While it would be easy to get lost in the dense forest of legalese around the Federal Trade Commission’s (FTC) recent informal hearings on its proposed trade regulation rule prohibiting marketers from using fake consumer reviews and testimonials, the main takeaway for the beauty industry is that the spotlight on this growing problem is getting brighter every day. 

In broad terms, the proposed “Trade Regulation Rule on the Use of Consumer Reviews and Testimonials” would, if enacted, prohibit the creation, purchase, dissemination, or sale of fake consumer reviews and testimonials. It would also block the ability to repurpose reviews from one product to another, the purchase of either positive or negative reviews, the nondisclosure of paid endorsements, and the suppression of false reviews. 

Getting even more granular, the proposed rule would also punish brands and companies that engage in “false indicators of social media influence.”

What’s at stake if the ruling gets the greenlight? Money—as in civil penalties of up to $51,744 per violation. 

Doing the quick math, that could mean well north of $250,000 for a brand with a mere five infractions. For small independent players in the exceedingly crowded and competitive beauty space, that’s cash they probably don’t have to spare. 

One would think both new and older beauty brands alike would have learned from the cautionary tale of Sunday Riley circa 2019. After it was determined the Houston-based luxury skincare brand had posted fake, employee-generated reviews on the Sephora website from 2015 to 2017, it was forced by the FTC to publicly admit wrongdoing and agree to never engage in such practices again. 

But perhaps it’s what didn’t happen with the Sunday Riley situation, i.e., the payment of a stiff fine, that has subsequently emboldened brands across multiple product categories to engage in nefarious review practices. 

Mary K. Engle, Executive Vice President of Policy for BBB National Programs’, is not only closely monitoring the status of the current proposed regulation, she was also with the FTC during the Sunday Riley era. 

“I was the head of the FTC’s division of advertising practices for 18 years before I joined BBB National Programs, and it was my division that brought the Sunday Riley case,” Engle notes. “It was like a whistleblower situation. Someone at Sunday Riley posted on Reddit about what was happening, someone at the FTC saw that, and it was turned into an investigation.”

Recounting what transpired at the first informal FTC hearing for the proposed regulation, which was open to the public and held in mid-February, Engle says the participants heard from three entities: Fake Review Watch, Interactive Advertising Bureau (IAB), and a group comprising three market research professors from Brigham Young University, Emory University, and Penn State. 

“The goal [of the hearing] was just to gather additional information,” Engle explains. “It really is just the process of obtaining additional views on the proposed rule that will be submitted to the commission itself for deciding whether to finalize the proposed rule, have it changed, or seek more comments.”

A follow-up hearing three weeks later, also open to the public, centered around whether the estimated cost to businesses of complying with the proposed rule will be minimal. “This issue was designated as a ‘disputed issue of material fact’ following the February 13 hearing,” says Engle. 

Despite her involvement with the Sunday Riley case, Engle said she doesn’t have an opinion about whether the cosmetics industry is especially vulnerable to fake reviews. 

“I haven’t seen any good data on whether beauty as a category is more problematic for fake reviews,” she says. “And the FTC, in the federal notice it issued, didn’t seem to have that data either. They certainly didn’t mention it.”

What Engle is sure about is the intense consumer interest in the beauty category. “It’s one of the areas in which people are interested in the views of other consumers,” she says. “’Oh, does this really work?’ Or, ‘Did you like this?’”

Complicating matters is the fact that results from the use of beauty products can be highly subjective. 

“In the beauty area, it’s not necessarily problematic to say, for example, ‘younger looking skin,’” says Engle. “That’s not automatically a dishonest claim. So it’s harder there.”

As Engle also points out, positive reviews posted by influencers or individuals who were paid but didn’t disclose that fact are also a barrier for anyone looking for concrete reasons to buy one product over another.

“There can be hundreds, or even thousands, of fake reviews posted for a product and the consumer has little way of knowing that,” she says. “You have to be a detective and really start noticing and scrolling down to see if there were a bunch of reviews posted at the same time,” or a similar red flag.

In other words, unless the new FTC ruling shifts from proposed to enforceable, anyone who doesn’t just want to roll the dice on a brand-new product might have to invest literal hours trying to determine whether all the glowing reviews she’s seeing are actually legit.

“The woman from Fake Review Watch is doing that, but that’s kind of her job,” says Engle. “The average consumer isn’t doing that.”