LendEDU were allegedly fabricated by its employees, other associates, or their friends and published on a third-party website); Complaint at 20, FTC v. Cure Encapsulations, Inc., No. 1:19–cv–00982 (E.D.N.Y. Feb. 26, 2019) (Amazon.com reviews of defendants' product were allegedly fabricated by one or more third parties whom defendants had paid to generate reviews); Complaint at 19, FTC v. Genesis Today, Inc., 1:15–cv–00062 (W.D. Tex. Jan. 26, 2015) (Amazon.com product reviews allegedly purchased by defendants); Complaint at 5, 8, FTC v. Dunlevy, No. 1:11–cv–01226–TWT (N.D. Ga. Apr. 4, 2011) (alleged fake consumer comments).

State Attorneys General have also brought cases challenging allegedly fabricated consumer reviews. See, e.g., Complaint at 4, Washington v. Alderwood Surgical Ctr., LLC, No. 2:22–cv–01835 (W.D. Wash. Dec. 29, 2022) (creating allegedly fake positive reviews on Google, Yelp, and other review sites); Complaint at 17–22, State v. Amazon Home Warranty LLC, No. CV2021–007632 (Ariz. Sup. Ct. Maricopa Cnty. May 10, 2021) (disseminated or caused the dissemination of allegedly fake favorable consumer reviews on third-party review websites, including on the BBB's website); Assurance of Voluntary Compliance at 3–5, State v. Unified Holding Grp., LLC, No. 2020–06785 (C.P. Cumberland Cnty., Pa. Dec. 16, 2020) (alleged fabricated reviews on the BBB website); Complaint at 15, State v. US Air Ducts & Sky Builders, Inc., No. 19–2–24757–6–SEA (Wash. Sup. Ct. Kings Cnty., Sept. 20, 2019) (allegedly created fake Google reviews); Complaint at 8–9, State v. Mechs. Heating & Air Conditioning, LLC, No. 13108809 (Ga. Sup. Ct. Cobb Cnty., Oct. 11, 2013) (alleged fake favorable customer reviews, including on Yelp.com, Kudzu.com, and Google+Local.com). In September 2013, the New York Attorney General's office announced settlements with 19 companies that allegedly either purchased fake reviews or arranged to have fake reviews posted for their clients.

Numerous private lawsuits have involved purportedly fake consumer reviews. See, e.g., BHRS Grp., LLC v. Brio Water Tech., Inc., 553 F. Supp. 3d 793, 797 (C.D. Cal. 2021) (defendant allegedly enlisted individuals to purchase products for the purpose of leaving positive Amazon.com reviews of its products and negative Amazon.com reviews of plaintiff's competing products); Marksman Sec. Corp. v. P.G. Sec., No. 19–62467–CIV–CAN, 2021 U.S. Dist. LEXIS 196580, at *43 (S.D. Fla. Oct. 12, 2021) (denying plaintiff's motion for default and granting in part its motion for summary judgment in a case in which defendants paid for positive Google reviews from at least three individuals who never lived in a building that a defendant serviced); Rubinstein v. Ourian, No. 20–21948–CIV–MORE, 2021 U.S. Dist. LEXIS 171799, at *3–4 (S.D. Fla. Sep. 10, 2021) (order granting motions for summary judgment on claims and counterclaims in a case in which defendant allegedly purchased negative reviews of plaintiff plastic surgeon); RingCentral, Inc. v. Nextiva, Inc., No. 19–cv–02626–NC, 2021 U.S. Dist. LEXIS 114042, at *7–8 (N.D. Cal. June 17, 2021) (order denying plaintiff's motion for summary judgment, and granting in part defendant's motion for summary judgment in a case in which plaintiff alleged defendant posted fake positive reviews for itself and fake negative reviews of the plaintiff, and defendant made similar allegations about plaintiff); AlphaCard Sys. LLC v. Fery LLC, Civil Action No. 19–20110 (MAS) (TJB), 2020 U.S. Dist. LEXIS 147059, at *2 (D.N.J. Aug. 14, 2020) (denying defendant's motion to dismiss in a case in which defendant allegedly “placed” hundreds of phony Amazon.com customer reviews on defendant's products); Stonecoat of Tex., LLC v. Procal Stone Design, LLC, Civil Action No. 4:17CV303, 2019 U.S. Dist. LEXIS 153115, at *7–8 (E.D. Tex. July 25, 2019) (denying motions for summary judgment on claims and counterclaims, and denying motion to strike attachments in a case in which plaintiffs allegedly directed employees and/or representatives to submit fake complaints/negative reviews about defendant and post fake positive reviews about plaintiff); Super Mario Plumbing v. Belodedov, No. 2:17–cv–02545–TLN–AC, 2018 U.S. Dist. LEXIS 24514, at *1–3 (E.D. Cal. Feb. 14, 2018) (denying motion for preliminary injunction in a case in which defendant allegedly posted fake negative reviews about competitor plaintiff); SA Luxury Expeditions LLC v. Latin Am. for Less, LLC, No. C 14–04085 WHA, 2014 U.S. Dist. LEXIS 159520, at *1–2 (N.D. Cal. Nov. 12, 2014) (motion to dismiss held in abeyance in a case in which defendant allegedly posted fake negative consumer reviews about competitor plaintiff).

The problem of fake reviews is not limited to the United States. Regulators in other countries, including Canada, the United Kingdom, and Germany, as well as international bodies like the Organisation for Economic Co-operation and Development (OECD), have all stated fake reviews are a growing, thriving, or substantial marketplace problem. The extent of fake reviews outside of the United States lends additional support to the conclusion that fake reviews are prevalent, but the Commission is not determining prevalence based upon such facts.

The Commission has also challenged allegedly fictitious consumer testimonials that appear in advertising. See, e.g., Complaint at 15, 17–18, FTC v. Wellco, Inc., No. 1:21–cv–02081 (S.D.N.Y. Mar. 10, 2021) (testimonials allegedly copied from competitors' websites); Shop Tutors, Inc., 169 F.T.C. 476, 488–89 (2020) (allegedly fabricated testimonials); Complaint at 14, 19, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv–3423 (D. Colo. Dec. 5, 2019) (allegedly fake testimonials); Complaint at 20–22, 31, FTC v. Global Cmty. Innovations LLC, No. 5:19–CV–00788 (N.D. Ohio Apr. 10, 2019) (allegedly fake testimonials); Complaint at 12, 18, FTC v. Fat Giraffe Mktg. Grp. LLC, No. 2:19–cv–00063–CW (D. Utah Jan. 29, 2019) (the people featured in testimonials allegedly were not real customers); FTC v. Cardiff, No. ED 18–cv–02104–DMG (PLAx), 2020 U.S. Dist. LEXIS 210930, at *15–16 (C.D. Cal. Oct. 9, 2020) (granting in part FTC motion for summary judgment and finding testimonialists in infomercial had not used the product); Complaint at 12–13, 20, FTC v. Mktg. Architects, Inc., No. 2:18–cv–00050–NT (D. Me. Feb. 5, 2018) (allegedly fake testimonials); Complaint at 14, 21, FTC v. Health Res. Labs., LLC, No. 2:17–cv–00467–JDL (D. Me. Nov. 30, 2017) (allegedly fake testimonials); Complaint at 13, 18, 28, FTC v. XXL Impressions LLC, No. 1:17–cv–00067–NT (D. Me. Feb. 22, 2017) (defendants allegedly did not know whether consumer endorsers of their products who appeared in their ads actually exist); Complaint at 5, 7, 12–13, FTC v. Anthony Dill, No. 2:16–cv–00023–GZS (D. Me. Jan. 19, 2016) (allegedly fake testimonials); First Amended Complaint at 75, FTC v. Jeremy Johnson, No. 10–cv–2203–RLH (GWF) (D. Nev. Feb. 25, 2013) (defendants allegedly hired third parties to post fake positive online articles and web pages purportedly by consumers who had successfully used defendants' product to find government grants); FTC v. Grant Connect, LLC, 827 F. Supp. 2d 1199, 1228 (D. Nev. 2011) (granting summary judgment on FTC's deception count where defendants presented no evidence showing certain testimonials were genuine), aff'd in part and vacated in part on other grounds, 763 F.3d 1094 (9th Cir. 2014); Buckingham Prods., Inc., 106 F.T.C. 116 (1985) (testimonials allegedly do not represent actual and genuine testimonials from customers); Technobrands, Inc., 133 F.T.C. 647, 650, 654–55 (2002) (purported consumer endorsers allegedly did not exist); Plaza Club, Inc., 80 F.T.C. 62 (1972) (testimonialist allegedly was not a member of respondents' physical fitness facilities and unknown to respondents); New Standard Publ'g. Co., Inc., 47 F.T.C. 1350, 1366 (1951) (some of the testimonials and letters recommending encyclopedia allegedly were not genuine).

The use of fake celebrity endorsements is widespread. A 2018 Better Business Bureau in-depth investigative study found many celebrity endorsements are fake. According to one news report, Ellen DeGeneres and Sandra Bullock both sued 100 anonymous defendants who fraudulently used their names in promoting an anti-aging serum and weight-loss products, and dozens of other celebrities' names have been misappropriated in similar fashion.

The FTC has challenged numerous allegedly false claims that specific celebrities endorsed certain products, services, or businesses. See, e.g., Complaint at 22–23, 27–28, 38–39, FTC v. Effen Ads, LLC, No. 2:19–cv–00945–RJS (D. Utah Nov. 26, 2019); Complaint at 15, 19–20, 30–31, Global Cmty. Innovations LLC, No. 5:19–CV–00788 (N.D. Ohio Apr. 10, 2019); Complaint at 5, 18–20, 22–23, 36, FTC v. Tarr, Inc., No. 3:17–cv–02024–LAB–KSC (S.D. Cal. Oct. 3, 2017); Complaint at 12–13, FTC v. Tachht, Inc., No. 8:16–cv–01397–JDW–AEP (M.D. Fla. June 1, 2016); Complaint at 13–15, 18, FTC v. Sales Slash, LLC, No. CV15–03107 (C.D. Cal. Apr. 27, 2015); Complaint at 2, 4–5, Norm Thompson Outfitters, Inc., No. C–4495 (Sept. 29, 2014); Complaint at 15–17, FTC v. Central Coast Nutraceuticals, Inc., No. 10 C 4931 (N.D. Ill. Aug. 5, 2010); The Raymond Lee Org., Inc., 92 F.T.C. 489 (1978) (use of the names, photographs, and words of public officials, including members of Congress, allegedly misled consumers that the officials recommended or endorsed the business). Most recently, FTC staff published a blog post to warn consumers about scammers using fake Shark Tank celebrity testimonials and endorsements.

Consumer reviews and testimonials that are not entirely fabricated can still misrepresent the experiences of the purported reviewers and testimonialists, and such misrepresentations are prevalent. This conclusion is reflected in NAIMA's comment, which asserted testimonials by those misrepresenting their experiences with products are plentiful.

