Federal Trade Commission announces final rules banning fake reviews and testimonials, with fines of up to 7.6 million yen for violations

The Federal Trade Commission (FTC) has announced a final rule banning false reviews written by people who have not purchased or used a product, as well as false endorsements using the names of celebrities who are not related to the product. The rule will go into effect 60 days after publication in the Federal Register, and violators will be subject to civil penalties. The fines are up to $51,744 (approximately 7.62 million yen) per violation.

Federal Trade Commission Announces Final Rule Banning Fake Reviews and Testimonials | Federal Trade Commission

Fake reviews and fake testimonials have been viewed as a threat to fair markets in recent years, and the FTC decided on a policy to formulate rules in November 2022 and published a proposed rule in June 2023.

The final rule specifically prohibits the following six actions:

Fake or false customer reviews, consumer testimonials, or celebrity endorsements
Reviews written by people who have not experienced the service or product, fake reviews generated by AI, and testimonials written by people pretending to be real people are prohibited. It is also prohibited to purchase, obtain, or spread reviews or testimonials knowing that they are fake.

For example, an AI-generated dental insurance commercial featuring the likeness of actor Tom Hanks that was created and distributed in 2023 would violate the rules.

-Purchase positive and negative reviews
Offering compensation or incentives to write customer reviews that express positive or negative sentiment is prohibited.

- Insider reviews and testimonials
Reviews and testimonials written by company insiders that do not disclose their relationship to the company are prohibited. Reviews and testimonials written by executives or managers are also prohibited. In addition, penalties will be applied if executives or managers ask their close relatives to write reviews or instruct their employees to have their close relatives write reviews, and reviews are actually posted.

・Review sites managed by companies
Websites or organizations controlled by companies will be prohibited from falsely representing themselves as providing 'independent reviews and opinions' of their own products or services.

・Review suppression
Companies are prohibited from using unfounded legal or physical threats or false accusations to coerce consumers into removing negative reviews. Companies that have reviews on their website are also prohibited from falsely claiming that they 'display all or most of the reviews' when they have made efforts to hide negative reviews.

・Abuse of fake social media indicators
The sale or purchase of fake 'social media influence metrics,' such as follower or view counts generated by bots or hijacked accounts, is prohibited. This only applies if the buyer knows the metrics are fake and misrepresents their influence or importance.

'Fake reviews not only waste people's time and money, they also pollute markets and drive business away from honest competitors,' said FTC Chairman Lina M. Khan. 'This final rule will protect Americans from being deceived, call out companies that illegally game the system, and promote fair, honest, and competitive marketplaces.'