What happened
Companies are now prohibited from paying for or selling online product reviews and generating other types of fake testimonials under a Federal Trade Commission rule that went into force Monday. The FTC rule, finalized and unanimously approved in August, will be enforced through civil penalties, including fines of up to $51,744 per violation.
Who said what
"Fake reviews not only waste people's time and money, but also pollute the marketplace and divert business away from honest competitors," FTC Chair Lina Khan said in August. The new rule "will protect Americans from getting cheated, put businesses that unlawfully game the system on notice and promote markets that are fair, honest and competitive."
Reviews are "increasingly important in almost all of our purchase decisions," Sandy Jap, an Emory University marketing professor, told The Wall Street Journal, and fake reviews create a "noisier environment for consumers" and muddle trust. The FTC also now prohibits hiding or suppressing bad reviews, reviews written by undisclosed company insiders, and "buying fake indicators of social media influence," like bot-generated followers or views.
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What next?
The FTC finalized a "click to cancel" rule last week that will take effect in about six months, giving companies time to come up with mechanisms to cancel subscriptions that are "at least as easy" as signing up for them, with no tricks or traps. The rule, approved 3-2 along party lines, is "part of President Joe Biden's administration's efforts to crack down on 'junk fees,'" USA Today said.
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