The Commission has challenged many advertisements that allegedly misrepresented endorsers' experiences. See, e.g., FTC v. Cardiff, 2020 U.S. Dist. LEXIS 210930, at *15–16, 48 (testimonialists had already lost weight without using the product); Complaint at 14, 18, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv–3423 (testimonialists had allegedly used a prior product formulation that contained substantially different ingredients); Complaint at 22, 25, NextGen Nutritionals, LLC, No. 8:17–cv–2807–T–36AEP (M.D. Fla. Jan. 9, 2018) (testimonials in ads allegedly did not represent the actual experiences of customers); Complaint at 22–24, 27, FTC v. Russell T. Dalbey, No. 1:11–cv–01396–CMA–KLM (D. Colo. May 26, 2011) (testimonials allegedly misrepresented earnings from brokering promissory notes using defendants' system); FTC v. Data Med. Capital, Inc., No. SA CV 99–1266 AHS (EEx), 2010 U.S. Dist. LEXIS 3344, *27 (C.D. Cal. Jan. 15, 2010) (testimonial for one defendant recycled as a fictitious testimonial for a different defendant); Complaint at 17, FTC v. Advanced Patch Techs., Inc., No. 104–CV–0670 (N.D. Ga. Mar. 10, 2004) (allegedly testimonialists attributed their weight loss to simply wearing the Pound A Patch but were also provided supervised exercise sessions three times per week); Esrim Ve Sheva Holding Corp., 132 F.T.C. 736, 740 (2001) (testimonial from respondent allegedly did not represent his actual findings and experience with the product); Computer Bus. Servs., Inc., 123 F.T.C. 75, 78–79 (1997) (testimonials by purchasers of home-based business ventures allegedly did not reflect their actual experiences); Twin Star Prods., Inc., 113 F.T.C. 847, 853–54 (1990) (endorsement allegedly did not reflect the honest opinions, findings, beliefs, or experience of the endorser); National Sys. Corp., 93 F.T.C. 58, 63–65 (1979) (some testimonials were allegedly untrue); Federated Sanitary Corp., 85 F.T.C. 130, 133 (1975) (alleging testimonials represented to be from salesmen, franchisees, or other distributors of respondents' products were not made by such individuals, and a substantial number of purported testimonialists had never dealt with the respondents); Natpac, Inc., 79 F.T.C. 454, 459 (1971) (testimonial letters were allegedly prepared by respondents and signed before the purported authors had received the products and had time to evaluate them); P. Lorillard Co., 46 F.T.C. 735, 740 (1950) (alleging testimonials did not present or reflect the actual personal experiences, knowledge, or beliefs of the signers; some testimonialists did not smoke Old Gold cigarettes or any cigarettes; many testimonials were prewritten by respondent's representatives; and many were known by the respondent to be false); R.J. Reynolds Tobacco Co., 46 F.T.C. 706, 731–32 (1950) (endorsements communicated that endorsers exclusively smoked Camel cigarettes when they did not smoke cigarettes, did not smoke Camels exclusively, or could not tell the difference between Camels and other cigarettes).

Accordingly, based on the foregoing evidence, the Commission concludes fake consumer reviews and testimonials, as well as reviews and testimonials that otherwise misrepresent the experiences of the reviewers and testimonialists, are prevalent.

B. Consumer Review or Testimonial Reuse or Repurposing

One type of review deception known as “review hijacking” or “review reuse fraud” appears to primarily or solely affect online marketplaces with third-party sellers, such as Amazon.com. Vendors and third-party sellers on Amazon's platform can make their own modifications to product pages, or request Amazon's assistance to do so, using features referred to as “product merging” and “product variation.” Products that are substantially similar and that differ only in narrow, specific ways—such as color, size, or quantity—but that do not alter the core essence of the item, such as a shirt that comes in multiple colors and different sizes, may share a variation relationship. Products in a variation relationship share the same product detail page. Each product will appear as an alternative on the product detail page, and, when a shopper selects a different product in the variation relationship, the content of the product detail page, such as the pictured product, may change. The variation relationship enables buyers to compare and choose among product attributes from a single product detail page, thereby facilitating customer choice and ease of shopping.

Some vendors and sellers abuse these features by repurposing a listing page for a product that has positive reviews ( e.g., a shower caddy or a jar of honey) and using it to sell a completely unrelated product ( e.g., a phone charger or a neck brace), thus inflating the star rating for the latter—and going unnoticed unless consumers read the individual reviews closely. By repurposing the page, the review hijacker is implicitly misrepresenting the repurposed reviews are for the second product and the product has more ratings and reviews than it does. The review hijacker may also be misrepresenting that the second product has a higher average star rating or that it has earned “Best Seller” or “Amazon's Choice” badges. These claims are unquestionably deceptive and of no redeeming value to legitimate marketers.

This problem has persisted since at least 2018 and is prevalent as reflected in reporting by Consumer Reports, The Verge, Buzzfeed News, and others. The reporting provides many examples of review hijacking found on Amazon.com across multiple product categories. The author of the Consumer Reports article stated that experts believe it is an “acute problem” and some legitimate Amazon.com sellers are overwhelmed with fighting it. The Verge article calls it a “common tactic” and quotes a former Amazon employee as saying “the problem is way bigger than people realize.”

The Commission recently brought its first case involving this type of review deception, suing a large vendor that boosted its newly launched products on Amazon.com. The vendor allegedly had Amazon establish variation relationships between the newer products and successful, established products that had more ratings and reviews, high average ratings, or “Amazon's Choice” or “#1 Best Seller” badges. See Complaint at 1–6, The Bountiful Co., No. C–4791 (Apr. 10, 2023).

Accordingly, based on the foregoing evidence, the Commission concludes that the unfair or deceptive reuse or repurposing of consumer reviews is prevalent.

C. Buying Positive or Negative Consumer Reviews

It is common for sellers or their agents to give incentives in exchange for reviews with the incentives conditioned on the sentiment of the reviews. In the review markets discussed in the comments and described above, prospective reviewers are offered free merchandise or money in exchange for 5-star reviews. Social media groups for procuring misleading reviews are prevalent. The UC Davis researchers found 242,000 products for which Amazon sellers solicited incentivized five-star Amazon.com reviews. In addition, the comment from the small business employee said that a competitor of the company for which she worked is providing incentives for 5-star reviews. In another academic study, UCLA researchers analyzed these review markets and resulting reviews on Amazon.com and found the market for fake reviews is large and the practice of buying and selling reviews is widespread.

The Commission has brought cases in which a marketer allegedly provided an incentive for a review or endorsement that was required to be positive. See, e.g., Complaint at 14, 19–20, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv–3423 (allegedly offered consumer endorsers free product in exchange for “especially positive and inspiring” reviews); Complaint at 5–6, 8, Urthbox, Inc., No. C–4676 (Apr. 3, 2019) (allegedly provided compensation for the posting of positive reviews on the BBB's website and other third-party websites); Complaint at 2–3, AmeriFreight, Inc., No. C–4518 (Feb. 27, 2015) (allegedly past customers were regularly encouraged to submit reviews of respondent's services in order to be eligible for a $100 “Best Monthly Review Award” given to “the review with the most captivating subject line and best content” and told that they should “be creative and try to make your review stand out for viewers to read!”).

Such conduct has also been challenged in private actions. See, e.g., Marksman Sec. Corp. v. P.G. Sec., 2021 U.S. Dist. LEXIS 196580, at *4 (denying plaintiff's motion for default and granting in part its motion for summary judgment in which it was undisputed that defendants paid for positive Google reviews).

Regulators in Australia, Denmark, and the United Kingdom, as well as the OECD, have issued guidelines or business guidance indicating companies should not provide incentives for giving positive reviews. While it may lend some additional support to the conclusion that the acts or practices are prevalent, the Commission is not concluding that the conduct is prevalent on the basis that other countries have taken actions.

Accordingly, based on the foregoing evidence, the Commission concludes the giving of incentives for reviews conditioned on the sentiment of the reviews is prevalent.

D. Insider Consumer Reviews and Testimonials

It is quite common for a company's owners, officers, managers, executives, employees, agents, or their relatives, to write consumer reviews or testimonials of its products or services.

According to Trustpilot, in 2021, more than 8,000 reviews for U.S. businesses were written by their owners, officers, or employees, or their family members. In addition, an individual commenter complained of having relied upon misleading reviews written by a business's employees or their spouses before selecting an auto repair shop.

The Commission has challenged numerous instances of deceptive reviews allegedly written by company insiders. See, e.g., Complaint at 21, 26–27, United States v. Vision Path, Inc., No. 1:22–cv–00176 (D.D.C. Jan. 25, 2022) (allegedly an executive of the company wrote a review on a third-party site and the co–CEO posted a public response thanking the reviewer); Complaint at 2–4, Sunday Riley Modern Skincare, LLC, No. C–4729 (Nov. 6, 2020) (company owner and managers allegedly asked company employees to write product reviews on third-party retailer's website); Creaxion Corp., 167 F.T.C. 71, 78–79 (2019) (company allegedly conducted program that reimbursed individuals, including the CEO and other company employees, for purchasing its product and posting online reviews); Complaint at 5–6, 8–9, Mikey & Momo, Inc., No. C–4655 (May 3, 2018) (Amazon.com reviews allegedly written by company officer and her relatives); Complaint at 10, 12, FTC v. Aura Labs, Inc., No. 8:16–cv–02147 (C.D. Cal. Dec. 12, 2016) (app store review and website testimonials allegedly written by CEO or relatives of Chairman); Complaint at 25–27, 32–33, FTC v. Universal City Nissan, Inc., No. 2:16–cv–07329 (C.D. Cal. Sept. 29, 2016) (customer reviews on third-party websites allegedly written by managers); Complaint at 10, United States v. Spokeo, Inc., No. 2:12–cv–05001–MMM–SH (C.D. Cal. June 7, 2012) (allegedly defendant directed its employees to draft and post comments endorsing its products on news and technology websites; and comments were reviewed and edited by managers and then posted using account names provided by defendant); Reverb Commc'ns, Inc., 150 F.T.C. 782, 783–84 (2010) (owner of public relations agency, her managers, and employees allegedly wrote iTunes store reviews for clients' games).

At least one State Attorney General has challenged alleged insider reviews. See Complaint at 15, State v. US Air Ducts & Sky Builders, Inc., No. 19–2–24757–6–SEA (Wash. Sup. Ct. Kings Cnty., Sept. 20, 2019) (Google reviews allegedly written by employees, relatives of employees, and the business owner).

