The FTC Ban on Fake Reviews & What It Means for Your Business

In response to growing concerns from consumers, the Federal Trade Commission (FTC) has been making moves for the past couple of years to combat deceptive advertising. In August of 2024, the FTC officially announced a final rule that prohibits fake reviews and testimonials on products and services. 

With the threat of an up to $51,744 fine per violation (in civil penalties) looming, the message is clear: the cost of deception far outweighs the temporary gains from falsified acclaim. The ruling, known as the Trade Regulation Rule on the Use of Consumer Reviews, outlines exactly what is prohibited, including:

• Fake endorsements of any kind, including those from insiders or celebrities not genuinely endorsing the product.
• Suppression, alteration, or fabrication of customer feedback.
• Creation or fostering of misleading social media engagement.

The FTC’s chair, Lina M. Khan, emphasizes that genuine customer feedback is the cornerstone of fair business practices. 

But don’t be afraid of the legal jargon from this regulation. This is an opportunity for your business to foster trust and build stronger relationships with your customers. Leads and purchasers largely rely on online reviews to convert – and naturally, having negative reviews can prevent this. In fact, approximately 81% of potential buyers check reviews before making a purchase.

Let’s break down how your current and future reviews are affected by this new ruling, and how you can continue to manage your business reputation while being fully and legally compliant.

The Federal Trade Commission Reviews Ban: What’s Prohibited?

Any testimonial or review that is not based on an authentic experience or not written by a real person falls under what’s prohibited. The FTC has outlined the following in their final ruling:

• Having any false customer reviews, consumer testimonials, or celebrity testimonials. Basically any reviews that misrepresent themselves and their experience with a product or service, as well as any that come from company insiders, fall under the ban.
• Creating any insider reviews or customer testimonials. A ‘company insider’ is anyone in a business who is a manager or above, or someone who owns at least 10% of company shares. Soliciting employees for reviews also falls under this ban.
• Buying fake reviews, whether positive or negative. Any false testimonial (whether low or high rating) is considered deceptive since it alters business perception.
• Suppressing customer reviews. Businesses cannot threaten, intimidate, or throw false accusations at any reviewers to prevent certain reviews.
• Selling or buying fake social media indicators. ‘Social media indicators’ include views, post likes, and followers – all of which businesses are now prohibited from buying. Using bots or fake accounts to alter social media influence also falls under this ban. 
• Having any company-controlled review websites. Businesses cannot interfere with independent review websites or misrepresent themselves to control them. (For example: Apple cannot be involved with websites like PCMag, which independently review their products).

Is the FTC Banning AI Reviews?

Yes. AI-generated reviews are considered false and deceptive since they are not created by a person. Authentic feedback serves as a testament to a business’s commitment to quality and integrity, laying the foundation for enduring customer relationships.

What Are the Possible Consequences of Fake Testimonials?

Overall, having fake reviews is deceptive and can tarnish your reputation – even without the FTC involved. The FTC has stated that violators will be penalized with fines, possibly up to $51,744 per violation in civil penalties. Calculating the exact dollar amount in penalties will ultimately be up to the courts in any given case (if found guilty).

False testimonials have had other consequences. According to the official court document, a celebrity commenter stated they received hundreds of emails from consumers who received advertisements for a fake product that falsely used the celebrity’s image.

What Should I Do With My Reviews and Testimonials?

First, do not purchase any reviews or social media indicators, or create AI-generated reviews. If you have any false reviews, get rid of them immediately. And if you find anyone impersonating you or anyone in your business, report them immediately.

Your reputation is one of your most valuable assets. In an age where information is at our fingertips, maintaining a positive public perception is paramount. The FTC’s crackdown on dishonest practices offers a compelling opportunity to audit your online presence and ensure that every review reflects the genuine quality and reliability of your offerings. But if your business has any unsavory reviews, there’s something you can do – compliantly. 

How You Can Manage Your Business Reputation With Ease

Reviews are a crucial part of business marketing, and chances are you might get a negative or unsavory review. But they’re a double-edged sword – since potential customers rely on them so much, reviews can attract or repel business with just a few keystrokes.

City Ranked has worked with several companies to increase their reviews and improve their reputation. Summit is our proprietary solution for managing customer testimonials to ultimately get better leads. With just a few touchpoints, you can see any negative reviews come in, so you can give them a personalized response.

We want to empower you to curate a positive digital footprint, engage constructively with customer feedback, and enhance your service offerings. Learn more about Summit here and how you can get started with a free trial.