Proposed Rule2023-15581
Trade Regulation Rule on the Use of Consumer Reviews and Testimonials
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
July 31, 2023
Issuing agencies
Federal Trade Commission
Abstract
The Federal Trade Commission ("FTC or "Commission") commences a rulemaking to promulgate a trade regulation rule entitled "Rule on the Use of Consumer Reviews and Testimonials," which would prohibit certain specified unfair or deceptive acts or practices involving consumer reviews or testimonials. The Commission finds such practices to be prevalent based on the comments it received in response to an advance notice of proposed rulemaking and other information discussed in this publication. The Commission now solicits written comment, data, and arguments concerning the utility and scope of the proposed trade regulation rule to prohibit the specified unfair or deceptive acts or practices.
Full Text
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<title>Federal Register, Volume 88 Issue 145 (Monday, July 31, 2023)</title>
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[Federal Register Volume 88, Number 145 (Monday, July 31, 2023)]
[Proposed Rules]
[Pages 49364-49392]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-15581]
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FEDERAL TRADE COMMISSION
16 CFR Part 465
RIN 3084-AB76
Trade Regulation Rule on the Use of Consumer Reviews and
Testimonials
AGENCY: Federal Trade Commission.
ACTION: Notice of proposed rulemaking; request for public comment.
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SUMMARY: The Federal Trade Commission (``FTC or ``Commission'')
commences a rulemaking to promulgate a trade regulation rule entitled
``Rule on the Use of Consumer Reviews and Testimonials,'' which would
prohibit certain specified unfair or deceptive acts or practices
involving consumer reviews or testimonials. The Commission finds such
practices to be prevalent based on the comments it received in response
to an advance notice of proposed rulemaking and other information
discussed in this publication. The Commission now solicits written
comment, data, and arguments concerning the utility and scope of the
proposed trade regulation rule to prohibit the specified unfair or
deceptive acts or practices.
DATES: Comments must be received on or before September 29, 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
Testimonials NPRM, R311003'' 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 F), Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Michael Ostheimer, Attorney, Federal
Trade Commission, Bureau of Consumer Protection, Advertising Practices
Division, (202) 326-2699, <a href="/cdn-cgi/l/email-protection#f4999b87809c919d999186b4928097da939b82"><span class="__cf_email__" data-cfemail="cda0a2beb9a5a8a4a0a8bf8dabb9aee3aaa2bb">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: The Commission invites interested parties to
submit data, views, and arguments on the proposed Rule on the Use of
Consumer Reviews and Testimonials (``proposed Rule'') and,
specifically, on the questions set forth in Section X of this notice of
proposed rulemaking (``NPRM''). The comment period will remain open
until September 29, 2023.\1\ To the extent practicable, all comments
will be available on the public record and posted at the docket for
this rulemaking on <a href="https://www.regulations.gov">https://www.regulations.gov</a>. If interested parties
request to present their position orally, the Commission will hold an
informal hearing, as specified in Section 18(c) of the FTC Act, 15
U.S.C. 57a(c). Persons interested in making a presentation at an
informal hearing must file a comment expressly requesting a hearing in
response to this publication, containing a statement identifying their
interests in the proceeding and any proposals to add disputed issues of
material fact necessary to be resolved during an informal hearing. The
comment should describe why the person thinks the informal hearing is
warranted and how they would participate, and include a summary of
their expected testimony. Interested persons' comments may also,
without requesting an informal hearing, expressly request to speak at
any informal hearing that is held, which may happen if another
commenter requests an informal hearing or if the Commission on its own
elects to hold one. If an informal hearing is held, the Commission will
publish a separate notice in accordance with 16 CFR 1.12(a) (``initial
notice of informal hearing'').
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\1\ The Commission elects not to provide a separate, second
comment period for rebuttal comments. See 16 CFR 1.11(e) (``The
Commission may in its discretion provide for a separate rebuttal
period following the comment period.'').
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I. Background
The Commission published, on November 8, 2022, an advance notice of
proposed rulemaking (``ANPR'') under the authority of Section
18(a)(1)(B) of the FTC Act, 15 U.S.C. 57a(a)(1)(B); \2\ which
authorizes the Commission to promulgate, modify, or 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).
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\2\ Fed. Trade Comm'n, ANPR: Trade Regulation Rule on the Use of
Reviews and Endorsements (``ANPR''), 87 FR 67424 (Nov. 8, 2022),
<a href="https://www.federalregister.gov/documents/2022/11/08/2022-24139/trade-regulation-rule-on-the-use-of-reviews-and-endorsements">https://www.federalregister.gov/documents/2022/11/08/2022-24139/trade-regulation-rule-on-the-use-of-reviews-and-endorsements</a>.
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The ANPR described the Commission's history of educating industry
and consumers about the use of deceptive reviews and testimonials and
of taking law enforcement action against certain unfair or deceptive
acts or practices involving consumer reviews or testimonials.\3\
Specifically, the ANPR discussed: (a) the use of reviews or
endorsements by people who do not exist, who did not actually use or
test the product or service, or who were misrepresenting their
experience with it; (b) review 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; (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
[[Page 49365]]
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; (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; (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; (g) the suppression of customer reviews by physical threat
or unjustified legal threat; and (h) selling, distributing, or buying
followers, subscribers, views, and other indicators of social media
influence. The ANPR also asked a series of questions to inform the
Commission's determination about whether it has reason to believe that
such practices are prevalent and, if so, whether and how to proceed
with an NPRM.\4\ During the 60-day comment period, the Commission
received 42 responsive comments.
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\3\ The ANPR was entitled ``Trade Regulation Rule Concerning
Reviews and Endorsements.'' The Commission has decided to change the
name of the proposed rule to ``Trade Regulation Rule on the Use of
Consumer Reviews and Testimonials,'' to better reflect its content.
\4\ ANPR, 87 FR at 67427.
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Based on the substance of these comments, as well as the
Commission's history of enforcement and other information discussed
below, the Commission is now exercising its authority under Section
18(a)(1)(B) of the FTC Act to propose a trade regulation rule that
defines conduct that, in the context of consumer reviews or
testimonials, constitutes unfair or deceptive acts or practices. The
Commission has reason to believe that certain unfair or deceptive
practices involving consumer reviews or testimonials are prevalent \5\
and that proceeding with this rulemaking is in the public interest.
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\5\ See 15 U.S.C. 57a(b)(3) (``The Commission shall issue a
notice of proposed rulemaking pursuant to paragraph (1)(A) only
where it has reason to believe that the unfair or deceptive acts or
practices which are the subject of the proposed rulemaking are
prevalent.'').
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After reviewing the comments and because the Commission believes it
would be in the public interest to move forward expeditiously with this
rulemaking proceeding, the Commission has decided to issue this NPRM
without holding the public workshops originally contemplated in the
ANPR. Upon reviewing the ANPR comments, the Commission determined that
conducting public workshops at that stage of the proceeding would not
provide additional unique viewpoints or issues. Instead, by issuing
this NPRM and analyzing the comments submitted in response, the
Commission will be able to further develop the record, receive comments
on potential alternatives, and decide whether additional events or
methods are needed to facilitate public participation in the rulemaking
process.
Below, after discussing the comments, setting out the evidence of
prevalence, and explaining its considerations in developing the
proposed Rule, the Commission poses specific questions for comment and
provides the text of the proposed Rule.
II. Summary of Comments to ANPR
The Commission received 42 responsive comments in response to the
ANPR.\6\ Twenty-nine comments supported the Commission proceeding with
a rulemaking. Four comments expressed the view that a rulemaking was
unnecessary, premature, or should not apply to the commenter's
constituents. One commenter expressed skepticism about the utility of a
rulemaking. The remaining commenters did not express a clear view on
the merits of proceeding or did not address the question. Fifteen
comments came from individual consumers. Seven comments were submitted
by trade associations, five by review platform operators and one by an
employee of one such operator, three by small businesses and one by a
small business employee, three by consumer advocacy organizations,
three by entities dedicated to fighting fake reviews, one by a public
interest research center, one by a think tank, one by academic
researchers, and one by an insurance marketing organization.
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\6\ The comments are publicly available on this rulemaking's
docket at <a href="https://www.regulations.gov/docket/FTC-2022-0070/comments">https://www.regulations.gov/docket/FTC-2022-0070/comments</a>.
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The 15 individual consumers expressed significant concerns about
fake consumer reviews and testimonials.\7\ One consumer comment
declared: ``this rule to extend the FTC power over fraudulent and paid
for testimonies and reviews is a necessity. I think . . . protection
against these types of scams is an integral need to the people of the
United States.'' \8\ Consumer commenters wrote about the difficulty
that many consumers have in identifying fake reviews.\9\ One consumer
who selected an auto repair shop based upon misleading reviews written
by the shop's employees or their spouses spoke of having been
personally harmed by deceptive reviews.\10\ Two consumer comments said
that truthful negative reviews are valuable and should not be
suppressed.\11\ Two additional consumer commenters spoke of the need to
punish and deter bad actors.\12\
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\7\ Anonymous Cmt. on Trade Regulation Rule on the Use of
Reviews and Endorsements (``Cmt. on ANPR'') (Nov. 15, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0006">https://www.regulations.gov/comment/FTC-2022-0070-0006</a> (``Anonymous
Consumer A Cmt.''); Mahzer Zaim, Cmt. on ANPR (Nov. 21, 2022),
<a href="https://www.regulations.gov/comment/FTC-2022-0070-0008">https://www.regulations.gov/comment/FTC-2022-0070-0008</a> (``Zaim
Cmt.''); Jill Monday, Cmt. on ANPR (Dec. 3, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0010">https://www.regulations.gov/comment/FTC-2022-0070-0010</a> (``Monday Cmt.'');
Donald Kelly, Cmt. on ANPR, (Dec. 7, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0012">https://www.regulations.gov/comment/FTC-2022-0070-0012</a> (``Kelly Cmt.'');
Heather Earl, Cmt. on ANPR (Dec. 11, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0013">https://www.regulations.gov/comment/FTC-2022-0070-0013</a>; Andrea Sliger, Cmt.
on ANPR (Dec. 11, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0014">https://www.regulations.gov/comment/FTC-2022-0070-0014</a>; Merrill Ahrens, Cmt. on ANPR (Dec. 11, 2022),
<a href="https://www.regulations.gov/comment/FTC-2022-0070-0015">https://www.regulations.gov/comment/FTC-2022-0070-0015</a>; Diane
Dauite, Cmt. on ANPR (Dec. 11, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0016">https://www.regulations.gov/comment/FTC-2022-0070-0016</a> (``Dauite Cmt.''); Stephanie Smith, Cmt.
on ANPR (Dec. 12, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0017">https://www.regulations.gov/comment/FTC-2022-0070-0017</a> (``Smith Cmt.''); Anonymous, Cmt. on ANPR (Dec. 13,
2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0018">https://www.regulations.gov/comment/FTC-2022-0070-0018</a>
(``Anonymous Consumer B Cmt.''); Jim Zevely, Cmt. on ANPR (Dec. 17,
2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0019">https://www.regulations.gov/comment/FTC-2022-0070-0019</a>
(``Zevely Cmt.''); Frank Evelhoch II, Cmt. on ANPR (Dec. 17, 2022),
<a href="https://www.regulations.gov/comment/FTC-2022-0070-0021">https://www.regulations.gov/comment/FTC-2022-0070-0021</a> (``Evelhoch
Cmt.''); Anonymous, Cmt. on ANPR (Dec. 26, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0022">https://www.regulations.gov/comment/FTC-2022-0070-0022</a> (``Anonymous Consumer
C Cmt.''); Judy Draper, Cmt. on ANPR (Dec. 28, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0023">https://www.regulations.gov/comment/FTC-2022-0070-0023</a>; Anonymous, Cmt. on
ANPR (Dec. 31, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0025">https://www.regulations.gov/comment/FTC-2022-0070-0025</a> (``Anonymous Consumer D Cmt.'').
\8\ Anonymous Consumer A Cmt. at 1.
\9\ Kelly Cmt. at 1; Smith Cmt. at 1; Zevely Cmt. at 1; Evelhoch
Cmt. at 1; Anonymous Consumer D Cmt. at 1.
\10\ Monday Cmt. at 1.
\11\ Dauite Cmt. at 1; Anonymous Consumer B Cmt. at 1.
\12\ Zaim Cmt. at 2; Anonymous Consumer C Cmt. at 1.
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The four comments from small businesses or a small business
employee were from Ubiquitous Advising, LLC, (``Ubiquitous Advising''),
Patrick's Pet Care, an anonymous small business that sells products
through a particular online marketplace, and Tammy Provencal, who is a
small business employee.\13\ Ubiquitous Advising supports the
rulemaking, and commented that fake reviews cause more damage than
anyone can imagine.\14\ It also said that review
[[Page 49366]]
suppression is just as bad, with businesses threatening, bullying, or
suing consumers who are trying to warn other consumers, even when there
is zero chance of those businesses winning such a lawsuit.\15\
Ubiquitous Advising described a company in its local area that is
constantly threatening and bullying reviewers.\16\ Patrick's Pet Care
did not indicate clearly whether it supports the rulemaking but
complained about being attacked with negative reviews.\17\ It suggested
that people should not be able to post anonymous, non-traceable reviews
and that platforms should disclose the names of reviewers.\18\ The
anonymous small business that submitted a comment did not address the
proposed rulemaking and asserted that a particular online marketplace
was manipulating the placement of negative reviews.\19\ The small
business employee supports the rulemaking and stated that a competitor
is giving incentives for 5-star reviews.\20\
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\13\ Ubiquitous Advising, LLC, Cmt. on ANPR (Dec. 29, 2022),
<a href="https://www.regulations.gov/comment/FTC-2022-0070-0024">https://www.regulations.gov/comment/FTC-2022-0070-0024</a> (``Ubiquitous
Advising Cmt.''); Patrick's Pet Care, Cmt. on ANPR (Jan. 9, 2023),
<a href="https://www.regulations.gov/comment/FTC-2022-0070-0032">https://www.regulations.gov/comment/FTC-2022-0070-0032</a> (``Patrick's
Pet Care Cmt.''); Anonymous, Cmt. on ANPR (Nov. 28, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0009">https://www.regulations.gov/comment/FTC-2022-0070-0009</a> (``Anonymous Business
Cmt.''); Tammy Provencal, Cmt. on ANPR (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0042">https://www.regulations.gov/comment/FTC-2022-0070-0042</a> (``Provencal Cmt.'').
\14\ Ubiquitous Advising Cmt. at 1-2.
\15\ Id. at 1.
\16\ Id.
\17\ Patrick's Pet Care Cmt. at 1-2.
\18\ Id. at 2.
\19\ Anonymous Business Cmt. at 1-2.
\20\ Provencal Cmt. at 1.
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The five review platforms that submitted comments, Yelp, Inc.
(``Yelp''), Trustpilot A/S (``Trustpilot''), Google LLC (``Google''),
Tripadvisor LLC (``Tripadvisor''), and <a href="http://Amazon.com">Amazon.com</a>, Inc. (``Amazon''),
wrote of the importance of reviews to consumers and the lengths to
which they go to stop and combat fake reviews.\21\ These comments
conveyed information both about the prevalence and harm caused by fake
review practices.
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\21\ Yelp, Inc., Cmt. on ANPR (Jan. 6, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0028">https://www.regulations.gov/comment/FTC-2022-0070-0028</a> (``Yelp Cmt.'');
Trustpilot A/S, Cmt. on ANPR (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0031">https://www.regulations.gov/comment/FTC-2022-0070-0031</a> (``Trustpilot
Cmt.''); Google LLC, Cmt. on ANPR, (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0034">https://www.regulations.gov/comment/FTC-2022-0070-0034</a> (``Google Cmt.'');
Tripadvisor LLC, Cmt. on ANPR (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0036">https://www.regulations.gov/comment/FTC-2022-0070-0036</a> (``Tripadvisor
Cmt.''); <a href="http://Amazon.com">Amazon.com</a>, Inc., Cmt. on ANPR (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0041">https://www.regulations.gov/comment/FTC-2022-0070-0041</a> (``Amazon Cmt.'').
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Yelp, which supports civil penalties for ``businesses and
individuals who author, arrange for or pay for deceptive reviews,''
\22\ said that an overwhelming majority of consumers who read reviews
(83 percent) say they trust online reviews about local businesses.\23\
In one Yelp survey, 71 percent of respondents said they would no longer
visit a business if they learned the business has fake or compensated
online reviews.\24\ As a first line of defense, Yelp uses automated
software systems in order to detect biased reviews and ``flags a
significant percentage of reviews--about 19% based on Yelp's most
recent . . . figures--as `not recommended.' '' \25\ Yelp said that
groups to facilitate the buying, selling, or exchange of fake reviews
exist on various online platforms (e.g., Facebook, Instagram,
Twitter).\26\ In 2021, Yelp made more than 1,000 reports to online
platforms warning them of nearly 950 suspicious groups, posts, or
individuals found on their sites.\27\ Yelp also wrote that ``abusive
and questionable or unjustified legal threats are another form of
review suppression that Yelp constantly confronts'' and that its 2021
data shows a majority of such threat alerts ``stemmed from beauty and
health categories--businesses consumers often turn to when making
critical life decisions or that can otherwise be sensitive in nature.''
\28\
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\22\ Yelp Cmt. at 12. At the same time, Yelp said that because
``such deceptive review practices are already illegal under Section
5 of the FTC Act,'' it ``recommends against additional rulemaking
that is specifically directed toward liability for deceptive
reviews.'' The Commission has difficulty reconciling these two
comments as the Commission could not adopt new civil penalties
without rulemaking.
\23\ Id. at 4.
\24\ Id.
\25\ Id. at 6.
\26\ Id. at 8.
\27\ Id.
\28\ Id. at 11-12.
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Trustpilot, a Danish company operating a website that hosts reviews
of businesses worldwide, did not appear to support or oppose the
rulemaking. It said that of the 46.7 million Trustpilot reviews written
globally in 2021, it removed 2.7 million fake reviews.\29\ In 2021,
Trustpilot identified and took action against more than 60,000 reviews
about United States businesses that were submitted by accounts it
deemed to be companies or individuals who offered fake reviews for sale
online.\30\ It noted that it is appropriate for consumers to review a
service provider with which they have had an experience even if they
did not make a purchase.\31\ In 2021, Trustpilot detected and removed
as biased just over 8,000 reviews for United States businesses written
by owners, officers, or employees of the company reviewed, or their
family members.\32\ Trustpilot stated that such behavior does not
necessarily reflect intentional fraud.\33\ It commented that it is
aware of cases outside of Trustpilot in which the suppression of
negative reviews has occurred on retailer or business websites.\34\ It
has seen some cases, mostly outside of the US, in which businesses have
threatened reviewers if they do not delete a negative review.\35\ In
response to the ANPR, Trustpilot said it is possible that, before
moving to regulation, there may be benefits in seeking to maximize the
effects of other steps, such as educating businesses and consumers or
developing codes of conduct.\36\ It noted that while regulation could
send a strong signal, it may face the challenge of being quite static
in a dynamic and fast-paced environment.\37\
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\29\ Trustpilot Cmt. at 2. Trustpilot noted that it defines
``fake reviews'' more broadly than was used in the FTC's ANPR.
\30\ Id. at 3.
\31\ Id. at 3-4.
\32\ Id. at 7.
\33\ Id.
\34\ Id. at 8.
\35\ Id. at 9.
\36\ Id. at 16.
\37\ Id. at 17.
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Google supports the rulemaking.\38\ It said that fake reviews
undermine users' confidence in the information available on its
platform.\39\ Google uses both automated systems and human operators to
monitor compliance with its policies and identify and remove fake
reviews.\40\ Spammers constantly evolve their tactics, so
distinguishing between fake and authentic reviews is an ongoing
battle.\41\ For example, in response to advances in Google's detection
and mitigation capabilities, bad actors have adapted, such as by using
Virtual Private Networks (``VPNs'') to evade routine detection.\42\
Google said that businesses may also have strong incentives to buy
positive reviews, which exacerbates the problem.\43\ In addition, many
reviews displayed on its platform are sourced or surfaced from third
parties (e.g., from the merchant website where consumers purchased the
product or service), and it can be more difficult to detect when such
reviews are fake because Google lacks access to some signals of
inauthentic activity, such as the account that created the review being
used to post duplicate content.\44\ In 2022, Google removed millions of
reviews from Google Play that it determined to be fake, inorganic, or
otherwise malicious.\45\ In 2021, users submitted around one billion
Google Maps reviews and Google blocked or removed more than 95 million
of them for violating its policies.\46\ Google also removed another one
million reviews that were reported
[[Page 49367]]
directly to it, and it disabled more than one million user accounts due
to policy-violating activity.\47\ Google urged the Commission to focus
on those posting fake reviews rather than on the platforms.\48\
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\38\ Google Cmt. at 9.
\39\ Id. at 1, 2, 9.
\40\ Id. at 1.