The Commission has also challenged testimonials allegedly written by insiders in numerous instances. See, e.g., Complaint at 15, 19–20, FTC v. Health Ctr., Inc., No. 2:20–cv–00547 (D. Nev. Mar. 19, 2020) (defendants allegedly used testimonials from their employees that purported to be from ordinary consumers); Complaint at 14, 19, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv–3423 (D. Colo. 2019) (ads allegedly included a testimonial by a 50 percent owner and officer); Complaint at 21, 25–26, FTC v. NutriMost LLC, No. 2:17–cv–00509–NBF (W.D. Pa. Apr. 20, 2017) (testimonials in ads were allegedly from licensees or franchisees, their relatives, or their employees); Deutsch LA, Inc., 159 F.T.C. 1163, 1168–69 (2015) (public relations firm allegedly asked employees to tweet about client's product); Complaint at 19, 21, FTC v. Genesis Today, Inc., No. 1:15–cv–00062 (W.D. Tex. Jan. 26, 2015) (allegedly defendants' promotional materials linked to video testimonials by purported users of their weight-loss products that were provided by their employees); Complaint at 17, FTC v. Advanced Patch Techs., Inc., No. 104–CV–0670 (N.D. Ga. Mar. 10, 2004) (shopping mall segment of infomercial with testimonials from “real people” allegedly included at least one employee of the defendants or their agents); Brake Guard Prods., Inc., 125 F.T.C. 138, 191 (1998) (published testimonial was allegedly from a dealer/distributor of the product); Gisela Flick, 116 F.T.C. 1108, 113–14 (1993) (alleged infomercial endorsement by company's Athletic Director); Cliffdale Assocs., Inc., 103 F.T.C. 110, 144–45, 172 (1984) (testimonials were allegedly by business associates or relatives).

Accordingly, based on the foregoing evidence, the Commission concludes the use of consumer reviews and testimonials written by company insiders—that is, consumer reviews and testimonials written by a company's owners, officers, managers, executives, employees, agents, or their relatives—is prevalent.

E. Company-Controlled Review Websites or Entities

Numerous businesses have set up purportedly independent websites, organizations, or entities that review or endorse their own products.

In numerous cases, the Commission has challenged sellers who allegedly misrepresented that the websites they controlled provided independent opinions of products. See, e.g., Complaint at 2, 8–9, Son Le, No. C–4619 (May 31, 2020) (respondents allegedly operated purportedly independent websites that reviewed their own trampolines); FTC v. Roca Labs, Inc., 345 F. Supp. 3d 1375, 1389–90 (M.D. Fla. 2018) (defendants operated a purportedly independent, objective website that endorsed defendants' products); Complaint at 21–25, 28, FTC v. NourishLife, LLC, No. 1:15–cv–00093 (N.D. Ill. Jan. 7, 2015) (defendants allegedly operated a purportedly independent, scientific research website that endorsed a supplement sold only by defendants).

The Commission has also challenged sellers who allegedly created purportedly independent organizations or entities that supposedly reviewed or approved their products or services. See, e.g., Complaint at 3–5, Bollman Hat Co., No. C–4643 (Jan. 23, 2018) (respondents allegedly created a U.S.-origin seal misrepresenting that an independent organization endorsed their products as made in the United States); Complaint at 18–20, 26, NextGen Nutritionals, LLC, No. 8:17–cv–2807–T–36AEP (M.D. Fla. Jan. 9, 2018) (alleged misrepresentation that sites displaying the Certified Ethical Site Seal were verified by an independent, third-party program); Complaint at 2–4, Moonlight Slumber, LLC, No. C–4634 (Sept. 28, 2017) (respondent represented its baby mattresses had been certified by Green Safety Shield and failed to disclose the shield was its own designation); Complaint at 4–6, Benjamin Moore & Co., Inc., No. C–4646 (July 11, 2017) (respondent allegedly used a “Green Promise” seal of its own creation to misrepresent that paints had been endorsed or certified by independent third party); Complaint at 2–4, ICP Constr. Inc., No. 4648 (July 11, 2017) (same); Complaint at 2–3, Ecobaby Organics, Inc., No. C–4416 (July 25, 2013) (manufacturer allegedly misrepresented that seal-providing association was an independent, third-party certifier when it created and controlled that association); Nonprofit Mgmt. LLC, 151 F.T.C. 144, 148–49 (2011) (respondents allegedly misrepresented their seal program was endorsed by two independent associations when respondents owned and operated them); Complaint at 34, 37, FTC v. A. Glenn Braswell, No. 2:03–cv–03700–DT–PJW (C.D. Cal. May 27, 2003) (defendants allegedly established the Council on Natural Nutrition and then misrepresented it was an independent organization of experts who had endorsed defendants' products); Nat'l Media Corp., 116 F.T.C. 549, 559–60 (1993) (respondents allegedly claimed the National Association of Advertising Producers was an existing, independent organization that evaluates commercials for their integrity and excellence); Revco, D.S., Inc., 67 F.T.C. 1158, 1163, 1208–18, 1250–51 (1965) (respondents allegedly created and controlled Consumer Protective Institute and gave their products its seal of approval).

Accordingly, based on the foregoing evidence, the Commission concludes the practice of marketers setting up purportedly independent websites, organizations, or entities to review or endorse their own products is prevalent.

F. Review Suppression

The ANPR addressed two types of review suppression. One type involves a seller's website representing that the consumer reviews displayed represent most or all of the reviews submitted when, in fact, reviews are being suppressed based upon their negativity. Trustpilot commented that it was aware of the suppression of negative reviews on retailer or business websites.

In a recent case, the Commission alleged a retailer suppressed hundreds of thousands of 1-, 2-, and 3-star reviews submitted to its website. See Complaint at 1–2, Fashion Nova, LLC, No. C–4759 (Mar. 18, 2022). Staff also publicly addressed this issue in a 2020 closing letter to Yotpo, the company that provided review management services to Fashion Nova and numerous other merchants. FTC staff's investigation of Yotpo revealed more than 4,500 Yotpo merchant clients were only automatically publishing 4- or 5-star reviews. Of the 1-star reviews submitted to merchants not automatically publishing 1-star reviews, just 21 percent were published; and of the 2-star reviews submitted to merchants not automatically publishing 2-star reviews, just 31 percent were published. After FTC staff began investigating Yotpo, it implemented clear and prominent guidance to its clients on their need to promptly post reviews, including negative reviews, and began to automatically post negative reviews that have not been promptly reviewed and acted upon by its clients.

Foreign consumer protection entities have brought several actions involving companies that prevented the publication of negative reviews. An online health-care booking service in Australia, which published patient reviews, admitted it did not publish approximately 17,000 reviews and edited another 3,000 reviews either to remove negative aspects or to embellish positive aspects. An Australian court found a home building company held back bad reviews from its review websites to give a more favorable impression of its services. A New Zealand holiday home rental website pleaded guilty and was fined for removing negative comments about rental properties and its maintenance and management of them, and not publishing any reviews that gave a rating below 3.5 stars. The United Kingdom's Competition and Markets Authority secured an undertaking from an online knitwear retailer that did not publish all genuine, relevant, and lawful reviews submitted by its customers. The problem is sufficiently prevalent that an EU Directive prohibits “publishing only positive reviews and deleting the negative ones.” These foreign actions lend additional support to the conclusion that the conduct is prevalent, but the Commission is not determining prevalence based upon such actions.

The other type of review suppression addressed in the ANPR is suppression by unjustified legal threat or physical threat. The comments in response to the ANPR support a determination that such review suppression is prevalent. Yelp said it “constantly confronts” the use of “abusive and questionable or unjustified legal threats” to suppress reviews. Trustpilot has seen cases, mostly outside of the United States, where businesses have threatened consumers if they do not delete negative reviews. A comment from Ubiquitous Advising described a company in its local area that is constantly threatening and bullying reviewers in order to suppress bad reviews. The Transparency Company said every year thousands of lawyers are hired to intimidate the authors of negative reviews.

In a case against Roca Labs, Inc., the Commission successfully challenged as unfair the defendants' threats to enforce—and their actual enforcement of—non-disparagement clauses in form contracts that were intended to suppress customers' negative reviews. A subsequent FTC case against World Patent Marketing challenged alleged review suppression through physical intimidation as unfair. According to the Commission's complaint, the defendants in that matter “cultivate[d] a threatening atmosphere through emails to would-be complainants.” For example, they distributed, through an email to all of their then-existing customers, a blog post discussing an incident that purportedly occurred in their offices: A consumer that allegedly wanted to speak with them about an invention idea was stopped, detained, and expelled by their “intimidating security team, all ex-Israeli Special Ops and trained in Krav Maga, one of the most deadly of the martial arts.” The post continued: “The World Patent Marketing Security Team are the kind of guys who are trained to knockout first and ask questions later.”

State Attorneys General have also challenged the alleged use of unjustified legal threats in attempts to have consumers remove negative reviews. See, e.g., Complaint at 12–14, Maine v. Liberty Bell Moving & Storage, Inc., 2:2022cv00204 (D. Me. July 8, 2022); Complaint at 4, Washington v. Alderwood Surgical Ctr., LLC.

A State Attorney General challenged the alleged suppression of negative reviews through intimidation, albeit not physical intimidation, and false accusations. Complaint at 5–7 and Appendices A–C, State v. Mechs. Heating & Air Conditioning, LLC (alleged publishing or threatening to publish the names, home addresses, telephone numbers, email addresses, and photographs of consumers who wrote negative reviews, together with accusations that the consumers engaged in illegal or unethical activities or otherwise maligning their character).

Accordingly, based on the foregoing evidence, the Commission concludes the types of review suppression discussed above are prevalent.

G. Indicators of Social Media Influence

In order to sell or market themselves or their products or services, some individuals and businesses misrepresent their social media influence by buying fake followers, fake subscribers, fake views, and other similar inauthentic indicators of such influence.

The Commission addressed the alleged sale and use of such fake and inauthentic indicators in complaint against Devumi, LLC. In that matter, the Commission alleged that, by selling and distributing these indicators to users of various social media platforms, the defendants enabled the purchasers to “exaggerate and misrepresent their social media influence,” thereby providing the means and instrumentalities for the purchasers to engage in deception. For example, the defendants allegedly sold fake Twitter followers to actors, athletes, musicians, writers, and other individuals who wanted to increase their appeal as influencers and to motivational speakers, law firm partners, investment professionals, experts, and other individuals who wanted to boost their credibility to potential clients for their services.

At least one State Attorney General has brought a case challenging the alleged misuse of fake indicators of social media influence for commercial purposes. In December 2022, the Washington State Attorney General filed suit against a plastic surgery provider accused of buying tens of thousands of fake “followers” on Instagram and thousands of fake “likes” on Instagram and other social media to create a false appearance of popularity in its advertising to consumers.

Platforms have also sued the sellers of fake indicators of social media influence. In April 2019, Facebook, Inc., and Instagram LLC sued the operators of websites offering fake engagement services. The operators allegedly used a network of computers or “bots” and Instagram accounts to provide fake “likes,” “views,” and “followers” to their customers' Instagram accounts.

Both the FTC and an independent organization have analyzed bots, inauthentic social media accounts, and fake followers. In July 2020, the Commission issued a report to Congress, titled “Social Media Bots and Deceptive Advertising.” The report stated social media companies have reported removing or disabling billions of inauthentic accounts, the online advertising industry has taken steps to curb bot and influencer fraud, and the computing community is designing sophisticated social bot detection methods, but nonetheless, use of social media bots remains a serious issue. A 2023 report by the NATO Strategic Communications Centre of Excellence, which analyzed the market for inauthentic social media accounts and fake followers for several years, found it is as fast and cheap to buy them now as several years ago, and the platforms' ability to detect and remove them is declining overall. Citing TikTok's own reports that it had removed 1.4 billion fake followers in the second quarter of 2022, the researchers stated the total number of fake followers on that platform during that period was likely much higher, given their experiments found only five percent of all purchased fake engagement was identified and removed in a four-week period. Further, in a 2022 study, researchers found that fake views of YouTube videos are widespread, and that the platform does not correct them quickly.

