The Federal Trade Commission published an Advanced Notice of Proposed Rulemaking (ANPR) on October 20 seeking public comment on a potential regulation aimed at curbing deceptive consumer reviews and endorsements. In its announcement, the FTC highlighted the prevalence of false and misleading reviews online and the harms they cause consumers and competitors.
The ANPR primarily solicits feedback on the costs and benefits of a rule that would expand the FTC’s ability to seek monetary relief for consumer reviews. The Commission would proceed pursuant to Section 18 of the FTC Act (15 U.S.C. 57a), which permits the agency to promulgate trade regulation rules that define with specificity acts or practices that are unfair or deceptive in or affecting commerce within the meaning of Section 5 of the FTC Act (15 U.S.C. 45(a)).
Among other things, the FTC is seeking comment on how widespread the practice is of:
- Posting reviews by nonexistent individuals, by non-purchasers, or by individuals who misrepresent their experiences with a product or service;
- Review hijacking (where a seller steals or repurposes reviews from another product);
- Paid or incentivized consumer reviews that were required to be positive or required to be negative (if of a competitor’s product);
- Consumer reviews written by persons connected to the company offering the product or service;
- “Independent” review sites that are controlled by the companies offering the products or services;
- Suppressing negative consumer reviews; and
- Selling or purchasing social media influence.
The ANPR is being released against the backdrop of the curtailment by the Supreme Court in AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021), of the FTC’s authority to obtain equitable monetary relief, such as restitution or disgorgement of profits, for violations of Section 5. As noted both by Chair Lina Khan in her supporting statement, and Commissioner Christine Wilson in her dissenting statement, the AMG Capital Mgmt. decision has not entirely prevented the FTC from pursuing monetary relief for allegedly fake and deceptive consumer reviews. As we previously reported, in August 2022, the FTC filed a complaint in the U.S. District Court for the Southern District of New York alleging that Roomster Corp., an online housing platform, used fake reviews to trick consumers into paying to access fake housing listings. The FTC, joined by several state attorneys general, is seeking injunctive relief under the FTCA and monetary relief under multiple state consumer protection laws. And in January 2022, the Commission settled a case against online fast fashion retailer Fashion Nova, who agreed to pay $4.2 million to resolve the FTC’s claims that Fashion Nova blocked negative reviews of its products online.
The FTC also continues to review its Endorsement Guides, which touch upon some of the same issues raised by the ANPR.
At the point at which the ANPR is published in the Federal Register, the FTC will take public comment for 60 days. The agency also indicated it intends to hold several public workshops on the issue.