\41\ Id. at 3.
\42\ Id.
\43\ Id.
\44\ Id. at 3, 6.
\45\ Id. at 8.
\46\ Id.
\47\ Id.
\48\ Id. at 9.
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Tripadvisor agrees that deceptive actions by bad actors harm
consumers and honest businesses.\49\ In 2021, of the 26 million reviews
submitted to Tripadvisor, it identified 3.6 percent as violating its
fraud guidelines.\50\ It said that in certain scenarios it can be
difficult to distinguish authentic reviews from fake.\51\ Tripadvisor
also said that efforts to suppress negative reviews, including by
threatening reviewers, is one of the problems that plague the online
consumer review ecosystem.\52\ Finally, it believes that targeted
authority for the FTC to impose financial penalties on bad actors can
be an element of a comprehensive effort to improve the consumer
information ecosystem, but that any provision that authorizes the
assessment of a financial penalty must be appropriately targeted in
both design and enforcement at those who knowingly engage in clearly
deceptive and fraudulent practices.\53\
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\49\ Tripadvisor Cmt. at 7.
\50\ Id.
\51\ Id. at 5-6.
\52\ Id. at 11.
\53\ Id. at 10.
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Amazon did not state support for or opposition to the rulemaking.
Amazon said that in 2021 alone, it invested more than $900 million and
employed more than 12,000 people who were dedicated to protecting
customers and its store from fraud and other forms of abuse.\54\ Amazon
stated that it proactively stopped more than 200 million suspected fake
reviews in 2020 alone.\55\ Amazon also noted that fraudsters approach
its customers through their own websites and on social media and
solicit them to write misleading reviews in exchange for money, free
products, or other incentives.\56\ In 2021, Amazon reported more than
16,000 social media groups that were buying or exchanging misleading
reviews to the social media sites that hosted them, including Facebook,
Twitter, and Instagram, resulting in the removal of groups with more
than 11 million members.\57\ In July 2022, Amazon sued more than 10,000
such Facebook groups.\58\ Amazon encouraged the FTC to increase the use
of its existing authority to pursue fake review brokers, collaborate
with other regulators to combat bad actors who facilitate review abuse,
continue to provide guidance to legitimate businesses, and educate
consumers about how to identify and report fake reviews.\59\
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\54\ Amazon Cmt. at 2.
\55\ Id.
\56\ Id. at 2.
\57\ Id.
\58\ Id. at 3.
\59\ Id.
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An individual Amazon employee working in the Amazon Risk department
for the past 10 years submitted a comment.\60\ The commenter personally
reviewed thousands of seller and buyer accounts for review abuse and
said there is no dispute that deceptive reviews are widespread and
harmful to customers.\61\ The commenter is ``skeptical about whether
the regulation will be effective'' because most online platforms and
shopping websites do not require customers to register using real
identities in order to leave reviews and because Section 230 of the
Communications Decency Act (47 U.S.C. 230) immunizes internet service
providers, like Google and Facebook, from lawsuits ``based on claims
related to content published by third-parties using their service[s].''
\62\
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\60\ Miao Zhao, Cmt. on ANPR (Dec. 19, 2022), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0020">https://www.regulations.gov/comment/FTC-2022-0070-0020</a> (``Zhao Cmt.'') at 1.
\61\ Id.
\62\ Id. at 1-2.
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The academic researchers who submitted a comment were Rajvardhan
Oak and Zubair Shafiq from the University of California Davis, who had
examined reviews on online marketplaces.\63\ They infiltrated an
``incentivized review service geared towards <a href="http://Amazon.com">Amazon.com</a>'' and
discovered solicitations for incentivized five-star reviews for 242,000
products.\64\ They found more than 250 groups on Facebook in which
reviews were brokered, the largest of which had around 550,000
members.\65\ Over the six weeks that they tracked products for which
incentivized reviews were sought, no reviews were removed from nearly
50 percent of those products.\66\ Although Amazon delists products
suspected of seeking incentivized reviews, only 25 of the 1,600
products they were tracking were removed by Amazon during the six-week
period.\67\ They also said that, in response to Amazon's lawsuits
against Facebook groups, group administrators and agents simply created
alternate communication channels, such as Signal/Telegram groups, and
circulated the details of the alternatives.\68\
---------------------------------------------------------------------------
\63\ Rajvardhan Oak and Zubair Shafiq, Cmt. on ANPR (Jan. 9,
2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0030">https://www.regulations.gov/comment/FTC-2022-0070-0030</a> (``Oak
& Shafiq Cmt.'') at 1.
\64\ Id. at 3-4.
\65\ Id. at 4.
\66\ Id. at 7-8.
\67\ Id. at 8.
\68\ Id.
---------------------------------------------------------------------------
The Commission received comments from three entities dedicated to
fighting fake reviews: the Transparency Company, Fake Review Watch, and
Fakespot, Inc.\69\ All three commenters asserted that the strategies
that are currently being used by review platforms are insufficient.\70\
---------------------------------------------------------------------------
\69\ The Transparency Company, Cmt. on ANPR (Jan. 9, 2023),
<a href="https://www.regulations.gov/comment/FTC-2022-0070-0044">https://www.regulations.gov/comment/FTC-2022-0070-0044</a>
(``Transparency Company Cmt.''); Fake Review Watch, Cmt. on ANPR
(Jan. 5, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0026">https://www.regulations.gov/comment/FTC-2022-0070-0026</a> (``Fake Review Watch Cmt.''); Fakespot, Inc., Cmt. on ANPR
(Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0035">https://www.regulations.gov/comment/FTC-2022-0070-0035</a> (``Fakespot Cmt.'').
\70\ Transparency Company Cmt. at 9, 18; Fake Review Watch Cmt.
at 2; Fakespot Cmt. at 1-2.
---------------------------------------------------------------------------
The Transparency Company, which supports a rulemaking, said that
its research suggests that the major review websites are unable to
detect a majority of fake reviews online.\71\ It estimated that 8.5
percent of published reviews--for all industries--are fake, and
provided a link to its fake review research, which asserted that 10.7
percent of Google reviews, 7.1 percent of Yelp reviews, and 5.2 percent
of Tripadvisor reviews were fake.\72\ The comment noted that 54 percent
of consumers say that they would not buy a product if they suspected it
to have fake reviews and estimated that consumer injury from fake
reviews is approximately $5 billion per year.\73\ It documented over
1,000 examples of fake negative reviews causing injury to competition
and it estimates that thousands of lawyers are hired each year to send
demand letters to and intimidate the authors of negative consumer
reviews.\74\ The comment identified platform actions that have been
effective in reducing consumer harm associated with fake reviews but
said that ending online review fraud would require, among other things,
the authentication of consumer reviewers.\75\
---------------------------------------------------------------------------
\71\ Transparency Company Cmt. at 9.
\72\ Id.; Uberall, The State of Online Review Fraud: An Analysis
of 4 Million Reviews on Google, Facebook, Yelp and Tripadvisor at
15, <a href="https://join.momentfeed.com/hubfs/2021%20Fake%20Reviews/FakeReviews_Report.pdf">https://join.momentfeed.com/hubfs/2021%20Fake%20Reviews/FakeReviews_Report.pdf</a>.
\73\ Transparency Company Cmt. at 16, 18.
\74\ Transparency Company Cmt. at 16.
\75\ Id. at 18-20.
---------------------------------------------------------------------------
Fake Review Watch, which supports a rulemaking, said that there is
a robust black market for paid for (or traded for) reviews on Google,
Yelp, Facebook, Trustpilot, and numerous other review sites and that
many of the transactions are conducted on social media.\76\ It
[[Page 49368]]
stated that fake reviews are commonplace and often difficult to detect
without examining review profile histories across multiple
businesses.\77\ Fake Review Watch has observed over 100 Facebook groups
operating as review exchanges, with hundreds or thousands of members
each.\78\ The comment also asserted that Google: (a) often allows
profiles that posted fake reviews to remain active even after it
removes those reviews, (b) provides no alerts to consumers about
businesses with fake reviews, and (c) makes fake review detection more
difficult by allowing profiles to choose not to display all of their
reviews and by not displaying the dates of reviews.\79\ The comment
also complained about reviews by Yelp Elite members,\80\ which Fake
Review Watch asserted are automatically recommended and not subject to
evaluation by Yelp's recommendation software, and about the inadequacy
of Yelp's consumer alerts.\81\ Fake Review Watch said that regulators
should require review sites to tell consumers everything they know
about a business's reviews and to post notices reminding consumers that
the site cannot guarantee the truthfulness and accuracy of any
review.\82\
---------------------------------------------------------------------------
\76\ Fake Review Watch Cmt. at 1, 9.
\77\ Id. at 1.
\78\ Id.
\79\ Id. at 3.
\80\ According to Yelp, Yelp Elite members are chosen ``based on
a number of things, including well-written reviews, high quality
photos, a detailed personal profile, and a history of playing well
with others.'' <a href="https://www.yelp-support.com/article/What-is-Yelps-Elite-Squad?l=en_US">https://www.yelp-support.com/article/What-is-Yelps-Elite-Squad?l=en_US</a>.
\81\ Id. at 4-5.
\82\ Id. at 9.
---------------------------------------------------------------------------
Fakespot did not state support for or opposition to a rulemaking.
In its comment, Fakespot opined that sellers posting fake reviews and
fake review farms are among the malicious actors generating fake online
content that, in the last five years, has led to a ``dramatic
deterioration'' of trust between sellers, platforms, and consumers.\83\
---------------------------------------------------------------------------
\83\ Fakespot Cmt. at 1.
---------------------------------------------------------------------------
The three consumer advocacy organizations that submitted comments,
Truth in Advertising, Inc. (``TINA''), the U.S. Public Interest
Research Group (``US PIRG''), and the National Consumers League
(``NCL''), all advocated for a rulemaking.\84\
---------------------------------------------------------------------------
\84\ Truth in Advertising, Inc., Cmt. on ANPR (Jan. 9, 2023),
<a href="https://www.regulations.gov/comment/FTC-2022-0070-0029">https://www.regulations.gov/comment/FTC-2022-0070-0029</a> (``TINA
Cmt.'') at 1; U.S. Public Interest Research Group, Cmt. on ANPR
(Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0045">https://www.regulations.gov/comment/FTC-2022-0070-0045</a> (``US PIRG Cmt.'') at 2; National Consumers League, Cmt. on
ANPR (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0039">https://www.regulations.gov/comment/FTC-2022-0070-0039</a> (``NCL Cmt.'') at 1. Electronic Privacy Information Center
(``EPIC''), which is a public interest research center, submitted a
comment supporting a rulemaking. Its comment focused mainly on
endorsements by police organizations of one product. Electronic
Privacy Information Center, Cmt. on ANPR (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0043">https://www.regulations.gov/comment/FTC-2022-0070-0043</a>.
---------------------------------------------------------------------------
TINA said that fake reviews are an insidious problem, primarily
because consumers have come to rely heavily on reviews in making their
online purchasing decisions, and it provided numerous citations to
publications regarding the importance of reviews to consumer decision
making.\85\ It stated that incentives to generate early, positive
reviews have led to a proliferation of false and fake reviews--a
deceptive marketing tactic that will only continue to flourish if not
effectively reined in by regulators.\86\ TINA said that, given the
Supreme Court's AMG Capital Management decision, a rule would
substantially improve the agency's ability to combat and deter
deception and unfairness in this area.\87\
---------------------------------------------------------------------------
\85\ TINA Cmt. at 2-3.
\86\ Id. at 3.
\87\ Id. at 3.
---------------------------------------------------------------------------
US PIRG cited findings by industry observers that 30 to 40 percent
of online reviews are not genuine, and stated that consumers have no
way of knowing which reviews are legitimate.\88\ It asserted that fake
reviews harm both consumers who are trying to make informed buying
decisions and honest businesses, and that, when consumers lose
confidence in reviews, legitimate positive reviews do not mean as
much.\89\ It said that the marketplace is poisoned by outright fake
reviews, reviews written in exchange for free items, fake negative
reviews written about competitors, review suppression, reviews or
endorsements written for consideration, and misrepresentations that a
website or a certification or a seal is independent.\90\
---------------------------------------------------------------------------
\88\ US PIRG Cmt. at 1.
\89\ Id.
\90\ Id. at 1-2.
---------------------------------------------------------------------------
NCL said that millions of consumers use reviews every day to inform
billions of dollars in purchasing decisions involving both online and
offline businesses.\91\ It cited an estimate that in 2021, fraudulent
reviews cost U.S. consumers $28 billion.\92\ NCL also cited a different
study which said that, by deceiving buyers into purchasing lower
quality and potentially unsafe products, fake reviews lead to $0.12 of
consumer welfare lost for every $1 spent online.\93\ It said that the
practices outlined in the ANPR were all unfair and deceptive, that the
sellers and service providers that do not use fake reviews are at a
competitive disadvantage, that the effects of a fake review may last up
to a month after its deletion or detection, and that the threat of fake
negative reviews is being used to extort honest businesses.\94\ NCL
also asked the Commission to require platforms to implement measures to
combat the unfair and deceptive uses of reviews, endorsements, and
indicators of social media influence, possibly requiring purchase
verification before allowing a user to leave a review and the active
policing of reviews.\95\ Finally, NCL suggested that the FTC explore
options for holding platforms accountable for allowing organized review
fraud to flourish.\96\
---------------------------------------------------------------------------
\91\ NCL Cmt. at 1.
\92\ Id. at 2.
\93\ Id.
\94\ Id. at 3-4.
\95\ Id. at 4.
\96\ Id.
---------------------------------------------------------------------------
The seven trade associations that submitted comments, the North
American Insulation Manufacturers Association (``NAIMA''), the American
Dental Association (``ADA''), the Computer & Communications Industry
Association (``CCIA''), the Travel Technology Association (``Travel
Tech''), the National Automobile Dealers Association (``NADA''), the
National Retail Federation (``NRF''), and the Association of National
Advertisers (``ANA''),\97\ took widely divergent positions on a
rulemaking.
---------------------------------------------------------------------------
\97\ North American Insulation Manufacturers Association, Cmt.
on ANPR (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0037">https://www.regulations.gov/comment/FTC-2022-0070-0037</a> (``NAIMA Cmt.''); American Dental Association, Cmt.
on ANPR (Jan. 5, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0027">https://www.regulations.gov/comment/FTC-2022-0070-0027</a> (``ADA Cmt.''); Computer & Communications Industry
Association, Cmt. on ANPR (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0047">https://www.regulations.gov/comment/FTC-2022-0070-0047</a> (``CCIA Cmt.'');
Travel Technology Association, Cmt. on ANPR (Jan. 9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0046">https://www.regulations.gov/comment/FTC-2022-0070-0046</a> (``Travel Tech
Cmt.''); National Automobile Dealers Association, Cmt. on ANPR (Jan.
9, 2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0038">https://www.regulations.gov/comment/FTC-2022-0070-0038</a>
(``NADA Cmt.''); National Retail Federation, Cmt. on ANPR (Jan. 9,
2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0039">https://www.regulations.gov/comment/FTC-2022-0070-0039</a> (``NRF
Cmt.''); Association of National Advertisers, Cmt. on ANPR (Jan. 9,
2023), <a href="https://www.regulations.gov/comment/FTC-2022-0070-0040">https://www.regulations.gov/comment/FTC-2022-0070-0040</a> (``ANA
Cmt.'').
---------------------------------------------------------------------------
NAIMA and ADA both support a rulemaking.\98\ With respect to
reviews or other endorsements by nonexistent individuals, NAIMA said
that it has challenged misleading claims that were ``supported by
avatars or entities that there was no chance of making real contact
with.'' \99\ It also asserted that testimonials by those
misrepresenting their experiences with products are plentiful.\100\
Finally, NAIMA stated that it regularly challenges statements about
[[Page 49369]]
its members' products ``that appear on standalone websites which
falsely claim to be independent reviewers.'' \101\ ADA wants the FTC to
allow dentists to disclose patient information in responding to reviews
and to require that reviewers identify themselves.\102\
---------------------------------------------------------------------------
\98\ NAIMA Cmt. at 1; ADA Cmt. at 1.
\99\ NAIMA Cmt. at 2.
\100\ Id.
\101\ Id.
\102\ ADA Cmt. at 1.
---------------------------------------------------------------------------
It is unclear whether Travel Tech or CCIA support a rulemaking.
Travel Tech commented that the integrity of reviews is essential to
maintain the trust and confidence of the customers of Travel Tech
members.\103\ It stated that the overwhelming majority of reviews are
legitimate and that Travel Tech members have systems in place to
address the minority of reviews that can be harmful to consumers or
travel-related operators and providers.\104\ Travel Tech recommended
that the Commission utilize its existing authority to combat nefarious
paid review-generation sites, referred to as ``click farms.'' \105\
CCIA said that any proposed rulemaking should focus on bad actors
engaging in fraudulent behavior, not legitimate endorsements that
happen to occur through social media.\106\
---------------------------------------------------------------------------
\103\ Travel Tech Cmt. at 1.
\104\ Id. at 3.
\105\ Id. at 4.
\106\ CCIA Cmt. at 4.
---------------------------------------------------------------------------
NADA commented that rulemaking is unnecessary because the
Commission did not identify any harmful market conduct for which
remedies to protect consumers do not exist under current Federal and
state law and because monetary penalty authority alone is not reason
enough to issue a rule.\107\ Its comment continued that, if the
rulemaking proceeds, the Commission should stick to its stated goal of
addressing ``certain types of clear Section 5 violations involving
reviews and endorsements'' to ``benefit consumers, help level the
playing field, and not burden legitimate marketers.'' \108\ With
respect to any potential rule provision addressing businesses writing,
soliciting, or publishing reviews by their employees or family members,
NADA asked that the FTC make clear that a violation ``only arises when
the business, and not another entity, affirmatively writes, solicits,
and publishes reviews that fail to provide clear and conspicuous
disclosures of those relationships'' and that the FTC define the term
``relative.'' \109\ The comment asserted that businesses may
legitimately ``seek to remove reviews or comments that are off topic or
include false statements, advertisements, inappropriate language, or
confidential or personal identification information'' or to ``remove
comments or review functions on their own websites or certain social
media posts.'' \110\ NADA also posited other practices that they
considered legitimate and did not want prohibited under a possible
rule: (a) responding on a comment thread to each negative review,
offering an explanation, making customers whole, and asking any
successfully satisfied customers to respond on the thread with their
satisfaction or update their previously negative review; (b) surveying
customer satisfaction and prompting only satisfied customers to leave
reviews; (c) reaching out to consumers in an effort to change reviews
by addressing their issues, sometimes giving customers something of
value in satisfaction of their problems; or (d) highlighting five-star
reviews from satisfied customers on a dealer's websites.\111\ NADA said
it understood that some third-party review websites promoted their
services to businesses and if a business did not purchase those
services, it would have a negative effect on the consumer reviews shown
for the business.\112\ Finally, NADA said that the FTC should directly
engage with review websites, e-commerce sites, and consumer brands
through public workshop conferences.\113\
---------------------------------------------------------------------------
\107\ NADA Cmt. at 1-2.
\108\ Id. at 3.
\109\ Id.
\110\ Id.
\111\ Id. at 3-4.
\112\ Id. at 4 n.12.
\113\ Id. at 5.
---------------------------------------------------------------------------
NRF opposed additional regulation of retailers but not of fake
review brokers.\114\ It believes that the issue of fake and misleading
reviews is important but that fake review brokers are much more likely
to mislead consumers and create issues for retailers given the
potential for brokers to submit fake reviews in volume.\115\ NRF said
that the fraudulent tactics employed by review brokers can include: (a)
using ``bots'' and artificial intelligence tools to generate reviews on
behalf of nonexistent consumers; (b) posting identical, or
substantially identical, reviews for multiple different products and/or
under multiple consumer accounts; (c) flooding social media platforms
such as Twitter, Instagram, and Facebook with false review content,
whether as standalone posts or as comments or replies to genuine
reviews or consumer questions; (d) creating and operating social media
groups or standalone websites that purport to offer benefits like
refunds or coupons in exchange for specified types of reviews or
ratings; and (e) reimbursing consumers for what would otherwise appear
to be bona-fide purchases in exchange for positive 5-star reviews and
ratings.\116\ NRF opposed requiring retailers to restrict consumer
reviews to verified purchasers.\117\ It also opposed blanket approaches
such as ``requiring manual review of every consumer review and the
poster's profile'' or approaches that ``risk inadvertent discriminatory
or disparate deletion of reviews based on implicit biases towards
certain consumer classes.'' \118\ NRF said that if a retailer is
actually acting in bad faith (whether by itself or by intentionally
engaging a fake review broker to act on its behalf), the FTC can take
the step of ``filing a complaint and bringing formal enforcement action
seeking monetary damages as it has done several times this year
alone.'' \119\ It accordingly believes that no new enforcement
mechanism is necessary for the Commission to ensure retailers comply
with existing law, or to hold them accountable for violations.\120\
---------------------------------------------------------------------------
\114\ NRF Cmt. at 1.