Accordingly, based on the foregoing evidence, the Commission concludes the sale and misuse of fake indicators of social media influence for commercial purposes is prevalent.

IV. Reasons for the Proposed Rule on the Use of Consumer Reviews and Testimonials

The Commission believes the proposed Rule will substantially improve its ability to combat certain specified, clearly unfair or deceptive acts or practices involving consumer reviews or testimonials. Although such practices are already unlawful under Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, the proposed Rule may increase deterrence against these practices in the first instance and will allow the Commission to seek civil penalties against the violators and more readily obtain monetary redress for their victims. As discussed below, the proposed Rule would accomplish these goals without significantly burdening honest businesses and provide benefits to consumers and honest competitors.

The Commission's objective in commencing this rulemaking is to deter certain clearly unfair or deceptive acts or practices involving consumer reviews or testimonials, and expand the remedies available to it in instances where such practices are uncovered. A recent U.S. Supreme Court decision, which overturned 40 years of precedent from the U.S. Circuit Courts of Appeal uniformly holding that the Commission could take action under Section 13(b) of the FTC Act, 15 U.S.C. 53(b), to return money unlawfully taken from consumers through unfair or deceptive acts or practices, has made it significantly more difficult for the Commission to return money to injured consumers. Without Section 13(b) as it had historically been understood, the only method the Commission has to return money unlawfully taken from consumers is Section 19 of the FTC Act, 15 U.S.C. 57b, which provides two paths for consumer redress. The longer path, under Section 19(a)(2), requires the Commission to first issue a final cease-and-desist order—including any resulting appeal. Then, to recover money for consumers, the Commission must prove separately in Federal court that the violator engaged in fraudulent or dishonest conduct. The shorter path to monetary relief is under Section 19(a)(1), which allows the Commission to recover redress directly through a Federal court action and is available only when the Commission alleges violation of a rule. None of the Commission's cases challenging deceptive consumer reviews or testimonials has involved other misconduct for which the Commission sought civil penalties under any of the rules it enforces.

In addition, the longer path to redress under Section 19(a)(2) provides relief only to redress consumer injury, which may be difficult to quantify in certain circumstances. By contrast, with a rule violation, the shorter path to redress under Section 19(a)(1) also gives the Commission the ability to obtain civil penalties, which punish the wrongdoer, provide general and specific deterrence, and do not require quantifiable proof of consumer injury.

Outlawing egregious review and testimonial practices by rule expands the Commission's enforcement toolkit and allows it to deliver on its mission by stopping and deterring harmful conduct and, in some cases, making American consumers whole when they have been wronged. Because fake reviews and the other unfair or deceptive review and testimonial practices described here are so prevalent and so harmful, the unlocking of additional remedies through this rulemaking, particularly the ability to seek civil penalties against violators and obtain redress for consumers or others injured by the conduct, will allow the Commission to more effectively police harmful review and testimonial practices that plague consumers and honest businesses.

V. Overview and Scope of Proposed Rule on the Use of Consumer Reviews and Testimonials

A. Key Definitions

Proposed § 465.1 would provide definitions for 12 terms as they appear in proposed 16 CFR part 465, including, among others, definitions for the terms “consumer reviews,” “consumer testimonials,” and “celebrity testimonials.”

The term “consumer review” is defined in proposed § 465.1(d) as a consumer's evaluation, or a purported consumer's evaluation, of a product, service, or business that is submitted by the consumer, or purported consumer, and that is published to a website or platform dedicated in whole or in part to receiving and displaying such reviews. The definition states that consumer reviews include consumer ratings, regardless of whether they include any text or narrative.

The definition includes “purported consumers” so that it covers reviews by authors who do not exist. It does not include all consumer evaluations of products or services, such as a blog post or other social media post evaluating a product; it is limited to those submitted to a website or platform or portion thereof dedicated to such reviews. Such websites and platforms would include, among other things, third-party review platforms and advertiser and retailer websites that collect and display consumer reviews. A consumer review submitted and published to one website that is republished on a second website is still a consumer review as republished. A consumer review is not necessarily advertising.

The term “consumer testimonial” is defined in proposed § 465.1(e) as an advertising or promotional message that consumers are likely to believe reflects the opinions, beliefs, or experiences of a consumer who has purchased, used, or otherwise had experience with a product, service, or business. Proposed § 465.1(b) provides a corresponding definition of the term “celebrity testimonial.” It defines the term “celebrity testimonial” as an advertising or promotional message that consumers are likely to believe reflects the opinions, beliefs, or experiences of a well-known person who purchased, used, or otherwise had experience with a product, service, or business.

B. Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials

Proposed § 465.2 would prohibit certain types of deceptive conduct involving “consumer reviews,” “consumer testimonials,” and “celebrity testimonials.”

Proposed § 465.2(a) would prohibit a business from writing, creating, or selling a consumer review, consumer testimonial, or celebrity testimonial that: (a) is by someone who does not exist; (b) is by someone who did not use or otherwise have experience with the product, service, or business that is the subject of the review or testimonial; or (c) materially misrepresents the reviewer's or testimonialist's experience with the product, service, or business.

Proposed § 465.2(b) would render it a deceptive act or practice for a business to purchase consumer reviews, or disseminate or cause the dissemination of consumer or celebrity testimonials, about the business or one of its products or services, if the business knew or should have known that the review or testimonial: (a) was by someone who does not exist, (b) is by someone who did not use or otherwise have experience with the product, service, or business, or (c) materially misrepresents the reviewer's or testimonialist's experience with the product, service, or business. In accordance with proposed § 465.1(h), “purchase a consumer review” means to provide something of value, such as money, goods, or another review, in exchange for a consumer review.

Proposed § 465.2(c) would make it a deceptive act or practice for a business to procure consumer reviews about the business or one of its products or services for posting on a third-party platform or website, if the business knew or should have known that the review: (a) was by someone who does not exist, (b) is by someone who did not use or otherwise have experience with the product, service, or business, or (c) materially misrepresents the reviewer's experience with the product, service, or business.

Google's comment said a proposed rulemaking should not apply to review platforms. Proposed § 465.2 accounts for this concern. The provision does not apply to businesses, like third-party review platforms, that disseminate consumer reviews that are not of their products, services, or businesses. Neither does it apply to any reviews that a platform simply publishes and that it did not purchase.

NRF opposed requiring the manual review of every consumer review and poster's profile. Proposed § 465.2 accounts for this concern by not imposing any obligation on those publishing consumer reviews to manually review consumer reviews or poster profiles and by not applying to reviews that a platform simply publishes.

Trustpilot asserted any rule should consider a consumer review to be legitimate if the consumer had experience with the business, even if no purchase was made, and NRF's comment opposed requiring retailers to restrict consumer reviews to verified purchasers. In light of these concerns, proposed § 465.2 does not limit legitimate reviews to reviews by purchasers or verified purchasers. It requires only that the reviewer had experience with the product, service, or business.

NRF also recommended any rule provision addressing fake reviews be limited to review brokers and not apply to the parties purchasing the reviews. It said that buyers of fake reviews should not be covered by a rule because the Commission can already bring a “formal enforcement action seeking monetary damages,” and it was not opposed to Commission action against such purchasers. The Commission believes a rule should indeed apply to those who knowingly purchase fake reviews given that they are no less culpable for deceiving consumers than the brokers. The Commission's ability to seek monetary relief without a rule applies to both brokers and buyers, and it does not obviate the need for a rule because, as discussed above, seeking such relief is much more difficult without a rule.

C. Consumer Review Repurposing

Proposed § 465.3 would prohibit a business from using or repurposing, or causing the use or repurposing of, a consumer review written or created for one product so it appears to have been written or created for a substantially different product. This could consist of combining substantially different products so that they share consumer reviews or changing a product page so it features a different product but retains the reviews of the prior product, or copying reviews of other products from other sites. The term “substantially different product” is defined in proposed § 465.1(j), which establishes that the term refers to a product that differs from another product in one or more material attributes other than color, size, count, or flavor. Although differences in flavor are likely to be material to some consumers in some instances, the question can be highly fact specific. For this reason, combining reviews for a product that has multiple flavors would not be a rule violation, though it could still be a deceptive practice under the FTC Act.

D. Buying Positive or Negative Consumer Reviews

Proposed § 465.4 would prohibit a business from offering compensation or other incentives in exchange for, or conditioned on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative, regarding the product, service, or business that is the subject of the review.

ANA's comment asserted any proposed rulemaking should not address “review gating” or the “ mere solicitation of positive reviews.” Review gating occurs when a business asks past purchasers to provide feedback on a product and then invites only those who provide positive feedback to post online reviews on one or more websites. Review gating and the mere solicitation of positive reviews are not covered by the proposed Rule. Although the Commission believes review gating can be deceptive, whether any given instance of review-gating is deceptive can be highly fact specific.

Family First Life commented that the FTC should not promulgate a rule “that sweeps in and penalizes any review just because the reviewer was offered an incentive to write it . . . without otherwise dictating what the review says.” The proposed Rule does not address incentivized reviews except for those required to express a particular sentiment, but the Commission notes that other uses of incentivized reviews can be deceptive and violate the FTC Act. The deceptiveness of undisclosed incentivized reviews is highly fact specific.

E. Insider Consumer Reviews and Consumer Testimonials

Proposed § 465.5 addresses company insider consumer reviews and consumer testimonials in three different ways. Proposed § 465.5(a) applies to insider reviews and testimonials; proposed § 465.5(b) applies to insider testimonials; and proposed § 465.5(c) applies to insider reviews.

Proposed § 465.5(a) would prohibit an officer or manager of a business from writing or creating a consumer review or consumer testimonial about the business or its products or services if the consumer review or consumer testimonial does not have a clear and conspicuous disclosure of the officer's or manager's relationship to the business. Proposed § 465.1(c) defines “clear and conspicuous” to mean that a required disclosure is easily noticeable ( i.e., difficult to miss) and easily understandable by ordinary consumers, including in all of the ways listed in the definition. This is the same definition the Commission proposed in its Negative Option Rule Notice of Proposed Rulemaking. In accordance with proposed § 465.1(g), “officers” are defined to include a business's owners, executives, and managing members.

Proposed § 465.5(b) applies to consumer testimonials in advertisements disseminated by or on behalf of a business. It would prohibit a business from disseminating or causing the dissemination of certain consumer testimonials about the business or its products or services if the consumer testimonial is written by the business's officers, managers, employees, or agents, or any of their relatives without clear and conspicuous disclosures of those relationships. This provision would apply only when the business knew or should have known of the testimonialist's relationship.

