The FTC’s Rule on the Use of Consumer Reviews and Testimonials went into effect on October 21, 2024 and addresses deceptive and unfair conduct involving consumer reviews and testimonials. You can also review the FTC’s other guidance on reviews and testimonials, including FAQs relating to the agency’s Endorsement Guides.
Here are 10 things that marketers must be aware of concerning the Rule in order to avoid liability exposure, including the initiation of regulatory investigations. Consult with an FTC review and testimonial lawyer if you or your company have received an access letter, a civil investigative demand (CID) or if you are interested in discussing the implementation of preventative compliance measures.
- The Rule authorizes courts to impose civil penalties for knowing violations and is important because fake, false or otherwise deceptive reviews and testimonials have, according to the agency, polluted the marketplace. There is no private right of action under the Rule.
- There is a difference between a consumer review and a testimonial. A consumer review is a consumer’s evaluation, or a purported consumer’s evaluation, of a product, service, or business that is submitted to and published on a website or platform dedicated in whole or in part to receiving and displaying such evaluations. So, consumer reviews could appear, for example, on a site dedicated to consumer reviews or on product pages of retailer websites. A testimonial, one type of endorsement, is an advertising message that consumers are likely to believe reflects the opinions, beliefs, or experiences of a consumer or celebrity who has purchased, used, or otherwise had experience with a product, service, or business. Testimonials can appear in a variety of contexts, such as in television or radio ads, on a company website, in Internet ads, or in social media.
Note: Most consumer reviews are not consumer testimonials, and most consumer testimonials are not consumer reviews. However, if a business pays for or gives incentives for consumer reviews of its business, products, or services, then those incentivized reviews would also be considered consumer testimonials under the Rule.
- In some instances the lack of a Rule violation could still violate the FTC Act. See, e.g., Endorsement Guides.
- Can your business ask for reviews only from customers whom you think are happy with the products/services? The Rule does not contain a specific prohibition against such conduct. However, this practice could violate the FTC Act. See, e.g., Endorsement Guides 16 C.F.R 255.2(d) and (e)(11).
Example: A marketer contacts recent online, mail-order, and in-store purchasers of its products and asks them to provide feedback to the marketer. The marketer then invites purchasers who give very positive feedback to post online reviews of the products on third-party websites. Less pleased and unhappy purchasers are simply thanked for their feedback. Such a practice may be an unfair or deceptive practice if it results in the posted reviews being substantially more positive than if the marketer had not engaged in the practice. If, in the alternative, the marketer had simply invited all recent purchasers to provide feedback on third-party websites, the solicitation would not have been unfair or deceptive, even if it had expressed its hope for positive reviews.
- The Rule does not prohibit giving incentives for reviews, as long as there is not an express or implied requirement that the reviews have to express a particular sentiment. Remember that failing to disclose incentives could be a violation of the FTC Act. See, e.g., Endorsement Guides 16 C.F.R 255.5(a) and (b)(6)(ii).
Note: A business does not violate the provision by offering a consumer an incentive for a review that it merely expects to be positive. Just because a business expects that an incentivized review will be positive does not mean there is either an express or implied requirement that it needs be positive to obtain the incentive. However, such a practice could violate the FTC Act. See, e.g., Endorsement Guides 16 C.F.R 255.2(d) and (e)(11).
Note: The Rule does not prohibit your business from offering compensation to a consumer to remove or change a review. However, paying consumers to change or remove truthful negative reviews may violate the FTC Act as an unfair or deceptive act or practice, because it may wind up distorting or otherwise misrepresenting what consumers think about your business or its products/services. See, e.g., Endorsement Guides 16 C.F.R 255.2(d).
Note: Also, individual consumers would not be violating the Rule by accepting money in exchange for posting a 5-star review. Section 465.4 only applies to the businesses that provide compensation or other incentives, not to the consumers who accept them.
- Your business cannot pay incentives for 5-star reviews on third-party review platforms, even if you ask the reviewers to add a disclosure about the incentive. Such conduct would violate Section 465.4. This section applies whether the reviews appear on your website or third-party review platforms. Section 465.4 only applies to consumer reviews. Hired influencers are providing testimonials, which are covered under other parts of the Rule.
- Additionally, you cannot suggest to consumers that their reviews must be positive (or negative) in order to obtain a promised incentive – even if you do not say so explicitly. For example, you would be implying that reviews have to be positive if you said: “Tell us how much you loved your visit to John’s Tavern and get a $5 coupon” or “Tell your friends about all the fun you had at Bob’s Arcade for a chance to win prizes.”
- The Rule does not prohibit your business from offering compensation to a consumer to remove or change a review. However, paying consumers to change or remove truthful negative reviews may violate the FTC Act as an unfair or deceptive act or practice, because it may wind up distorting or otherwise misrepresenting what consumers think about your business or its products. See, e.g., Endorsement Guides 16 C.F.R 255.2(d).
- The Rule does not prohibit offering incentives to consumers for taking take down their negative reviews. However, offering such incentives could be an unfair practice in violation of the FTC Act. See, e.g., Endorsement Guides 16 C.F.R 255.2(d).
- The Rule prohibits businesses from implying that a review has to be positive in order for consumers to get an incentive for the review. You cannot suggest to consumers that their reviews must be positive (or negative) in order to obtain a promised incentive – even if you do not say so explicitly.
Example: You would be implying that reviews have to be positive if you said: “Tell us how much you loved your visit to Ray’s Tavern and get a $5 coupon” or “Tell your friends about all the fun you had at Jennifer’s Pottery Shack for a chance to win prizes.”
