On August 14, 2024, the Federal Trade Commission’s (“Commission”) new Trade Regulation Rule on the Use of Consumer Reviews and Testimonials (the “Rule”) was finalized and went into effect. The Rule prohibits specified unfair or deceptive acts or practices involving consumer reviews or testimonials. Violations of the Rule can result in a business being assessed civil penalties up to $51,744 per violation. In addition, any entity or person who violates such a Rule is liable for any injury caused to consumers by the Rule violation.
Overall, this Rule mandates that it is “unfair or deceptive act or practice” for any business to “write, create, or sell a consumer review, customer testimonial, or celebrity testimonial that materially misrepresents” the existence of the reviewer, the reviewer’s use of the product, or the reviewer’s experience with the product.[1] The Rule defines a business to include an individual, partnership, corporation, or any other commercial entity that “sells products or services.”[2] Further the Rule would prohibit these businesses from purchasing such reviews or disseminating such testimonials if the businesses knew or should have known that the reviews were fake or false.[3]
Any review from a business’s officers, managers, employees, agents, or any of their immediate relatives are prohibited when the business knows that the review will materially misrepresent without a “clear and conspicuous” disclosure.[4] The clear and conspicuous disclosure must be “easily noticeable and easily understandable by ordinary customers.”[5] Businesses cannot disseminate testimonials by insiders without clear disclosures of their relationships and prohibits certain solicitations by officers or managers of reviews from company employees or their relatives, depending on whether the businesses knew or should have known of these relationships.[6] However, this rule would not apply to 1) any generalized solicitations by a business to its purchasers to post review of testimonials about the product or service or 2) any review that appears on a website as a result of the business merely engaging in consumer review hosting.[7]
Businesses are prohibited from providing compensation or other incentives conditioned on the writing of consumer reviews expressing a particular sentiment, either positive or negative.[8] Purchasing a consumer review can include providing “money, gift certificates, products, services, discounts, coupons, contest entries, or another review, in exchange for a consumer review.”[9] Businesses would also be prohibited from controlling, owning, or operating a website provides independent opinions about a category of products or services that includes its own products or services.[10]
Any “unfounded or groundless legal threats, intimidation, or a public false accusation” to prevent or remove a negative consumer review by a business would also be prohibited.[11] The Rule bars a business from misrepresenting that the reviews on its website represent all reviews submitted when negative reviews have been suppressed.[12] Suppression of reviews is only allowed when applied across all reviews equally and suppressed due to the review containing trade secrets, defamatory or explicit content, personal information of another individual, discriminatory, misleading, or reasonable belief the review is fake.[13]
Finally, a business is prohibited from selling or distributing fake indicators of social media influence to “materially misrepresent their influence or importance for a commercial purpose.”[14] Distributing fake indicators of social media influence includes “social media influence generated by bots, purported individual accounts not associated with a real individual, accounts created with a real individual’s personal information without their consent, or hijacked accounts, or that otherwise do not reflect a real individual’s or entity’s activities, opinions, findings, or experiences.”[15]
Overall, the Rule will undoubtedly impact the manner in which endorsements and consumer reviews are handled moving forward. Indeed, the new Rule may in all likelihood be utilized by state governmental enforcers and private litigants in those states, such as Connecticut, that have adopted a “Little FTC Act” that utilizes the Cigarette Rule public policy methodology to analyze unfair acts and practices.[16]
Those who may be affected by these changes should review their current practices to ensure they are in line with the new changes.
Wiggin and Dana possess extensive knowledge and experience in navigating both federal and state consumer protection laws and regulations, including the many Guides and Trade Regulation Rules adopted by the Federal Trade Commission.
[1] 16 CFR § 465.2(a)
[2] 16 CFR § 465.1(a)
[3] 16 CFR § 465.2(b)
[4] 16 CFR § 465.5
[5] 16 CFR § 465.1(c)
[6] 16 CFR § 465.5
[7] 16 CFR § 465.2(d)
[8] 16 CFR § 465.4
[9] 16 CFR § 465.1(m)
[10] 16 CFR § 465.6
[11] 16 CFR § 465.7
[12] Id.
[13] Id.
[14] 16 CFR § 465.8
[15] 16 CFR § 465.1(h)
[16] The Cigarette Rule methodology states: “(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other businessmen).” Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking. 29 Fed.Reg. 8355 (July 2, 1964). See 12 Robert M. Langer, John T. Morgan & David L. Belt, Connecticut Practice Series, Connecticut Unfair Trade Practices, Business Torts and Antitrust § 2:2, p.18 (2023-24 ed.) (“This language has been the foundation of the analysis defining the meaning of “unfair acts or practices” under CUTPA and has been cited repeatedly by the Connecticut Supreme Court.” Id. at 18-19).