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FTC Votes 3-1 to Explore Rules for Fake Online Reviews

The FTC voted 3-1 Thursday to explore issuing rules combating fake online reviews. Commissioner Christine Wilson dissented, saying the FTC’s “avalanche” of rulemakings risks the agency becoming more of a legislature than a law enforcer.

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Research suggests up to 25% of reviews on Yelp are “less reliable” and about 10% of Google reviews are fake, said Commissioner Rebecca Kelly Slaughter: Amazon claims less than 1% of its reviews are “inauthentic,” but third-party research suggests the amount is higher. She noted Amazon posted 233 million product reviews between 1996 and 2018.

Fake reviews “pollute” the marketplace and put honest businesses at a competitive disadvantage, said Chair Lina Khan. The commission approved the Division of Advertising Practices’ recommendation to publish an Advance NPRM to potentially craft rules on fake reviews, review suppression, buying social media followers and other harm to consumers and businesses. Other issues include sellers hiding bad reviews and boosting negative reviews of competitors.

The rule-a-palooza at the FTC has begun,” said Wilson, noting the agency has proposed six potential consumer protection rules this year. She agreed to the need to enforce against fake and deceptive reviews but said these “massive” regulatory undertakings require significant resources. This year the FTC has brought 30 consumer protection enforcement actions, which she said compares with 79 under the Trump administration in 2020. She noted the commission is already attempting to address deceptive social media marketing by updating its endorsement guidelines (see 2209270065). And the FTC’s October 2021 notice of penalty offenses enables the agency to seek civil penalties against marketers pushing fake reviews, she said.

Both Khan and Slaughter noted the Supreme Court’s unanimous decision in AMG Capital Management v. FTC to weaken the agency’s authority to obtain monetary relief (see 2104270086). A rulemaking could enable the FTC to “more easily obtain” monetary redress and civil penalties for a violation, said Khan. The agency’s work on fake reviews and endorsements is another example of the FTC using every tool in its toolbox to deter harmful and illegal conduct, said Slaughter. Fake reviews have a huge impact on small and local businesses, noted Commissioner Alvaro Bedoya. The ANPRM will help the agency better understand the scope of the problem, the prevalence, who’s harmed and how the commission can help, he said.

Wilson noted that in December she warned the public the FTC would propose an “avalanche” of rulemakings on both competition and consumer protection. Khan said the potential rulemaking complements other agency efforts, like its action in August against Roomster, which according to the FTC misled consumers seeking affordable housing by “paying for fake reviews and then charging for access to phony listings" (see 2208300051). Online shopping “runs on reviews,” and sometimes platforms have an incentive to turn a blind eye to the deception, said Khan. “This is a highly salient issue for the public.”