Proposed Rule2022-24139
Trade Regulation Rule on the Use of Reviews and Endorsements
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 8, 2022
Issuing agencies
Federal Trade Commission
Abstract
The Federal Trade Commission (the "Commission") proposes to commence a rulemaking proceeding to address certain deceptive or unfair uses of reviews and endorsements. The Commission is soliciting written comment, data, and arguments concerning the need for such a rulemaking to prevent unfair or deceptive marketing utilizing reviews and endorsements. In addition, the Commission solicits comment on how the Commission can ensure the broadest participation by affected interests in the rulemaking process.
Full Text
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<title>Federal Register, Volume 87 Issue 215 (Tuesday, November 8, 2022)</title>
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[Federal Register Volume 87, Number 215 (Tuesday, November 8, 2022)]
[Proposed Rules]
[Pages 67424-67430]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-24139]
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FEDERAL TRADE COMMISSION
16 CFR Part 465
Trade Regulation Rule on the Use of Reviews and Endorsements
AGENCY: Federal Trade Commission.
ACTION: Advance notice of proposed rulemaking; request for public
comment.
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SUMMARY: The Federal Trade Commission (the ``Commission'') proposes to
commence a rulemaking proceeding to address certain deceptive or unfair
uses of reviews and endorsements. The Commission is soliciting written
comment, data, and arguments concerning the need for such a rulemaking
to prevent unfair or deceptive marketing utilizing reviews and
endorsements. In addition, the Commission solicits comment on how the
Commission can ensure the broadest participation by affected interests
in the rulemaking process.
DATES: Comments must be received on or before January 9, 2023.
ADDRESSES: Interested parties may file a comment online or on paper by
following the instructions in the Comment Submissions part of the
SUPPLEMENTARY INFORMATION section below. Write ``Reviews and
Endorsements ANPR, P214504'' on your comment, and file your comment
online at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. If you prefer to file your
comment on paper, mail your comment to the following address: Federal
Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW,
Suite CC-5610 (Annex B), Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Michael Ostheimer (202-326-2699),
<a href="/cdn-cgi/l/email-protection#99f4f6eaedf1fcf0f4fcebd9ffedfab7fef6ef"><span class="__cf_email__" data-cfemail="7815170b0c101d11151d0a381e0c1b561f170e">[email protected]</span></a>, or Michael Atleson (202-326-2962),
<a href="/cdn-cgi/l/email-protection#442925302821372b2a042230276a232b32"><span class="__cf_email__" data-cfemail="0964687d656c7a6667496f7d6a276e667f">[email protected]</span></a>, Division of Advertising Practices, Bureau of Consumer
Protection, Federal Trade Commission, Room CC-10603, 600 Pennsylvania
Avenue NW, Washington, DC 20580.
SUPPLEMENTARY INFORMATION:
[[Page 67425]]
I. General Background Information
The Commission is publishing this advance notice of proposed
rulemaking pursuant to Section 18 of the Federal Trade Commission
(``FTC'') Act, 15 U.S.C. 57a, and the provisions of Part 1, Subpart B
of the Commission's Rules of Practice, 16 CFR 1.7-1.20, and 5 U.S.C.
553. This authority permits the Commission to promulgate, modify, and
repeal 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(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).
II. Objectives the Commission Seeks To Achieve and Possible Regulatory
Alternatives
A. Rulemaking Addressing Endorsements and Testimonials
1. Background
Fake and deceptive reviews and other endorsements have long been
problematic, and we have no reason to believe the market will correct
this problem on its own. The commercial incentives to engage in such
misconduct can be large. It can be difficult for anyone--including
consumers, competitors, platforms, and researchers--to distinguish real
from fake and determine the truth in this area. Further, some platforms
may have mixed incentives to deal effectively with the problematic
reviews and, despite some platforms purporting to take enforcement of
problematic reviews seriously, fake and deceptive reviews continue to
flourish on those very platforms. The sheer number of people engaged in
fraudulent or deceptive reviews and endorsements makes them even more
difficult to combat, especially given such content is often created by
individuals or small companies, some of whom are located abroad.
Although the Commission has brought several cases involving reviews
and other endorsements under Section 5 of the FTC Act, 15 U.S.C. 45,
our current remedial authority is limited. Monetary relief is no longer
available under Section 13(b),\1\ disgorgement is not available under
Section 19(b), 15 U.S.C. 57b(b), and, while the Commission has deployed
new tools to combat this problem, in many cases, it remains difficult
to obtain monetary relief.\2\ Under these circumstances, the
availability of a civil penalty remedy may provide a potent deterrent.
We believe initiating a Magnuson-Moss rulemaking to address certain
types of clear Section 5 violations involving reviews and endorsements
would benefit consumers, help level the playing field, and not burden
legitimate marketers. The rule would be designed to deter bad actors,
simplify our enforcement burdens by spelling out prohibitions plainly,
and subject violators to civil penalties.
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\1\ AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).
\2\ In October 2021, the Commission announced the issuance of a
Notice of Penalty Offenses which can allow the FTC to obtain civil
penalties from marketers that use fake reviews. See <a href="http://www.ftc.gov/enforcement/penalty-offenses/endorsements">www.ftc.gov/enforcement/penalty-offenses/endorsements</a>. Such notices, however,
are limited to practices addressed in prior fully litigated
administrative decisions, only apply to marketers that engaged in
covered misconduct after receipt of the notice, and do not provide
for or allow consumer redress. The Commission can still obtain
consumer redress through Section 19(a)(2) of the FTC Act if the
Commission can satisfy a court that a reasonable person would have
known the act or practice at issue was dishonest or fraudulent. See,
e.g., Order at 2-4, Fashion Nova LLC, No. C-4759 (Mar. 18, 2022)
(company that suppressed negative reviews agreed to pay $4.2
million). If the marketer refuses to settle, such relief can only be
obtained in federal court after a fully litigated administrative
decision. Furthermore, redress in matters involving deceptive review
practices can be very difficult to calculate and disgorgement and
civil penalties are not available through such proceedings.