Proposed § 465.5(c) applies to solicitations of employee and other insider reviews. It would prohibit under some circumstances an officer's or manager's solicitation of consumer reviews from employees, agents, or relatives that results in reviews that don't clearly and conspicuously disclose the reviewer's relationship. The provision is limited to situations when the person soliciting the review knew or should have known of the prospective reviewer's relationship and: (a) failed to instruct the prospective reviewer to disclose clearly and conspicuously that relationship, (b) knew or should have known the review appeared without such a disclosure and failed to take remedial steps or, (c) encouraged the prospective reviewer not to make such a disclosure.

NADA recommended any proposed rule provision addressing businesses writing, soliciting, or publishing reviews by their employees or family members clarify that a violation “only arises when the business, and not another entity, affirmatively writes, solicits, and publishes reviews that fail to provide clear and conspicuous disclosures of those relationships.” Proposed § 465.5(c) would apply to reviews by employees or family members. Proposed § 465.5(c) is limited to solicitation by an officer or manager, and only when the solicitor failed to advise a disclosure, knew or should have known that a review appeared without such a disclosure and failed to take remedial steps, or encouraged the prospective reviewer not to make such a disclosure. The business would not be liable under the proposed provision for an unsolicited review, for a review about which the solicitor reasonably should not have known, or for a reviewer who refuses to make a disclosure. However, proposed § 465.5(c) reflects the Commission's belief that businesses should be prohibited not only from publishing insider reviews themselves but also from causing their creation ( e.g., when an officer or manager of the business solicits employees to post reviews on third-party review websites and fails to instruct the employees to disclose their relationship to the business).

NADA asked the FTC to define the term “relative.” The Commission believes that the limitation to situations in which officers or managers know or should know that they are soliciting a relative for an endorsement or testimonial addresses the comment without the need for a definition.

Family First Life commented that when an independent contractor agent writes a review on a workplace-review platform such as Glassdoor, the reviewer's relationship to the company is obvious and assumed. The Commission agrees, in reviews on such platforms, the relationship is readily apparent and, in effect, already disclosed. The Commission does not believe the proposed Rule needs to specifically address this scenario.

F. Company-Controlled Review Websites or Entities

Proposed § 465.6 prohibits a business from representing that a website, organization, or entity is providing its independent reviews or opinions about a category of businesses, products, or services that includes the business or its products or services, when the business controls, owns, or operates that website, organization, or entity.

G. Review Suppression

Proposed § 465.7 addresses two types of review suppression. The first type, addressed in proposed § 465.7(a), would prohibit anyone from using an unjustified legal threat or a physical threat, intimidation, or false accusation to prevent the creation of a consumer review or cause the removal of all or part of a review. In accordance with proposed § 465.1(l), an “unjustified legal threat” is defined as a threat to initiate or file a baseless legal action, such as an action for defamation that challenges truthful speech or matters of opinion.

NADA recommended that any proposed rule not prohibit what it characterized as good faith online reputation management practices, such as a business: (a) reaching out to consumers who have posted negative reviews and attempting to improve their reviews by addressing their concerns (including sometimes giving customers something of value in satisfaction of their complaints), or (b) responding on a comment thread to each negative review, offering an explanation, making customers whole, and asking any successfully satisfied customers to update their previously negative review. Neither proposed § 465.7(a) nor any other proposed Rule provision would prohibit such conduct (assuming that reviewers are not required to remove or change their reviews in order to be made whole).

Proposed § 465.7(b) would prohibit a business from misrepresenting that the consumer reviews of one or more of its products or services displayed on its website or platform represent most or all the reviews submitted to the website or platform if reviews are being suppressed based upon their ratings or their negativity. As proposed, the provision makes clear that the non-publication of consumer reviews for certain enumerated reasons is not considered to be review suppression so long as the criteria for withholding reviews are applied to all reviews submitted without regard to the favorability of the review. The listed acceptable reasons for not publishing a review are: (a) that the review contains: (i) trade secrets or privileged or confidential commercial or financial information, (ii) libelous, harassing, abusive, obscene, vulgar, or sexually explicit content, (iii) the personal information or likeness of another person, (iv) content that is discriminatory with respect to race, gender, sexuality, ethnicity, or another protected class, or (v) content that is clearly false or misleading; (b) the seller reasonably believes it is fake; or (c) the review is wholly unrelated to the products or services offered by or available at the website or platform. These criteria are based upon those enumerated in the Consumer Review Fairness Act, 15 U.S.C. 45b(b)(2) and (3). Moreover, consumers would reasonably expect and often prefer that a business exclude reviews meeting these criteria, so the undisclosed exclusion of such reviews solely due to application of those criteria would be unlikely to mislead or be material to consumers.

NADA stated that businesses should be able to “remove reviews or comments that are off topic or include false statements, advertisements, inappropriate language, or confidential or personal identification information.” As to reviews that are “off topic,” proposed § 465.7(b) would permit not publishing reviews that are “wholly unrelated to the products or services offered.” As to reviews that contain “false statements,” proposed § 465.7(b) would permit not publishing reviews that are “clearly false or misleading.” It is unclear what the comment meant by reviews that include “advertisements.” If NADA means that it is acceptable to delete a review that mentions a competitor, that is not an exception provided in proposed § 465.7(b). With regard to reviews that contain “inappropriate language,” proposed § 465.7(b) would permit not publishing reviews containing “harassing, abusive, obscene, vulgar, or sexually explicit content” or “content that is discriminatory with respect to race, gender, sexuality, ethnicity, or another protected class.” As to reviews that contain “confidential or personal identification information,” proposed § 465.7(b) would allow a seller to not publish a review that contains “trade secrets or privileged or confidential commercial or financial information,” or the “personal information . . . of another person.” NADA also said that businesses should be able to “remove comments or review functions on their own websites or certain social media posts.” The proposed Rule does not prohibit or address such conduct.

H. Misuse of Fake Indicators of Social Media Influence

Proposed § 465.8 prohibits the misuse of indicators of social media influence. As defined by proposed § 465.1(f), the term “indicators of social media influence” refers to any metrics used by the public to make assessments of an individual's or entity's social media influence, such as followers, friends, connections, subscribers, views, plays, likes, reposts, and comments.

Proposed § 465.8(a) prohibits anyone from selling fake indicators of social media influence that can be used by persons or businesses to misrepresent their influence for a commercial purpose. Proposed § 465.8(b) prohibits anyone from procuring fake indicators of social media influence to misrepresent their influence or importance for a commercial purpose.

I. Severability

Proposed § 465.9 is a severability provision. It provides that the provisions of the proposed Rule are separate and severable from one another. If any provision is stayed or determined to be invalid, the remaining provisions will continue in effect.

VI. The Rulemaking Process

The Commission can decide to finalize the proposed Rule if the rulemaking record, including the public comments in response to this NPRM, supports such a conclusion. The Commission may, either on its own initiative or in response to a commenter's express request, engage in additional processes, including those described in 16 CFR 1.12 and 1.13. If the Commission on its own initiative decides to conduct an informal hearing, or if a commenter files an express request for such a hearing, then a separate notice will issue under 16 CFR 1.12(a). Any person who would like to participate by providing an oral statement at any informal hearing must make an express request to do so in response to this NPRM. Based on the comment record and existing prohibitions against unfair or deceptive consumer reviews and testimonials under Section 5 of the FTC Act, the Commission does not here identify any disputed issues of material fact necessary to be resolved at an informal hearing. The Commission may still do so later, on its own initiative or in response to a commenter.

VII. Preliminary Regulatory Analysis

Under Section 22 of the FTC Act, the Commission, when it publishes any NPRM for a rule as defined in Section 22(a)(1), must include a “preliminary regulatory analysis.” 15 U.S.C. 57b–3(b)(1). The required contents of a preliminary regulatory analysis are (a) “a concise statement of the need for, and the objectives of, the proposed rule,” (b) “a description of any reasonable alternatives to the proposed rule which may accomplish the stated objective,” and (c) “a preliminary analysis of the projected benefits and any adverse economic effects and any other effects” for the proposed rule and each alternative, along with an analysis “of the effectiveness of the proposed rule and each alternative in meeting the stated objectives of the proposed rule.” 15 U.S.C. 57b–3(b)(1)(A)–(C). This NPRM already provided the concise statement of the need for, and the objectives of, the proposed Rule in Section IV above. It addresses the other requirements below.

A. Anticipated Costs and Benefits and Reasonable Alternatives

The Commission is proposing a rule to curb certain unfair or deceptive uses of reviews and testimonials. The proposed Rule contains several provisions to promote accuracy in consumer reviews (henceforth “reviews”) and, thus, will help the vast majority of American consumers who rely on such reviews to make better-informed purchase decisions. The proposed Rule prohibits: the creation, purchasing, procurement, or dissemination of fake or false reviews; repurposing of reviews for substantially different products; and buying of reviews in exchange for, or conditioned on, positive or negative sentiments. It also includes prohibitions on fake or false consumer or celebrity testimonials, insider reviews, misleading company-controlled review websites or entities, certain review suppression practices, and the misuse of indicators of fake social media influence.

The Commission believes that the benefits of proceeding with the rulemaking will significantly outweigh the costs, but it welcomes public comment and data (both qualitative and quantitative) on any benefits and costs to inform a final regulatory analysis.

In the preliminary analysis below, the NPRM describes the anticipated impacts of the proposed Rule. Where possible, it quantifies the benefits and costs. If a benefit or cost is quantified, it indicates the sources of the data relied upon. If an assumption is needed, the text makes clear which quantities are being assumed. The NPRM measures the benefits and costs of the proposed Rule against a baseline in which no rule regarding consumer reviews has been promulgated by the Commission. The Commission solicits comments from the public to improve these estimates before the promulgation of any final rule.

The estimates in this preliminary analysis attempt to include a broad set of economic actors, using data on the number of entities registered as businesses in the United States, data on retail sales, and data on U.S. consumers who shop online. The Commission invites submission of information pertaining to additional economic actors who would be affected by the proposed Rule. Conversely, the Commission solicits information on whether a more limited set of economic actors would yield improved estimates.

Quantifiable benefits stem from consumer welfare improvements and consumer time savings. With the proposed Rule, online reviews will be more accurate overall, leading consumers to purchase higher-quality products or products that are better-matched to their preferences. The proposed Rule will also lead to more trustworthy aggregate review ratings ( e.g., star ratings), leading some consumers to spend less time scrutinizing reviews to determine their validity. Quantifiable costs primarily reflect the resources spent by businesses to review the proposed Rule and to take any preemptive or remedial steps to comply with its provisions. Because the proposed Rule is an application of preexisting law under Section 5 of the FTC Act, the Commission expects these compliance costs to be minimal.

A period of 10 years is used in the baseline scenario because FTC rules are subject to review every 10 years. Quantifiable aggregate benefits and costs are summarized as the net present value over this 10-year period in Table 1.1. The discount rate reflects society's preference for receiving benefits earlier rather than later; a higher discount rate is associated with a greater preference for benefits in the present. The present value is obtained by multiplying each year's net benefit by the discount rate raised to the power of the number of years in the future the net benefit accrues.

