Is the FTC War on Fake Reviews Doomed to Fail?

Audioholics has commented on the problem of fake reviews before, but it has remained a growing problem since the Web 2.0-era ushered in user-generated content. Fake reviews waste time and misleads consumers while earning profit for online market platforms and product review websites. Now with the rise of AI-generated content, scammers have a powerful tool to contribute further to what author Cory Doctorow calls the “enshitification of the Internet". Many of us are so jaded now that we don’t even consider the user-review section of an Amazon product listing. We assume it’s just another wretched hive of scum and villainy.

Despite their problems, online reviews remain an important part of the online shopping experience. A 2023 survey of 8,000 American online shoppers by Power Reviews provided statistics on the enduring popularity of online reviews:

• 99.5% of shoppers research purchases online at least sometimes. 
• Nearly 87% do so regularly or always. 
• 77% of shoppers specifically seek out websites with ratings and reviews. 
• The most popular places for consumers to read reviews are Amazon (94%), retail websites (91%), search engines (70%), and brand websites (68%).
  

Back in 2019, Audioholics President Gene DelaSala was so annoyed at seeing one of his videos embedded in a low-quality fake review website that he created a comprehensive guide to identifying inauthentic review and comparison websites. Since you’re reading Audioholics, you’ve likely encountered electronics or audio websites that mislead by presenting marketing or auto-generated content posing as independent consumer education. The audio market is especially ripe for deceptive messaging, as specs are often manipulated, making it difficult to make apples-to-apples product comparisons. For instance, amplifier power ratings can be murky when your only source of information is the manufacturer. 

Consumers would benefit from assurances of authenticity, whether they’re reading a user’s first-hand account of product ownership or an educational deep dive into the real-world product specifications in the style of Audioholics’ reviews. 

FTC to the Rescue? 

A Federal Trade Commission ruling, dubbed the Trade Regulation Rule on the Use of Consumer Reviews and Testimonials seeks to solve the fake review problem once and for all. The new rules (FTC 16 CFR Part 465) prohibit the sale, purchase or dissemination of fake consumer reviews and testimonials. Backed by fines of up to $51,744 per-violation, the FTC hopes online scammers will now think twice about disseminating review bots to artificially inflate product ratings.

FTC consumer protections have always required the disclosure of paid advertising, and on paper, they’re supposed to protect honest reviewers from litigation for negative review. But the new final ruling seeks to clarify those protections while giving the FTC additional power to, in the words of FTC Chair Lina M. Khan: 

“...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.”

The new regulations, approved in a 5-0 vote and published in the *Federal Register* on August 14 2023, will take effect on October 21, 2024. Once active, the FTC will be able to penalize violations under six specific prohibitions. New Prohibitions Against Deceptive Reviews

Fake or False Consumer Reviews, Consumer Testimonials, and Celebrity Testimonials: Includes AI-generated reviews, fake testimonials, and endorsements by celebrities who have no experience with the reviewed product/service. 

Buying Positive or Negative Reviews: Prohibits the purchase of both positive or negative reviews, including paying for specific sentiments to be included in a review. This rule also applies to companies attempting to harm a competitor’s reputation by paying for a negative review. 

Insider Reviews and Consumer Testimonials: Prohibits reviews and testimonials from company insiders such as any employee without full disclosure. While not a new rule, it will now be punishable under the new regulation.

Company-Controlled Review Websites: Bans company owned websites from posing as independent review sites. For example, Dyson Inc. cannot launch a new website called VacuumCleaners&HeadphoneReviews.com, simply to give its products high marks while slagging the competition. It sounds crazy, but it’s true! Dyson really makes headphones now. 

Review Suppression: Bans manufacturers from removing or changing negative reviews. This includes sending legal threats to honest reviewers that may not have been impressed by a product’s performance. 

Misuse of Fake Social Media Indicators: Prohibits buying or selling fake social media influence indicators, such as bot-generated follower counts and fake engagement metrics. Certain so-called social media influencers are now on notice! 

Regulations, Not Laws

It’s an important distinction that FTC regulations are not laws, they're not even a bill! The power to create laws is a privilege granted to Congress, not agency appointees. A new feature of the American legal landscape could greatly diminish the power of regulatory agencies, as Chevron Doctrine was overturned last June. The Chevron Doctrine was a 1984 Supreme Court precedent that had enshrined the power of agencies to interpret rules. Now that the precedent has been overturned, regulatory rules are in a much darker place.

At least the Schoolhouse Rock Bill isn't a regulation in 2024

"Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority," - Chief Justice John Roberts wrote in the decision.

What Overturned Chevron could mean for the FTC?

Hypothetically, a large online retail platform known for hosting fake reviews and a $2-trillion dollar valuation could challenge the FTC’s authority in court, armed with all the legal and lobbying firepower of one of America’s major tech companies. By contrast, the FTC operates on a relatively modest budget, estimated to be $528 million for 2025. FTC Budget 

In reality, our hypothetical online retailer likely doesn’t want to be seen as a magnet for fake product reviews. Ideally, the FTC and online platforms would work together to improve the consumer experience by cracking down on prohibited deceptive practices. Amazon, Facebook, and Google may be incentivized to disincentivize fake reviews through delisting, deranking, or where prudent, flagging violations for the FTC to deploy fines. It wouldn’t be the first time tech companies and three letter government agencies have worked together. 

Conclusion

The new FTC rules have made a bold statement in defining the forms of online fakery it will now prohibit starting October 21, 2024. Their effectiveness has yet to be seen. Hopefully the threat of fines will serve as a deterrent to bad actors. However, enforcing these regulations in an era of AI tools that can automate deceptive practices at near infinite scale presents a serious challenge. For independent creators like Audioholics, the new rules should bolster confidence and credibility while helping consumers cut through the noise when seeking honest, informed opinions online. In a perfect world, the FTC’s efforts may usher in a new era of online authenticity as large companies audit their marketing practices for compliance to the new rules. 

However, the FTC is notoriously understaffed and underfunded, and already embroiled in a high-profile antitrust case against Meta (Facebook). The challenge of policing deceptive online practices may prove an impossible task. Without the willingness of the tech platforms to assist, the FTC may be trying to spread too little Marmite over too large a cracker.

How do you feel about the FTC ruling to crack down on fake reviews? Do you think this will help safeguard consumers against bogus reviews? Please drop a comment in the related forum thread below.