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The Commission has well-established guidance on endorsements and
testimonials. In particular, the Endorsement Guides reportedly remain
very helpful to legitimate actors in the marketplace,\3\ but Commission
guides are not enforceable regulations. Truly bad actors will not be
deterred by Commission guidance, but the possibility of substantial
civil penalties changes the economic incentives and may provide greater
deterrence as to both legitimate and bad actors.
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\3\ Guides Concerning the Use of Endorsements and Testimonials
in Advertising, 16 CFR part 255. In an ongoing regulatory review of
the Endorsement Guides, the Commission received over one hundred
public comments, most of which noted the Guides are beneficial and
should be retained, and none of which disagreed. See 87 FR 44288,
44289-44290 (July 26, 2022).
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2. Objectives and Regulatory Alternatives
The Commission requests input on whether and how it should use its
authority under Section 18 of the FTC Act, 15 U.S.C. 57a, to address
certain inarguably deceptive or unfair commercial acts or practices
involving reviews or other endorsements. The Commission does not
propose to cover every issue addressed in the Endorsement Guides.
Specifically, the Commission proposes addressing the following
practices, many of which have been the subject of Commission
investigations or law enforcement actions: (a) reviews or endorsements
by people who do not exist, who did not actually use or test the
product or service, or who are misrepresenting their experience with
it; \4\ (b) review
[[Page 67426]]
hijacking, where a seller steals or repurposes reviews of another
product; (c) marketers offering compensation or other incentives in
exchange for, or conditioned on, the writing of positive or negative
consumer reviews; \5\ (d) owners, officers, or managers of a company:
(i) writing reviews or testimonials of their own products or services,
or publishing testimonials by their employees or family members, which
fail to provide clear and conspicuous disclosures of those
relationships, or (ii) soliciting reviews from employees or relatives
without instructing them to disclose their relationships; \6\ (e) the
creation or operation of websites, organizations, or entities that
purportedly provide independent reviews or opinions of products or
services but are, in fact, created and controlled by the companies
offering the products or services; \7\ (f) misrepresenting that the
consumer reviews displayed represent most or all of the reviews
submitted when, in fact, reviews are being suppressed based upon their
negativity; \8\ (g) the suppression of customer reviews by physical
threat or unjustified legal threat; \9\ or (h) selling, distributing,
or buying, followers, subscribers, views, and other indicators of
social media influence.\10\ The Commission hopes that by focusing on
practices most clearly and inarguably deceptive or unfair, it can
streamline its rulemaking, benefit consumers, and not burden legitimate
marketers.
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\4\ The Commission has challenged fabricated consumer reviews.
See, e.g., Complaint 9-17, FTC v. Roomster Corp., No. 1:22-CV-07389
(S.D.N.Y. Aug. 30, 2022) (purchase and sale of fake app store and
other reviews for room and roommate finder app and platform);
Complaint at 2-4, Sunday Riley Modern Skincare, LLC, No. C-4729
(Nov. 6, 2020) (company personnel created fake accounts to write
fake reviews of company's products on third-party retailer's
website); Complaint at 12-13, 15-16, Shop Tutors, Inc., No. C-4719
(Feb. 3, 2020) (reviews of LendEDU were fabricated by its employees,
other associates, or their friends and published on a third-party
website); Complaint at 20, FTC v. Cure Encapsulations, Inc., No.
1:19-cv-00982 (E.D.N.Y. Feb. 26, 2019) (Amazon reviews of
defendants' product were fabricated by one or more third parties
whom defendants had paid to generate reviews). It has similarly
challenged fictitious endorsements. See, e.g., Complaint at 14, 19,
FTC v. A.S. Resch., LLC (Synovia), No. 1:19-cv-3423 (D. Colo. Dec 5,
2019) (fake consumer testimonials); Complaint at 20-22, 31, Global
Cmty. Innovations LLC, No. 5:19-CV-00788 (N.D. Ohio Apr. 10, 2019)
(fake consumer testimonials); Complaint at 27-28, 43, Jason Cardiff
(Redwood Sci. Techs., Inc.), No. ED 18-cv-02104 SJO (C.D. Cal. Oct.
24, 2018) (testimonials in infomercial were paid actors who had not
used defendants' product); Complaint at 12-3, 20, FTC v. Mktg.
Architects, Inc., No. 2:18-cv-00050-NT (D. Me. Feb. 5, 2018) (fake
testimonials); Complaint at 14, 21, FTC v. Health Rsch. Labs., LLC,
No. 2:17-cv-00467-JDL (D. Me. Nov. 30, 2017) (fake consumer
testimonials and expert endorsements); Complaint at 13, 18, 28, XXL
Impressions LLC, No. 1:17-cv-00067-NT (D. Me. Feb. 22, 2017)
(defendants do not know whether consumer endorsers of their products
who appeared in their ads actually exist); Complaint at 5, 7, 12-13,
FTC v. Anthony Dill, No. 2:16-cv-00023-GZS (D. Me. Jan. 19, 2016)
(fake testimonials); Amended Complaint at 38-39, 43-44, FTC v. Lisa
Levey, No. 03-4670 GAF (C.D. Cal. Mar. 8, 2004) (fictitious expert
endorsements). It has also challenged false claims that specific
celebrities endorsed specific products, services, or businesses.
See, e.g., Complaint at 15, 19-20, 30-31, Global Cmty. Innovations
LLC, No. 5:19-CV-00788 (N.D. Ohio Apr. 10, 2019); Complaint at 5,
18-20, 22-23, 36, FTC v. Tarr, Inc., No. 3:17-cv-02024-LAB-KSC (S.D.
Cal. Oct. 3, 2017); Complaint at 13-15, 18, Sales Slash, LLC, No
CV15-03107 (C.D. Cal. Apr. 27, 2015); Complaint at 2, 4-5, Norm
Thompson Outfitters, Inc., No. C-4495 (Sept. 29, 2014); The Raymond
Lee Org., Inc., 92 F.T.C. 489 (1978) (use of the names, photographs
and words of public officials, including members of the Congress,
misled consumers that the officials recommended or endorsed the
business). It has similarly challenged false claims of endorsements
by specific entities. See, e.g., Complaint at 15-16, 18, FTC v.