1. Estimated Benefits of the Proposed Rule

This section describes the beneficial impacts of the proposed Rule, provides preliminary quantitative estimates where possible, and describes benefits that are only assessed qualitatively. The quantifiable estimates reflect benefits stemming from the decrease in online review manipulation on third-party platforms or company websites, which covers most of the prohibitions contained in the proposed Rule. This analysis does not calculate benefits from the other aspects of the proposed Rule—prohibitions on fake or false celebrity testimonials; prohibitions on company-controlled entities that purportedly provide independent opinions; prohibitions on unjustified legal threats or physical threats, intimidation, or false accusations in an attempt to suppress negative consumer reviews; and prohibitions on the misuse of indicators of fake social media influence—because of the limited quantitative research in these areas. The Commission invites comment on research concerning these other aspects of the proposed Rule. The quantified benefits are presented by benefit category, rather than stemming from a specific provision in the proposed Rule, because the relevant provisions have the same end goal—that is, to improve the information available to consumers by reducing the level of review manipulation. Therefore, it is difficult to disentangle the benefits stemming from each provision.

Existing academic literature in economics, marketing, computer science, and other fields documents the importance of online reviews: the number of online reviews and aggregate ratings are extremely important for consumer purchase decisions. It is widely documented that the presence of online reviews improves consumer welfare via reductions in both search costs and the level of information asymmetry that exists prior to purchase.

When making purchase decisions, consumers typically have incomplete information on product quality and attributes. Searching for additional information is costly. Consumers incur costs—including time and effort costs—to seek, evaluate, and integrate incoming information. Online platforms where past users share information about their experiences can significantly lower search costs.

Researchers have also demonstrated consumer reviews create value for consumers beyond a reduction in search costs. Consumers are better able to learn of a product's quality and attributes when there is free-flowing, non-manipulated commentary from past consumers. Consumer reviews lead to “better” decisions by increasing the level of information available prior to purchase and reducing uncertainty. By the same token, the academic literature also documents that manipulated or fake reviews lead to reductions in consumer welfare by leading consumers to buy low-quality products or otherwise make suboptimal purchase decisions.

A secondary benefit is deterrence of the specified review and testimonial practices. The proposed Rule is essentially the only means for imposing civil penalties in most cases involving such practices. Civil penalties are not generally available under the FTC Act for this conduct, unless parties are already subject to a relevant Commission order or have been served with a copy of a relevant Notice of Penalty Offenses. Also, as noted above, in many cases involving this conduct, calculating redress or other Section 19 relief may be difficult. Without civil penalties, bad actors have little fear of being penalized for using fraud and deception in connection with reviews and endorsements.

To obtain redress without alleging a rule violation, the Commission must successfully conclude an administrative proceeding including any appeal and file a follow-on Federal case under Section 19 to establish that the conduct is “one which a reasonable man would have known under the circumstances was dishonest or fraudulent.” Although the Commission is likely to meet this standard in cases involving the conduct covered by the proposed Rule, it would take substantially more time and resources, and would significantly delay any redress to victims, compared to a case under the proposed Rule violation, which does not require multiple proceedings or a special knowledge requirement.

Given the prevalence of unfair or deceptive conduct involving reviews and testimonials, the Commission will have no shortage of bad actors to investigate; it could invest the extra resources freed up by any final rule into more investigations and actions with respect to consumer reviews or testimonials. In sum, the potential consumer-redress benefits of the proposed Rule are significant: the Commission could put a stop to more inarguably unfair or deceptive consumer reviews or testimonials, return money to more victims, and obtain that redress more quickly.

a. Consumer Welfare Benefits From Better-Informed Purchase Decisions

The study containing the most direct estimate of welfare losses from review manipulation finds that the presence of fake reviews leads consumers to lose $0.12 for every dollar spent in an experimental setting. Due to limited quantitative estimates in the literature, the NPRM assumes this measure of welfare loss encompasses the various types of review manipulation covered by the proposed Rule. It also assumes the proposed Rule causes all fake or manipulated reviews to vanish. Thus, consumers will gain an estimated $0.12 for every dollar spent on goods whose online reviews included fake ones.

To estimate consumer welfare benefits from better-informed purchase decisions, the NPRM first estimates the total amount of sales for which consumers consult online reviews. U.S. e-commerce sales totaled $1.034 trillion in 2022. The NPRM assumes all products sold online had some form of user-generated commentary ( e.g., on third-party review platforms, on discussion boards, on company websites, or on social media), and that this commentary factors into consumers' purchase decisions for these goods.

Online reviews are also important for commerce not conducted online, including for revenues earned by the hospitality industry and by other services. Sales for businesses classified as “Food Services and Drinking Places” by the U.S. Census totaled $843.61 billion in 2021, which includes revenue from restaurants and bars. The NPRM assumes consumers rely on reviews for only a portion of these sales. Some consumers—particularly those living in rural parts of the country and in smaller cities—may have a small set of familiar food and drink establishments available to them, making online reviews less influential to their decision to patronize a particular one. Moreover, prior research has found online reviews do not impact revenues of chain restaurants. Accordingly, the NPRM assumes consumers rely on reviews for 25 percent of the total revenue generated in the food services and drinking places sector (25 percent of $843.61 billion, or $210.90 billion).

Online reviews are also important for sales in other service sectors. In 2021, total revenue was $247.25 billion for the accommodations sector (which includes hotels and vacation rentals), and total revenue was $56.85 billion for personal services (including beauty salons, barber shops, health clubs, and non-veterinary pet care), totaling $304.10 billion for both sectors. About half of hotel revenue is generated by business travelers, who are likely to rely less on online reviews than leisure travelers do. In addition, pre-paid hotel bookings and vacation rentals booked online are already accounted for in the e-commerce sales figure described above. Furthermore, some consumers may be loyal customers of local salons and other personal services, regardless of these businesses' online reputations. Because of these reasons, the NPRM assumes that a subset of accommodation and personal services revenues is affected by consumer reviews. Similar to the calculation for the food and drinking places industry, the NPRM assumes 25 percent of total accommodation and personal care services revenue is impacted by consumer reviews (25 percent of $304.10 billion, or $76.03 billion). The total estimated revenue for services impacted by consumer reviews is $286.93 billion (the sum of $210.90 billion and $76.03 billion). The Commission seeks comments to improve this estimate.

Combining the revenue estimates described above yields $1.321 trillion in estimated sales of goods or services for which consumers incorporate reviews into their decision-making. In this analysis, the NPRM does not incorporate revenues stemming from the physical sale of goods in retail stores where consumers read online reviews before purchasing items in person. The Commission invites commenters to submit information to quantify non-e-commerce retail sales that are impacted by reviews.

Quantitative estimates of the incidence of fake or false reviews vary by source. Nevertheless, at least three prior studies examining the degree of review manipulation as a proportion of businesses or products (rather than as a proportion of reviews ) contain similar findings: according to these studies, approximately 10 percent of products or businesses have some manipulated consumer reviews. Thus, a basic approximation of total e-commerce sales involving some review manipulation is 10 percent of $1.034 trillion, or $103.4 billion. Similarly, a basic approximation of review-dependent service industry sales involving some review manipulation is 10 percent of $286.93 billion, or $28.69 billion. The Commission seeks submissions of additional research on the prevalence of review manipulation to improve this estimate.

Importantly, online businesses that engage in review manipulation are likely to earn less revenue than other e-commerce companies. For example, prior research has found independent firms and sellers offering lower-quality products are more likely to engage in review manipulation. Therefore, e-commerce sales affected by review manipulation are likely to be lower than the $103.4 billion in sales described above. A more conservative estimate of e-commerce sales involving review manipulation can be obtained by using price differentials of review-manipulated products versus others. Because products with online review manipulation have price points approximately 19 percent of the average price of goods sold online (according to research using data from Amazon), a more conservative estimate of review-manipulated products' revenue is 1.9 percent (19 percent × 10 percent) of all $1.034 trillion in e-commerce sales, or $19.65 billion. Because the Commission does not have data on the revenue or quantities sold of review-manipulated products, the NPRM assumes revenue is constant across price points and rely solely on the price differential to approximate revenue. The NPRM does not similarly adjust revenues for non-e-commerce firms ( e.g., restaurant and hotels) because there is less variation in prices in those industries. The Commission invites commenters to submit information to improve this estimate.

The NPRM estimates annual welfare gains by applying the $0.12 estimate, described above, to the estimated amount of U.S. sales likely to have some manipulated consumer reviews, yielding an annual estimate of welfare gains in the range of $5.80 billion (12 percent of $48.34 billion, the sum of $19.65 billion and $28.69 billion) and $15.85 billion (12 percent of $132.09 billion, the sum of $103.4 billion and $28.69 billion). Assuming e-commerce sales increase linearly over the next ten years at the same rate as they did in the past year, the present value of consumer welfare improvements from better-informed purchasing decisions is estimated to be between $50.16 and $199.40 billion as described in Table 2.1.

b. Consumer Time Savings From Increased Reliability of Summary Ratings

The proposed Rule's prohibitions against deceptive and unfair consumer review practices would increase the reliability of consumer reviews. The NPRM assumes this improvement in the dependability of reviews will lead consumers to place more trust in aggregate measures ( e.g., aggregate star ratings), which many review settings use to summarize consumer reviews. This in turn will lead some consumers to spend less time scrutinizing individual reviews to detect red flags commonly found in manipulated reviews ( e.g., spelling and grammar mistakes, generic highly positive or negative statements, and lack of detail). Therefore, the proposed Rule is likely to result in some amount of time savings for consumers who consult online reviews before making purchases.

Approximately 80 percent of Americans are online shoppers. Of those who shop online, 14 percent shop online more than once a week, 20 percent shop online once a week, 23 percent shop online once every two weeks, 25 percent shop online once a month, and the remainder do so every few months. Different age groups of online shoppers spend various amounts of time reading reviews before making a purchase decision. On average, younger consumers spend more time reading reviews than older consumers. This analysis does not incorporate time spent by consumers researching reviews of restaurants, hotels, and other goods and services that are not purchased online because of the limited amount of information available regarding consumers' total time spent on such activities. The Commission invites commenters to submit information related to the time consumers spend reading reviews for goods and services not purchased online.

According to the Bureau of Labor Statistics, the average hourly wage in 2021 was $28.01. Recent research suggests individuals living in the United States value their non-work time at 82 percent of average hourly earnings. Thus, Americans overall value their non-work time at $22.97 per hour on average. The Commission invites comment on this methodology and seeks submissions of additional data related to quantifying Americans' value of time.

The survey data does not specify whether consumers were surveyed regarding the time spent reading reviews before the purchase of a single product or whether the question concerned the purchase of multiple products. This analysis assumes the time listed in the survey results pertains to the purchase of a single product. It also assumes the implementation of the proposed Rule would reduce the time spent reading reviews by 10 percent. Combining the above figures results in $2.49 billion in consumer time savings per year, or a present value of $18.55 billion to $21.69 billion over a 10-year period, as described in Table 2.2. The Commission invites commenters to submit information to improve this estimate.

