FTC, CFPB, Take Aim at Fake Review Fraud

By Nathalie Voit

The fake review industry is about to get a serious shake-up. In a sheer demonstration of federal prowess, the Federal Trade Commission (FTC) issued a Notice of Penalty Offenses to over 700 U.S. companies to warn them from engaging in deceptive business practices or unfair conduct that misleads or tricks consumers.

The warning, issued in October of last year, follows a steep rise in fake review fraud across the online marketplace. To curb rampant review fraud, the agency put hundreds of businesses on notice about the law.

“Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses,” said Director of the FTC’s Bureau of Consumer Protection Samuel Levine in a press release. “Advertisers will pay a price if they engage in these deceptive practices.”

Businesses who are found guilty of violating the FTC’s policy on endorsements and testimonials will face up to $43,792 per offense, as per the release.

The notice rules out several practices that the agency has previously found to be unfair, including “falsely claiming an endorsement by a third party; using an endorsement to make deceptive performance claims;” and “failing to disclose an unexpected material connection with an endorser,” among others.

In order to offer clearer guidance on what constitutes fake review fraud and other forms of “deceptive endorsements,” the Consumer Financial Protection Bureau (CFPB) released its formal policy on contractual ‘gag’ clauses and sham reviews on Tuesday.

In a statement released on March 22, the CFPB said manipulating reviews, suppressing reviews, limiting the posting of negative reviews, laundering fake reviews, or attempts to silence consumers from posting an honest review are generally considered unlawful under the Consumer Financial Protection Act.

The agency also reminded industry actors to ensure that their customer review practices complied with all federal laws, including the Consumer Financial Protection Act.

“In America, no corporation should be able to silence a customer from posting an honest review online,” CFPB Director Rohit Chopra said in the statement. “Corporate disinformation campaigns that suppress legitimate reviews or manufacture fake reviews are not only a threat to free speech and fair competition, they are also illegal.”