<a href="http://Mercola.com">Mercola.com</a>, LLC, No. 1:16-cv-04282 (N.D. Ill. Apr. 13, 2016)
(misrepresentation the FDA endorsed the use of indoor tanning
systems as safe); Mytinger & Casselberry, Inc., 57 F.T.C. 717, 743-
46 (1960) (misrepresentation that a consent decree restraining
respondents from making certain claims was an endorsement by the
U.S. government of its product); Trade Union Courier Publ'g Corp.,
51 F.T.C. 1275, 1300-03 (1955) (misrepresentation that newspaper was
endorsed by the American Federation of Labor when it was only
endorsed by some unions within the AFL); Ar-Ex Cosms., Inc., 48
F.T.C. 800, 806 (1952) (misrepresentation that lipstick had been
recommended by Consumers' Research); A. P. W. Paper Co., Inc., 38
F.T.C. 1, 15-17 (1944) (misrepresentation that product was endorsed
by the American Red Cross); Wilbert W. Haase Co., Inc., 33 F.T.C.
662, 681-83 (1941) (misrepresentation that insurance company had
endorsed burial vault business and its vaults). Furthermore, the
Commission has challenged advertisements that misrepresent
endorsers' experiences. See, e.g., Complaint at 14, 18, FTC v. A.S.
Resch., LLC (Synovia), No. 1:19-cv-3423 (testimonialists had used a
prior product formulation that contained substantially different
ingredients); Complaint at 22, 25, NextGen Nutritionals, LLC, No.
8:17-cv-2807-T-36AEP (M.D. Fla. Jan. 9, 2018) (testimonials in ads
misrepresented the actual experiences of customers); Complaint at
22-24, 27, FTC v. Russel T. Dalbey, No. 1:11-cv-01396-CMA--KLM (D.
Colo. May 26, 2011) (testimonials misrepresented earnings from
brokering promissory notes using defendants' system); Computer Bus.
Servs., Inc., 123 F.T.C. 75, 78-79 (1997) (testimonials by
purchasers of home-based business ventures did not reflect their
actual experiences); R. J. Reynolds Tobacco Co., 46 F.T.C. 706, 731-
32 (1950) (endorsements communicated endorsers exclusively smoked
Camel cigarettes whereas they did not smoke cigarettes, did not
smoke Camels exclusively, or could not tell the difference between
Camels and other cigarettes).
\5\ The Commission has challenged giving an incentive for a
review or endorsement and requiring that it be positive. See, e.g.,
Complaint at 14, 19-20, FTC v. A.S. Resch., LLC (Synovia), No. 1:19-
cv-3423 (offered consumer endorsers with free product in exchange
for ``especially positive and inspiring'' reviews); Complaint at 5-
6, 8, Urthbox, Inc., No. C-4676 (Apr. 3, 2019) (deceptively provided
compensation for the posting of positive reviews on the BBB's
website and other third-party websites); Complaint at 2-3,
AmeriFreight, Inc., No. C-4518 (Feb. 27, 2015) (every month past
customers were encouraged to submit reviews of respondent's services
in order to be eligible for a $100 ``Best Monthly Review Award'',
given to ``the review with the most captivating subject line and
best content'' and that they should ``be creative and try to make
your review stand out for viewers to read!'').
\6\ The Commission has challenged such conduct. See, e.g.,
Complaint at 2-4, Sunday Riley Modern Skincare, LLC, No. C-4729
(Nov. 6, 2020) (company owner and managers asked company employees
to write product reviews on third-party retailer's website);
Complaint at 15, 19-20, FTC v. Health Ctr., Inc., No. 2:20-cv-00547
(D. Nev. Mar. 19, 2020) (defendants used testimonials from their
employees that purported to be from ordinary consumers); Complaint
at 14, 19, FTC v. A.S. Resch., LLC (Synovia), No. 1:19-cv-3423 (ads
include testimonial by 50% owner and officer); Complaint at 5-6, 8-
9, Mikey & Momo, Inc., No. C-4655 (May 3, 2018) (Amazon reviews
written by company officer and her relatives); Complaint at 21, 25-
26, FTC v. NutriMost LLC, No. 2:17-cv-00509-NBF (W.D. Pa. Apr. 20,
2017) (testimonials in ads were from licensees or franchisees, their
relatives, or their employees); Complaint at 10, 12, FTC v. Aura
Labs, Inc., No. 8:16-cv-02147 (C.D. Cal. Dec. 12, 2016) (app store
review and website testimonials by CEO or relatives of Chairman);
Complaint at 25-27, 32-33, FTC v. Universal City Nissan, Inc., No.
2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (customer reviews on third-
party websites written by managers); Complaint at 19, 21, FTC v.
Genesis Today, Inc., No. 1:15-cv-00062 (W.D. Tex. Jan. 26, 2015)
(video testimonials to which defendants' promotional materials
linked were provided by defendants' employees); Complaint at 10,
U.S. v. Spokeo, Inc., No. 2:12-cv-05001-MMM-SH (C.D. Cal. June 7,
2012) (defendant directed its employees to draft endorsements and
post them on news and technology websites); Gisela Flick, 116 F.T.C.
1108, 113-14 (1993) (infomercial endorsement by company's Athletic
Director).
\7\ The Commission has challenged sellers who control websites
claiming to provide independent opinions of products. See, e.g.,
Complaint at 2, 8-9, Son Le., No. C-4619 (May 31, 2020) (respondents
operated purportedly independent websites that reviewed their own
trampolines); Complaint at 19-20, 28, FTC v. Roca Labs, Inc., No.