In addition, there are likely to be other utility-related benefits consumers receive when reading nonmanipulated online reviews or consulting more accurate aggregate summary measures, such as increased satisfaction (apart from purchasing decisions) and decreased frustration. The Commission is not able to quantify these benefits and invites commenters to submit information to assist with calculating these additional benefits.

Finally, some consumers may spend more time reading reviews if reviews are less likely to be fake or otherwise manipulated. This increase in time spent reading reviews may offset any time savings from the increased reliability of summary ratings. Therefore, the NPRM presents another scenario in Table 2.2 where consumers do not gain any benefits from time savings. However, as before, there are likely to be additional benefits difficult to quantify ( e.g., decreased frustration) that result from reading more accurate reviews, likely yielding positive net benefits related to reading reviews even when consumers spend more time doing so. The Commission invites comment on methods that would allow us to quantify such benefits.

c. Benefits Related to Competition

Accurate online reviews have been shown to improve competition. Several studies have found online reviews are particularly important for independent and newer firms. Ratings are more influential for these firms because consumers do not have strong prior beliefs as to their quality. New entrants whose sales benefit from online reviews typically offer higher quality goods and services. On the other hand, lower-quality firms often experience revenue losses with more online review activity.

Relatedly, fake online reviews allow companies to surpass competitors. One study found it only takes 50 fake reviews for a seller to pass any of its competitors in terms of visibility ( e.g., via rankings or search results). It follows that by curbing the number of fake or manipulated reviews, the proposed Rule would benefit consumers by improving the competitive environment for legitimate firms selling higher-quality products ( i.e., those who do not rely on review manipulation to sell their goods). The benefits resulting from improvements in the competitive environment are difficult to quantify. The Commission invites comment on the best approach to quantifying such benefits.

2. Estimated Costs of the Proposed Rule

This section describes the costs associated with the proposed Rule, provides preliminary quantitative estimates where possible, and describes costs that are only assessed qualitatively.

a. Compliance Costs

The acts and practices prohibited by the proposed Rule are unfair or deceptive under Section 5 of the FTC Act. The proposed Rule targets acts or practices that are clear violations of Section 5, and businesses that are compliant will continue to be compliant. Moreover, the FTC routinely provides guidance to businesses on complying with FTC law, which will make the implications of the proposed Rule easy to understand for a wide range of businesses. Accordingly, the NPRM presents one scenario in Table 3.1 where businesses spend a de minimis amount of time interpreting the proposed Rule and make no changes to their current policies.

However, because of the enhanced penalty associated with violating the proposed Rule (relative to de novo violations of Section 5 of the FTC Act), businesses may choose to incur additional administrative burdens to ensure compliance. The NPRM presents another scenario in Table 3.1 where businesses notify their employees of the proposed Rule, conduct a review of their processes, and take any steps they deem important to ensure compliance. For firms that already comply with Section 5, these steps might be out of caution so as not to risk the possibility of violating the proposed Rule. For example, some sellers may currently flag and remove reviews on their websites that they reasonably believe are fake. While this practice would not amount to not a violation of the relevant rule provision (proposed § 465.7(b)), promulgation of the proposed Rule may lead some businesses to choose to take extra steps to verify the inauthenticity of such reviews before suppressing them. A business may also decide to notify its employees of the proposed Rule. For example, if certain employees are responsible for posting new product pages or managing the company's social media presence, business owners may wish to notify these employees to ensure compliance. Although cautious firms may elect to conduct additional compliance review, the proposed Rule would not require any additional recordkeeping or notices beyond what is required by Section 5 of the FTC Act.

For the heightened compliance review scenario in Table 3.1, the NPRM makes assumptions about the number of businesses impacted and the number of person-hours involved in compliance activities. In 2019, there were approximately 33.20 million total firms in the United States. 20,868 of these were entities with 500 or more employees (“large companies”), and the remaining 33.19 million had fewer than 500 employees (“small companies”). The NPRM assumes all 20,868 large companies had some form of online consumer review presence ( e.g., on third-party business platforms such as Yelp or Google Reviews, or on their own websites). It assumes 74 percent of the 33.19 million small companies (24.56 million companies) had an online consumer review presence.

With heightened compliance review, the NPRM assumes lawyers at large companies, whose time is valued at $61.54 per hour, will spend eight hours conducting a one-time review of the proposed Rule and notifying employees whose role involves creating new product pages, managing the company's social media presence, and any other relevant practices covered by the proposed Rule. It assumes small company owners, whose time is valued at $33.23, spend one hour doing the same.

In addition, some companies may spend time reviewing their automated processes to ensure they comply with the proposed Rule. For instance, they may check any review filtering processes to ensure reviews that are flagged and removed meet the permissible exceptions listed in proposed § 465.7(b). These costs, which companies might incur just once or on a recurring basis, are likely to be minimal. The NPRM does not quantify these process-related costs because, among other things, the Commission does not know the number of firms that might undertake such a review. The Commission invites commenters to submit information to assist with the calculation of these costs.

The total estimated costs are tabulated in Table 3.1. The Commission seeks comments on the assumptions incorporated in these estimates.

b. Other Impacts of the Proposed Rule

There are several other potential effects from the proposed Rule. While the proposed requirements are far from onerous, there is the possibility some sellers may “overcorrect” in response to the higher penalties imposed by the rule compared to existing law. For example, a firm may encounter an excess of fake, negative reviews from a competitor. While proposed § 465.7(b) permits the suppression of reviews the seller reasonably believes are fake, an overcautious seller seeking to suppress fake reviews from competitors may choose to display no reviews whatsoever so as not to risk violating the proposed Rule. Alternatively, such a firm may take no action towards suspected fake reviews to avoid a possible rule violation. Both of these hypothetical scenarios would likely hurt the information environment for consumers. The Commission believes such unintended consequences of the proposed Rule are very unlikely. The Commission seeks comment on the likelihood of such effects and information on how to best quantify them.

3. Potentially Reasonable Alternatives

One alternative to the proposed Rule is to terminate the rulemaking and rely instead on the existing tools the Commission currently possesses to combat the specified review and testimonial practices, such as consumer education and enforcement actions brought under Sections 5 and 19 of the FTC Act. Terminating the rulemaking would preserve those Commission resources needed to continue the rulemaking, but such a short-term benefit would come at a significant cost. Failing to strengthen the set of tools available in support of the Commission's enforcement program against unfair or deceptive consumer reviews or testimonials would deprive it of the benefits outlined above. The Commission seeks comment on this alternative and any potentially reasonable alternative to the proposed Rule.

VIII. Paperwork Reduction Act

In addition to the requirements of Section 22, the Commission must provide in any NPRM the “information required by the Regulatory Flexibility Act, 5 U.S.C. 601–612, and the Paperwork Reduction Act, 44 U.S.C. 3501–3520, if applicable.” 16 CFR 1.11(c)(4).

The Paperwork Reduction Act requires the Commission to engage in additional processes and analysis if it proposes to engage in a “collection of information” as part of the proposed Rule. 44 U.S.C. 3506. The Commission states that the proposed Rule contains no collection of information.

IX. Regulatory Flexibility Act—Initial Regulatory Flexibility Analysis

The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601 et seq., requires an agency to provide an Initial Regulatory Flexibility Analysis (“IRFA”) with a proposed rule and a Final Regulatory Flexibility Analysis (“FRFA”) with a final rule, if any, unless the Commission certifies the proposed rule will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605. The purpose of a regulatory flexibility analysis is to ensure an agency considers potential impacts on small entities and examines regulatory alternatives that could achieve the regulatory purpose while minimizing burdens on small entities.

The Commission believes the proposed Rule would not have a significant economic impact upon small entities, although it may affect a substantial number of small businesses. The proposed Rule primarily prohibits certain unfair or deceptive acts or practices involving consumer reviews or testimonials and does not impose a recordkeeping or disclosure requirement upon businesses. In addition, the Commission does not anticipate these changes will add significant additional costs to small businesses. Specifically, as discussed in further detail below, the Commission anticipates than an average small business will spend, at most, one hour on compliance review, incurring a cost of $33.23. Therefore, the NPRM imposes no new significant burdens on law-abiding businesses.

Accordingly, based on available information, the Commission certifies the proposed Rule will not have a significant economic impact on a substantial number of small entities. Although the Commission certifies under the RFA that the proposed rule would not, if promulgated, have a significant impact on a substantial number of small entities, the Commission has determined, nonetheless, it is appropriate to publish an IRFA to inquire into the impact of the proposed Rule on small entities. Therefore, the Commission has prepared the following analysis:

A. Description of the Reasons Agency Action Is Being Considered

The Commission describes the reasons for the proposed Rule in Section IV above. The FTC's law enforcement, outreach, and other engagement in this area indicate certain unfair or deceptive acts or practices involving consumer reviews or testimonials are prevalent. The proposed Rule would benefit consumers and legitimate businesses without imposing significant burdens.

B. Statement of the Objectives of, and Legal Basis for, the Proposed Rule

The Commission describes the objectives for the proposed rule in Section IV above. The legal basis for the proposed rule is Section 18 of the FTC Act, 15 U.S.C. 57a, which authorizes the Commission to promulgate, modify, and repeal trade regulation rules that define with specificity acts or practices in or affecting commerce that are unfair or deceptive within the meaning of Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

C. Description and Estimate of the Number of Small Entities to Which the Proposed Rule Will Apply

The proposed Rule would impact all small entities that currently have, or might potentially accrue, consumer reviews or testimonials. It would also impact small entities that use celebrity testimonials or have a social media presence. It is likely the proposed rule would primarily affect businesses that sell products or services directly to consumers. For example, the proposed Rule is less likely to impact small entities that manufacture niche raw materials for other businesses or small agricultural firms that do not sell directly to consumers. Nevertheless, for a conservative estimate of total costs, the NPRM assumes the proposed Rule would impact all industry classes of small entities.

As described in Part V.A.2.a., there are approximately 33.19 million small businesses in the United States. Prior research has found 74 percent of small businesses have at least one Google review. It is possible that, across all platforms (beyond Google reviews), a higher percentage of small businesses have consumer reviews or testimonials, celebrity testimonials, or a social media presence. The Commission does not have the appropriate data to refine this estimate. Therefore, the best estimate is 24.56 million (74 percent × 33.19 million) small businesses would be impacted by the proposed Rule. The Commission seeks comment on the estimated number of small business entities for which the proposed Rule would have a significant economic impact.

D. Description of the Projected Reporting, Recordkeeping, and Other Compliance Requirements

The proposed contains no reporting or recordkeeping requirements. Therefore, many legitimate businesses are likely to incur no additional compliance costs with the proposed Rule.

As described in Section V.A.2.a, a cautious firm may elect to undertake additional compliance review due to the enhanced penalties associated with potential rule violations (relative to de novo violations of Section 5 of the FTC Act). If every small business impacted by the proposed Rule conducted one hour of compliance review, each firm would incur $33.23 of compliance costs, which reflects the estimated hourly earnings of a small business owner. Therefore, under the conservative assumption of heightened compliance review for all small businesses, costs to small businesses would total $816.13 million (24.56 million × $33.23). Because it is likely only a minority of small businesses would elect to conduct optional compliance review, total compliance costs for these entities are likely to be significantly lower than this estimate.