\115\ Id. at 2.
\116\ Id. at 2-3.
\117\ Id. at 6.
\118\ Id.
\119\ Id.
\120\ Id. at 7.
---------------------------------------------------------------------------
ANA asserted that a rulemaking is premature, while making clear
that ``ANA does not take the position that fake reviews may not produce
economic injury.'' \121\ It asserted that the ``FTC has not
demonstrated evidence of prevalence and has not identified a particular
industry that would justify embarking upon rulemaking that would be
sufficient, clear, narrowly tailored, easy to enforce, and not
burdensome to legitimate marketers.'' \122\ ANA appeared to agree that
some of the practices challenged in past FTC cases involving the
offering of compensation or other incentives in exchange for, or
conditioned on, the writing of positive consumer reviews are
problematic and deceptive.\123\ It sought to distinguish such practices
from other practices that, according to ANA, do not obviously cause
consumer harm, such as review gating or the ``mere solicitation of
positive reviews.'' \124\
---------------------------------------------------------------------------
\121\ ANA Cmt. at 2, 4.
\122\ Id. at 1-2.
\123\ Id. at 6.
\124\ Id. at 7.
---------------------------------------------------------------------------
The Commission also received a comment from an insurance marketing
organization, Family First Life LLC (``Family First Life''), which
supported ``a narrowly tailored rule [that] would benefit consumers,
help level the playing field, and not burden legitimate
[[Page 49370]]
marketers.'' \125\ It recommended that any regulation ``be tailored to
exclude situations where an employee or independent contractor is
leaving a review of their experience working with their employer or
principal.'' \126\ Family First Life pointed out that when someone
``writes a review of her own personal experience working with a company
on workplace-review platforms, such as Glassdoor or Indeed,'' concerns
about the reviewer's undisclosed relationship to the company are absent
because, on such platforms, ``there is an obvious and assumed
relationship between the reviewer and the company.'' \127\ Family First
Life commented that the ``FTC should not write a rule that sweeps in
and penalizes any review just because the reviewer was offered an
incentive to write it--without otherwise dictating what the review
says.'' \128\ Family First Life also stated that the ``FTC should
include in any proposed regulation it promulgates a safe harbor for
truthful reviews that are incentivized but not influenced, controlled,
or conditioned by the entity offering the incentive.'' \129\ Finally,
it asserted that the FTC should not treat platforms' determinations of
policy violations as evidence of rule breaking.\130\
---------------------------------------------------------------------------
\125\ Family First Life LLC, Cmt. on ANPR (Jan. 9, 2023),
<a href="https://www.regulations.gov/comment/FTC-2022-0070-0049">https://www.regulations.gov/comment/FTC-2022-0070-0049</a> (``Family
First Life Cmt.'') at 1-2.
\126\ Id. at 9.
\127\ Id. at 9-10.
\128\ Id. at 12-13.
\129\ Id. at 14.
\130\ Id. at 18.
---------------------------------------------------------------------------
The Commission also received a comment from a non-partisan think
tank, the Center for Data Innovation (``CDI'').\131\ As part of its
comment, CDI asserted that regulation is premature because there are no
widely accepted best practices for platforms and platforms are still
experimenting with solutions.\132\ CDI acknowledged that researchers
studying deceptive reviews found that fake reviews do have a large
presence online and a significant impact on commerce, citing research
and reports that included the following findings, among others: (a)
``around five percent of reviews left for a private-label apparel
company were posted by individuals who did not purchase products''; (b)
``around 4 percent of online reviews [we]re fake in 2021''; (c) fake
reviews impact nearly $152 billion in global e-commerce revenue; (d)
Yelp flagged and filtered out around 16 percent of reviews in 2016; and
(e) 20 percent of 41,572 reviews on Tripadvisor were suspicious.\133\
It noted that an artificial intelligence (``AI'') system is able to
write reviews that are nearly indistinguishable from reviews written by
people.\134\ CDI commented that fake review brokers help facilitate the
creation of fake reviews by connecting bad actors with reviewers, often
using ``large groups on websites such as Facebook to find reviewers
willing to write reviews in exchange for free products or
compensation.'' \135\ The comment asserted that the review broker
dictates the rating and what the review should say and then pays the
reviewer only once the review is accepted and posted.\136\ CDI proposed
that, instead of engaging in a rulemaking, the FTC should establish
partnerships with review companies, e-commerce platforms, and social
media companies to establish voluntary best practices to detect and
prevent fake reviews.\137\
---------------------------------------------------------------------------
\131\ Center for Data Innovation, Cmt. on ANPR (Jan. 9, 2023),
<a href="https://www.regulations.gov/comment/FTC-2022-0070-0048">https://www.regulations.gov/comment/FTC-2022-0070-0048</a> (``CDI
Cmt.'').
\132\ Id. at 5.
\133\ Id. at 3.
\134\ Id. at 3-4.
\135\ Id. at 5.
\136\ Id.
\137\ Id. at 5-6.
---------------------------------------------------------------------------
III. Prevalence of the Consumer Review and Testimonial Practices at
Issue
A. Fake or False Consumer Reviews or Testimonials
Comments from the platforms support a finding that fake consumer
reviews are prevalent. In 2020, Amazon asserted it proactively stopped
more than 200 million suspected fake reviews.\138\ In 2021, according
to the company, Google blocked or removed more than 95 million Google
Maps reviews for policy violations; in 2022, it removed millions of
fake, inorganic, or otherwise malicious Google Play reviews.\139\ Yelp
commented that, in 2021, its recommendation software identified about
19 percent of reviews as ``not recommended.'' \140\ In 2021,
Tripadvisor reportedly flagged 3.6 percent of reviews submitted (or
about one million reviews) as fraudulent.\141\ Trustpilot stated that
in 2021, accounts deemed to be review sellers submitted more than
60,000 reviews of U.S. businesses; it identified and filtered the
reviews and blocked the accounts associated with them.\142\
---------------------------------------------------------------------------
\138\ Amazon Cmt. at 2.
\139\ Google Cmt. at 8.
\140\ Yelp Cmt. at 6.
\141\ Tripadvisor Cmt. at 7.
\142\ Trustpilot Cmt. at 3.
---------------------------------------------------------------------------
Several comments spoke about the prevalence of consumer review
rings on various online platforms (e.g., Facebook, Instagram, Twitter)
that facilitate the buying, selling, or exchange of fake reviews. In
2021, Amazon reported more than 16,000 abusive review-related groups to
social media sites, leading to the removal of groups with more than 11
million members.\143\ In July 2022, Amazon sued administrators of more
than 10,000 Facebook groups that attempted to orchestrate fake reviews
on <a href="http://Amazon.com">Amazon.com</a> in exchange for money or free products.\144\ In 2021,
Yelp reported almost 950 suspicious groups, posts, or individuals to
online platforms.\145\ Fake Review Watch has accessed more than 100
Facebook review exchange groups, each with hundreds or thousands of
participants.\146\
---------------------------------------------------------------------------
\143\ Amazon Cmt. at 2.
\144\ Id. at 3.
\145\ Yelp Cmt. at 8.
\146\ Fake Review Watch Cmt. at 1.
---------------------------------------------------------------------------
The comment from the Amazon employee who reviewed thousands of
accounts for review abuse said that deceptive reviews are
widespread.\147\
---------------------------------------------------------------------------
\147\ Zhao Cmt. at 1.
---------------------------------------------------------------------------
Other comments suggest the platforms may be underestimating the
extent of the fake review problem. The Transparency Company estimated
8.5 percent of published consumer reviews are fake.\148\ The Fake
Review Watch comment explained reviews written by Yelp Elite members
are not subject to evaluation by Yelp's automatic software and there is
a robust market for Yelp Elite Reviews.\149\ US PIRG asserted 30 to 40
percent of online reviews are fabricated or otherwise not genuine.\150\
The UC Davis researchers found that nearly 50 percent of the products
sold on <a href="http://Amazon.com">Amazon.com</a> by those seeking incentivized reviews did not have
any of their reviews removed during the six-week period the researchers
tracked them.\151\ CDI cited research regarding the prevalence of fake
reviews, including findings that ``around five percent of reviews left
for a private-label apparel company were posted by individuals who did
not purchase products,'' ``around 4 percent of online reviews [we]re
fake in 2021,'' and, based on a third-party analysis of 41,572 reviews,
around 20 percent of Tripadvisor reviews were suspicious.\152\
---------------------------------------------------------------------------
\148\ Transparency Company Cmt. at 9.
\149\ Fake Review Watch Cmt. at 4.
\150\ US PIRG Cmt. at 1.
\151\ Oak & Shafiq Cmt. at 7-8.
\152\ CDI Cmt. at 3.
---------------------------------------------------------------------------
Numerous research reports, several of which are cited in the
comments, further establish the prevalence of fake reviews. For
example, in 2020, the Department of Homeland Security issued a report
that focused on counterfeit and pirated goods but also found that ``the
ratings systems across platforms have been gamed, and the
[[Page 49371]]
proliferation of fake reviews and counterfeit goods on third-party
marketplaces now threatens the trust mechanism itself.'' \153\ An
Uberall report from 2021 estimated 10.7 percent of Google reviews, 7.1
percent of Yelp reviews, and 5.2 percent of Tripadvisor reviews were
fake.\154\ A 2021 joint report by the University of Baltimore and CHEQ
AI Technologies Ltd., a company that provides online security services,
described the ``booming market'' for fake reviews and estimated, based
on self-reporting from several major platforms, four percent of global
reviews are fake.\155\ Also in 2021, Fakespot released a report finding
that, in 2020, nearly 37.6 percent of reviews on <a href="http://Walmart.com">Walmart.com</a> were
unreliable, with the figure at 27.6 percent for <a href="http://Amazon.com">Amazon.com</a>.\156\
Further, in its most recent annual local consumer review survey,
BrightLocal reported 54 percent of consumers were confident they saw
fake reviews on <a href="http://Amazon.com">Amazon.com</a> in 2022, with the figures being 50 percent
for Google and 42 percent for Facebook.\157\
---------------------------------------------------------------------------
\153\ See, e.g., Department of Homeland Security, Combating
Trafficking in Counterfeit and Pirated Goods (2020), <a href="https://www.dhs.gov/sites/default/files/publications/20_0124_plcy_counterfeit-pirated-goods-report_01.pdf">https://www.dhs.gov/sites/default/files/publications/20_0124_plcy_counterfeit-pirated-goods-report_01.pdf</a>.
\154\ See ``Fake Reviews: How Big a Problem Exactly?,'' Oct. 28,
2021, <a href="https://uberall.com/en-us/resources/blog/how-big-a-problem-are-fake-reviews">https://uberall.com/en-us/resources/blog/how-big-a-problem-are-fake-reviews</a>. Notably, these percentages refer to reviews that
were not blocked by these platforms before publication.
\155\ See University of Baltimore and CHEQ, ``The Economic Cost
of Bad Actors on the Internet: Fake Online Reviews 2021,'' <a href="https://f.hubspotusercontent00.net/hubfs/5228455/Research/Fake%20Online%20Reviews%202021.pdf">https://f.hubspotusercontent00.net/hubfs/5228455/Research/Fake%20Online%20Reviews%202021.pdf</a>.
\156\ See Fakespot, ``2021 Fakespot US Online Shopping, Ratings
& Reviews Analysis Report,'' <a href="https://www.fakespot.com/2021holidayreport">https://www.fakespot.com/2021holidayreport</a>.
\157\ See Sammy Paget, ``Local Consumer Review Survey 2023,''
Feb. 7, 2023, <a href="https://www.brightlocal.com/research/local-consumer-review-survey/">https://www.brightlocal.com/research/local-consumer-review-survey/</a>.
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Academic research--some of which, again, is cited in the comments--
has also repeatedly confirmed the prevalence of fake reviews.\158\
Numerous journalists, including from The Washington Post, The Wall
Street Journal, CBC News, and CNBC, have also reported on such
prevalence, sometimes having undertaken their own investigations.\159\
Further, Which?, a consumer advocacy group based in the United Kingdom,
has issued several reports documenting fake and manipulated reviews
across multiple platforms.\160\
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\158\ See, e.g., Jesper Akesson et al., ``The Impact of Fake
Reviews on Demand and Welfare,'' National Bureau of Economic
Research Conference, July 20, 2022, <a href="https://conference.nber.org/conf_papers/f166391.pdf">https://conference.nber.org/conf_papers/f166391.pdf</a>; Sherry He et al., ``The Market for Fake
Reviews,'' 2021, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3664992">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3664992</a>; Devesh Raval, ``Do Bad Businesses
Get Good Reviews? Evidence from Online Review Platforms,'' 2020,
<a href="https://deveshraval.github.io/reviews.pdf">https://deveshraval.github.io/reviews.pdf</a>; Renee DiResta,
``Manipulating Consumption,'' 2018, <a href="https://medium.com/@noupside/manipulating-consumption-42f2e9013d0b">https://medium.com/@noupside/manipulating-consumption-42f2e9013d0b</a>; Ted Lappas et al., ``The
Impact of Fake Reviews on Online Visibility: A Vulnerability
Assessment of the Hotel Industry,'' 2016, <a href="https://pubsonline.informs.org/doi/abs/10.1287/isre.2016.0674">https://pubsonline.informs.org/doi/abs/10.1287/isre.2016.0674</a>; Michael Luca
and Georgios Zervas, ``Fake It Till You Make It: Reputation,
Competition, and Yelp Review Fraud,'' 62(12) Mgmt. Sci. Dec. 3412-27
(2016), <a href="https://dash.harvard.edu/handle/1/22836596">https://dash.harvard.edu/handle/1/22836596</a>.
\159\ See, e.g., Bob Segall, ``Millions of those 5-star online
reviews are fake; Here's how to spot them,'' WTHR, Feb. 15, 2022,
<a href="https://www.wthr.com/article/news/investigations/13-investigates/many-of-those-5-star-reviews-you-see-online-are-totally-fake-yelp-google-facebook-false-accounts/531-f175843b-1316-494a-a746-5bdfcada43fa">https://www.wthr.com/article/news/investigations/13-investigates/many-of-those-5-star-reviews-you-see-online-are-totally-fake-yelp-google-facebook-false-accounts/531-f175843b-1316-494a-a746-5bdfcada43fa</a>; Nicole Nguyen, ``Fake Reviews and Inflated Ratings Are
Still a Problem for Amazon,'' Wall St. J., June 13, 2021, <a href="https://www.wsj.com/articles/fake-reviews-and-inflated-ratings-are-still-a-problem-for-amazon-11623587313">https://www.wsj.com/articles/fake-reviews-and-inflated-ratings-are-still-a-problem-for-amazon-11623587313</a>; Laura Sydell, ``Fake patient reviews
are making it increasingly hard to seek medical help on Google, Yelp
and other directory sites,'' Wash. Post, June 5, 2021, <a href="https://www.washingtonpost.com/business/2021/06/04/fake-medical-reviews-google-zocdoc-trustpilot/">https://www.washingtonpost.com/business/2021/06/04/fake-medical-reviews-google-zocdoc-trustpilot/</a>; Matthew Pierce et al., ``Black market in
Google reviews means you can't believe everything you read,'' CBC
News, May 4, 2021 (finding that sale of reviews is a growing and
widespread problem), <a href="https://www.cbc.ca/news/investigates/fake-reviews-on-google-1.6033859">https://www.cbc.ca/news/investigates/fake-reviews-on-google-1.6033859</a>; Natasha Lomas, ``Apple urged to root
out rating scams as developer highlights ugly cost of enforcement
failure,'' Tech Crunch, Feb. 3, 2021 (finding that selling fake App
Store reviews ``is a booming business''), <a href="https://techcrunch.com/2021/02/03/apple-urged-to-root-out-rating-scams-as-developer-highlights-ugly-cost-of-enforcement-failure/">https://techcrunch.com/2021/02/03/apple-urged-to-root-out-rating-scams-as-developer-highlights-ugly-cost-of-enforcement-failure/</a>; Katie Tarasov,
``Amazon is filled with fake reviews and it's getting harder to spot
them,'' CNBC, Sep. 6, 2020, <a href="https://www.cnbc.com/2020/09/06/amazon-reviews-thousands-are-fake-heres-how-to-spot-them.html">https://www.cnbc.com/2020/09/06/amazon-reviews-thousands-are-fake-heres-how-to-spot-them.html</a>; Greg
Sterling, ``Fake reviews problem is much worse than people know,''
Search Engine Land, Apr. 22, 2020, <a href="https://searchengineland.com/fake-reviews-problem-is-much-worse-than-people-know-333331">https://searchengineland.com/fake-reviews-problem-is-much-worse-than-people-know-333331</a>; Nick
Fernandez, ``It's 2020 and the Google Play Store still has a major
fake review problem,'' Android Authority, Feb. 23, 2020, <a href="https://www.androidauthority.com/play-store-fake-review-problem-1082191/">https://www.androidauthority.com/play-store-fake-review-problem-1082191/</a>;
Eric Griffith, ``39 Percent of Online Reviews Are Totally
Unreliable,'' PCMag, Nov. 7, 2019, <a href="https://www.pcmag.com/news/39-percent-of-online-reviews-are-totally-unreliable">https://www.pcmag.com/news/39-percent-of-online-reviews-are-totally-unreliable</a>; Elizabeth Dwoskin
and Craig Timberg, ``How merchants use Facebook to flood Amazon with
fake reviews,'' Wash. Post, Apr. 23, 2018, <a href="https://www.washingtonpost.com/business/economy/how-merchants-secretly-use-facebook-to-flood-amazon-with-fake-reviews/2018/04/23/5dad1e30-4392-11e8-8569-26fda6b404c7_story.html">https://www.washingtonpost.com/business/economy/how-merchants-secretly-use-facebook-to-flood-amazon-with-fake-reviews/2018/04/23/5dad1e30-4392-11e8-8569-26fda6b404c7_story.html</a>.
\160\ See, e.g., Hannah Walsh, ``Apple App store and Google Play
flooded with fake reviews,'' WHICH?, Mar. 9, 2023, <a href="https://www.which.co.uk/news/article/apple-app-store-and-google-play-flooded-with-fake-reviews-aEA138U8bUw6">https://www.which.co.uk/news/article/apple-app-store-and-google-play-flooded-with-fake-reviews-aEA138U8bUw6</a>; Sara Spary, ``How Facebook
fuels Amazon's fake reviews,'' WHICH?, Jan. 13, 2022 (finding
Facebook groups with more than 200,000 members facilitating the sale
of fake Amazon reviews), <a href="https://www.which.co.uk/news/2022/01/how-facebook-fuels-amazons-fake-reviews/">https://www.which.co.uk/news/2022/01/how-facebook-fuels-amazons-fake-reviews/</a>; Hannah Walsh, ``How a thriving
fake review industry is gaming Amazon marketplace,'' WHICH?, Feb.
16, 2021 (finding a ``thriving industry of review manipulation
businesses'' targeting the Amazon marketplace and trading on a
``massive scale''), <a href="https://www.which.co.uk/news/2021/02/how-a-thriving-fake-review-industry-is-gaming-amazon-marketplace/">https://www.which.co.uk/news/2021/02/how-a-thriving-fake-review-industry-is-gaming-amazon-marketplace/</a>.
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More recently, concerns have been raised that generative artificial
intelligence (``AI'') tools can be used to write product reviews.\161\
It has been reported that an AI chatbot is being used to create fake
reviews.\162\ As the reporting notes, the widespread emergence of AI
chatbots is likely to make it easier for bad actors to write fake
reviews.
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\161\ See, e.g., Chat GPT, ``Reader Beware: This Gear Review Was
Written by an AI Bot,'' GearJunkie, Dec. 7, 2022, <a href="https://gearjunkie.com/news/chat-gpt-ai-gear-review-msr-pocket-rocket">https://gearjunkie.com/news/chat-gpt-ai-gear-review-msr-pocket-rocket</a>.
\162\ See Annie Palmer, ``People are using A.I. chatbots to
write Amazon reviews,'' CNBC, Apr. 25, 2023, <a href="https://www.cnbc.com/2023/04/25/amazon-reviews-are-being-written-by-ai-chatbots.html">https://www.cnbc.com/2023/04/25/amazon-reviews-are-being-written-by-ai-chatbots.html</a>.
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The Commission has brought numerous cases involving allegedly
fabricated consumer reviews. See, e.g., Complaint at 9-17, FTC v.
Roomster Corp., No. 1:22-CV-07389 (S.D.N.Y. Aug. 30, 2022) (alleged
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
allegedly created fake accounts to write fake reviews of company's
products on third-party retailer's website); Shop Tutors, Inc., 169
F.T.C. 476, 487-89 (2020) (reviews of LendEDU were allegedly 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) (<a href="http://Amazon.com">Amazon.com</a> reviews of
defendants' product were allegedly fabricated by one or more third
parties whom defendants had paid to generate reviews); Complaint at 19,
FTC v. Genesis Today, Inc., 1:15-cv-00062 (W.D. Tex. Jan. 26, 2015)
(<a href="http://Amazon.com">Amazon.com</a> product reviews allegedly purchased by defendants);
Complaint at 5, 8, FTC v. Dunlevy, No. 1:11-cv-01226-TWT (N.D. Ga. Apr.
