The Federal Trade Commission (FTC) has announced a final rule banning the use of fake reviews and testimonials in advertising practices. The new regulation aims to protect consumers from deceptive marketing tactics and promote fair competition in the marketplace.

FTC Chair Lina M. Khan expressed her concerns about the impact of fake reviews on consumers, stating, "Fake reviews not only waste people's time and money, but also pollute the marketplace and divert business away from honest competitors." The new rule is expected to strengthen the FTC's enforcement capabilities, allowing for the imposition of civil penalties on violators and deterring the use of AI-generated fake reviews.

Following an advance notice of proposed rulemaking in November 2022 and a notice of proposed rulemaking in June 2023, the FTC has made adjustments based on public comments received. The final rule addresses various aspects of deceptive advertising practices, including the creation or sale of fake consumer reviews or testimonials, the buying of positive or negative reviews, and the misuse of company-controlled review websites.

Specifically, the final rule prohibits:

1. The creation or sale of fake or false consumer reviews, testimonials, or celebrity testimonials that misrepresent the identity of the reviewer or their experience with the business or its products or services.
2. The provision of compensation or incentives conditioned on the writing of consumer reviews expressing a particular sentiment.
3. The dissemination of testimonials or consumer reviews by company insiders without proper disclosure of their material connection to the business.
4. Misrepresentation of a company-controlled website as providing independent reviews or opinions about a category of products or services that includes the company's own products or services.
5. The use of unfounded legal threats, physical threats, intimidation, or false public accusations to prevent or remove negative consumer reviews.
6. The misrepresentation of the completeness or authenticity of consumer reviews on a company's website.
7. The sale or purchase of fake indicators of social media influence, such as followers or views generated by bots or hijacked accounts.

The FTC believes that the new rule will enhance deterrence and strengthen its enforcement actions. The Commission voted unanimously in favor of the final rule, which is expected to become effective 60 days after its publication in the Federal Register. The primary staff members responsible for this matter are Michael Ostheimer and Michael Atleson from the FTC's Bureau of Consumer Protection.

Consumers are encouraged to be vigilant about deceptive advertising practices and report any suspected fraudulent activities to the Federal Trade Commission. The FTC remains committed to promoting competition and protecting consumers from misleading marketing tactics.