8:15-cv-02231-MSS-TBM (M.D. Fla. Sept. 24, 2015) (defendants
operated Gastricbypass.me website, a purported independent,
objective resource, which endorsed defendants' products); Complaint
at 21-25, 28, FTC v. NourishLife, LLC, No. 1:15-cv-00093 (N.D. Ill.
Jan. 7, 2015) (defendants operated Apraxia Research website, a
purported independent, objective resource, which endorsed a type of
supplement sold only by defendants). It has also challenged sellers
who control purportedly independent organizations or entities that
reviewed or approved the sellers' products or services. See, e.g.,
Complaint at 3-5, Bollman Hat Co., No. C-4643 (Jan. 23, 2018)
(respondents created seal misrepresenting that independent
organization endorsed their products as made in the United States);
Complaint at 18-20, 26, NextGen Nutritionals, LLC, No. 8:17-cv-2807-
T-36AEP (M.D. Fla. Jan. 9, 2018) (misrepresentation that sites
displaying the Certified Ethical Site Seal were verified by an
independent, third-party program); Complaint at 2-4, Moonlight
Slumber, LLC, No. C-4634 (Sept. 28, 2017) (respondent misrepresented
that baby mattresses had been certified by Green Safety Shield, when
in fact the shield was its own designation); Complaint at 4-6,
Benjamin Moore & Co., Inc., No. C-4646 (July 11, 2017) (respondent
used seal of its own creation to misrepresent that paints had been
endorsed or certified by independent third party); Complaint at 2-4,
ICP Constr. Inc., No. 4648 (July 11, 2017) (same); Complaint at 2-3,
Ecobaby Organics, Inc., No. C-4416 (July 25, 2013) (manufacturer
misrepresented seal was awarded by industry association when in fact
it created and controlled that association); Complaint at 2-4,
Nonprofit Mgmt. LLC, No. C-4315 (Jan. 11, 2011) (respondents
misrepresented their seal program was endorsed by two associations
when in fact a respondent owned and operated them); Complaint at 34,
37, FTC v. A. Glenn Braswell, No. 2:03-cv-03700-DT-PJW (C.D. Cal.
May 27, 2003) (defendants established Council on Natural Nutrition
and then misrepresented it was an independent organization of
experts who had endorsed defendants' products).
\8\ The Commission has challenged the suppression of customer
reviews based upon their negativity. See Complaint at 1-2, Fashion
Nova LLC, No. C-4759 (Mar. 18, 2022). Commission staff has also
addressed the issue in a closing letter. See Letter from Serena
Viswanathan, Acting Associate Director, Division of Advertising
Practices to Amy R. Mudge and Randall M. Shaheen, Counsel for Yotpo,
Ltd. (Nov. 17, 2020), <a href="https://www.ftc.gov/system/files/documents/closing_letters/nid/202_3039_yotpo_closing_letter.pdf">https://www.ftc.gov/system/files/documents/closing_letters/nid/202_3039_yotpo_closing_letter.pdf</a>.
\9\ The Commission has challenged review suppression through
threats and intimidation as unfair. See Complaint at 8-10, 12, World
Patent Mktg., Inc., No. 1:17-cv-20848-DPG (S.D. Fla. Mar. 6, 2017).
\10\ The Commission has challenged the sale of fake indicators
of social media influence, such as fake Twitter followers. See
Complaint at 5, FTC v. Devumi, LLC, No. 9:19-cv-81419-RKA (S.D. Fla.
Oct. 18, 2019).
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The Commission seeks comment on, among other things, the prevalence
of each of the above practices, the costs and benefits of a rule that
would address them, and alternatives to such a rulemaking, such as the
publication of additional consumer and business education. In their
replies, commenters should provide any available evidence and data that
supports their position, such as empirical data, consumer perception
studies, and consumer complaints.
3. The Rulemaking Process
The Commission seeks the broadest participation by the affected
interests in the rulemaking. To that end, the Commission will proceed
through an ``open rulemaking,'' which will provide all affected
interests numerous opportunities to submit comments and to participate
in the rulemaking process. The Commission encourages all interested
parties to submit written comments.
The Commission also expects the affected interests to assist the
Commission in analyzing various options and in drafting a proposed
rule. The Commission believes public workshop conferences to discuss
the various issues involving the rule are a productive and efficient
means to develop the record and explore various alternatives. The
Commission will also use public workshop conferences to assist the
Commission in drafting a proposed rule.
[[Page 67427]]
4. Public Workshop Conferences
In order to facilitate the greatest participation by the public in
the rulemaking process, Commission staff will hold several public
workshop conferences to discuss the issues noted above. Staff will
announce a schedule of these conferences after the close of the comment
period.
III. Request for Comments
Members of the public are invited to comment on any issues or
concerns they believe are relevant or appropriate to the Commission's
consideration of the proposed rulemaking. The Commission requests
factual data upon which the comments are based be submitted with the
comments. In addition to the issues raised above, the Commission
solicits public comment on the specific questions identified below.
These questions are designed to assist the public and should not be
construed as a limitation on the issues on which public comment may be
submitted. Please identify the evidence and data source(s) that support
each of your answers.
Questions
(1) How widespread is the marketing of products or services using:
a. reviews or other endorsements by nonexistent individuals or by
those who did not actually use or test the product or service;
b. reviews or other endorsements by individuals who are
misrepresenting their experiences with a product or service;
c. review hijacking (where a seller steals or repurposes reviews
from another product);
d. paid or incentivized consumer reviews that were required to be
positive or required to be negative (if of a competitor's product);
e. consumer reviews written by the owners, officers, or employees
of the company offering the product or service, or their family
members; or
f. Websites or other organizations or devices that purportedly
provide independent reviews or opinions of products or services but are
in fact created and controlled by the companies offering the products
or services?
(2) How widespread is the suppression of negative consumer reviews:
a. on retailer websites because the retailers filter out and do not
publish negative reviews; or
b. by marketers threatening the authors of the reviews (other than
through the form contract provisions prohibited by the Consumer Review
Fairness Act)?
