What Brands Should Know about the FTC's New Rule on Consumer Reviews and Testimonials

On August 14, 2024, the Federal Trade Commission (FTC) finalized a groundbreaking rule, 16 CFR Part 465: Trade Regulation Rule on the Use of Consumer Reviews and Testimonials. The rule represents a shift in online marketing to eliminate fake reviews and deceptive testimonials, which have become widespread across digital platforms. For brands, the message is clear: transparency is now more important than ever. The FTC has stressed that businesses must ensure reviews are genuine, unbiased, and accurately reflect customer experiences. Violations of the rule can result in steep fines and reputational damage, with the FTC stating it will closely monitor compliance.

What Brands Should Do to Comply

Here are five steps brands can take to comply with the new FTC regulation

  1. Ensure Reviews Are Authentic

The cornerstone of the new rule is authenticity. Brands must ensure that reviews on their website or social media platforms are genuine and not fabricated or manipulated. Avoid posting fake reviews or incentivizing customers to leave positive reviews without full disclosure.

  1. Clearly Disclose Paid Endorsements

The FTC’s rule mandates that all paid or incentivized endorsements be clearly disclosed. Whether working with influencers or paid reviewers, be transparent about any financial relationship. Require influencers and reviewers to disclose paid relationships prominently in posts, reviews, or videos. Monitor sponsored content to ensure compliance with disclosure requirements.

This video gets into the details with callout of the rule and examples of non-compliance.

  1. Avoid Review Manipulation

Review manipulation—such as deleting negative reviews or artificially inflating ratings—will not only damage consumer trust but also violate the new FTC rule. Businesses must present an accurate representation of customer feedback, both positive and negative. Allow all types of feedback, good or bad, to be visible. Avoid cherry-picking reviews that present the product in an overly favorable light.

  1. Develop a Compliance Plan

With the new rules in place, brands must adopt internal processes to ensure they are adhering to FTC guidelines. Train marketing teams on the new rule and its requirements. Audit review practices and influencer campaigns to ensure compliance.

  1. Collaborate with Review Platforms

Work closely with platforms like Google, Yelp, and Trustpilot to prevent the publication of fake or biased reviews. These platforms often have their own policies against review manipulation, and aligning with them can help brands stay on the right side of the law.

Conclusion

The FTC’s 16 CFR Part 465 rule marks a new era of transparency in online marketing. Its important that brands take these new rules seriously to avoid hefty fines and protect their reputation. By focusing on authenticity, disclosure, and proactive compliance measures, companies can foster genuine consumer trust while staying compliant with the law.

A Quick Summary of the Rule

The Final Rule prohibits businesses from using deceptive or misleading consumer reviews and testimonials in their marketing efforts. This includes tactics such as:

  • Fake or False Consumer Reviews, Consumer Testimonials, and Celebrity Testimonials
    where the person does not exist, who did not have actual experience with the brand, or misrepresent the experience
  • Buying Positive or Negative Reviews
    where reviewers are paid only if they comply with reviews expressing a particular sentiment.
  • Insider Reviews and Consumer Testimonials
    where reviews are written by company insiders that fail to clearly and conspicuously disclose the giver’s material connection to the business.
  • Company-Controlled Review Websites
    such as if a company controls a website that is masquerading as an objective source yet it gives positive reviews about the company’s products.
  • Review Suppression
    if a business uses threats to prevent or remove a negative consumer review. Also, it bans a business from misrepresenting that the reviews on a review portion of its website represent all or most of the reviews submitted when reviews have been suppressed based upon their ratings or negative sentiment.
  • Misuse of Fake Social Media Indicators
    selling or buying fake indicators of social media influence, such as followers or views generated by a bot.

More here from the news release. More, for those who want to peruse the 163 page document.

Three legal sources and The Wall Street Journal weigh in on the issue.