4, 2011) (alleged fake consumer comments).
State Attorneys General have also brought cases challenging
allegedly fabricated consumer reviews. See, e.g., Complaint at 4,
Washington v. Alderwood Surgical Ctr., LLC, No. 2:22-cv-01835 (W.D.
Wash. Dec. 29, 2022) (creating allegedly fake positive reviews on
Google, Yelp, and other review sites); Complaint at 17-22, State v.
Amazon Home Warranty LLC, No. CV2021-007632 (Ariz. Sup. Ct. Maricopa
Cnty. May 10, 2021) (disseminated or caused the dissemination of
allegedly fake favorable consumer reviews on third-party review
websites, including on the
[[Page 49372]]
BBB's website); Assurance of Voluntary Compliance at 3-5, State v.
Unified Holding Grp., LLC, No. 2020-06785 (C.P. Cumberland Cnty., Pa.
Dec. 16, 2020) (alleged fabricated reviews on the BBB website);
Complaint at 15, State v. US Air Ducts & Sky Builders, Inc., No. 19-2-
24757-6-SEA (Wash. Sup. Ct. Kings Cnty., Sept. 20, 2019) (allegedly
created fake Google reviews); Complaint at 8-9, State v. Mechs. Heating
& Air Conditioning, LLC, No. 13108809 (Ga. Sup. Ct. Cobb Cnty., Oct.
11, 2013) (alleged fake favorable customer reviews, including on
<a href="http://Yelp.com">Yelp.com</a>, <a href="http://Kudzu.com">Kudzu.com</a>, and Google+<a href="http://Local.com">Local.com</a>). In September 2013, the New
York Attorney General's office announced settlements with 19 companies
that allegedly either purchased fake reviews or arranged to have fake
reviews posted for their clients.\163\
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\163\ Press Release, A.G. Schneiderman Announces Agreement With
19 Companies To Stop Writing Fake Online Reviews And Pay More Than
$350,000 In Fines, Sept. 23, 2013, <a href="https://ag.ny.gov/press-release/2013/ag-schneiderman-announces-agreement-19-companies-stop-writing-fake-online-reviews">https://ag.ny.gov/press-release/2013/ag-schneiderman-announces-agreement-19-companies-stop-writing-fake-online-reviews</a>.
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Numerous private lawsuits have involved purportedly fake consumer
reviews. See, e.g., BHRS Grp., LLC v. Brio Water Tech., Inc., 553 F.
Supp. 3d 793, 797 (C.D. Cal. 2021) (defendant allegedly enlisted
individuals to purchase products for the purpose of leaving positive
<a href="http://Amazon.com">Amazon.com</a> reviews of its products and negative <a href="http://Amazon.com">Amazon.com</a> reviews of
plaintiff's competing products); Marksman Sec. Corp. v. P.G. Sec., No.
19-62467-CIV-CAN, 2021 U.S. Dist. LEXIS 196580, at *43 (S.D. Fla. Oct.
12, 2021) (denying plaintiff's motion for default and granting in part
its motion for summary judgment in a case in which defendants paid for
positive Google reviews from at least three individuals who never lived
in a building that a defendant serviced); Rubinstein v. Ourian, No. 20-
21948-CIV-MORE, 2021 U.S. Dist. LEXIS 171799, at *3-4 (S.D. Fla. Sep.
10, 2021) (order granting motions for summary judgment on claims and
counterclaims in a case in which defendant allegedly purchased negative
reviews of plaintiff plastic surgeon); RingCentral, Inc. v. Nextiva,
Inc., No. 19-cv-02626-NC, 2021 U.S. Dist. LEXIS 114042, at *7-8 (N.D.
Cal. June 17, 2021) (order denying plaintiff's motion for summary
judgment, and granting in part defendant's motion for summary judgment
in a case in which plaintiff alleged defendant posted fake positive
reviews for itself and fake negative reviews of the plaintiff, and
defendant made similar allegations about plaintiff); AlphaCard Sys. LLC
v. Fery LLC, Civil Action No. 19-20110 (MAS) (TJB), 2020 U.S. Dist.
LEXIS 147059, at *2 (D.N.J. Aug. 14, 2020) (denying defendant's motion
to dismiss in a case in which defendant allegedly ``placed'' hundreds
of phony <a href="http://Amazon.com">Amazon.com</a> customer reviews on defendant's products);
Stonecoat of Tex., LLC v. Procal Stone Design, LLC, Civil Action No.
4:17CV303, 2019 U.S. Dist. LEXIS 153115, at *7-8 (E.D. Tex. July 25,
2019) (denying motions for summary judgment on claims and
counterclaims, and denying motion to strike attachments in a case in
which plaintiffs allegedly directed employees and/or representatives to
submit fake complaints/negative reviews about defendant and post fake
positive reviews about plaintiff); Super Mario Plumbing v. Belodedov,
No. 2:17-cv-02545-TLN-AC, 2018 U.S. Dist. LEXIS 24514, at *1-3 (E.D.
Cal. Feb. 14, 2018) (denying motion for preliminary injunction in a
case in which defendant allegedly posted fake negative reviews about
competitor plaintiff); SA Luxury Expeditions LLC v. Latin Am. for Less,
LLC, No. C 14-04085 WHA, 2014 U.S. Dist. LEXIS 159520, at *1-2 (N.D.
Cal. Nov. 12, 2014) (motion to dismiss held in abeyance in a case in
which defendant allegedly posted fake negative consumer reviews about
competitor plaintiff).
The problem of fake reviews is not limited to the United States.
Regulators in other countries, including Canada, the United Kingdom,
and Germany, as well as international bodies like the Organisation for
Economic Co-operation and Development (OECD), have all stated fake
reviews are a growing, thriving, or substantial marketplace
problem.\164\ The extent of fake reviews outside of the United States
lends additional support to the conclusion that fake reviews are
prevalent, but the Commission is not determining prevalence based upon
such facts.
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\164\ See, e.g., Competition Bureau Canada, ``Honest Advertising
in the Digital Age,'' Jan. 22, 2020, <a href="https://www.canada.ca/en/competition-bureau/news/2020/01/honest-advertising-in-the-digital-age.html">https://www.canada.ca/en/competition-bureau/news/2020/01/honest-advertising-in-the-digital-age.html</a>; UK Competition and Markets Authority, ``CMA expects
Facebook and eBay to tackle sale of fake reviews,'' June 21, 2019,
<a href="https://www.gov.uk/government/news/cma-expects-facebook-and-ebay-to-tackle-sale-of-fake-reviews">https://www.gov.uk/government/news/cma-expects-facebook-and-ebay-to-tackle-sale-of-fake-reviews</a>; Germany Federal Cartel Office,
``Bundeskartellamt launches sector inquiry into user reviews,'' May
23, 2019, <a href="https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/23_05_2019_SU_Nutzerbwertungen.html">https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/23_05_2019_SU_Nutzerbwertungen.html</a>; OECD,
``Understanding Online Ratings and Reviews'' at 14-15 (2019),
<a href="https://www.oecd-ilibrary.org/science-and-technology/understanding-online-consumer-ratings-and-reviews_eb018587-en">https://www.oecd-ilibrary.org/science-and-technology/understanding-online-consumer-ratings-and-reviews_eb018587-en</a>; OECD, ``Good
Practice Guide on Online Consumer Ratings and Reviews'' at 6 (2019)
(noting evidence that some businesses post fake reviews ``on a large
scale''), <a href="http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DSTI/CP">http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DSTI/CP</a>(2019)5/FINAL&docLanguage=En.
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The Commission has also challenged allegedly fictitious consumer
testimonials that appear in advertising. See, e.g., Complaint at 15,
17-18, FTC v. Wellco, Inc., No. 1:21-cv-02081 (S.D.N.Y. Mar. 10, 2021)
(testimonials allegedly copied from competitors' websites); Shop
Tutors, Inc., 169 F.T.C. 476, 488-89 (2020) (allegedly fabricated
testimonials); Complaint at 14, 19, FTC v. A.S. Resch., LLC (Synovia),
No. 1:19-cv-3423 (D. Colo. Dec. 5, 2019) (allegedly fake testimonials);
Complaint at 20-22, 31, FTC v. Global Cmty. Innovations LLC, No. 5:19-
CV-00788 (N.D. Ohio Apr. 10, 2019) (allegedly fake testimonials);
Complaint at 12, 18, FTC v. Fat Giraffe Mktg. Grp. LLC, No. 2:19-cv-
00063-CW (D. Utah Jan. 29, 2019) (the people featured in testimonials
allegedly were not real customers); FTC v. Cardiff, No. ED 18-cv-02104-
DMG (PLAx), 2020 U.S. Dist. LEXIS 210930, at *15-16 (C.D. Cal. Oct. 9,
2020) (granting in part FTC motion for summary judgment and finding
testimonialists in infomercial had not used the product); Complaint at
12-13, 20, FTC v. Mktg. Architects, Inc., No. 2:18-cv-00050-NT (D. Me.
Feb. 5, 2018) (allegedly fake testimonials); Complaint at 14, 21, FTC
v. Health Res. Labs., LLC, No. 2:17-cv-00467-JDL (D. Me. Nov. 30, 2017)
(allegedly fake testimonials); Complaint at 13, 18, 28, FTC v. XXL
Impressions LLC, No. 1:17-cv-00067-NT (D. Me. Feb. 22, 2017)
(defendants allegedly did 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) (allegedly fake testimonials); First Amended Complaint at 75, FTC
v. Jeremy Johnson, No. 10-cv-2203-RLH (GWF) (D. Nev. Feb. 25, 2013)
(defendants allegedly hired third parties to post fake positive online
articles and web pages purportedly by consumers who had successfully
used defendants' product to find government grants); FTC v. Grant
Connect, LLC, 827 F. Supp. 2d 1199, 1228 (D. Nev. 2011) (granting
summary judgment on FTC's deception count where defendants presented no
evidence showing certain testimonials were genuine), aff'd in part and
vacated in part on other grounds, 763 F.3d 1094 (9th Cir. 2014);
Buckingham Prods., Inc., 106 F.T.C. 116 (1985) (testimonials allegedly
do not represent actual and genuine testimonials from customers);
Technobrands, Inc., 133 F.T.C. 647, 650, 654-55 (2002) (purported
consumer endorsers allegedly did not exist); Plaza
[[Page 49373]]
Club, Inc., 80 F.T.C. 62 (1972) (testimonialist allegedly was not a
member of respondents' physical fitness facilities and unknown to
respondents); New Standard Publ'g. Co., Inc., 47 F.T.C. 1350, 1366
(1951) (some of the testimonials and letters recommending encyclopedia
allegedly were not genuine).
The use of fake celebrity endorsements is widespread. A 2018 Better
Business Bureau in-depth investigative study found many celebrity
endorsements are fake.\165\ According to one news report, Ellen
DeGeneres and Sandra Bullock both sued 100 anonymous defendants who
fraudulently used their names in promoting an anti-aging serum and
weight-loss products, and dozens of other celebrities' names have been
misappropriated in similar fashion.\166\
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\165\ See Better Business Bureau, Subscription Traps and
Deceptive Free Trials Scam Millions with Misleading Ads and Fake
Celebrity Endorsements (Dec. 12, 2018), <a href="https://www.bbb.org/article/investigations/18929-subscription-traps-and-deceptive-free-trials-scam-millions-with-misleading-ads-and-fake-celebrity-endorsements">https://www.bbb.org/article/investigations/18929-subscription-traps-and-deceptive-free-trials-scam-millions-with-misleading-ads-and-fake-celebrity-endorsements</a>.
\166\ See Randy Hutchinson, Opinion, Endorsements by stars such
as Ellen DeGeneres and Sandra Bullock might be fake, The Tennessean,
Jan. 8, 2020, <a href="https://www.tennessean.com/story/opinion/2020/01/08/celebrity-endorsement-of-products-could-be/2834860001/">https://www.tennessean.com/story/opinion/2020/01/08/celebrity-endorsement-of-products-could-be/2834860001/</a>.
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The FTC has challenged numerous allegedly false claims that
specific celebrities endorsed certain products, services, or
businesses. See, e.g., Complaint at 22-23, 27-28, 38-39, FTC v. Effen
Ads, LLC, No. 2:19-cv-00945-RJS (D. Utah Nov. 26, 2019); 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
12-13, FTC v. Tachht, Inc., No. 8:16-cv-01397-JDW-AEP (M.D. Fla. June
1, 2016); Complaint at 13-15, 18, FTC v. 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); Complaint at 15-17, FTC
v. Central Coast Nutraceuticals, Inc., No. 10 C 4931 (N.D. Ill. Aug. 5,
2010); The Raymond Lee Org., Inc., 92 F.T.C. 489 (1978) (use of the
names, photographs, and words of public officials, including members of
Congress, allegedly misled consumers that the officials recommended or
endorsed the business). Most recently, FTC staff published a blog post
to warn consumers about scammers using fake Shark Tank celebrity
testimonials and endorsements.\167\
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\167\ See Karen Hobbs, Did your favorite Shark Tank celebrity
really endorse THAT? Probably not, Fed. Trade Comm'n Consumer Blog
(Feb. 17, 2023), <a href="https://consumer.ftc.gov/consumer-alerts/2023/02/did-your-favorite-shark-tank-celebrity-really-endorse-probably-not">https://consumer.ftc.gov/consumer-alerts/2023/02/did-your-favorite-shark-tank-celebrity-really-endorse-probably-not</a>.
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Consumer reviews and testimonials that are not entirely fabricated
can still misrepresent the experiences of the purported reviewers and
testimonialists, and such misrepresentations are prevalent. This
conclusion is reflected in NAIMA's comment, which asserted testimonials
by those misrepresenting their experiences with products are plentiful.
The Commission has challenged many advertisements that allegedly
misrepresented endorsers' experiences. See, e.g., FTC v. Cardiff, 2020
U.S. Dist. LEXIS 210930, at *15-16, 48 (testimonialists had already
lost weight without using the product); Complaint at 14, 18, FTC v.
A.S. Resch., LLC (Synovia), No. 1:19-cv-3423 (testimonialists had
allegedly 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
allegedly did not represent the actual experiences of customers);
Complaint at 22-24, 27, FTC v. Russell T. Dalbey, No. 1:11-cv-01396-
CMA-KLM (D. Colo. May 26, 2011) (testimonials allegedly misrepresented
earnings from brokering promissory notes using defendants' system); FTC
v. Data Med. Capital, Inc., No. SA CV 99-1266 AHS (EEx), 2010 U.S.
Dist. LEXIS 3344, *27 (C.D. Cal. Jan. 15, 2010) (testimonial for one
defendant recycled as a fictitious testimonial for a different
defendant); Complaint at 17, FTC v. Advanced Patch Techs., Inc., No.
104-CV-0670 (N.D. Ga. Mar. 10, 2004) (allegedly testimonialists
attributed their weight loss to simply wearing the Pound A Patch but
were also provided supervised exercise sessions three times per week);
Esrim Ve Sheva Holding Corp., 132 F.T.C. 736, 740 (2001) (testimonial
from respondent allegedly did not represent his actual findings and
experience with the product); Computer Bus. Servs., Inc., 123 F.T.C.
75, 78-79 (1997) (testimonials by purchasers of home-based business
ventures allegedly did not reflect their actual experiences); Twin Star
Prods., Inc., 113 F.T.C. 847, 853-54 (1990) (endorsement allegedly did
not reflect the honest opinions, findings, beliefs, or experience of
the endorser); National Sys. Corp., 93 F.T.C. 58, 63-65 (1979) (some
testimonials were allegedly untrue); Federated Sanitary Corp., 85
F.T.C. 130, 133 (1975) (alleging testimonials represented to be from
salesmen, franchisees, or other distributors of respondents' products
were not made by such individuals, and a substantial number of
purported testimonialists had never dealt with the respondents);
Natpac, Inc., 79 F.T.C. 454, 459 (1971) (testimonial letters were
allegedly prepared by respondents and signed before the purported
authors had received the products and had time to evaluate them); P.
Lorillard Co., 46 F.T.C. 735, 740 (1950) (alleging testimonials did not
present or reflect the actual personal experiences, knowledge, or
beliefs of the signers; some testimonialists did not smoke Old Gold
cigarettes or any cigarettes; many testimonials were prewritten by
respondent's representatives; and many were known by the respondent to
be false); R.J. Reynolds Tobacco Co., 46 F.T.C. 706, 731-32 (1950)
(endorsements communicated that endorsers exclusively smoked Camel
cigarettes when they did not smoke cigarettes, did not smoke Camels
exclusively, or could not tell the difference between Camels and other
cigarettes).
Accordingly, based on the foregoing evidence, the Commission
concludes fake consumer reviews and testimonials, as well as reviews
and testimonials that otherwise misrepresent the experiences of the
reviewers and testimonialists, are prevalent.
B. Consumer Review or Testimonial Reuse or Repurposing
One type of review deception known as ``review hijacking'' or
``review reuse fraud'' appears to primarily or solely affect online
marketplaces with third-party sellers, such as <a href="http://Amazon.com">Amazon.com</a>. Vendors and
third-party sellers on Amazon's platform can make their own
modifications to product pages, or request Amazon's assistance to do
so, using features referred to as ``product merging'' and ``product
variation.'' Products that are substantially similar and that differ
only in narrow, specific ways--such as color, size, or quantity--but
that do not alter the core essence of the item, such as a shirt that
comes in multiple colors and different sizes, may share a variation
relationship. Products in a variation relationship share the same
product detail page. Each product will appear as an alternative on the
product detail page, and, when a shopper selects a different product in
the variation relationship, the content of the product detail page,
such as the pictured product, may change. The variation relationship
enables buyers to compare and choose among product attributes from a
single product detail
[[Page 49374]]
page, thereby facilitating customer choice and ease of shopping.
Some vendors and sellers abuse these features by repurposing a
listing page for a product that has positive reviews (e.g., a shower
caddy or a jar of honey) and using it to sell a completely unrelated
product (e.g., a phone charger or a neck brace), thus inflating the
star rating for the latter--and going unnoticed unless consumers read
the individual reviews closely. By repurposing the page, the review
hijacker is implicitly misrepresenting the repurposed reviews are for
the second product and the product has more ratings and reviews than it
does. The review hijacker may also be misrepresenting that the second
product has a higher average star rating or that it has earned ``Best
Seller'' or ``Amazon's Choice'' badges. These claims are unquestionably
deceptive and of no redeeming value to legitimate marketers.
This problem has persisted since at least 2018 and is prevalent as
reflected in reporting by Consumer Reports, The Verge, Buzzfeed News,
and others.\168\ The reporting provides many examples of review
hijacking found on <a href="http://Amazon.com">Amazon.com</a> across multiple product categories. The
author of the Consumer Reports article stated that experts believe it
is an ``acute problem'' and some legitimate <a href="http://Amazon.com">Amazon.com</a> sellers are
overwhelmed with fighting it. The Verge article calls it a ``common
tactic'' and quotes a former Amazon employee as saying ``the problem is
way bigger than people realize.'' \169\
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\168\ See, e.g., Sara Spary, ``Top-rated Amazon headphones
boosted by `fake reviews' for toys, mugs and umbrellas,'' WHICH?,
Apr. 7, 2022, <a href="https://www.which.co.uk/news/2022/04/top-rated-amazon-headphones-boosted-by-fake-reviews-for-toys-mugs-and-umbrellas/">https://www.which.co.uk/news/2022/04/top-rated-amazon-headphones-boosted-by-fake-reviews-for-toys-mugs-and-umbrellas/</a>;
Timothy B. Lee, ``Amazon still hasn't fixed its problem with bait-
and-switch reviews,'' ARS Technica, Dec. 20, 2020, <a href="https://arstechnica.com/tech-policy/2020/12/amazon-still-hasnt-fixed-its-problem-with-bait-and-switch-reviews/">https://arstechnica.com/tech-policy/2020/12/amazon-still-hasnt-fixed-its-problem-with-bait-and-switch-reviews/</a>; Jon Keegan, ``Is This Amazon
Review Bullshit?,'' The Markup, July 21, 2020, <a href="https://themarkup.org/ask-the-markup/2020/07/21/how-to-spot-fake-amazon-product-reviews">https://themarkup.org/ask-the-markup/2020/07/21/how-to-spot-fake-amazon-product-reviews</a>; Josh Dzieza, ``Even Amazon's own products are
getting hijacked by imposter sellers,'' The Verge, Aug. 29, 2019,
<a href="https://www.theverge.com/2019/8/29/20837359/amazon-basics-fake-sellers-imposters-third-party-marketplace">https://www.theverge.com/2019/8/29/20837359/amazon-basics-fake-sellers-imposters-third-party-marketplace</a>; Jake Swearingen,
``Hijacked Reviews on Amazon Can Trick Shoppers,'' Consumer Rep.,
Aug. 26, 2019, <a href="https://www.consumerreports.org/customer-reviews-ratings/hijacked-reviews-on-amazon-can-trick-shoppers/">https://www.consumerreports.org/customer-reviews-ratings/hijacked-reviews-on-amazon-can-trick-shoppers/</a>; Nicole
Nguyen, ``Here's Another Kind Of Review Fraud Happening On Amazon,''
Buzzfeed News, May 29, 2018, <a href="https://www.buzzfeednews.com/article/nicolenguyen/amazon-review-reuse-fraud">https://www.buzzfeednews.com/article/nicolenguyen/amazon-review-reuse-fraud</a>.
