Customer reviews are a decisive stop on the path to purchase for many beauty consumers, becoming increasingly important as e-commerce penetration increases. The Federal Trade Commission (FTC) is finally taking action to fight deceptive practices like fake reviews, review hijacking, and suppressing negative reviews. The U.S. PIRG Education Fund estimates 30% to 40% of online reviews are "concocted or are in some way not genuine."
“Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses," said Samuel Levine, Director of the FTC's Bureau of Consumer Protection. "Advertisers will pay a price if they engage in these deceptive practices.”
This rule has been a long time in the making. Sunday Riley is one brand that got caught by the FTC cutting corners by using fake accounts to post product reviews on Sephora.com between November 2015 and August 2017. The brand admitted to the accusations, Sephora removed the reviews, and the FTC slapped Sunday Riley on the wrist for the infraction. No fine was imposed, and the brand is not required to notify customers regarding the misinformation—not exactly a deterrent.
Now the FTC is ready to put some teeth into its oversight, raising the stakes for brands playing dirty. “Our proposed rule on fake reviews shows that we’re using all available means to attack deceptive advertising in the digital age,” said Levine. “The rule would trigger civil penalties for violators and should help level the playing field for honest companies.”
The explosive growth of online marketplaces and platforms has made it easier than ever for brands to manipulate reviews to make themselves look better or their competitors look worse. Social media has further blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the consumer marketplace. The emergence of generative AI will make it easier than ever for bad actors to proliferate platforms with fake reviews.
The Commission seeks comments on proposed measures to fight these clearly deceptive practices. For example, the proposed rule would prohibit:
Selling or Obtaining Fake Consumer Reviews and Testimonials: The proposed rule would prohibit businesses from writing or selling consumer reviews or testimonials and prohibit the procurement of reviews or disseminating testimonials if the companies knew or should have known that they were fake or false.
Review Hijacking: Prohibition of using or repurposing a consumer review written for one product so that it appears to have been written for a different product. The FTC recently brought its first review hijacking enforcement action against Nature’s Bounty earlier this year.
Buying Positive or Negative Reviews: Businesses would be prohibited from providing compensation or other incentives conditioned on the writing of consumer reviews expressing a particular sentiment, either positive or negative.
Insider Reviews and Consumer Testimonials: The proposed rule would prohibit a company’s officers and managers from writing reviews or testimonials without clearly disclosing their relationships. And restrict solicitation of reviews from company employees or their relatives.
Company-Controlled Review Websites: Businesses would be prohibited from creating or controlling a website that claims to provide independent opinions about a category of products or services that includes its own products or services.
Illegal Review Suppression: Businesses would be prohibited from using unjustified legal threats, other intimidation, or false accusations to prevent or remove a negative consumer review.
Selling Fake Social Media Indicators: Businesses would be prohibited from selling false indicators of social media influence, like fake followers or views.
In a statement, the FTC said, "Although the FTC has taken strong enforcement action in this area recently, case-by-case enforcement without civil penalty authority might not be enough to deter clearly deceptive review and testimonial practices. The Supreme Court’s decision in AMG Capital Management LLC v. FTC has hindered the FTC’s ability to seek monetary relief for consumers under the FTC Act. A rule clearly spelling out prohibited practices and allowing for the judicial imposition of civil penalties could strengthen deterrence and FTC enforcement actions."
The rule is now open for public comment and will not take effect immediately. After 60 days, the FTC will weigh any new information and adjust the rules if necessary before putting the finalized rule to a vote.
