Fake Reviews Could Cost Companies Under FTC Proposal

Topline

The Federal Trade Commission wants to stop businesses who buy positive reviews and pay to suppress negative ones under a proposed rule that could fine companies up to $50,000 per violation, the Washington Post reported, in a boon for consumers troubled by misleading evaluations of businesses.

Close-up of sign on facade at headquarters of travel and restaurant rating company Yelp in San … [+] Francisco, California, December 25, 2018. Photo by Smith Collection/Gado/Getty Images

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Key Facts

As many as 40% of online reviews are deceptive or completely fake, according to the consumer advocacy group U.S. PIRG, which told the FTC earlier this year that customers have “no way of knowing for certain which reviews are legitimate.”

The new rule would make it illegal for a business to write or sell fake customer reviews or falsely inflate social media follower count; stop suppression of bad reviews; ban company employees from writing reviews for its services without disclosing their affiliation; and make it illegal for a business to own a website that claims to provide independent opinions.

In addition to the $50,000 per-case fine, the federal agency would also have the ability to retrieve money directly for consumers harmed by the fakes, according to the Washington Post.

The rules do not crack down on the actual publishers of the reviews themselves, like Yelp, TripAdvisor, Google and Amazon, which have said they take fake reviews seriously and have deleted hundreds of millions of suspected fake reviews in the last year.

Key Background

The problem of illegitimate online reviews took off during the Covid-19 pandemic, the World Economic Forum said, influencing $152 billion in global spending on lackluster products and services in 2021. Paid-review firms have popped up to provide services to businesses that want to falsely boost their ratings on review platforms, and they usually advertise to businesses on sites like Facebook, Craigslist and Reddit to avoid detection. Fake reviews can cost anywhere from 25 cents to $100, WEF said, and flooding a business with new reviews can boost its search position and sales ranks for weeks, even if the reviews have been detected and deleted. Google earlier this month filed a lawsuit against one such reviewer that managed to create more than 350 fake business profiles and post 14,000 fake reviews on Google search, Maps and YouTube.

What To Watch For

When the rule goes into effect. The commission will take comments from the public on the proposed rules for 60 days before moving forward.

Crucial Quote

“There really are no repercussions,” Kay Dean, who runs the organization Fake Review Watch, told the Washington Post.

Big Number

$600,000. That’s how much The Bountiful Company will have to pay after the FTC charged it with “hijacking” ratings and reviews on Amazon. The company tricked customers into thinking its newly introduced supplements had more product ratings and reviews than they did by re-using reviews that were left on other, well-established products, the FTC said.