\169\ See Dzieza, ``Even Amazon's own products are getting
hijacked by imposter sellers,'' supra note 168.
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The Commission recently brought its first case involving this type
of review deception, suing a large vendor that boosted its newly
launched products on <a href="http://Amazon.com">Amazon.com</a>. The vendor allegedly had Amazon
establish variation relationships between the newer products and
successful, established products that had more ratings and reviews,
high average ratings, or ``Amazon's Choice'' or ``#1 Best Seller''
badges. See Complaint at 1-6, The Bountiful Co., No. C-4791 (Apr. 10,
2023).
Accordingly, based on the foregoing evidence, the Commission
concludes that the unfair or deceptive reuse or repurposing of consumer
reviews is prevalent.
C. Buying Positive or Negative Consumer Reviews
It is common for sellers or their agents to give incentives in
exchange for reviews with the incentives conditioned on the sentiment
of the reviews. In the review markets discussed in the comments and
described above, prospective reviewers are offered free merchandise or
money in exchange for 5-star reviews. Social media groups for procuring
misleading reviews are prevalent. The UC Davis researchers found
242,000 products for which Amazon sellers solicited incentivized five-
star <a href="http://Amazon.com">Amazon.com</a> reviews.\170\ In addition, the comment from the small
business employee said that a competitor of the company for which she
worked is providing incentives for 5-star reviews.\171\ In another
academic study, UCLA researchers analyzed these review markets and
resulting reviews on <a href="http://Amazon.com">Amazon.com</a> and found the market for fake reviews
is large and the practice of buying and selling reviews is
widespread.\172\
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\170\ Oak & Shafiq Cmt. at 3-4.
\171\ Provencal Cmt. at 1.
\172\ He et al., ``The Market for Fake Reviews,'' supra note
158.
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The Commission has brought cases in which a marketer allegedly
provided an incentive for a review or endorsement that was required to
be positive. See, e.g., Complaint at 14, 19-20, FTC v. A.S. Resch., LLC
(Synovia), No. 1:19-cv-3423 (allegedly offered consumer endorsers free
product in exchange for ``especially positive and inspiring'' reviews);
Complaint at 5-6, 8, Urthbox, Inc., No. C-4676 (Apr. 3, 2019)
(allegedly 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) (allegedly past
customers were regularly 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 told that they should ``be creative and try to
make your review stand out for viewers to read!'').
Such conduct has also been challenged in private actions. See,
e.g., Marksman Sec. Corp. v. P.G. Sec., 2021 U.S. Dist. LEXIS 196580,
at *4 (denying plaintiff's motion for default and granting in part its
motion for summary judgment in which it was undisputed that defendants
paid for positive Google reviews).
Regulators in Australia, Denmark, and the United Kingdom, as well
as the OECD, have issued guidelines or business guidance indicating
companies should not provide incentives for giving positive
reviews.\173\ While it may lend some additional support to the
conclusion that the acts or practices are prevalent, the Commission is
not concluding that the conduct is prevalent on the basis that other
countries have taken actions.
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\173\ Australian Competition & Consumer Commission, Online
product and service reviews, <a href="https://www.accc.gov.au/business/advertising-and-promotions/online-product-and-service-reviews">https://www.accc.gov.au/business/advertising-and-promotions/online-product-and-service-reviews</a>;
Danish Consumer Ombudsman, Guidelines on publication of user reviews
(2015), <a href="https://www.forbrugerombudsmanden.dk/media/49717/guidelines.pdf">https://www.forbrugerombudsmanden.dk/media/49717/guidelines.pdf</a>; United Kingdom Competition and Markets Authority,
Online reviews and endorsements (2015), <a href="https://www.gov.uk/government/consultations/online-reviews-and-endorsements">https://www.gov.uk/government/consultations/online-reviews-and-endorsements</a>; OECD, Good
Practice Guide on Online Consumer Ratings and Reviews (2019),
<a href="https://www.oecd-ilibrary.org/science-and-technology/good-practice-guide-on-online-consumer-ratings-and-reviews_0f9362cf-en">https://www.oecd-ilibrary.org/science-and-technology/good-practice-guide-on-online-consumer-ratings-and-reviews_0f9362cf-en</a>.
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Accordingly, based on the foregoing evidence, the Commission
concludes the giving of incentives for reviews conditioned on the
sentiment of the reviews is prevalent.
D. Insider Consumer Reviews and Testimonials
It is quite common for a company's owners, officers, managers,
executives, employees, agents, or their relatives, to write consumer
reviews or testimonials of its products or services.
According to Trustpilot, in 2021, more than 8,000 reviews for U.S.
businesses were written by their owners, officers, or employees, or
their family members.\174\ In addition, an individual commenter
complained of having relied upon misleading reviews written by a
business's employees or their spouses before selecting an auto repair
shop.\175\
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\174\ Trustpilot Cmt. at 7.
\175\ Monday Cmt. at 1.
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The Commission has challenged numerous instances of deceptive
[[Page 49375]]
reviews allegedly written by company insiders. See, e.g., Complaint at
21, 26-27, United States v. Vision Path, Inc., No. 1:22-cv-00176
(D.D.C. Jan. 25, 2022) (allegedly an executive of the company wrote a
review on a third-party site and the co-CEO posted a public response
thanking the reviewer); Complaint at 2-4, Sunday Riley Modern Skincare,
LLC, No. C-4729 (Nov. 6, 2020) (company owner and managers allegedly
asked company employees to write product reviews on third-party
retailer's website); Creaxion Corp., 167 F.T.C. 71, 78-79 (2019)
(company allegedly conducted program that reimbursed individuals,
including the CEO and other company employees, for purchasing its
product and posting online reviews); Complaint at 5-6, 8-9, Mikey &
Momo, Inc., No. C-4655 (May 3, 2018) (<a href="http://Amazon.com">Amazon.com</a> reviews allegedly
written by company officer and her relatives); 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 allegedly written 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 allegedly written by
managers); Complaint at 10, United States v. Spokeo, Inc., No. 2:12-cv-
05001-MMM-SH (C.D. Cal. June 7, 2012) (allegedly defendant directed its
employees to draft and post comments endorsing its products on news and
technology websites; and comments were reviewed and edited by managers
and then posted using account names provided by defendant); Reverb
Commc'ns, Inc., 150 F.T.C. 782, 783-84 (2010) (owner of public
relations agency, her managers, and employees allegedly wrote iTunes
store reviews for clients' games).
At least one State Attorney General has challenged alleged insider
reviews. See Complaint at 15, State v. US Air Ducts & Sky Builders,
Inc., No. 19-2-24757-6-SEA (Wash. Sup. Ct. Kings Cnty., Sept. 20, 2019)
(Google reviews allegedly written by employees, relatives of employees,
and the business owner).
The Commission has also challenged testimonials allegedly written
by insiders in numerous instances. See, e.g., Complaint at 15, 19-20,
FTC v. Health Ctr., Inc., No. 2:20-cv-00547 (D. Nev. Mar. 19, 2020)
(defendants allegedly 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 (D. Colo. 2019) (ads
allegedly included a testimonial by a 50 percent owner and officer);
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 allegedly from
licensees or franchisees, their relatives, or their employees); Deutsch
LA, Inc., 159 F.T.C. 1163, 1168-69 (2015) (public relations firm
allegedly asked employees to tweet about client's product); Complaint
at 19, 21, FTC v. Genesis Today, Inc., No. 1:15-cv-00062 (W.D. Tex.
Jan. 26, 2015) (allegedly defendants' promotional materials linked to
video testimonials by purported users of their weight-loss products
that were provided by their employees); Complaint at 17, FTC v.
Advanced Patch Techs., Inc., No. 104-CV-0670 (N.D. Ga. Mar. 10, 2004)
(shopping mall segment of infomercial with testimonials from ``real
people'' allegedly included at least one employee of the defendants or
their agents); Brake Guard Prods., Inc., 125 F.T.C. 138, 191 (1998)
(published testimonial was allegedly from a dealer/distributor of the
product); Gisela Flick, 116 F.T.C. 1108, 113-14 (1993) (alleged
infomercial endorsement by company's Athletic Director); Cliffdale
Assocs., Inc., 103 F.T.C. 110, 144-45, 172 (1984) (testimonials were
allegedly by business associates or relatives).
Accordingly, based on the foregoing evidence, the Commission
concludes the use of consumer reviews and testimonials written by
company insiders--that is, consumer reviews and testimonials written by
a company's owners, officers, managers, executives, employees, agents,
or their relatives--is prevalent.
E. Company-Controlled Review Websites or Entities
Numerous businesses have set up purportedly independent websites,
organizations, or entities that review or endorse their own products.
In numerous cases, the Commission has challenged sellers who
allegedly misrepresented that the websites they controlled provided
independent opinions of products. See, e.g., Complaint at 2, 8-9, Son
Le, No. C-4619 (May 31, 2020) (respondents allegedly operated
purportedly independent websites that reviewed their own trampolines);
FTC v. Roca Labs, Inc., 345 F. Supp. 3d 1375, 1389-90 (M.D. Fla. 2018)
(defendants operated a purportedly independent, objective website that
endorsed defendants' products); Complaint at 21-25, 28, FTC v.
NourishLife, LLC, No. 1:15-cv-00093 (N.D. Ill. Jan. 7, 2015)
(defendants allegedly operated a purportedly independent, scientific
research website that endorsed a supplement sold only by defendants).
The Commission has also challenged sellers who allegedly created
purportedly independent organizations or entities that supposedly
reviewed or approved their products or services. See, e.g., Complaint
at 3-5, Bollman Hat Co., No. C-4643 (Jan. 23, 2018) (respondents
allegedly created a U.S.-origin seal misrepresenting that an
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) (alleged 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 represented its
baby mattresses had been certified by Green Safety Shield and failed to
disclose the shield was its own designation); Complaint at 4-6,
Benjamin Moore & Co., Inc., No. C-4646 (July 11, 2017) (respondent
allegedly used a ``Green Promise'' 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 allegedly misrepresented that seal-
providing association was an independent, third-party certifier when it
created and controlled that association); Nonprofit Mgmt. LLC, 151
F.T.C. 144, 148-49 (2011) (respondents allegedly misrepresented their
seal program was endorsed by two independent associations when
respondents 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 allegedly established the Council on Natural Nutrition and
then misrepresented it was an independent organization of experts who
had endorsed defendants' products); Nat'l Media Corp., 116 F.T.C. 549,
559-60 (1993) (respondents allegedly claimed the National Association
of Advertising Producers was an existing, independent organization that
evaluates commercials for their integrity and excellence); Revco, D.S.,
Inc., 67 F.T.C. 1158, 1163, 1208-18, 1250-51 (1965) (respondents
allegedly created and controlled Consumer Protective Institute and gave
their products its seal of approval).
Accordingly, based on the foregoing evidence, the Commission
concludes the practice of marketers setting up
[[Page 49376]]
purportedly independent websites, organizations, or entities to review
or endorse their own products is prevalent.
F. Review Suppression
The ANPR addressed two types of review suppression. One type
involves a seller's website representing that the consumer reviews
displayed represent most or all of the reviews submitted when, in fact,
reviews are being suppressed based upon their negativity. Trustpilot
commented that it was aware of the suppression of negative reviews on
retailer or business websites.\176\
---------------------------------------------------------------------------
\176\ Trustpilot Cmt. at 8.
---------------------------------------------------------------------------
In a recent case, the Commission alleged a retailer suppressed
hundreds of thousands of 1-, 2-, and 3-star reviews submitted to its
website. See Complaint at 1-2, Fashion Nova, LLC, No. C-4759 (Mar. 18,
2022). Staff also publicly addressed this issue in a 2020 closing
letter to Yotpo, the company that provided review management services
to Fashion Nova and numerous other merchants.\177\ FTC staff's
investigation of Yotpo revealed more than 4,500 Yotpo merchant clients
were only automatically publishing 4- or 5-star reviews. Of the 1-star
reviews submitted to merchants not automatically publishing 1-star
reviews, just 21 percent were published; and of the 2-star reviews
submitted to merchants not automatically publishing 2-star reviews,
just 31 percent were published. After FTC staff began investigating
Yotpo, it implemented clear and prominent guidance to its clients on
their need to promptly post reviews, including negative reviews, and
began to automatically post negative reviews that have not been
promptly reviewed and acted upon by its clients.\178\
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\177\ See <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>.
\178\ See id.
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Foreign consumer protection entities have brought several actions
involving companies that prevented the publication of negative reviews.
An online health-care booking service in Australia, which published
patient reviews, admitted it did not publish approximately 17,000
reviews and edited another 3,000 reviews either to remove negative
aspects or to embellish positive aspects.\179\ An Australian court
found a home building company held back bad reviews from its review
websites to give a more favorable impression of its services.\180\ A
New Zealand holiday home rental website pleaded guilty and was fined
for removing negative comments about rental properties and its
maintenance and management of them, and not publishing any reviews that
gave a rating below 3.5 stars.\181\ The United Kingdom's Competition
and Markets Authority secured an undertaking from an online knitwear
retailer that did not publish all genuine, relevant, and lawful reviews
submitted by its customers.\182\ The problem is sufficiently prevalent
that an EU Directive prohibits ``publishing only positive reviews and
deleting the negative ones.'' \183\ These foreign actions lend
additional support to the conclusion that the conduct is prevalent, but
the Commission is not determining prevalence based upon such actions.
---------------------------------------------------------------------------
\179\ See ``HealthEngine to pay $2.9 million for misleading
reviews and patient referrals,'' Australian Competition & Consumer
Commission, Aug. 20, 2020, <a href="https://www.accc.gov.au/media-release/healthengine-to-pay-29-million-for-misleading-reviews-and-patient-referrals">https://www.accc.gov.au/media-release/healthengine-to-pay-29-million-for-misleading-reviews-and-patient-referrals</a>.
\180\ See ``Aveling Homes ordered to pay penalties of $380,000
for misleading review websites,'' Australian Competition & Consumer
Commission, Nov. 30, 2017, <a href="https://www.accc.gov.au/media-release/aveling-homes-ordered-to-pay-penalties-of-380000-for-misleading-review-websites">https://www.accc.gov.au/media-release/aveling-homes-ordered-to-pay-penalties-of-380000-for-misleading-review-websites</a>.
\181\ See ``Bachcare fined for removing negative comments in
online reviews,'' RNZ, Dec. 20, 2019, <a href="https://www.rnz.co.nz/news/national/405929/bachcare-fined-for-removing-negative-comments-in-online-reviews">https://www.rnz.co.nz/news/national/405929/bachcare-fined-for-removing-negative-comments-in-online-reviews</a>.
\182\ See ``Retailer hosting reviews on its website: improvement
of practices,'' Competition and Markets Authority, Aug. 11, 2016,
<a href="https://www.gov.uk/cma-cases/retailer-hosting-reviews-on-its-website-improvement-of-practices">https://www.gov.uk/cma-cases/retailer-hosting-reviews-on-its-website-improvement-of-practices</a>.
\183\ See Directive (EU) 2019/2161 of the European Parliament
and of the Council, Nov. 27, 2019, <a href="https://eur-lex.europa.eu/eli/dir/2019/2161/oj">https://eur-lex.europa.eu/eli/dir/2019/2161/oj</a>.
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The other type of review suppression addressed in the ANPR is
suppression by unjustified legal threat or physical threat. The
comments in response to the ANPR support a determination that such
review suppression is prevalent. Yelp said it ``constantly confronts''
the use of ``abusive and questionable or unjustified legal threats'' to
suppress reviews.\184\ Trustpilot has seen cases, mostly outside of the
United States, where businesses have threatened consumers if they do
not delete negative reviews.\185\ A comment from Ubiquitous Advising
described a company in its local area that is constantly threatening
and bullying reviewers in order to suppress bad reviews.\186\ The
Transparency Company said every year thousands of lawyers are hired to
intimidate the authors of negative reviews.\187\
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\184\ Yelp Cmt. at 11.
\185\ Trustpilot Cmt. at 9.
\186\ Ubiquitous Advising Cmt. at 1.
\187\ Transparency Company Cmt. at 16.
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In a case against Roca Labs, Inc., the Commission successfully
challenged as unfair the defendants' threats to enforce--and their
actual enforcement of--non-disparagement clauses in form contracts that
were intended to suppress customers' negative reviews.\188\ A
subsequent FTC case against World Patent Marketing challenged alleged
review suppression through physical intimidation as unfair.\189\
According to the Commission's complaint, the defendants in that matter
``cultivate[d] a threatening atmosphere through emails to would-be
complainants.'' \190\ For example, they distributed, through an email
to all of their then-existing customers, a blog post discussing an
incident that purportedly occurred in their offices: A consumer that
allegedly wanted to speak with them about an invention idea was
stopped, detained, and expelled by their ``intimidating security team,
all ex-Israeli Special Ops and trained in Krav Maga, one of the most
deadly of the martial arts.'' \191\ The post continued: ``The World
Patent Marketing Security Team are the kind of guys who are trained to
knockout first and ask questions later.''
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\188\ See FTC v. Roca Labs, Inc., 345 F. Supp. 3d at 1393-96.
\189\ See Complaint at 8-10, 12, FTC v. World Patent Mktg.,
Inc., No. 1:17-cv-20848-DPG (S.D. Fla. Mar. 6, 2017).
\190\ Id. at 9.
\191\ Id.
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State Attorneys General have also challenged the alleged use of
unjustified legal threats in attempts to have consumers remove negative
reviews. See, e.g., Complaint at 12-14, Maine v. Liberty Bell Moving &
Storage, Inc., 2:2022cv00204 (D. Me. July 8, 2022); Complaint at 4,
Washington v. Alderwood Surgical Ctr., LLC.
A State Attorney General challenged the alleged suppression of
negative reviews through intimidation, albeit not physical
intimidation, and false accusations. Complaint at 5-7 and Appendices A-
C, State v. Mechs. Heating & Air Conditioning, LLC (alleged publishing
or threatening to publish the names, home addresses, telephone numbers,
email addresses, and photographs of consumers who wrote negative
reviews, together with accusations that the consumers engaged in
illegal or unethical activities or otherwise maligning their
character).
Accordingly, based on the foregoing evidence, the Commission
concludes the types of review suppression discussed above are
prevalent.
G. Indicators of Social Media Influence
In order to sell or market themselves or their products or
services, some individuals and businesses misrepresent their social
media influence by buying fake followers, fake subscribers, fake
[[Page 49377]]
views, and other similar inauthentic indicators of such influence.
The Commission addressed the alleged sale and use of such fake and
inauthentic indicators in complaint against Devumi, LLC.\192\ In that
matter, the Commission alleged that, by selling and distributing these
indicators to users of various social media platforms, the defendants
enabled the purchasers to ``exaggerate and misrepresent their social
media influence,'' thereby providing the means and instrumentalities
for the purchasers to engage in deception.\193\ For example, the
defendants allegedly sold fake Twitter followers to actors, athletes,
musicians, writers, and other individuals who wanted to increase their
appeal as influencers and to motivational speakers, law firm partners,
investment professionals, experts, and other individuals who wanted to
boost their credibility to potential clients for their services.\194\
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\192\ See Complaint at 5, FTC v. Devumi, LLC, No. 9:19-cv-81419-
RKA (S.D. Fla. Oct. 18, 2019).
\193\ Id. at 5.
\194\ Id. at 3-4.
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At least one State Attorney General has brought a case challenging
the alleged misuse of fake indicators of social media influence for
commercial purposes. In December 2022, the Washington State Attorney
General filed suit against a plastic surgery provider accused of buying
tens of thousands of fake ``followers'' on Instagram and thousands of
fake ``likes'' on Instagram and other social media to create a false
appearance of popularity in its advertising to consumers.\195\
---------------------------------------------------------------------------
\195\ Complaint at 4, Washington v. Alderwood Surgical Ctr.,
LLC.