- Advertising agencies, public relations firms, review brokers and reputation management companies are potentially liable under the Rule. For example, they could be liable under Section 465.2(a) if they write, create, or sell a fake or false consumer review, consumer testimonial, or celebrity testimonial. They could potentially be liable under Section 465.4 if they provide compensation or other incentives conditioned on the writing or creation of consumer reviews expressing a particular sentiment. They could also potentially be liable under Section 465.7(a) if they engage in review suppression or under Section 465.8 if they misuse fake or false indicators of social media influence.
- The Rule does not cover when and how influencers should disclose their relationship to a brand. The Rule’s disclosure requirements relate to certain situations involving company insiders. But failing to disclose relationships between influencers and brands could violate the FTC Act. FTC staff has guidance about such disclosures to help businesses and influencers avoid violations.
- Brokers of fake reviews would generally fall under Section 465.2(a)’s prohibition against selling a consumer review, given that such brokers are generally being paid to provide fake reviews.
- If you host consumer reviews of products/services that you sell, you should be concerned about whether the reviews submitted are fake or false. However, you may not face liability under the Rule for such reviews, assuming you did not write or purchase them. Section 465.2(d) of the Rule provides an exception for reviews that appear on a website or platform when the business is doing nothing more than hosting consumer reviews.
Note: The Rule’s exemption for mere review hosting may apply to a business that solicits review submissions or aggregates star ratings. That exemption applies to mere consumer review hosting, even if the business prompts review submissions or aggregates star ratings. The exemption for review hosting does not apply to consumer reviews that a business features in its advertising or marketing materials. When featured in that context, consumer reviews become testimonials and the exemption for review hosting does not apply.
Note: A business that hosts reviews on its retail website be liable if it wrote or created fake or false reviews or if it purchased consumer reviews that it knew or should have known were false.
Note: A business can be liable under the Rule for hosting false testimonials on its website. Testimonials are, by definition, advertising or promotional messages. A business that puts testimonials on its own website is disseminating them and is not merely “hosting” them. If those testimonials are fake or false, the business could be liable.
- If your business sells its products/services on its website and routinely emails every purchaser and asks them to post a consumer review, one of those purchasers happens to be an employee of your business, and if that employee sees such an email and writes a false review, you may not be responsible for it. Section 465.2(d) of the Rule provides an exception for reviews that resulted from a business making generalized solicitations to purchasers to post reviews about their experiences with a product, service, or business.
- If your business hires influencers to review your products/services, are those reviews covered by the Rule? Under the Rule, a hired influencer’s social media post touting a product/service would be considered a celebrity testimonial, not a review. Your business could be liable under Section 465.2(b) if it knew or should have known that any such influencers misrepresented that they used or had experience with the product/service or misrepresented their experiences with it.
Note: Businesses should look for red flags indicating that a testimonial is likely fake or false, and they should act accordingly if such a flag is present. For example, if someone gives a testimonial and then asks for the product/service, a business should question whether the testimonialist used the product/service.
- When should a business know that it is buying reviews that are fake or false? The Rule does not impose a general duty for businesses to investigate whether each consumer review of its products/services is/are fake or false. However, sometimes there may be clear indications that purchased reviews are likely to be fake or false, in which case failing to investigate may trigger liability under the “should have known” standard. For example, let’s say that a business hires a third party to generate reviews by providing free samples of its products/services to consumers. The business would likely be on notice that resulting reviews are likely fake or false if, for example, the reviews appear so quickly after purchase that it is doubtful they reflect real experiences with the product/service, an unusually large number of reviews appear in a very short period of time, or they refer to the wrong product/service.
- Your business is in compliance with the Rule if it asks insiders to write reviews of your products/services, so long as they disclose their relationships to the company in the reviews. However, the disclosures must be “clear and conspicuous.” Also, if the reviews materially increase the average star rating of a product/service, the business could be violating the FTC Act even with such disclosures, because consumers might see only the star rating and not look at the individual reviews. See, e.g., Endorsement Guides 16 C.F.R 255.5(b)(6)(ii).
- When a disclosure is required, it has to be “clear and conspicuous.” The definition of that term says that the disclosure needs to be “unavoidable.” What does “unavoidable” mean? “Unavoidable” is an objective standard that turns on whether consumers could have avoided the disclosure. The Rule’s “clear and conspicuous” definition says that a disclosure is avoidable when “a consumer must take any action to see it.
- Can a hashtag be a “clear and conspicuous” disclosure? If so, can it be a short one like “‘#Ad”? Maybe. Depending upon their wording and appearance, hashtags can be clear and conspicuous disclosures for purposes of the rule. Whether “#Ad” would be adequate depends on the specific context. For testimonials in social media, it could work at the beginning of a text-only post, as readers are more likely to see it there, but it may be too easy to miss in a video post. In general, disclosures can indeed be short and simple. The only provision for which the “clear and conspicuous” definition is relevant is Section 465.5, which addresses the failure to disclose insider relationships. An adequate disclosure could be the testimonialist’s description of a product as “my company’s” or “my wife’s company’s.”
Note: Would using a platform’s built-in disclosure tool make the disclosure clear and conspicuous? Not necessarily. Some of these tools may generate inadequate disclosures that are fleeting, too hard to read because of poor contrast or small size, or placed in locations too easy to miss.
Takeaway: In conjunction with the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, the FTC aggressively investigates and enforces false and misleading review practices and testimonials. The Rule on the Use of Consumer Reviews and Testimonials prohibits certain practices identified as unfair or deceptive in the updated Endorsement Guides. Unlike the Endorsement Guides, violations of the Rule carry specific consequences (for example and without limitation, civil monetary penalties). The Guides address a broader range of conduct than the Rule and set forth general principles relating to the use of endorsements/testimonials in advertising.
Marketers and agencies should consult with experienced digital marketing counsel and implement written compliance and training policies.