FTC proposes new guidelines to hem in use of fake reviews

By Hank Schultz contact

- Last updated on GMT

©Getty Images - Artur
©Getty Images - Artur

Related tags: Ftc, Advertising, Asa, Federal trade commission, Marketing

The US Federal Trade Commission is proposing an updated set of rules that would attempt to rein in the burgeoning use of phony reviews to hawk products online. They would also work to prevent the suppression of negative reviews

“We’re updating the guides to crack down on fake reviews and other forms of misleading marketing, and we’re warning marketers on stealth advertising that targets kids,”​ said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Whether it’s fake reviews or influencers who hide that they were paid to post, this kind of deception results in people paying more money for bad products and services, and it hurts honest competitors.”

The announcement last week concerns proposed changes to FTC’s Endorsement Guides document that incorporates some of the suggestions found in the more than 75 comments it had already received. The document is now open for another round of commentary before being made final.

Industry suggested FTC accelerate pace of updates

One of earlier comments came from California-based supplement manufacturer Pharmavite. That company noted that FTC last updated the guidelines more than 10 years ago. Given the rapid rate at which the online marketplace is evolving, the company suggested the Commission should accelerate that pace.  Other commenters echoed this suggestion, with the consensus of a three year revision cycle, according to FTC.

Other suggestions included pressuring social media outlets to make tools for disclosure of connections easier to use, more prominent and/or mandatory.  Some of these, such as watermarks over images, might be too fleeting or too hard to read to be of much use.

Misrepresenting extent of influence

In addition to the disclosure of material connections between an endorser and the product being endorsed, the FTC guidelines also address the question of endorsers misrepresenting themselves.  It is already illegal to use a bot to generate review.  If an actual person is typing out and entering a review, they have to be who they say they are.

“It is a deceptive practice for users of social media to purchase or create indicators of social media influence and then use them to misrepresent their influence for a commercial purpose,” ​the document states.

According to FTC the new guidelines will:

  • Warn social media platforms that some of their tools for endorsers are inadequate and may open them up to liability;
  • Clarify that fake reviews are covered under the guides and added a new principle that in procuring, suppressing, boosting, organizing, or editing consumer reviews, advertisers should not distort or misrepresent what consumers think of their products.
  • Clarify that tags in social media posts are covered under the guides and modified the definition of “endorsers” to bring virtual influencers—that is, computer-generated fictional characters—under the guides.

Attorney: FTC working hard to make rules match reality

Attorney Ivan Wasserman, a partner in the firm Amin Talati Wasserman, said the new guidelines should help companies stay on the right side of the regulations with updated real world examples.

“While radio and television advertising hasn’t changed much in decades, online advertising is constantly and rapidly evolving, becoming increasingly sophisticated in the ways it is able to influence consumer behavior, and the attendant potential to deceive.  It is certainly a challenge for regulators to keep up with the pace of change, as it is for the industry to understand how laws  written prior to the dawn of the internet apply to the ways marketing is done today,”​ he said.

The new guidelines also serve as a warning, Wasserman said.  As the examples in the guidelines become more specific and better represent what’s going on in the market today, it becomes harder for those firms seeking to bend the rules to claim they didn’t understand the nuances of the regulations.

FDA could take page from FTC primer

Wasserman said this mismatch between the pace of technological change and regulation doesn’t extend only to communications covered by FTC rules.  It lies at the heart of the supplement industry, with fuzzy definitions of what this ‘education’ mentioned in Dietary Supplements Health and Education Act is supposed to be about.

“As an FDA example of how technology is outpacing regulation, DSHEA, enacted in 1994, has a  ‘reading room’ exception to product labeling.  Under that exception third party literature in brick and mortar retail stores is not considered to be ‘labeling’ for supplements sold in the store provided certain conditions are met (think of a natural food store selling a book on ‘Vitamin C Cures Cancer’),” ​Wasserman said.

“I am often asked how that exception applies in an on-line world.   Does the literature have to be one-click away from the supplements?  Two clicks?  Can there be links?  ‘Store’ branding?   While companies do their best to follow the spirit of DSHEA, guidance like this from the FDA would help provide clarity,”​  he added.

A full copy of the proposed FTC guidelines can be found here​.

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