---------------------------------------------------------------------------
Platforms have also sued the sellers of fake indicators of social
media influence. In April 2019, Facebook, Inc., and Instagram LLC sued
the operators of websites offering fake engagement services.\196\ The
operators allegedly used a network of computers or ``bots'' and
Instagram accounts to provide fake ``likes,'' ``views,'' and
``followers'' to their customers' Instagram accounts.\197\
---------------------------------------------------------------------------
\196\ Complaint at 1, 5-9, Facebook, Inc. v. Arend Nollen, No.
3:19-cv-02262 (N.D. Cal. Apr. 25, 2019).
\197\ Id. at 8-9.
---------------------------------------------------------------------------
Both the FTC and an independent organization have analyzed bots,
inauthentic social media accounts, and fake followers. In July 2020,
the Commission issued a report to Congress, titled ``Social Media Bots
and Deceptive Advertising.'' \198\ The report stated social media
companies have reported removing or disabling billions of inauthentic
accounts, the online advertising industry has taken steps to curb bot
and influencer fraud, and the computing community is designing
sophisticated social bot detection methods, but nonetheless, use of
social media bots remains a serious issue.\199\ A 2023 report by the
NATO Strategic Communications Centre of Excellence, which analyzed the
market for inauthentic social media accounts and fake followers for
several years, found it is as fast and cheap to buy them now as several
years ago, and the platforms' ability to detect and remove them is
declining overall.\200\ Citing TikTok's own reports that it had removed
1.4 billion fake followers in the second quarter of 2022, the
researchers stated the total number of fake followers on that platform
during that period was likely much higher, given their experiments
found only five percent of all purchased fake engagement was identified
and removed in a four-week period. Further, in a 2022 study,
researchers found that fake views of YouTube videos are widespread, and
that the platform does not correct them quickly.\201\
---------------------------------------------------------------------------
\198\ See Social Media Bots and Deceptive Advertising: Federal
Trade Commission Report to Congress, <a href="https://www.ftc.gov/system/files/documents/reports/social-media-bots-advertising-ftc-report-congress/socialmediabotsreport.pdf">https://www.ftc.gov/system/files/documents/reports/social-media-bots-advertising-ftc-report-congress/socialmediabotsreport.pdf</a>.
\199\ Id. at 5.
\200\ See NATO Strategic Communications Centre of Excellence,
``Social Media Manipulation 2022/2023: Assessing the Ability of
Social Media Companies to Combat Platform Manipulation,'' January
2023, <a href="https://stratcomcoe.org/publications/social-media-manipulation-20222023-assessing-the-ability-of-social-media-companies-to-combat-platform-manipulation/272">https://stratcomcoe.org/publications/social-media-manipulation-20222023-assessing-the-ability-of-social-media-companies-to-combat-platform-manipulation/272</a>. See also Johan
Lindquist and Esther Weltevrede, ``Negotiating Authenticity in the
Market for Fake Followers on Social Media,'' Social Science Research
Council, Oct. 5, 2021 (describing ability of manipulation services
to evade platform detection), <a href="https://items.ssrc.org/beyond-disinformation/negotiating-authenticity-in-the-market-for-fake-followers-on-social-media/">https://items.ssrc.org/beyond-disinformation/negotiating-authenticity-in-the-market-for-fake-followers-on-social-media/</a>; Joseph Cox, ``All of My TikTok Followers
Are Fake,'' Vice Motherboard, Aug. 13, 2020 (describing the speed
and ease of buying fake followers in bulk), <a href="https://www.vice.com/en/article/z3e8na/get-buy-tiktok-followers-likes-views-cheap-easy">https://www.vice.com/en/article/z3e8na/get-buy-tiktok-followers-likes-views-cheap-easy</a>.
\201\ See Maria Castaldo et al., ``Doing data science with
platforms crumbs: an investigation into fakes views on YouTube,''
Sep. 28, 2022, <a href="https://doi.org/10.48550/arXiv.2210.01096">https://doi.org/10.48550/arXiv.2210.01096</a>.
---------------------------------------------------------------------------
Accordingly, based on the foregoing evidence, the Commission
concludes the sale and misuse of fake indicators of social media
influence for commercial purposes is prevalent.
IV. Reasons for the Proposed Rule on the Use of Consumer Reviews and
Testimonials
The Commission believes the proposed Rule will substantially
improve its ability to combat certain specified, clearly unfair or
deceptive acts or practices involving consumer reviews or testimonials.
Although such practices are already unlawful under Section 5 of the FTC
Act, which prohibits unfair or deceptive acts or practices, the
proposed Rule may increase deterrence against these practices in the
first instance and will allow the Commission to seek civil penalties
against the violators and more readily obtain monetary redress for
their victims. As discussed below, the proposed Rule would accomplish
these goals without significantly burdening honest businesses and
provide benefits to consumers and honest competitors.
The Commission's objective in commencing this rulemaking is to
deter certain clearly unfair or deceptive acts or practices involving
consumer reviews or testimonials, and expand the remedies available to
it in instances where such practices are uncovered. A recent U.S.
Supreme Court decision,\202\ which overturned 40 years of precedent
from the U.S. Circuit Courts of Appeal uniformly holding that the
Commission could take action under Section 13(b) of the FTC Act, 15
U.S.C. 53(b), to return money unlawfully taken from consumers through
unfair or deceptive acts or practices, has made it significantly more
difficult for the Commission to return money to injured consumers.\203\
Without Section 13(b) as it had historically been understood, the only
method the Commission has to return money unlawfully taken from
consumers is Section 19 of the FTC Act, 15 U.S.C. 57b, which provides
two paths for consumer redress. The longer path, under Section
19(a)(2), requires the Commission to first issue a final cease-and-
desist order--including any resulting appeal. Then, to recover money
for consumers, the Commission must prove separately in Federal court
that the violator engaged in fraudulent or dishonest conduct.\204\ The
shorter path to monetary relief is under Section 19(a)(1), which allows
the Commission to recover redress directly through a Federal court
action and is available only when the Commission alleges violation of a
rule.\205\ None of the Commission's cases challenging deceptive
consumer reviews or testimonials has involved other misconduct for
which the Commission
[[Page 49378]]
sought civil penalties under any of the rules it enforces.
---------------------------------------------------------------------------
\202\ See AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1352
(2021).
\203\ See ANPR, 87 FR at 67425 & n.1 (discussing AMG Cap.
Mgmt.).
\204\ See 15 U.S.C. 57b(a)(2) (``If the Commission satisfies the
court that the act or practice to which the cease-and-desist order
relates is one which a reasonable man would have known under the
circumstances was dishonest or fraudulent, the court may grant
relief.'').
\205\ Compare 15 U.S.C. 57b(a)(1) (rule violations), with id.
57b(a)(2) (Section 5 violations).
---------------------------------------------------------------------------
In addition, the longer path to redress under Section 19(a)(2)
provides relief only to redress consumer injury, which may be difficult
to quantify in certain circumstances. By contrast, with a rule
violation, the shorter path to redress under Section 19(a)(1) also
gives the Commission the ability to obtain civil penalties, which
punish the wrongdoer, provide general and specific deterrence, and do
not require quantifiable proof of consumer injury.
Outlawing egregious review and testimonial practices by rule
expands the Commission's enforcement toolkit and allows it to deliver
on its mission by stopping and deterring harmful conduct and, in some
cases, making American consumers whole when they have been wronged.
Because fake reviews and the other unfair or deceptive review and
testimonial practices described here are so prevalent and so harmful,
the unlocking of additional remedies through this rulemaking,
particularly the ability to seek civil penalties against violators and
obtain redress for consumers or others injured by the conduct, will
allow the Commission to more effectively police harmful review and
testimonial practices that plague consumers and honest businesses.
V. Overview and Scope of Proposed Rule on the Use of Consumer Reviews
and Testimonials
A. Key Definitions
Proposed Sec. 465.1 would provide definitions for 12 terms as they
appear in proposed 16 CFR part 465, including, among others,
definitions for the terms ``consumer reviews,'' ``consumer
testimonials,'' and ``celebrity testimonials.''
The term ``consumer review'' is defined in proposed Sec. 465.1(d)
as a consumer's evaluation, or a purported consumer's evaluation, of a
product, service, or business that is submitted by the consumer, or
purported consumer, and that is published to a website or platform
dedicated in whole or in part to receiving and displaying such reviews.
The definition states that consumer reviews include consumer ratings,
regardless of whether they include any text or narrative.
The definition includes ``purported consumers'' so that it covers
reviews by authors who do not exist. It does not include all consumer
evaluations of products or services, such as a blog post or other
social media post evaluating a product; it is limited to those
submitted to a website or platform or portion thereof dedicated to such
reviews. Such websites and platforms would include, among other things,
third-party review platforms and advertiser and retailer websites that
collect and display consumer reviews. A consumer review submitted and
published to one website that is republished on a second website is
still a consumer review as republished. A consumer review is not
necessarily advertising.
The term ``consumer testimonial'' is defined in proposed Sec.
465.1(e) as an advertising or promotional message that consumers are
likely to believe reflects the opinions, beliefs, or experiences of a
consumer who has purchased, used, or otherwise had experience with a
product, service, or business.\206\ Proposed Sec. 465.1(b) provides a
corresponding definition of the term ``celebrity testimonial.'' It
defines the term ``celebrity testimonial'' as an advertising or
promotional message that consumers are likely to believe reflects the
opinions, beliefs, or experiences of a well-known person who purchased,
used, or otherwise had experience with a product, service, or business.
---------------------------------------------------------------------------
\206\ The definition of a consumer testimonial is based upon the
definition of an ``endorsement'' in the Commission's Guides
Concerning the Use of Endorsements and Testimonials in Advertising.
See Guides Concerning the Use of Endorsements and Testimonials in
Advertising, 16 CFR 255.0(b).
---------------------------------------------------------------------------
B. Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity
Testimonials
Proposed Sec. 465.2 would prohibit certain types of deceptive
conduct involving ``consumer reviews,'' ``consumer testimonials,'' and
``celebrity testimonials.''
Proposed Sec. 465.2(a) would prohibit a business from writing,
creating, or selling a consumer review, consumer testimonial, or
celebrity testimonial that: (a) is by someone who does not exist; (b)
is by someone who did not use or otherwise have experience with the
product, service, or business that is the subject of the review or
testimonial; or (c) materially misrepresents the reviewer's or
testimonialist's experience with the product, service, or business.
Proposed Sec. 465.2(b) would render it a deceptive act or practice
for a business to purchase consumer reviews, or disseminate or cause
the dissemination of consumer or celebrity testimonials, about the
business or one of its products or services, if the business knew or
should have known that the review or testimonial: (a) was by someone
who does not exist, (b) is by someone who did not use or otherwise have
experience with the product, service, or business, or (c) materially
misrepresents the reviewer's or testimonialist's experience with the
product, service, or business. In accordance with proposed Sec.
465.1(h), ``purchase a consumer review'' means to provide something of
value, such as money, goods, or another review, in exchange for a
consumer review.
Proposed Sec. 465.2(c) would make it a deceptive act or practice
for a business to procure consumer reviews about the business or one of
its products or services for posting on a third-party platform or
website, if the business knew or should have known that the review: (a)
was by someone who does not exist, (b) is by someone who did not use or
otherwise have experience with the product, service, or business, or
(c) materially misrepresents the reviewer's experience with the
product, service, or business.
Google's comment said a proposed rulemaking should not apply to
review platforms.\207\ Proposed Sec. 465.2 accounts for this concern.
The provision does not apply to businesses, like third-party review
platforms, that disseminate consumer reviews that are not of their
products, services, or businesses. Neither does it apply to any reviews
that a platform simply publishes and that it did not purchase.
---------------------------------------------------------------------------
\207\ Google Cmt. at 9.
---------------------------------------------------------------------------
NRF opposed requiring the manual review of every consumer review
and poster's profile.\208\ Proposed Sec. 465.2 accounts for this
concern by not imposing any obligation on those publishing consumer
reviews to manually review consumer reviews or poster profiles and by
not applying to reviews that a platform simply publishes.
---------------------------------------------------------------------------
\208\ NRF Cmt. at 6.
---------------------------------------------------------------------------
Trustpilot asserted any rule should consider a consumer review to
be legitimate if the consumer had experience with the business, even if
no purchase was made, and NRF's comment opposed requiring retailers to
restrict consumer reviews to verified purchasers.\209\ In light of
these concerns, proposed Sec. 465.2 does not limit legitimate reviews
to reviews by purchasers or verified purchasers. It requires only that
the reviewer had experience with the product, service, or business.
---------------------------------------------------------------------------
\209\ Trustpilot Cmt. at 3-4; NRF Cmt. at 6.
---------------------------------------------------------------------------
NRF also recommended any rule provision addressing fake reviews be
limited to review brokers and not apply to the parties purchasing the
reviews.\210\ It said that buyers of fake reviews should not be covered
by a rule because the Commission can already bring a
[[Page 49379]]
``formal enforcement action seeking monetary damages,'' and it was not
opposed to Commission action against such purchasers.\211\ The
Commission believes a rule should indeed apply to those who knowingly
purchase fake reviews given that they are no less culpable for
deceiving consumers than the brokers. The Commission's ability to seek
monetary relief without a rule applies to both brokers and buyers, and
it does not obviate the need for a rule because, as discussed above,
seeking such relief is much more difficult without a rule.
---------------------------------------------------------------------------
\210\ NRF Cmt. at 1, 7.
\211\ Id. at 6.
---------------------------------------------------------------------------
C. Consumer Review Repurposing
Proposed Sec. 465.3 would prohibit a business from using or
repurposing, or causing the use or repurposing of, a consumer review
written or created for one product so it appears to have been written
or created for a substantially different product. This could consist of
combining substantially different products so that they share consumer
reviews or changing a product page so it features a different product
but retains the reviews of the prior product, or copying reviews of
other products from other sites. The term ``substantially different
product'' is defined in proposed Sec. 465.1(j), which establishes that
the term refers to a product that differs from another product in one
or more material attributes other than color, size, count, or flavor.
Although differences in flavor are likely to be material to some
consumers in some instances, the question can be highly fact specific.
For this reason, combining reviews for a product that has multiple
flavors would not be a rule violation, though it could still be a
deceptive practice under the FTC Act.
D. Buying Positive or Negative Consumer Reviews
Proposed Sec. 465.4 would prohibit a business from offering
compensation or other incentives in exchange for, or conditioned on,
the writing or creation of consumer reviews expressing a particular
sentiment, whether positive or negative, regarding the product,
service, or business that is the subject of the review.
ANA's comment asserted any proposed rulemaking should not address
``review gating'' or the ``mere solicitation of positive reviews.''
\212\ Review gating occurs when a business asks past purchasers to
provide feedback on a product and then invites only those who provide
positive feedback to post online reviews on one or more websites.
Review gating and the mere solicitation of positive reviews are not
covered by the proposed Rule. Although the Commission believes review
gating can be deceptive,\213\ whether any given instance of review-
gating is deceptive can be highly fact specific.
---------------------------------------------------------------------------
\212\ ANA Cmt. at 7.
\213\ See Endorsement Guides, 16 CFR 255.2(e)(11) (review gating
``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'') and 16 CFR 255.2(d).
---------------------------------------------------------------------------
Family First Life commented that the FTC should not promulgate a
rule ``that sweeps in and penalizes any review just because the
reviewer was offered an incentive to write it . . . without otherwise
dictating what the review says.'' \214\ The proposed Rule does not
address incentivized reviews except for those required to express a
particular sentiment, but the Commission notes that other uses of
incentivized reviews can be deceptive and violate the FTC Act.\215\ The
deceptiveness of undisclosed incentivized reviews is highly fact
specific.
---------------------------------------------------------------------------
\214\ Family First Life Cmt. at 12-13.
\215\ See, e.g., Endorsement Guides, 16 CFR 255.5(b)(6)(ii) (any
resulting review that fails to clearly and conspicuously disclose
the incentives provided to that reviewer is likely deceptive).
---------------------------------------------------------------------------
E. Insider Consumer Reviews and Consumer Testimonials
Proposed Sec. 465.5 addresses company insider consumer reviews and
consumer testimonials in three different ways. Proposed Sec. 465.5(a)
applies to insider reviews and testimonials; proposed Sec. 465.5(b)
applies to insider testimonials; and proposed Sec. 465.5(c) applies to
insider reviews.
Proposed Sec. 465.5(a) would prohibit an officer or manager of a
business from writing or creating a consumer review or consumer
testimonial about the business or its products or services if the
consumer review or consumer testimonial does not have a clear and
conspicuous disclosure of the officer's or manager's relationship to
the business. Proposed Sec. 465.1(c) defines ``clear and conspicuous''
to mean that a required disclosure is easily noticeable (i.e.,
difficult to miss) and easily understandable by ordinary consumers,
including in all of the ways listed in the definition. This is the same
definition the Commission proposed in its Negative Option Rule Notice
of Proposed Rulemaking.\216\ In accordance with proposed Sec.
465.1(g), ``officers'' are defined to include a business's owners,
executives, and managing members.
---------------------------------------------------------------------------
\216\ See Fed. Trade Comm'n, NPRM: Negative Option Rule, 88 FR
24716, 24734 (Apr. 24, 2023), <a href="https://www.govinfo.gov/content/pkg/FR-2023-04-24/pdf/2023-07035.pdf">https://www.govinfo.gov/content/pkg/FR-2023-04-24/pdf/2023-07035.pdf</a>.
---------------------------------------------------------------------------
Proposed Sec. 465.5(b) applies to consumer testimonials in
advertisements disseminated by or on behalf of a business. It would
prohibit a business from disseminating or causing the dissemination of
certain consumer testimonials about the business or its products or
services if the consumer testimonial is written by the business's
officers, managers, employees, or agents, or any of their relatives
without clear and conspicuous disclosures of those relationships. This
provision would apply only when the business knew or should have known
of the testimonialist's relationship.
Proposed Sec. 465.5(c) applies to solicitations of employee and
other insider reviews. It would prohibit under some circumstances an
officer's or manager's solicitation of consumer reviews from employees,
agents, or relatives that results in reviews that don't clearly and
conspicuously disclose the reviewer's relationship. The provision is
limited to situations when the person soliciting the review knew or
should have known of the prospective reviewer's relationship and: (a)
failed to instruct the prospective reviewer to disclose clearly and
conspicuously that relationship, (b) knew or should have known the
review appeared without such a disclosure and failed to take remedial
steps or, (c) encouraged the prospective reviewer not to make such a
disclosure.
NADA recommended any proposed rule provision addressing businesses
writing, soliciting, or publishing reviews by their employees or family
members clarify that a violation ``only arises when the business, and
not another entity, affirmatively writes, solicits, and publishes
reviews that fail to provide clear and conspicuous disclosures of those
relationships.'' \217\ Proposed Sec. 465.5(c) would apply to reviews
by employees or family members. Proposed Sec. 465.5(c) is limited to
solicitation by an officer or manager, and only when the solicitor
failed to advise a disclosure, knew or should have known that a review
appeared without such a disclosure and failed to take remedial steps,
or encouraged the prospective reviewer not to make such a disclosure.
The business would not be liable under the proposed provision for an
unsolicited review, for a review about which the solicitor reasonably
should not have known, or for a reviewer who refuses to make a
disclosure. However, proposed Sec. 465.5(c) reflects the Commission's
[[Page 49380]]
belief that businesses should be prohibited not only from publishing
insider reviews themselves but also from causing their creation (e.g.,
when an officer or manager of the business solicits employees to post
reviews on third-party review websites and fails to instruct the
employees to disclose their relationship to the business).
---------------------------------------------------------------------------
\217\ NADA Cmt. at 3.
---------------------------------------------------------------------------
NADA asked the FTC to define the term ``relative.'' \218\ The
Commission believes that the limitation to situations in which officers
or managers know or should know that they are soliciting a relative for
an endorsement or testimonial addresses the comment without the need
for a definition.
---------------------------------------------------------------------------
\218\ Id.
---------------------------------------------------------------------------
Family First Life commented that when an independent contractor
agent writes a review on a workplace-review platform such as Glassdoor,
the reviewer's relationship to the company is obvious and assumed.\219\
The Commission agrees, in reviews on such platforms, the relationship
is readily apparent and, in effect, already disclosed. The Commission
does not believe the proposed Rule needs to specifically address this
scenario.
---------------------------------------------------------------------------
\219\ Family First Life Cmt. at 9-10.
---------------------------------------------------------------------------
F. Company-Controlled Review Websites or Entities
Proposed Sec. 465.6 prohibits a business from representing that a
website, organization, or entity is providing its independent reviews
or opinions about a category of businesses, products, or services that
includes the business or its products or services, when the business
controls, owns, or operates that website, organization, or entity.
G. Review Suppression
Proposed Sec. 465.7 addresses two types of review suppression. The
first type, addressed in proposed Sec. 465.7(a), would prohibit anyone
from using an unjustified legal threat or a physical threat,
intimidation, or false accusation to prevent the creation of a consumer
review or cause the removal of all or part of a review. In accordance
with proposed Sec. 465.1(l), an ``unjustified legal threat'' is
defined as a threat to initiate or file a baseless legal action, such
as an action for defamation that challenges truthful speech or matters
of opinion.