(3) How widespread is:
a. the sale of followers, subscribers, views, and other indicators
of social media influence;
b. the purchase and use for commercial purposes of followers,
subscribers, views, and other indicators of social media influence?
(4) For each of the practices described in Questions 1 through 3,
above, does the practice cause consumer injury? If so, what evidence
demonstrates such practices cause consumer injury?
(5) For each of the practices described in Questions 1 through 3,
above, does the practice cause injury to competition? If so, what
evidence demonstrates such practices cause injury to competition?
(6) For each of the practices described in Questions 1 through 3,
above, are there circumstances in which such practices would not be
deceptive or unfair? If so, what are those circumstances and could and
should the Commission exclude such circumstances from the scope of any
rulemaking? Why or why not?
(7) Please provide any evidence concerning consumer perception of,
or experience with, consumer reviews or other endorsements relevant to
the practices described in Questions 1 through 3, above.
(8) What existing laws and regulations, other than the FTC Act, if
any, cover the practices described in Questions 1 through 3, above? How
do those laws affect consumers? How do those laws affect businesses,
particularly small businesses?
(9) What actions, if any, have platforms taken to address the
practices described in Questions 1 through 3, above? Have those actions
been effective in reducing consumer harm associated with the practices
described in Questions 1 through 3, above? Why or why not?
(10) What actions have others taken to facilitate or enable the
practices described in Questions 1 through 3, above? For example, what
types of services specifically allow marketers to engage in these
practices, and who is providing these services?
(11) Is there a need for new regulatory provisions to prevent the
practices described in Questions 1 through 3, above? If yes, why? If
no, why not? What evidence supports your answer?
(12) How should a rule addressing the practices described in
Questions 1 through 3, above, be crafted to maximize the benefits to
consumers while minimizing the costs to businesses under either
approach? What evidence supports your answer?
(13) Do current or impending changes in technology or market
practices affect whether and how a rulemaking should proceed? If so,
what are such changes and how do they affect whether and how a
rulemaking should proceed?
(14) Are there foreign or international laws, regulations, or
standards addressing reviews or endorsements the Commission should
consider as to whether and how a rulemaking should proceed? If so, what
are they? Should the Commission consider adopting, or avoiding, any of
these? If so, why? If not, why not?
(15) Should the Commission consider additional consumer and
business education to reduce consumer harm associated with the
practices described in Questions 1 through 3, above? If so, what should
such education materials include, and how should the Commission
communicate that information to consumers and businesses?
(16) What alternatives to regulations should the Commission
consider when addressing the practices described in Questions 1 through
3, above? Would those alternatives obviate the need for regulation? If
so, why? If not, why not? What evidence supports your answer?
(17) Are there other commercial acts or practices involving reviews
or other endorsements that are inarguably deceptive or unfair that
should be addressed in the proposed rulemaking? If so, describe the
practices. How widespread are the practices? Please answer Questions 4
through 8, 10, 11, 14, and 15 with respect to the practices.
IV. Comment Submissions
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before January 9, 2023.
Write ``Reviews and Endorsements ANPR, P214504'' on your comment. Your
comment--including your name and your state--will be placed on the
public record of this proceeding, including, to the extent practicable,
on the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
Because of the agency's heightened security screening, postal mail
addressed to the Commission will be subject to delay. We strongly
encourage you to submit your comments online through the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website. To ensure the Commission considers your
online comment, please follow the instructions on the web-based form.
If you file your comment on paper, write ``Reviews and Endorsements
ANPR, P214504'' on your comment and on the envelope, and mail your
comment to the following address:
[[Page 67428]]
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania
Avenue NW, Suite CC-5610 (Annex B), Washington, DC 20580.
Because your comment will be placed on the public record, you are
solely responsible for making sure your comment does not include any
sensitive or confidential information. In particular, your comment
should not contain sensitive personal information, such as your or
anyone else's Social Security number; date of birth; driver's license
number or other state identification number or foreign country
equivalent; passport number; financial account number; or credit or
debit card number. You are also solely responsible for making sure your
comment does not include any sensitive health information, such as
medical records or other individually identifiable health information.
In addition, your comment should not include any ``[t]rade secret or
any commercial or financial information which . . . is privileged or
confidential''--as provided in Section 6(f) of the FTC Act, 15 U.S.C.
46(f), and FTC Rule Sec. 4.10(a)(2), 16 CFR 4.10(a)(2)--including in
particular competitively sensitive information such as costs, sales
statistics, inventories, formulas, patterns, devices, manufacturing
processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule Sec. 4.9(c). In
particular, the written request for confidential treatment that
accompanies the comment must include the factual and legal basis for
the request and must identify the specific portions of the comment to
be withheld from the public record. See FTC Rule Sec. 4.9(c). Your
comment will be kept confidential only if the General Counsel grants
your request in accordance with the law and the public interest. Once
your comment has been posted publicly at <a href="http://www.regulations.gov">www.regulations.gov</a>--as
legally required by FTC Rule Sec. 4.9(b)--we cannot redact or remove
your comment, unless you submit a confidentiality request that meets
the requirements for such treatment under FTC Rule Sec. 4.9(c), and
the General Counsel grants that request.
Visit the FTC website to read this document and the news release
describing it. The FTC Act and other laws the Commission administers
permit the collection of public comments to consider and use in this
proceeding as appropriate. The Commission will consider all timely and
responsive public comments it receives on or before January 9, 2023.
For information on the Commission's privacy policy, including routine
uses permitted by the Privacy Act, see <a href="https://www.ftc.gov/site-information/privacy-policy">https://www.ftc.gov/site-information/privacy-policy</a>.
By direction of the Commission, Commissioner Wilson dissenting.
April J. Tabor,
Secretary.
Note: The following statements will not appear in the Code of
Federal Regulations.
Statement of Chair Lina M. Khan
Online shopping runs on reviews. When you're in a brick-and-mortar
store, you can see the inventory. If it's a couch, you can sit on it.
