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All five Federal Trade Commissioners have voted in favor of legislation to curtail fake online reviews for products.
The rule will go into effect 60 days after being published in the Federal Register, which will be around mid-October.
The new ban grants additional powers to the Federal Trade Commission (FTC), allowing them to fine those found to violate this policy. The organization can seek a maximum penalty of around $51,744 per violation.
The new legislation prohibits artificial intelligence (AI) generated reviews, and bans companies from paying for either positive reviews to inflate their image or negative ones to disparage competitors. It also curtails the power of online influencers by banning the practice of exaggerating their reach for example by paying for bot followers. It also bans companies from paying for good reviews or threatening customers over negative reviews, as well as hiding or suppressing negative reviews.
“Fake reviews not only waste people’s time and money but also pollute the marketplace and divert business away from honest competitors,” FTC Chair Lina Khan said in a statement. “By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive,” she added.
Yelp General Council Aaron Schur made a statement on Wednesday, saying “We believe the enforcement of this new rule will improve the review landscape for consumers and help level the playing field for businesses,” he said. He also added that Yelp’s terms and conditions have long prohibited the practices covered by the new FTC rulings.
Fake or AI-generated reviews are a growing concern
As commerce continues to move increasingly online, reviews can be critical for companies looking to attract business and consumers looking to evaluate products before making a purchase.
Google has acknowledged that it is an ongoing and escalating issue on its platforms, and reported removing over 170 million fake reviews in 2023 – over 45% more than in 2022.
Featured image credit: generated by Ideogram
