A new rule proposed by the Federal Trade Commission would crack down on bogus online reviews of businesses and deceptive endorsements by penalizing bad actors.
“If adopted, any website that utilizes reviews and testimonials would clearly be impacted by this rule,” Hooper Lundy’s Mark E. Reagan told the McKnight’s Business Daily.
The federal agency is looking to dissuade violators with “stiff civil penalties,” according to Samuel Levine, director of the FTC’s Bureau of Consumer Protection.
“Some individuals use review services for improper purposes, and this could have a chilling effect on the legitimate pushback by businesses whose reputations have been unfairly harmed,” Reagan explained.
According to the FTC, the rapid growth of online marketplaces and platforms has made it easier for dishonest companies to create and use fake reviews or endorsements to make themselves look better or their competitors look worse.
“It can be difficult for anyone — including consumers, competitors, platforms, and researchers — to distinguish real from fake, giving bad actors big incentives to break the law,” the agency said.
Older adults are especially vulnerable to fake reviews, attorney Andrew Lieb told the McKnight’s Business Daily, “given that their generation predates the online world.”
“The Lanham Act already combats fake online reviews by permitting industry rivals / competitors to bring false advertising claims against businesses that employ false online reviews,” Lieb noted.
Hannah Sweiss, a partner at Fisher Phillips and co-chair of the firm’s healthcare industry group, said she believes that the proposed rule is a good idea.
“In the private company world, there’s been a push to try to prevent some of the fake reviews through [artificial intelligence] processes. I think the proposed rule further supports and tries to prevent deceptive practices,” Sweiss said. “We’ve seen a lot of scams where people can be susceptible to believing reviews that are online.”
The FTC is seeking comments on its proposed rule through Aug. 29 — specifically on potential harms stemming from deceptive or unfair review and endorsement practices and on whether a rule would help consumers and level the playing field for honest marketers.
