FTC warns they will seek significant civil penalties for fake reviews

The Federal Trade Commission has put companies, advertisers, retailers, consumer product companies, and advertising agencies on notice about deceptive practices online.

FTC Fake Ads

In response to the increasing amount of deceptive advertising practices on social networks and review sites, the Federal Trade Commission (FTC) has put businesses on notice. The FTC sent a letter to more than 700 companies warning them that they could incur civil penalties of up to $43,792 per violation.

Re: Unlawful practices relating to the use of endorsements and testimonials

I am enclosing the Federal Trade Commission’s Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct around Endorsements and Testimonials. Companies use endorsements and testimonials in many forms to advertise and market their products and services, both in traditional and social media, as well as in the form of online reviews. As reflected by the Commission’s enforcement actions and other efforts, some companies use these advertising tools in a manner that deceives consumers. We recommend that you carefully review the notice and take any steps necessary to ensure that your company’s practices do not violate the law.

The notice of penalty offenses consists of Commission determinations in prior litigated cases that certain practices are deceptive or unfair and are unlawful under Section 5 of the Federal Trade Commission Act. As set forth in more detail in the notice, these acts and practices include: falsely claiming an endorsement by a third party; misrepresenting that an endorser is an actual user, a current user, or a recent user; continuing to use an endorsement without good reason to believe that the endorser continues to subscribe to the views presented; misrepresenting that an endorsement represents the experience, views, or opinions of users or purported users; using an endorsement to make deceptive performance claims; failing to disclose an unexpected material connection with an endorser; and misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience. Note that positive consumer reviews are a type of endorsement, so such reviews can be unlawful, e.g., when they are fake or when a material connection is not adequately disclosed.

Receipt of the notice puts your company on notice that engaging in conduct described therein could subject the company to civil penalties of up to $43,792 per violation. (See 15 U.S.C. § 45(m)(1)(B).)

We request that you distribute copies of the notice of penalty offenses and this letter to each of your subsidiaries that sells or markets products or services to consumers in the United States.

FTC staff is not singling out your company or suggesting that you have engaged in deceptive or unfair conduct. We are widely distributing similar letters and the notice to large companies, top advertisers, leading retailers, top consumer product companies, and major advertising agencies.

Copies of the case decisions discussed in the notice are available on the Commission’s website at www.ftc.gov/endorsement-notice-penalty-offenses.

The Commission’s website has other important resources designed to ensure that advertisers know their responsibilities under the FTC Act. These resources include a staff business guidance document, The FTC’s Endorsement Guides: What People Are Asking, available at www.FTC.gov/endorsements. That document contains a link to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 CFR Part 255.

If you have any questions about this letter or the enclosed materials, please contact Michael Ostheimer at [email protected] or (202) 326-3556 or Michael Atleson at [email protected] or (202) 326-2962.

✉️ Letter sent by the FTC’s Associate Director, Serena Viswanathan

In a press release, Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, stated that fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses. Advertisers will pay a price if they engage in these deceptive practices.

The FTC has created clear guidelines for companies and social influencers to follow, and they’ve sent numerous notices to companies and influencers over the past few years. However, this new notice sparks an escalation in the agency’s attempt to reign in the explosion in deceptive endorsements across the marketplace.

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Jon is the founder of Coywolf and the EIC and the primary author reporting for Coywolf News. He is an industry veteran with over 25 years of digital marketing and internet technologies experience. Follow @henshaw