E. Identification of Duplicative, Overlapping, or Conflicting Federal Rules

The Commission has not identified any duplication, overlap, or conflict with the proposed Rule. The Commission invites comment and information on this issue.

F. Description of Any Significant Alternatives to the Proposed Rule

The Commission describes alternatives in Section V.A.3. One alternative to the proposed Rule is to rely on the existing tools the Commission currently possesses to combat the specified review and testimonial practices, such as consumer education and enforcement actions brought under Sections 5 and 19 of the FTC Act. The Commission believes promulgation of the proposed Rule would result in greater net benefits to the marketplace while imposing no additional burdens beyond what is required by the FTC Act. As described in further detail in Section V.A., the proposed Rule would not only result in significant benefits to consumers but also improve the competitive environment, particularly for small, independent, or new firms. Therefore, the proposed Rule appears to be superior to this alternative for small entities.

The Commission seeks comment on alternative compliance methods that would reduce the economic impact of the proposed Rule on small entities.

X. Request for Comments

Members of the public are invited to comment on any issues or concerns they believe are relevant or appropriate to the Commission's consideration of the proposed Rule. The Commission requests that factual data on which the comments are based be submitted with the comments. In addition to the issues raised above, the Commission solicits public comment on the specific questions identified below. Responses to these questions should be itemized according to the numbered questions in this document. These questions are designed to assist the public and should not be construed as a limitation on the issues on which public comment may be submitted.

General Questions for Comment

When responding to any of the following general questions, please specify the portion(s) of the proposal to which your comment relates.

1. Does the proposed Rule further the Commission's goal of protecting consumers from clearly unfair or deceptive acts or practices involving consumer reviews and testimonials? Why or why not?

2. Should the Commission finalize the proposed Rule as a final rule? Why or why not? How, if at all, should the Commission change the proposed Rule in promulgating a final rule?

3. Please provide comment, including relevant data, statistics, consumer complaint information, or any other evidence, on each different provision of the proposed Rule. Regarding each provision, please include answers to the following questions:

a. What would the provision's impact (including any benefits and costs), if any, be on consumers, governments, and businesses, including existing businesses and those yet to be started? Are there changes that could be made to lessen any such burdens without significantly reducing the benefits?

b. Is the proposed prohibition in the provision clear, meaningful, and appropriate?

c. Should the scope of the proposed prohibition be expanded or narrowed, and, if so, how, and why? How, if at all, should it be improved?

d. Should any final rule keep the proposed prohibition and, if so, why? If not, what alternative proposals should the Commission consider?

4. Does the proposed Rule contain a collection of information?

5. Would the proposed Rule, if promulgated, have a significant economic impact on a substantial number of small entities? If so, how could it be modified to avoid a significant economic impact on a substantial number of small entities?

Specific Questions for Comment

§ 465.1 Definitions

6. Are the proposed definitions clear? Should changes be made to any definitions? Should the scope of any of the proposed definitions be expanded or narrowed, and if so, why?

7. What additional definitions, if any, are needed?

§ 465.2 Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials

Proposed § 465.2(b) would prohibit businesses from purchasing a consumer review, or from disseminating or causing the dissemination of a consumer testimonial or celebrity testimonial when the business knew or should have known it was false or fake. Proposed § 465.2(c) would prohibit businesses from procuring a consumer review for posting on a third-party platform or website that the business knew or should have known was false or fake.

8. Is the “knew or should have known” standard appropriate for purposes of proposed § 465.2(b) and (c)? Why or why not? One alternative would define a violation as occurring whenever a business engages in a deceptive practice with respect to a review or testimonial if the business “knew or could have known” that the review or testimonial was deceptive. Should the Commission adopt this alternative? Why or why not? Should the Commission adopt a different knowledge requirement, and if so, what should it be and why? Should there be no knowledge requirement at all for proposed § 465.2(b) and (c)? Why or why not?

9. Under what circumstances should a business purchasing or procuring a consumer review know that it is fake or false?

10. Under what circumstances should a business disseminating or causing the dissemination of a consumer testimonial or celebrity testimonial know that it is fake or false?

§ 465.3 Consumer Review Repurposing

Proposed § 465.3 would prohibit businesses from repurposing or causing the repurposing of a consumer review created for one product so that it appears to have been created for a substantially different product.

11. Is the description of “substantially different product” appropriate for purposes of this provision? Why or why not? If not, how should it be modified?

12. Under what circumstances do consumers consider products to be significantly different enough that they should not share the same consumer reviews?

§ 465.4 Buying Positive or Negative Consumer Reviews

Proposed § 465.4 would prohibit providing compensation or other incentives in exchange for, or conditioned on, the writing or creation of consumer reviews expressing a particular sentiment.

12. Should the proposed prohibition distinguish in any way between an explicit and implied condition that a consumer review express a particular sentiment? Why or why not? If so, how should it be addressed?

§ 465.5 Insider Consumer Reviews and Consumer Testimonials

Proposed § 465.5(a) would prohibit an officer or manager of a business from writing or creating a consumer review or consumer testimonial about the business or one of its products or services that fails to have a clear and conspicuous disclosure of the officer's or manager's relationship to the business. Proposed § 465.5(b) would prohibit a business from disseminating a testimonial by an officer, manager, employee, or agent, or any of their relatives, without a clear and conspicuous disclosure of the relationship, when the business knew or should have known the testimonialist's relationship. Proposed § 465.5(c) would prohibit an officer or manager of a business from asking for a consumer review about the business or one of its products or services from a person related to the business, when the solicitor knew or should have known the prospective reviewer's relationship, the request results in a review without a clear and conspicuous disclosure of the relationship, and the requestor failed to advise a disclosure, knew or should have known that a review appeared without such a disclosure and failed to take remedial steps, or encouraged the prospective reviewer not to make such a disclosure.

13. Is it appropriate that proposed § 465.5(a) and (c) apply to “officers” and “managers”? Why or why not? If not, how should either or both prohibitions be modified?

14. Should the term “managers” be defined or described? Why or why not? If so, how should it be defined or described?

15. Is it appropriate that proposed § 465.5(a), (b), and (c) are limited to circumstances in which the requisite disclosure is absent? Why or why not? If not, how should any of the prohibitions be modified?

16. Is it appropriate that proposed § 465.5(b) and (c)(1) are limited to circumstances in which the business, officer, or manager knew or should have known of the relationship? Why or why not? One alternative would be to limit the circumstances of a violation to when the business, officer, or manager “knew or could have known” of the relationship. Should the Commission adopt this alternative? Why or why not? Should the Commission adopt a different knowledge requirement, and if so, what should it be and why? Should there be no knowledge requirement at all for proposed § 465.5(b) and (c)(1)? Why or why not?

17. Is it appropriate that § 465.5(b) and (c) are limited to testimonials and reviews from officers, managers, employees, agents, or relatives? Why or why not? If not, how should either or both prohibitions be modified?

18. Should the Commission define or otherwise describe the term “relative”? Why or why not? If so, how should it be defined or described?

19. Is it appropriate that § 465.5(c)(2)(ii) is limited to circumstances in which the requestor knew or should have known that the review appeared without such a disclosure? Why or why not? One alternative would be to limit the circumstances of a violation to when the requestor “knew or could have known” that the review appeared without such a disclosure. Should the Commission adopt this alternative? Why or why not? Should the Commission adopt a different knowledge requirement, and if so, what should it be and why? Should there be no knowledge requirement at all for proposed § 465.5(c)(2)(ii)? Why or why not?

§ 465.7 Review Suppression

Proposed § 465.7(a) would prohibit anyone from using an unjustified legal threat or a physical threat, intimidation, or false accusation in an attempt to remove or prevent a negative consumer review. Proposed § 465.7(b) would prohibit a merchant from misrepresenting that the consumer reviews displayed on its website or platform represent most or all the reviews submitted when it is suppressing reviews based upon their ratings or their negativity.

20. Is it appropriate that proposed § 465.7(a) focuses on the specific types of listed threats or activities? Why or why not? If not, how should it be modified?

21. Is the definition of “unjustified legal threat” sufficiently clear? Why or why not? If not, how should it be modified?

22. Is it appropriate that proposed § 465.7(b) is limited to circumstances in which reviews are being suppressed based on rating or negativity? Why or why not? If not, how should it be modified?

23. Is it appropriate that proposed § 465.7(b) is limited to the misrepresentations described therein? Why or why not? If not, how should it be modified?

XI. Comment Submissions

You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before September 29, 2023. Write “Consumer Reviews and Testimonials NPRM, R311003” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the website https://www.regulations.gov.

Because of the agency's heightened security screening, postal mail addressed to the Commission will be subject to delay. We strongly encourage you to submit your comments online through the https://www.regulations.gov website. To ensure that the Commission considers your online comment, please follow the instructions on the web-based form.

If you file your comment on paper, write “Consumer Reviews and Testimonials NPRM, R311003” on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex F), Washington, DC 20580. If possible, please submit your paper comment to the Commission by overnight service.

Because your comment will be placed on the public record, you are solely responsible for making sure that your comment does not include any sensitive or confidential information. In particular, your comment should not contain sensitive personal information, such as your or anyone else's Social Security number; date of birth; driver's license number or other state identification number or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for making sure your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any “[t]rade secret or any commercial or financial information which . . . is privileged or confidential”—as provided in Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)—including, in particular, competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names.

Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule 4.9(c), 16 CFR 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request and must identify the specific portions of the comment to be withheld from the public record. See FTC Rule 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted publicly at https://www.regulations.gov —as legally required by FTC Rule 4.9(b), 16 CFR 4.9(b)—we cannot redact or remove your comment, unless you submit a confidentiality request that meets the requirements for such treatment under FTC Rule 4.9(c), and the General Counsel grants that request.

Visit the FTC website to read this document and the news release describing it. The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments it receives on or before September 29, 2023. For information on the Commission's privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/siteinformation/privacypolicy.

XII. Communications by Outside Parties to the Commissioners or Their Advisors

Pursuant to FTC Rule 1.18(c)(1)(i)–(ii), the Commission has determined that communications with respect to the merits of this proceeding from any outside party to any Commissioner or Commissioner advisor shall be subject to the following treatment. Written communications and summaries or transcripts of oral communications shall be placed on the rulemaking record if the communication is received before the end of the public comment period in response to this NPRM. They shall be placed on the public record if the communication is received later. Unless the outside party making an oral communication is a member of Congress, such communications are permitted only if advance notice is published in the Weekly Calendar and Notice of Sunshine Meetings.

List of Subjects in 16 CFR Part 465

• Advertising

For the reasons set forth above, the Federal Trade Commission proposes to amend title 16, chapter I, subchapter D of the Code of Federal Regulations by adding part 465 to read as follows:

PART 465—RULE ON THE USE OF CONSUMER REVIEWS AND TESTIMONIALS

Authority: 15 U.S.C. 57a.