If it's a TV, you can watch it. But when you're shopping online, it's
much harder to know what you're actually buying. That's why reviews are
so crucial. If 500 other people have bought something and say it works,
you can have a lot more confidence.
But what if those people were paid to leave those positive reviews?
Or what if they're bots? What if the seller is hiding a thousand one-
star reviews?
That's the dilemma when you shop online. Reviews are essential, but
it's hard to know when they can be trusted. Precisely because of the
importance of reviews, firms can face powerful incentives to game the
system. Businesses have been caught leaving positive reviews for their
own products or services, suppressing negative ones, and boosting bad
reviews of their competitors.\1\ The incentives extend beyond the
seller of the product itself. The platforms that host reviews may also,
in some instances, benefit indirectly from fake ratings and
endorsements and have financial incentives to turn a blind eye to
misconduct that brings in revenue.
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\1\ See, e.g., Sherry He, et al., The Market for Fake Reviews,
41 Mktg. Sci. 896 (2020) (measuring the impact of fake reviews on
Amazon sales); Theodore Lappas, et al., The Impact of Fake Reviews
on Online Visibility: A Vulnerability Assessment of the Hotel
Industry, 27 Info. Sys. Rsch. 940 (2016); Renee DiResta,
Manipulating Consumption, Medium (Jun. 29, 2018), <a href="https://medium.com/@noupside/manipulating-consumption-42f2e9013d0b">https://medium.com/@noupside/manipulating-consumption-42f2e9013d0b</a>.
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These practices don't only harm the consumers who place their trust
in fake reviews. They also pollute the marketplace and put honest
businesses at a competitive disadvantage.
The Commission has brought several enforcement actions to address
this issue. In January, for example, the Commission settled allegations
that the fast-fashion company Fashion Nova had suppressed negative
reviews.\2\ And in August, the Commission, along with several state
attorneys general, sued Roomster for allegedly flooding its rental
listing marketplace with phony reviews.\3\
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\2\ Press Release, Fed. Trade Comm'n, Fashion Nova will Pay $4.2
Million as part of Settlement of FTC Allegations it Blocked Negative
Reviews of Products (Jan. 25, 2022), <a href="https://www.ftc.gov/news-events/news/press-releases/2022/01/fashion-nova-will-pay-42-million-part-settlement-ftc-allegations-it-blocked-negative-reviews">https://www.ftc.gov/news-events/news/press-releases/2022/01/fashion-nova-will-pay-42-million-part-settlement-ftc-allegations-it-blocked-negative-reviews</a>.
\3\ Press Release, Fed. Trade Comm'n, FTC, States Sue Rental
Listing Platform Roomster and Its Owners for Duping Prospective
Renters with Fake Reviews and Phony Listings (Aug. 30, 2022),
<a href="https://www.ftc.gov/news-events/news/press-releases/2022/08/ftc-states-sue-rental-listing-platform-roomster-its-owners-duping-prospective-renters-fake-reviews">https://www.ftc.gov/news-events/news/press-releases/2022/08/ftc-states-sue-rental-listing-platform-roomster-its-owners-duping-prospective-renters-fake-reviews</a>. In addition, in 2019, the FTC sued
a company called Synovia for marketing a fake arthritis cure with
fake testimonials and fake doctor endorsements. Press Release, Fed.
Trade Comm'n, FTC Stops Marketers from Making False Arthritis
Treatment Claims (Dec. 5, 2019), <a href="https://wwhw.ftc.gov/news-events/news/press-releases/2019/12/ftc-stops-marketers-making-false-arthritis-treatment-claims">https://wwhw.ftc.gov/news-events/news/press-releases/2019/12/ftc-stops-marketers-making-false-arthritis-treatment-claims</a>. In January of this year, the Commission
settled with Vision Path for, among other things, failing to
disclose that one of its own senior employees posted a positive
review on the BBB website. Press Release, Fed. Trade Comm'n, Vision
Path, Inc., Online Seller of Hubble Lenses, Settles Charges it
Violated the Contact Lens Rule and FTC Act to Boost Sales (Jan. 28,
2022), <a href="https://www.ftc.gov/news-events/news/press-releases/2022/01/vision-path-inc-online-seller-hubble-lenses-settles-charges-it-violated-contact-lens-rule-ftc-act">https://www.ftc.gov/news-events/news/press-releases/2022/01/vision-path-inc-online-seller-hubble-lenses-settles-charges-it-violated-contact-lens-rule-ftc-act</a>.
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In addition to enforcement activity, the Commission has used other
authorities to try to address market-wide problems with fake reviews.
Last year, the Commission put more than 700 companies on notice
regarding its litigated decisions in this area, which triggered the
FTC's penalty offense authority.\4\ This past May, the Commission also
proposed revisions to tighten its guidelines for advertisers who use
endorsements and reviews and to warn social media platforms about
inadequate disclosure.
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\4\ Fed. Trade Comm'n, Penalty Offenses Concerning Endorsements,
<a href="https://www.ftc.gov/enforcement/penalty-offenses/endorsements">https://www.ftc.gov/enforcement/penalty-offenses/endorsements</a>.
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With today's advance notice of proposed rulemaking, the Commission
is seeking comment from the public on whether rulemaking would be an
appropriate way to address the problem more systemically. A rulemaking
here would provide benefits beyond the agency's other powers. The
Supreme Court decision in AMG Capital Management, LLC v. FTC
substantially limited our ability to seek monetary relief for harmed
consumers.\5\ A rule against fake reviews could enable us to obtain
civil penalties and return money to consumers injured as a result of
[[Page 67429]]
deceptive or unfair reviews and endorsements.
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\5\ AMG Capital Mgmt. v. FTC, 141 S. Ct. 1341 (2021).
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I am grateful to staff for their hard work on this ANPR. And I am
happy to cast my vote in favor of beginning this process. It's critical
that the Commission use all its authorities in order to prohibit unfair
or deceptive practices--and to help consumers who have been harmed by
them. I look forward to hearing from the public and stakeholders as the
agency embarks on the rulemaking process.
