As my colleague Hannah Taylor blogged about back in August, the FTC published its final Trade Regulation Rule on the Use of Consumer Reviews and Testimonials.  The Rule, which went into effect in late October and is intended to protect the review ecosystem, prohibits deceptive and unfair conduct involving consumer reviews and testimonials and authorizes courts to impose civil penalties for knowing violations.  

The FTC staff has now published FAQs, providing guidance on how FTC staff interprets the Rule, though not providing a safe harbor for businesses who follow it.  It is noteworthy that in many instances where the guidance states that certain conduct described in a question does not violate the Rule itself, it also states that the conduct could otherwise constitute a violation of the Endorsement Guides or the FTC Act.  The guidance also repeatedly makes clear that businesses would be wise to not turn a blind eye to unsavory review practices undertaken on their behalf by others, as the Rule itself provides for liability where a company knows or “should have known” of the prohibited conduct.  This post will outline some of the most significant topics addressed in the FAQs. 

As a preliminary matter, the guidance clarifies the distinction between consumer reviews and consumer testimonials. A consumer review is a consumer’s evaluation of a product or business that is submitted to and published on a website or platform dedicated in whole or in part to receiving and displaying such evaluations, such as a review site or product pages of a retailer website.  By contrast, a testimonial, a type of endorsement, is an advertising message that consumers are likely to believe reflects the opinions, beliefs, or experiences of a consumer (or celebrity) who has purchased, used, or otherwise had experience with a product or business. The guidance notes that “[m]ost consumer reviews are not consumer testimonials, and most consumer testimonials are not consumer reviews,” but that if a business provides an incentive to the consumer for the review, then the review is a testimonial.

The guidance also establishes who is liable and for what: ordinary consumers are not liable under the Rule for what they say in reviews.  Influencers are liable if they lie.  Those in the business of creating fake reviews are liable. And enablers of fake reviews, like advertising and public relations companies and reputation management companies, are liable. 

The FAQs provide important guidance on the scope of the exemption created by Section 465.2(d) of the Rule, which carves out from the prohibition on the procurement of fake reviews those reviews that appear on a website or platform as a result of the business merely hosting the reviews.  The guidance clarifies that the retailer does not have a duty to investigate whether the reviews are legitimate so long as it is not buying or writing the reviews.  This is true even if the retailer is soliciting or aggregating the reviews. However, a business can be liable “if it wrote or created fake or false reviews or if it purchased consumer reviews that it knew or should have known were false” (emphasis added).  Further, putting testimonials on its website is not considered merely “hosting” reviews, so if those testimonials are fake or false, the business could be liable. 

Moreover, while the guidance makes clear that the rule does not impose a general duty for businesses to investigate whether each consumer review of its products is fake or false, it also states that “sometimes there may be clear indications that purchased reviews are likely to be fake or false, in which case failing to investigate may trigger liability under the ‘should have known’ standard.” As an example of such a “should have known” situation is where a business hires a third party to generate reviews by providing free samples of its products to consumers. “The business would likely be on notice that resulting reviews are likely fake or false if, for example, the reviews appear so quickly after purchase that it’s doubtful they reflect real experiences with the product, an unusually large number of reviews appear in a very short period of time, or they refer to the wrong product.”

Addressing the prohibition contained in Section 465.4 on buying “consumer reviews expressing a particular sentiment,” the guidance makes clear that businesses can’t even suggest to consumers that their reviews must express particular sentiment in order for the consumer to obtain a promised incentive.  As an example, the guidance provides as follows: “you would be implying that reviews have to be positive if you said: ‘Tell us how much you loved your visit to John’s Steakhouse and get a $5 coupon’ or ‘Tell your friends about all the fun you had at Jane’s Arcade for a chance to win prizes.’”  In other words, don’t get cute.

Regarding the use of “insider” reviews under Section 465.5 (i.e., reviews by officers or managers of a business, or their relatives), the guidance tackles a few important topics, including the exemption for general solicitations, and the clarity of disclosures. As to the first, the guidance makes clear that if a business asks all purchasers to post reviews, and some of those purchasers are insiders who fail to disclose their connection to the business in their review, the business won’t be liable; however, the business should be aware of (and not turn a blind eye to) possible red flags in a review indicating insider status.  As to disclosures of insider status, the guidance notes that the “clear and conspicuous” standard established by the section, and defined in the Rules as “unavoidable,” means consumers should not have to click on or hover over a link to see it.  However, a disclosure in the first line of a text-only review would be considered “unavoidable.”  However, if the review is in a video, the disclosure must otherwise “stand out” so that viewers “would actually notice it.”

Addressing Section 465.7, dealing with review suppression, the guidance notes that while organizing reviews, including putting all the 5 star ones on the top of a review page, is not covered by the Rule, “organizing reviews in a way that makes it difficult for consumers to know about or find negative reviews could be an unfair or deceptive act or practice in violation of Section 5 of the FTC Act.”

While this post covers some of the most salient information covered by the FAQs, they're well worth reading in full. The guidance addresses practices and concerns shared by virtually all companies engaged in collecting and displaying consumer reviews, issues that clearly remain top of mind for regulators.