NADA recommended that any proposed rule not prohibit what it
characterized as good faith online reputation management practices,
such as a business: (a) reaching out to consumers who have posted
negative reviews and attempting to improve their reviews by addressing
their concerns (including sometimes giving customers something of value
in satisfaction of their complaints), or (b) responding on a comment
thread to each negative review, offering an explanation, making
customers whole, and asking any successfully satisfied customers to
update their previously negative review.\220\ Neither proposed Sec.
465.7(a) nor any other proposed Rule provision would prohibit such
conduct (assuming that reviewers are not required to remove or change
their reviews in order to be made whole).
---------------------------------------------------------------------------
\220\ NADA Cmt. at 3-4.
---------------------------------------------------------------------------
Proposed Sec. 465.7(b) would prohibit a business from
misrepresenting that the consumer reviews of one or more of its
products or services displayed on its website or platform represent
most or all the reviews submitted to the website or platform if reviews
are being suppressed based upon their ratings or their negativity. As
proposed, the provision makes clear that the non-publication of
consumer reviews for certain enumerated reasons is not considered to be
review suppression so long as the criteria for withholding reviews are
applied to all reviews submitted without regard to the favorability of
the review. The listed acceptable reasons for not publishing a review
are: (a) that the review contains: (i) trade secrets or privileged or
confidential commercial or financial information, (ii) libelous,
harassing, abusive, obscene, vulgar, or sexually explicit content,
(iii) the personal information or likeness of another person, (iv)
content that is discriminatory with respect to race, gender, sexuality,
ethnicity, or another protected class, or (v) content that is clearly
false or misleading; (b) the seller reasonably believes it is fake; or
(c) the review is wholly unrelated to the products or services offered
by or available at the website or platform. These criteria are based
upon those enumerated in the Consumer Review Fairness Act, 15 U.S.C.
45b(b)(2) and (3). Moreover, consumers would reasonably expect and
often prefer that a business exclude reviews meeting these criteria, so
the undisclosed exclusion of such reviews solely due to application of
those criteria would be unlikely to mislead or be material to
consumers.
NADA stated that businesses should be able to ``remove reviews or
comments that are off topic or include false statements,
advertisements, inappropriate language, or confidential or personal
identification information.'' \221\ As to reviews that are ``off
topic,'' proposed Sec. 465.7(b) would permit not publishing reviews
that are ``wholly unrelated to the products or services offered.'' As
to reviews that contain ``false statements,'' proposed Sec. 465.7(b)
would permit not publishing reviews that are ``clearly false or
misleading.'' It is unclear what the comment meant by reviews that
include ``advertisements.'' If NADA means that it is acceptable to
delete a review that mentions a competitor, that is not an exception
provided in proposed Sec. 465.7(b).\222\ With regard to reviews that
contain ``inappropriate language,'' proposed Sec. 465.7(b) would
permit not publishing reviews containing ``harassing, abusive, obscene,
vulgar, or sexually explicit content'' or ``content that is
discriminatory with respect to race, gender, sexuality, ethnicity, or
another protected class.'' As to reviews that contain ``confidential or
personal identification information,'' proposed Sec. 465.7(b) would
allow a seller to not publish a review that contains ``trade secrets or
privileged or confidential commercial or financial information,'' or
the ``personal information . . . of another person.'' NADA also said
that businesses should be able to ``remove comments or review functions
on their own websites or certain social media posts.'' \223\ The
proposed Rule does not prohibit or address such conduct.
---------------------------------------------------------------------------
\221\ Id. at 3.
\222\ Cf. FTC Statement of Policy Regarding Comparative
Advertising (1979), <a href="https://www.ftc.gov/legal-library/browse/statement-policy-regarding-comparative-advertising">https://www.ftc.gov/legal-library/browse/statement-policy-regarding-comparative-advertising</a> (``Commission
policy in the area of comparative advertising encourages the naming
of, or reference to competitors, but requires clarity, and, if
necessary, disclosure to avoid deception of the consumer.'').
\223\ NADA Cmt. at 3. The NADA also posited that highlighting
five-star reviews from satisfied customers on a dealer's websites is
a legitimate practice that should not be prohibited under a possible
rule. Id. at 4. The proposed Rule does not address such a practice.
The Commission notes, however, that highlighting five-star reviews
from satisfied customers on a dealer's websites or in its other
advertising could be a deceptive practice depending on the facts.
---------------------------------------------------------------------------
H. Misuse of Fake Indicators of Social Media Influence
Proposed Sec. 465.8 prohibits the misuse of indicators of social
media influence. As defined by proposed Sec. 465.1(f), the term
``indicators of social media influence'' refers to any metrics used by
the public to make assessments of an individual's or entity's social
media influence, such as followers, friends, connections, subscribers,
views, plays, likes, reposts, and comments.
Proposed Sec. 465.8(a) prohibits anyone from selling fake
indicators of social media influence that can be used by persons or
businesses to misrepresent their influence for a commercial purpose.
Proposed Sec. 465.8(b) prohibits
[[Page 49381]]
anyone from procuring fake indicators of social media influence to
misrepresent their influence or importance for a commercial purpose.
I. Severability
Proposed Sec. 465.9 is a severability provision. It provides that
the provisions of the proposed Rule are separate and severable from one
another. If any provision is stayed or determined to be invalid, the
remaining provisions will continue in effect.
VI. The Rulemaking Process
The Commission can decide to finalize the proposed Rule if the
rulemaking record, including the public comments in response to this
NPRM, supports such a conclusion. The Commission may, either on its own
initiative or in response to a commenter's express request, engage in
additional processes, including those described in 16 CFR 1.12 and
1.13. If the Commission on its own initiative decides to conduct an
informal hearing, or if a commenter files an express request for such a
hearing, then a separate notice will issue under 16 CFR 1.12(a). Any
person who would like to participate by providing an oral statement at
any informal hearing must make an express request to do so in response
to this NPRM. Based on the comment record and existing prohibitions
against unfair or deceptive consumer reviews and testimonials under
Section 5 of the FTC Act, the Commission does not here identify any
disputed issues of material fact necessary to be resolved at an
informal hearing. The Commission may still do so later, on its own
initiative or in response to a commenter.
VII. Preliminary Regulatory Analysis
Under Section 22 of the FTC Act, the Commission, when it publishes
any NPRM for a rule as defined in Section 22(a)(1), must include a
``preliminary regulatory analysis.'' 15 U.S.C. 57b-3(b)(1). The
required contents of a preliminary regulatory analysis are (a) ``a
concise statement of the need for, and the objectives of, the proposed
rule,'' (b) ``a description of any reasonable alternatives to the
proposed rule which may accomplish the stated objective,'' and (c) ``a
preliminary analysis of the projected benefits and any adverse economic
effects and any other effects'' for the proposed rule and each
alternative, along with an analysis ``of the effectiveness of the
proposed rule and each alternative in meeting the stated objectives of
the proposed rule.'' 15 U.S.C. 57b-3(b)(1)(A)-(C). This NPRM already
provided the concise statement of the need for, and the objectives of,
the proposed Rule in Section IV above. It addresses the other
requirements below.
A. Anticipated Costs and Benefits and Reasonable Alternatives
The Commission is proposing a rule to curb certain unfair or
deceptive uses of reviews and testimonials. The proposed Rule contains
several provisions to promote accuracy in consumer reviews (henceforth
``reviews'') and, thus, will help the vast majority of American
consumers who rely on such reviews to make better-informed purchase
decisions. The proposed Rule prohibits: the creation, purchasing,
procurement, or dissemination of fake or false reviews; repurposing of
reviews for substantially different products; and buying of reviews in
exchange for, or conditioned on, positive or negative sentiments. It
also includes prohibitions on fake or false consumer or celebrity
testimonials, insider reviews, misleading company-controlled review
websites or entities, certain review suppression practices, and the
misuse of indicators of fake social media influence.
The Commission believes that the benefits of proceeding with the
rulemaking will significantly outweigh the costs, but it welcomes
public comment and data (both qualitative and quantitative) on any
benefits and costs to inform a final regulatory analysis.
In the preliminary analysis below, the NPRM describes the
anticipated impacts of the proposed Rule. Where possible, it quantifies
the benefits and costs. If a benefit or cost is quantified, it
indicates the sources of the data relied upon. If an assumption is
needed, the text makes clear which quantities are being assumed. The
NPRM measures the benefits and costs of the proposed Rule against a
baseline in which no rule regarding consumer reviews has been
promulgated by the Commission. The Commission solicits comments from
the public to improve these estimates before the promulgation of any
final rule.
The estimates in this preliminary analysis attempt to include a
broad set of economic actors, using data on the number of entities
registered as businesses in the United States, data on retail sales,
and data on U.S. consumers who shop online. The Commission invites
submission of information pertaining to additional economic actors who
would be affected by the proposed Rule. Conversely, the Commission
solicits information on whether a more limited set of economic actors
would yield improved estimates.
Quantifiable benefits stem from consumer welfare improvements and
consumer time savings. With the proposed Rule, online reviews will be
more accurate overall, leading consumers to purchase higher-quality
products or products that are better-matched to their preferences. The
proposed Rule will also lead to more trustworthy aggregate review
ratings (e.g., star ratings), leading some consumers to spend less time
scrutinizing reviews to determine their validity. Quantifiable costs
primarily reflect the resources spent by businesses to review the
proposed Rule and to take any preemptive or remedial steps to comply
with its provisions. Because the proposed Rule is an application of
preexisting law under Section 5 of the FTC Act, the Commission expects
these compliance costs to be minimal.
A period of 10 years is used in the baseline scenario because FTC
rules are subject to review every 10 years. Quantifiable aggregate
benefits and costs are summarized as the net present value over this
10-year period in Table 1.1. The discount rate reflects society's
preference for receiving benefits earlier rather than later; a higher
discount rate is associated with a greater preference for benefits in
the present. The present value is obtained by multiplying each year's
net benefit by the discount rate raised to the power of the number of
years in the future the net benefit accrues.
Table 1.1--Present Value of Net Benefits, 2023-2033
[In billions]
------------------------------------------------------------------------
Present value: Present value:
low-end estimate high-end estimate
------------------------------------------------------------------------
Total Benefits:
3% Discount Rate.............. $59.31 $234.28
[[Page 49382]]
7% Discount Rate.............. 50.16 200.26
-------------------------------------
Total One-Time Costs...... 0.83 0.00
Net Benefits
3% Discount Rate.............. 58.48 234.28
7% Discount Rate.............. 49.33 200.26
------------------------------------------------------------------------
1. Estimated Benefits of the Proposed Rule
This section describes the beneficial impacts of the proposed Rule,
provides preliminary quantitative estimates where possible, and
describes benefits that are only assessed qualitatively. The
quantifiable estimates reflect benefits stemming from the decrease in
online review manipulation on third-party platforms or company
websites, which covers most of the prohibitions contained in the
proposed Rule. This analysis does not calculate benefits from the other
aspects of the proposed Rule--prohibitions on fake or false celebrity
testimonials; prohibitions on company-controlled entities that
purportedly provide independent opinions; prohibitions on unjustified
legal threats or physical threats, intimidation, or false accusations
in an attempt to suppress negative consumer reviews; and prohibitions
on the misuse of indicators of fake social media influence--because of
the limited quantitative research in these areas. The Commission
invites comment on research concerning these other aspects of the
proposed Rule. The quantified benefits are presented by benefit
category, rather than stemming from a specific provision in the
proposed Rule, because the relevant provisions have the same end goal--
that is, to improve the information available to consumers by reducing
the level of review manipulation. Therefore, it is difficult to
disentangle the benefits stemming from each provision.
Existing academic literature in economics, marketing, computer
science, and other fields documents the importance of online reviews:
the number of online reviews and aggregate ratings are extremely
important for consumer purchase decisions. It is widely documented that
the presence of online reviews improves consumer welfare via reductions
in both search costs and the level of information asymmetry that exists
prior to purchase.\224\
---------------------------------------------------------------------------
\224\ See, e.g., Dina Mayzlin, ``Promotional Chat on the
Internet,'' 25(2) Mktg. Sci., 155-63 (2006).
---------------------------------------------------------------------------
When making purchase decisions, consumers typically have incomplete
information on product quality and attributes. Searching for additional
information is costly. Consumers incur costs--including time and effort
costs--to seek, evaluate, and integrate incoming information. Online
platforms where past users share information about their experiences
can significantly lower search costs.
Researchers have also demonstrated consumer reviews create value
for consumers beyond a reduction in search costs. Consumers are better
able to learn of a product's quality and attributes when there is free-
flowing, non-manipulated commentary from past consumers. Consumer
reviews lead to ``better'' decisions by increasing the level of
information available prior to purchase and reducing uncertainty. By
the same token, the academic literature also documents that manipulated
or fake reviews lead to reductions in consumer welfare by leading
consumers to buy low-quality products or otherwise make suboptimal
purchase decisions.
A secondary benefit is deterrence of the specified review and
testimonial practices. The proposed Rule is essentially the only means
for imposing civil penalties in most cases involving such practices.
Civil penalties are not generally available under the FTC Act for this
conduct, unless parties are already subject to a relevant Commission
order or have been served with a copy of a relevant Notice of Penalty
Offenses. Also, as noted above, in many cases involving this conduct,
calculating redress or other Section 19 relief may be difficult.
Without civil penalties, bad actors have little fear of being penalized
for using fraud and deception in connection with reviews and
endorsements.
To obtain redress without alleging a rule violation, the Commission
must successfully conclude an administrative proceeding including any
appeal and file a follow-on Federal case under Section 19 to establish
that the conduct is ``one which a reasonable man would have known under
the circumstances was dishonest or fraudulent.'' \225\ Although the
Commission is likely to meet this standard in cases involving the
conduct covered by the proposed Rule, it would take substantially more
time and resources, and would significantly delay any redress to
victims, compared to a case under the proposed Rule violation, which
does not require multiple proceedings or a special knowledge
requirement.\226\
---------------------------------------------------------------------------
\225\ 15 U.S.C. 57b(a)(2). Depending on the egregiousness of the
misconduct and the harm it is causing, the Commission also may seek
preliminary injunctive relief in Federal court. 15 U.S.C. 53(b).
\226\ See, e.g., Press Release, Fed. Trade Comm'n, Marketers of
Ab Force Weight Loss Device Agree to Pay $7 Million for Consumer
Redress (Jan. 14, 2009), <a href="https://www.ftc.gov/news-events/news/press-releases/2009/01/marketers-ab-force-weight-loss-device-agree-pay-7-million-consumer-redress">https://www.ftc.gov/news-events/news/press-releases/2009/01/marketers-ab-force-weight-loss-device-agree-pay-7-million-consumer-redress</a> (describing a 2009 settlement of a follow-
on Section 19 action against Telebrands Corp. that was brought after
litigation of a 2003 administrative complaint alleging violations of
Section 5 concluded--in this case, the Section 19 action settled
instead of being litigated to judgment, which would have taken more
time).
---------------------------------------------------------------------------
Given the prevalence of unfair or deceptive conduct involving
reviews and testimonials, the Commission will have no shortage of bad
actors to investigate; it could invest the extra resources freed up by
any final rule into more investigations and actions with respect to
consumer reviews or testimonials. In sum, the potential consumer-
redress benefits of the proposed Rule are significant: the Commission
could put a stop to more inarguably unfair or deceptive consumer
reviews or testimonials, return money to more victims, and obtain that
redress more quickly.
a. Consumer Welfare Benefits From Better-Informed Purchase Decisions
The study containing the most direct estimate of welfare losses
from review manipulation finds that the presence of fake reviews leads
consumers to lose
[[Page 49383]]
$0.12 for every dollar spent in an experimental setting.\227\ Due to
limited quantitative estimates in the literature, the NPRM assumes this
measure of welfare loss encompasses the various types of review
manipulation covered by the proposed Rule. It also assumes the proposed
Rule causes all fake or manipulated reviews to vanish. Thus, consumers
will gain an estimated $0.12 for every dollar spent on goods whose
online reviews included fake ones.
---------------------------------------------------------------------------
\227\ See Akesson et al., ``The Impact of Fake Reviews on Demand
and Welfare,'' supra note 158.
---------------------------------------------------------------------------
To estimate consumer welfare benefits from better-informed purchase
decisions, the NPRM first estimates the total amount of sales for which
consumers consult online reviews. U.S. e-commerce sales totaled $1.034
trillion in 2022.\228\ The NPRM assumes all products sold online had
some form of user-generated commentary (e.g., on third-party review
platforms, on discussion boards, on company websites, or on social
media), and that this commentary factors into consumers' purchase
decisions for these goods.
---------------------------------------------------------------------------
\228\ See U.S. Census Bureau, ``Quarterly E-Commerce Sales
Report,'' Feb. 17, 2023, <a href="https://www.census.gov/retail/ecommerce.html">https://www.census.gov/retail/ecommerce.html</a>.
---------------------------------------------------------------------------
Online reviews are also important for commerce not conducted
online, including for revenues earned by the hospitality industry and
by other services. Sales for businesses classified as ``Food Services
and Drinking Places'' by the U.S. Census totaled $843.61 billion in
2021, which includes revenue from restaurants and bars.\229\ The NPRM
assumes consumers rely on reviews for only a portion of these sales.
Some consumers--particularly those living in rural parts of the country
and in smaller cities--may have a small set of familiar food and drink
establishments available to them, making online reviews less
influential to their decision to patronize a particular one. Moreover,
prior research has found online reviews do not impact revenues of chain
restaurants.\230\ Accordingly, the NPRM assumes consumers rely on
reviews for 25 percent of the total revenue generated in the food
services and drinking places sector (25 percent of $843.61 billion, or
$210.90 billion).\231\
---------------------------------------------------------------------------
\229\ U.S. Census Bureau, ``Service Annual Survey,'' Nov. 22,
2022, <a href="https://www.census.gov/programs-surveys/sas.html">https://www.census.gov/programs-surveys/sas.html</a> (listing
total revenue of $843,605,000,000 for NAICS Code 722 in 2021, the
most recent year with data).
\230\ See Michael Luca, ``Reviews, Reputation, and Revenue: The
Case of <a href="http://Yelp.com">Yelp.com</a>.'' Harvard Bus. Sch. Working Paper 12-016 (2016).
\231\ 25 percent is likely to be a reasonable estimate based on
the difference in revenues for new restaurants and established
restaurants. A study conducted by Toast, Inc. found that new
restaurants earn approximately $112,000 in average revenue per year
(<a href="https://pos.toasttab.com/blog/on-the-line/average-restaurant-revenue">https://pos.toasttab.com/blog/on-the-line/average-restaurant-revenue</a>). This is approximately 25 percent of average revenue for
restaurants overall ($486,000, according to the website Eat Pallet,
<a href="https://eatpallet.com/how-much-do-restaurants-make-in-a-day">https://eatpallet.com/how-much-do-restaurants-make-in-a-day</a>).
---------------------------------------------------------------------------
Online reviews are also important for sales in other service
sectors. In 2021, total revenue was $247.25 billion for the
accommodations sector (which includes hotels and vacation rentals), and
total revenue was $56.85 billion for personal services (including
beauty salons, barber shops, health clubs, and non-veterinary pet
care), totaling $304.10 billion for both sectors.\232\ About half of
hotel revenue is generated by business travelers, who are likely to
rely less on online reviews than leisure travelers do.\233\ In
addition, pre-paid hotel bookings and vacation rentals booked online
are already accounted for in the e-commerce sales figure described
above. Furthermore, some consumers may be loyal customers of local
salons and other personal services, regardless of these businesses'
online reputations. Because of these reasons, the NPRM assumes that a
subset of accommodation and personal services revenues is affected by
consumer reviews. Similar to the calculation for the food and drinking
places industry, the NPRM assumes 25 percent of total accommodation and
personal care services revenue is impacted by consumer reviews (25
percent of $304.10 billion, or $76.03 billion). The total estimated
revenue for services impacted by consumer reviews is $286.93 billion
(the sum of $210.90 billion and $76.03 billion). The Commission seeks
comments to improve this estimate.
---------------------------------------------------------------------------
\232\ See U.S. Census Bureau, ``Service Annual Survey,'' supra
note 229 (listing total 2021 revenue of $247,246,000,000 for NAICS
Code 721 and listing total 2021 revenue of $56,845,000,000 for NAICS
Codes 812111 through 812199 and NAICS Code 81291).
\233\ See Linchi Kwok, ``Will business travel spending return to
the pre-pandemic level soon?'' Hospitality Net, Sept. 22, 2022,
<a href="https://www.hospitalitynet.org/opinion/4112075.html">https://www.hospitalitynet.org/opinion/4112075.html</a>.