Statement of Commissioner Rebecca Kelly Slaughter
Online reviews and endorsements of products and services play a
powerful role in influencing consumer choices. From 1996 to 2018, 233
million product reviews were posted on Amazon alone.\1\ Last month, my
own fridge unexpectedly broke down and I had to scramble to find a
repairman. Like many consumers, I relied on online reviews and other
endorsements to decide whom to hire for this important task. The
importance of consumer reviews to modern commerce makes the problem of
fake and deceptive reviews even more pernicious. Companies like Yelp
flag about 25% of reviews as ``less reliable'' and a recent report
found that 10.7% of all Google reviews are fake.\2\ These practices
harm not only consumers, but also mom-and-pop businesses, like my new
and excellent appliance repairman, who rely on online reviews to
attract new customers.
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\1\ See Jianmo Lee et al., Justifying Recommendations using
Distantly-Labeled Reviews and Fined-Grained Aspects, Empirical
Methods in Natural Language Processing (EMNLP) 2019, <a href="https://research-it.wharton.upenn.edu/data/amazon-user-review-database/">https://research-it.wharton.upenn.edu/data/amazon-user-review-database/</a>.
\2\ See Ryan Kailath, ``Some Amazon Reviews Are Too Good to Be
Believed. They're Paid For,'' NPR (July 30, 2018), <a href="https://www.npr.org/2018/07/30/629800775/some-amazon-reviews-are-too-good-to-bebelieved-">https://www.npr.org/2018/07/30/629800775/some-amazon-reviews-are-too-good-to-bebelieved-</a>theyre-paid-for; Greg Sterling, ``Fake Reviews: How
Big a Problem Exactly?'', Uberall (Oct. 28, 2021), <a href="https://uberall.com/enus/resources/blog/how-big-a-problem-are-fake-reviews">https://uberall.com/enus/resources/blog/how-big-a-problem-are-fake-reviews</a>.
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So, I'm pleased to support today's publication of this Advance
Notice of Proposed Rulemaking on Reviews and Endorsements to help
ensure that people have accurate information about the products and
services they buy. The ANPR asks important questions about the
prevalence of these practices. Our inquiry here asks questions about
practices from fake reviews by non-existent people, or people who have
never actually used the product, to review suppression, and the
practice of buying followers or subscribers as an indicator of social
media influence.
I hope that an open inquiry into these practices will also be
illuminating for the Commission. I'm troubled by the lack of
transparency by platforms and the subsequent difficulty in addressing
consumer harm. Companies like Amazon, for example, claim that less than
1% of their reviews are inauthentic, but this stands in stark contrast
to consumer experiences and third-party estimates.\3\ Deceptive reviews
waste people's time and money. A recent survey has found that consumers
estimated having wasted about $125 in the prior year due to
``inaccurate'' reviews.\4\
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\3\ See id.
\4\ Canvas8, ``The Critical Role of Reviews in internet Trust,''
2020, Feb. 26, 2020, <a href="https://business.trustpilot.com/guidesreports/build-trusted-brand/the-critical-role-of-reviews-in-internet-trust">https://business.trustpilot.com/guidesreports/build-trusted-brand/the-critical-role-of-reviews-in-internet-trust</a>.
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The FTC's work on fake reviews and endorsements is a great example
of our ``every tool in the toolbox'' approach to deterring unlawful
conduct in the market. Our Endorsements Guides have been helpful in
setting expectations for market participants about our enforcement
priorities in this area. After the loss of our Section 13(b) authority
the Commission announced a revised Notice of Penalty Offenses
Concerning Deceptive or Unfair Conduct around Endorsements and
Testimonials last year, allowing the agency to collect civil penalties
from those law violators to whom we have provided notice. And now, with
this vote, we've begun the process of considering rules that could help
ensure that consumers can trust the information they use to buy goods
and services, online and offline.
I want to thank BCP's Division of Advertising Practices and the
Office of the General Counsel for their partnership and hard work in
developing this ANPR. I look forward to hearing more from the public.
Dissenting Statement of Commissioner Christine S. Wilson
Today the Commission votes to issue an Advance Notice of Proposed
Rulemaking (``ANPR'') seeking comment on a proposed rule addressing
fake and deceptive reviews and endorsements. The FTC has challenged
these practices, and platforms have sought to combat them, but
deception continues to flourish. I agree that these practices are
unlawful, and I have supported the FTC's enforcement and guidance in
this area. Notably, the Commission recently authorized additional tools
to address these issues--tools that we were chastised for not deploying
sooner. Given recent deployment of those tools, as well as ongoing
efforts to update our Endorsement Guides, I do not believe that
initiating yet another Section 18 rulemaking is the best use of our
scarce resources, particularly given the nature of the harm at issue
here. And the opportunity cost of launching yet another rulemaking is
high, because the division overseeing this rule is also charged with
enforcement in the opioids arena. For these reasons, I dissent.
I appreciate that our remedial authority is limited. The Commission
cannot obtain civil penalties for first-time violations of Section 5 of
the FTC Act, and the Supreme Court's decision in AMG ended the
Commission's use of Section 13(b) to obtain equitable monetary
relief.\1\ But the harm that results from the deception at issue is
speculative in nature. The ANPR acknowledges that redress in matters
involving deceptive review practices can be difficult to calculate, and
we know that many retailers and platforms have procedures in place to
screen out and reject fake reviews. An endorsement or a review may sway
a consumer to purchase a product or service, in part, and should be
truthful. But, in cases involving deceptive endorsements or fake
reviews, there often is no allegation that the product or service did
not perform as represented. The endorsement or review in many cases is
not the central claim.\2\
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\1\ AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).
\2\ Last year, the Commission issued a Notice of Penalty
Offenses for earnings claims and later authorized an Advanced Notice
of Proposed Rulemaking seeking comment on a proposed rule. I
supported both of those recommendations. Earning claims relate to
the core functionality and efficacy of the product or service being
marketed. The claims addressed in the earnings claims Notice of
Penalty Offenses and the ANPR are typically fraudulent and
significant monetary harm often results from the deception. For that
reason, I was comfortable seeking comment on that proposed rule.
