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FTC proposal would ban deceptive reviews
On June 30, the FTC introduced a proposed rule to combat deceptive review practices and ensure consumer protection in light of the impact and progression of technology and artificial intelligence. The rule seeks to prohibit the creation and sale of fake consumer reviews, prevent review hijacking, and restrict the manipulation of reviews through incentives. Under the proposed rule, businesses would be prohibited from creating or selling reviews by individuals who do not exist or lack real experience with the product or service. Additionally, the proposed rule prohibits businesses from providing compensation or incentives in exchange for consumer reviews expressing specific sentiments, whether positive or negative. To enhance transparency and integrity, the proposed rule also includes provisions related to insider reviews and testimonials. It also emphasizes the importance of transparency by requiring disclosure of relationships in insider reviews and testimonials. Under these provisions, officers and managers of companies would be required to disclose their relationships when writing reviews or testimonials about their products or services. Businesses would also be obligated to disclose relationships in testimonials written by insiders. Moreover, the FTC's proposed rule targets businesses that create or control websites claiming to provide impartial opinions about a particular category of products or services, including their offerings. Further, it prohibits businesses from using unjustified legal threats, intimidation, or false accusations to prevent or remove negative consumer reviews. This provision aims to preserve the independence and authenticity of consumer reviews, preventing businesses from manipulating public perception through controlled review websites. Considering the widespread influence of social media, the rule would prohibit businesses from selling or buying fake followers or views.
The FTC is currently seeking public comments on the proposed rule.
FTC notifies online marketplaces on INFORM compliance
On June 20, the FTC sent 50 letters to online marketplaces nationwide notifying them of their obligation to comply with the INFORM Consumers Act (the “Act”) set to take effect on June 27. The Act “imposes obligations on online marketplaces regarding the collection, verification, safeguarding, and disclosure of certain identifying information of ‘high-volume third party sellers’ that sell, offer to sell, or contract to sell new or unused consumer products in the United States through marketplaces’ platforms.” The Act also requires that online marketplaces make reporting of certain suspicious marketplace activity available. The letter warns that the FTC will enforce the Act to its fullest extent, and therefore encourages online vendors to prepare for the Act’s imposition, including by communicating with and informing third party sellers about the information the Act requires to be collected, verified, and disclosed. The FTC also emphasizes the civil penalties for violations of the Act, which are north of $50,000, in the letter. According to the FTC, the Act is designed to protect consumers from unsafe, stolen, and counterfeit goods by verifying the identity of their third-party sellers and simplifying the avenues for consumers to report suspicious activity.