---------------------------------------------------------------------------
Combining the revenue estimates described above yields $1.321
trillion in estimated sales of goods or services for which consumers
incorporate reviews into their decision-making. In this analysis, the
NPRM does not incorporate revenues stemming from the physical sale of
goods in retail stores where consumers read online reviews before
purchasing items in person. The Commission invites commenters to submit
information to quantify non-e-commerce retail sales that are impacted
by reviews.
Quantitative estimates of the incidence of fake or false reviews
vary by source.\234\ Nevertheless, at least three prior studies
examining the degree of review manipulation as a proportion of
businesses or products (rather than as a proportion of reviews) contain
similar findings: according to these studies, approximately 10 percent
of products or businesses have some manipulated consumer reviews.\235\
Thus, a basic approximation of total e-commerce sales involving some
review manipulation is 10 percent of $1.034 trillion, or $103.4
billion. Similarly, a basic approximation of review-dependent service
industry sales involving some review manipulation is 10 percent of
$286.93 billion, or $28.69 billion. The Commission seeks submissions of
additional research on the prevalence of review manipulation to improve
this estimate.
---------------------------------------------------------------------------
\234\ These estimates range from the single digits to over 20
percent. See Tripadvisor, ``2023 Review Transparency Report,''
<a href="https://www.tripadvisor.com/TransparencyReport2023">https://www.tripadvisor.com/TransparencyReport2023</a> (finding that
4.4% of review submissions were fraudulent); Trustpilot,
``Transparency Report 2022,'' <a href="https://cdn.trustpilot.net/trustsite-consumersite/trustpilot-transparency-report-2022.pdf">https://cdn.trustpilot.net/trustsite-consumersite/trustpilot-transparency-report-2022.pdf</a> (stating that
its software removed 5.8 percent of reviews due to being fake);
Yelp, ``2022 Yelp Trust & Safety Report,'' <a href="https://trust.yelp.com/trust-and-safety-report">https://trust.yelp.com/trust-and-safety-report</a> (stating that 19 percent of submitted
reviews were marked as ``not recommended'' by Yelp's software);
Devesh Raval, ``Do Gatekeepers Develop Worse Products? Evidence from
Online Review Platforms,'' Working Paper, Feb. 27, 2023, <a href="https://deveshraval.github.io/reviews.pdf">https://deveshraval.github.io/reviews.pdf</a> (finding that the share of hidden
(likely fake) Yelp reviews is as high as 47 percent).
\235\ See Nan Hu et al., ``Manipulation of online reviews: An
analysis of ratings, readability, and sentiments,'' 52(3) Decision
Support Systems 674-84 (Feb. 2012) (finding that 10.3 percent of
books sold on Amazon had manipulated reviews); Luca and Zervas,
``Fake It Till You Make It: Reputation, Competition, and Yelp Review
Fraud,'' supra note 158 (finding that 10 percent of Boston, MA
restaurants had filtered 5-star reviews on Yelp) (Table 3, row 4);
Raval, ``Do Gatekeepers Develop Worse Products? Evidence from Online
Review Platforms,'' supra note 234 (finding that 9.7 percent of
businesses with reviews or complaints with the Better Business
Bureau are of low quality, where fake reviews inflate ratings)
(Table III, column 3, row 1).
---------------------------------------------------------------------------
Importantly, online businesses that engage in review manipulation
are likely to earn less revenue than other e-commerce companies. For
example, prior research has found independent firms and sellers
offering lower-quality products are more likely to engage in review
manipulation.\236\ Therefore, e-commerce sales affected by review
manipulation are likely to be lower than the $103.4 billion in sales
described above. A more conservative estimate of e-commerce sales
involving review manipulation can be obtained by using
[[Page 49384]]
price differentials of review-manipulated products versus others.
Because products with online review manipulation have price points
approximately 19 percent of the average price of goods sold online
(according to research using data from Amazon),\237\ a more
conservative estimate of review-manipulated products' revenue is 1.9
percent (19 percent x 10 percent) of all $1.034 trillion in e-commerce
sales, or $19.65 billion. Because the Commission does not have data on
the revenue or quantities sold of review-manipulated products, the NPRM
assumes revenue is constant across price points and rely solely on the
price differential to approximate revenue. The NPRM does not similarly
adjust revenues for non-e-commerce firms (e.g., restaurant and hotels)
because there is less variation in prices in those industries. The
Commission invites commenters to submit information to improve this
estimate.
---------------------------------------------------------------------------
\236\ See He et al., ``The Market for Fake Reviews,'' supra note
158; Dina Mayzlin et al., ``Promotional Reviews: An Empirical
Investigation of Online Review Manipulation,'' 104(8) The Am. Econ.
Rev. 2421-55 (2014).
\237\ See Davide Proserpio et al., ``How Fake Customer Reviews
Do--and Don't--Work,'' Harvard Bus. Rev., Nov. 24, 2020, <a href="https://hbr.org/2020/11/how-fake-customer-reviews-do-and-dont-work">https://hbr.org/2020/11/how-fake-customer-reviews-do-and-dont-work</a>. The
authors find that products sold on Amazon with manipulated reviews
are typically in the $15 to $40 price range. The midpoint of this
range ($27.50) represents 19 percent of the average product's price
($142.74, according to a study conducted by Semrush Inc., <a href="https://www.semrush.com/blog/amazon-pricing-study">https://www.semrush.com/blog/amazon-pricing-study</a>).
---------------------------------------------------------------------------
The NPRM estimates annual welfare gains by applying the $0.12
estimate, described above, to the estimated amount of U.S. sales likely
to have some manipulated consumer reviews, yielding an annual estimate
of welfare gains in the range of $5.80 billion (12 percent of $48.34
billion, the sum of $19.65 billion and $28.69 billion) and $15.85
billion (12 percent of $132.09 billion, the sum of $103.4 billion and
$28.69 billion). Assuming e-commerce sales increase linearly over the
next ten years at the same rate as they did in the past year,\238\ the
present value of consumer welfare improvements from better-informed
purchasing decisions is estimated to be between $50.16 and $199.40
billion as described in Table 2.1.
---------------------------------------------------------------------------
\238\ E-commerce sales increased by 7.7 percent from 2021 to
2022. See U.S. Census Bureau, ``Quarterly E-Commerce Sales Report,''
supra note 228. Using growth in the past year to predict future e-
commerce sales results in a more conservative estimate than using a
longer time frame. E-commerce sales experienced higher annual growth
rates prior to 2021 (14 percent from 2018 to 2019, 43 percent from
2019 to 2020, and 14 percent from 2020 to 2021). The NPRM does not
project revenues for non-e-commerce industries because the two most
recent years of data are from 2021 and 2020; linear trends during
these years are unique to the pandemic and are unlikely to be
accurate for future years.
Table 2.1--Estimated Benefits From Consumer Welfare Improvements From Purchase Decisions
----------------------------------------------------------------------------------------------------------------
Total annual
welfare Total 10-year Total 10-year
improvements from (2023-2033) (2023-2033)
Percent of e-commerce revenue impacted by review better- informed welfare welfare
manipulation purchase improvement, 3% improvement, 7%
decisions (in discount rate (in discount rate (in
billions) billions) billions)
----------------------------------------------------------------------------------------------------------------
10..................................................... $15.85 $199.40 $170.43
1.9.................................................... 5.80 59.31 50.16
----------------------------------------------------------------------------------------------------------------
b. Consumer Time Savings From Increased Reliability of Summary Ratings
The proposed Rule's prohibitions against deceptive and unfair
consumer review practices would increase the reliability of consumer
reviews. The NPRM assumes this improvement in the dependability of
reviews will lead consumers to place more trust in aggregate measures
(e.g., aggregate star ratings), which many review settings use to
summarize consumer reviews. This in turn will lead some consumers to
spend less time scrutinizing individual reviews to detect red flags
commonly found in manipulated reviews (e.g., spelling and grammar
mistakes, generic highly positive or negative statements, and lack of
detail). Therefore, the proposed Rule is likely to result in some
amount of time savings for consumers who consult online reviews before
making purchases.
Approximately 80 percent of Americans are online shoppers.\239\ Of
those who shop online, 14 percent shop online more than once a week, 20
percent shop online once a week, 23 percent shop online once every two
weeks, 25 percent shop online once a month, and the remainder do so
every few months.\240\ Different age groups of online shoppers spend
various amounts of time reading reviews before making a purchase
decision. On average, younger consumers spend more time reading reviews
than older consumers.\241\ This analysis does not incorporate time
spent by consumers researching reviews of restaurants, hotels, and
other goods and services that are not purchased online because of the
limited amount of information available regarding consumers' total time
spent on such activities. The Commission invites commenters to submit
information related to the time consumers spend reading reviews for
goods and services not purchased online.
---------------------------------------------------------------------------
\239\ See Pew Research Center, ``Online Shopping and E-
Commerce,'' Dec. 19, 2016, <a href="https://www.pewresearch.org/internet/2016/12/19/online-shopping-and-e-commerce">https://www.pewresearch.org/internet/2016/12/19/online-shopping-and-e-commerce</a>.
\240\ See Int'l Post Corp., ``Cross-Border E-Commerce Shopper
Survey 2022,'' Jan. 2023, <a href="https://www.ipc.be/-/media/documents/public/publications/ipc-shoppers-survey/onlineshoppersurvey2022.pdf">https://www.ipc.be/-/media/documents/public/publications/ipc-shoppers-survey/onlineshoppersurvey2022.pdf</a>.
\241\ See BrightLocal, ``Local Consumer Review Survey 2019,''
Dec. 11, 2019, <a href="https://www.brightlocal.com/research/local-consumer-review-survey-2019">https://www.brightlocal.com/research/local-consumer-review-survey-2019</a>.
---------------------------------------------------------------------------
According to the Bureau of Labor Statistics, the average hourly
wage in 2021 was $28.01.\242\ Recent research suggests individuals
living in the United States value their non-work time at 82 percent of
average hourly earnings.\243\ Thus, Americans overall value their non-
work time at $22.97 per hour on average. The Commission invites comment
on this methodology and seeks submissions of additional data related to
quantifying Americans' value of time.
---------------------------------------------------------------------------
\242\ Bureau of Labor Statistics, ``May 2021 National
Occupational and Wage Estimates, Unites States,'' <a href="https://www.bls.gov/oes/current/oes_nat.htm">https://www.bls.gov/oes/current/oes_nat.htm</a> (listing mean hourly wage of
$28.01 for all occupations).
\243\ See Daniel S. Hamermesh, ``What's to Know About Time
Use?,'' 30 J. of Econ. Survs. 198-203 (2016), <a href="https://doi.org/10.1111/joes.12107">https://doi.org/10.1111/joes.12107</a>.
---------------------------------------------------------------------------
The survey data does not specify whether consumers were surveyed
regarding the time spent reading reviews before the purchase of a
single product or whether the question concerned the purchase of
multiple products. This analysis assumes the time listed in the survey
results pertains to the purchase of a single product. It also assumes
the implementation of the
[[Page 49385]]
proposed Rule would reduce the time spent reading reviews by 10
percent. Combining the above figures results in $2.49 billion in
consumer time savings per year, or a present value of $18.55 billion to
$21.69 billion over a 10-year period, as described in Table 2.2. The
Commission invites commenters to submit information to improve this
estimate.
In addition, there are likely to be other utility-related benefits
consumers receive when reading nonmanipulated online reviews or
consulting more accurate aggregate summary measures, such as increased
satisfaction (apart from purchasing decisions) and decreased
frustration. The Commission is not able to quantify these benefits and
invites commenters to submit information to assist with calculating
these additional benefits.
Finally, some consumers may spend more time reading reviews if
reviews are less likely to be fake or otherwise manipulated. This
increase in time spent reading reviews may offset any time savings from
the increased reliability of summary ratings. Therefore, the NPRM
presents another scenario in Table 2.2 where consumers do not gain any
benefits from time savings. However, as before, there are likely to be
additional benefits difficult to quantify (e.g., decreased frustration)
that result from reading more accurate reviews, likely yielding
positive net benefits related to reading reviews even when consumers
spend more time doing so. The Commission invites comment on methods
that would allow us to quantify such benefits.
Table 2.2--Estimated Benefits From Time Savings
------------------------------------------------------------------------
------------------------------------------------------------------------
Scenario 1--Improved Reliability of Aggregate
Measures Reduces Overall Time Spent Reading Reviews:
Number of online shoppers, age 18-34 \a\......... 60,467,204
Average amount of time spent reading online 0.336
reviews before making a purchase decision (in
hours), age 18-34...............................
Number of online shoppers, age 35-54 \a\......... 67,273,832
Average amount of time spent reading online 0.231
reviews before making a purchase decision (in
hours), age 35-54...............................
Number of online shoppers, age 55+ \a\........... 78,920,814
Average amount of time spent reading online 0.167
reviews before making a purchase decision (in
hours), age 55+.................................
------------------
Total amount of time all online shoppers 48,991,116
spend reading online reviews before making a
purchase decision (in hours)................
Total amount of time U.S. online shoppers 1,728,406,578
spend reading online reviews per year (in
hours) \b\..................................
Value of time for online shoppers (per hour). $22.97
Percentage of time saved..................... 10%
------------------
Total annual time savings................ $3,970,149,909
Total 10-year (2023-2033) time savings, 3% discount $34.88
rate (in billions)..................................
Total 10-year (2023-2033) time savings, 7% discount $29.84
rate (in billions)..................................
------------------------------------------------------------------------
Scenario 2--Increase in Time Spent Reading Reviews
Offsets Time Savings from Improved Reliability of
Summary Measures:
No quantifiable benefit.......................... $0
------------------------------------------------------------------------
\a\ 80% of age-specific total U.S. population (Source: Pew Research
Center, U.S. Census).
\b\ Adjusting for online shopping frequency (Source: International Post
Corporation).
c. Benefits Related to Competition
Accurate online reviews have been shown to improve competition.
Several studies have found online reviews are particularly important
for independent and newer firms.\244\ Ratings are more influential for
these firms because consumers do not have strong prior beliefs as to
their quality. New entrants whose sales benefit from online reviews
typically offer higher quality goods and services. On the other hand,
lower-quality firms often experience revenue losses with more online
review activity.\245\
---------------------------------------------------------------------------
\244\ See Luca, ``Reviews, Reputation, and Revenue: The Case of
<a href="http://Yelp.com">Yelp.com</a>,'' supra note 230 (finding that chain restaurants have
declined in market share as Yelp penetration has increased); Gregory
Lewis and Georgios Zervas, ``The Welfare Impact of Consumer Reviews:
A Case Study of the Hotel Industry,'' Working Paper, <a href="https://economics.sas.upenn.edu/sites/default/files/filevault/u475/tawelfare.pdf">https://economics.sas.upenn.edu/sites/default/files/filevault/u475/tawelfare.pdf</a> (finding that demand for independent hotels is more
sensitive to reviews on Tripadvisor); Brett Hollenbeck, ``Online
Reputation Mechanisms and the Decreasing Value of Chain
Affiliation,'' 55(5) J. of Mktg. Resch. 636-54 (2018), <a href="https://www.jstor.org/stable/26966532">https://www.jstor.org/stable/26966532</a> (finding that branded, chain-
affiliated hotels' premiums over independent hotels have declined
substantially largely due to online reputation mechanisms).
\245\ See Limin Fang, ``The Effects of Online Review Platforms
on Restaurant Revenue, Consumer Learning, and Welfare,'' 68(11)
Mgmt. Sci. 7793-8514 (2022).
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Relatedly, fake online reviews allow companies to surpass
competitors. One study found it only takes 50 fake reviews for a seller
to pass any of its competitors in terms of visibility (e.g., via
rankings or search results).\246\ It follows that by curbing the number
of fake or manipulated reviews, the proposed Rule would benefit
consumers by improving the competitive environment for legitimate firms
selling higher-quality products (i.e., those who do not rely on review
manipulation to sell their goods). The benefits resulting from
improvements in the competitive environment are difficult to quantify.
The Commission invites comment on the best approach to quantifying such
benefits.
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\246\ See Lappas et al., ``The Impact of Fake Reviews on Online
Visibility: A Vulnerability Assessment of the Hotel Industry,''
supra note 158.
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2. Estimated Costs of the Proposed Rule
This section describes the costs associated with the proposed Rule,
provides preliminary quantitative estimates where possible, and
describes costs that are only assessed qualitatively.
a. Compliance Costs
The acts and practices prohibited by the proposed Rule are unfair
or deceptive under Section 5 of the FTC Act. The proposed Rule targets
acts or practices that are clear violations of Section 5, and
businesses that are compliant will continue to be compliant. Moreover,
the FTC routinely provides guidance to businesses on complying with FTC
law, which will make the implications of the proposed Rule easy to
understand for a wide range of businesses. Accordingly, the NPRM
presents one scenario in Table 3.1 where businesses spend a de minimis
amount of time interpreting the proposed Rule and make no changes to
their current policies.
[[Page 49386]]
However, because of the enhanced penalty associated with violating
the proposed Rule (relative to de novo violations of Section 5 of the
FTC Act), businesses may choose to incur additional administrative
burdens to ensure compliance. The NPRM presents another scenario in
Table 3.1 where businesses notify their employees of the proposed Rule,
conduct a review of their processes, and take any steps they deem
important to ensure compliance. For firms that already comply with
Section 5, these steps might be out of caution so as not to risk the
possibility of violating the proposed Rule. For example, some sellers
may currently flag and remove reviews on their websites that they
reasonably believe are fake. While this practice would not amount to
not a violation of the relevant rule provision (proposed Sec.
465.7(b)), promulgation of the proposed Rule may lead some businesses
to choose to take extra steps to verify the inauthenticity of such
reviews before suppressing them. A business may also decide to notify
its employees of the proposed Rule. For example, if certain employees
are responsible for posting new product pages or managing the company's
social media presence, business owners may wish to notify these
employees to ensure compliance. Although cautious firms may elect to
conduct additional compliance review, the proposed Rule would not
require any additional recordkeeping or notices beyond what is required
by Section 5 of the FTC Act.
For the heightened compliance review scenario in Table 3.1, the
NPRM makes assumptions about the number of businesses impacted and the
number of person-hours involved in compliance activities. In 2019,
there were approximately 33.20 million total firms in the United
States. 20,868 of these were entities with 500 or more employees
(``large companies''), and the remaining 33.19 million had fewer than
500 employees (``small companies'').\247\ The NPRM assumes all 20,868
large companies had some form of online consumer review presence (e.g.,
on third-party business platforms such as Yelp or Google Reviews, or on
their own websites). It assumes 74 percent of the 33.19 million small
companies (24.56 million companies) had an online consumer review
presence.\248\
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\247\ See U.S. Census Bureau, ``2019 SUSB Annual Data Tables by
Establishment Industry,'' <a href="https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html">https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html</a> (listing 6.10 million total firms
with at least one paid employee) and ``Nonemployer Statistics,''
<a href="https://www.census.gov/programs-surveys/nonemployer-statistics.html">https://www.census.gov/programs-surveys/nonemployer-statistics.html</a>
(listing 27.10 million firms with no paid employees).
\248\ 74 percent of small businesses have at least one Google
review. See BrightLocal, ``Google Reviews Study,'' <a href="https://www.brightlocal.com/research/google-reviews-study/">https://www.brightlocal.com/research/google-reviews-study/</a>.
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With heightened compliance review, the NPRM assumes lawyers at
large companies, whose time is valued at $61.54 per hour,\249\ will
spend eight hours conducting a one-time review of the proposed Rule and
notifying employees whose role involves creating new product pages,
managing the company's social media presence, and any other relevant
practices covered by the proposed Rule. It assumes small company
owners, whose time is valued at $33.23,\250\ spend one hour doing the
same.
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\249\ See Bureau of Labor Statistics, Occupational Outlook
Handbook: Lawyers, <a href="https://www.bls.gov/ooh/legal/lawyers.htm">https://www.bls.gov/ooh/legal/lawyers.htm</a>.
\250\ See Payscale, ``Average Small Business Owner Salary,''
<a href="https://www.payscale.com/research/US/Job=Small_Business_Owner/Salary">https://www.payscale.com/research/US/Job=Small_Business_Owner/Salary</a>.
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In addition, some companies may spend time reviewing their
automated processes to ensure they comply with the proposed Rule. For
instance, they may check any review filtering processes to ensure
reviews that are flagged and removed meet the permissible exceptions
listed in proposed Sec. 465.7(b). These costs, which companies might
incur just once or on a recurring basis, are likely to be minimal. The
NPRM does not quantify these process-related costs because, among other
things, the Commission does not know the number of firms that might
undertake such a review. The Commission invites commenters to submit
information to assist with the calculation of these costs.
The total estimated costs are tabulated in Table 3.1. The
Commission seeks comments on the assumptions incorporated in these
estimates.
Table 3.1--Estimated Compliance Costs
------------------------------------------------------------------------
2023 Only
------------------------------------------------------------------------
Scenario 1--No Review:
No cost.......................................... $0
------------------
Total cost................................... $0
-------------------------------
[…truncated; see source link]Indexed from Federal Register on July 31, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.