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Moreover, the Commission already has a multi-pronged strategy in
place to combat this issue. To educate businesses regarding their
obligations, the Commission has published Guides Concerning the Use of
Endorsements and Testimonials (``Endorsement Guides'') and a companion
business guidance piece. Earlier this year, the Commission sought
comment on potential updates and revisions to the Endorsement
Guides.\3\ In October 2021, the Commission issued a Notice of Penalty
Offenses which, as explained in the ANPR, may enable the Commission to
obtain civil penalties from marketers that use fake or deceptive
endorsements
[[Page 67430]]
or reviews.\4\ Commissioner statements issued at that time lauded the
resurrection of these types of Notices, describing them as unique tools
that the Commission had allowed to languish and that would to allow
staff to pursue the full range of actions against bad actors.\5\ While
the ANPR now downplays their likely impact, the agency invested non-
trivial resources in drafting the Notice of Penalty Offenses,
identifying potential recipients, and serving it on more than 700
entities.\6\ Rather than churning out another proposed rule, perhaps we
should stay the course on these initiatives and devote the incremental
resources to enforcement in other critical areas.
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\3\ FTC Press Release: FTC Proposes to Strengthen Advertising
Guidelines Against Fake and Manipulated Reviews (May 19, 2022),
<a href="https://www.ftc.gov/news-events/news/press-releases/2022/05/ftc-proposes-strengthen-advertising-guidelines-against-fake-manipulated-reviews">https://www.ftc.gov/news-events/news/press-releases/2022/05/ftc-proposes-strengthen-advertising-guidelines-against-fake-manipulated-reviews</a>.
\4\ See <a href="http://www.ftc.gov/enforcement/penalty-offenses/endorsements">www.ftc.gov/enforcement/penalty-offenses/endorsements</a>.
\5\ For example, Commissioner Chopra wrote that ``this unique
authority in consumer protection enforcement . . . that past
Commissioners largely ignored, depriving our hardworking staff of
the ability to pursue the full range of actions against bad actors .
. . is particularly important given the Supreme Court's recent
ruling in AMG Capital Management.'' Rohit Chopra, Prepared Remarks
of Commissioner Rohit Chopra, Regarding the Resurrection of the
FTC's Penalty Offense Authority to Deter False Claims by For-Profit
Colleges (Oct. 6, 2012), <a href="https://www.ftc.gov/system/files/documents/public_statements/1597178/prepared_remarks_of_commissioner_chopra_re_penalty_offense.pdf">https://www.ftc.gov/system/files/documents/public_statements/1597178/prepared_remarks_of_commissioner_chopra_re_penalty_offense.pdf</a>. He
further observed that ``[a]ctivating the FTC's Penalty Offense
Authority is one of many examples where the agency needs to put its
tools to use, rather than letting them languish.'' Id. Chair Khan
agreed, tweeting that ``@FTC is resurrecting its Penalty Offense
Authority to put companies on notice that certain practices are
unlawful and violators will be hit with significant financial
penalties.'' Lina Khan, @linakhanFTC, <a href="https://twitter.com/linakhanftc/status/1445816849430634496">https://twitter.com/linakhanftc/status/1445816849430634496</a>. The Notice of Penalty
Offenses for endorsements was issued on Oct. 13, 2021.
\6\ FTC Press Release, FTC Puts Hundreds of Businesses on Notice
about Fake Reviews and other Misleading Endorsements (Oct. 13,
2021), <a href="https://www.ftc.gov/news-events/news/press-releases/2021/10/ftc-puts-hundreds-businesses-notice-about-fake-reviews-other-misleading-endorsements">https://www.ftc.gov/news-events/news/press-releases/2021/10/ftc-puts-hundreds-businesses-notice-about-fake-reviews-other-misleading-endorsements</a>.
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The opportunity cost of yet another rulemaking should not be
understated. Importantly, as noted above, the division that has
responsibility for endorsements also oversees enforcement of the Opioid
Addiction Recovery Fraud Prevention Act. Last year, after an 18-month
delay not caused by staff, the Commission announced its first case
under this statute.\7\ For the second consecutive year, deaths from
overdoses rose dramatically and now exceed the country's peak deaths
from AIDS, car crashes, and guns.\8\ Our citizens who suffer from
opioid addiction are some of the most vulnerable people in this
country; we could use our power and authority to great benefit by
devoting more resources to this area.
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\7\ Christine S. Wilson, Concurring Statement of Commissioner
Christine S. Wilson, R360 LLC (May 17, 2022), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/2022-05-17-R360-Commissioner-Wilson-Statement-FINAL.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/2022-05-17-R360-Commissioner-Wilson-Statement-FINAL.pdf</a>.
\8\ Noah Weiland and Margot Sanger-Katz, ``Overdose Deaths
Continue Rising, With Fentanyl and Meth Key Culprits, NY Times (May
11, 2022), <a href="https://www.nytimes.com/2022/05/11/us/politics/overdose-deaths-fentanyl-meth.html?action=click&pgtype=Article&state=default&module=styln-opioid&variant=show®ion=MAIN_CONTENT_1&block=storyline_levelup_swipe_recirc">https://www.nytimes.com/2022/05/11/us/politics/overdose-deaths-fentanyl-meth.html?action=click&pgtype=Article&state=default&module=styln-opioid&variant=show®ion=MAIN_CONTENT_1&block=storyline_levelup_swipe_recirc</a>.
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Although I disagree with its issuance, it is worth noting that
staff's approach to this ANPR is laudable. Rather than employing an
``everything but the kitchen sink'' approach, the ANPR is carefully
tailored to focus on practices that are likely to be clear violations
of Section 5. For the reasons described in this statement, I cannot
support its issuance.
Accordingly, I dissent.
[FR Doc. 2022-24139 Filed 11-7-22; 8:45 am]
BILLING CODE 6750-01-P
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