FTC Crackdown: Fake Online Reviews Banned Starting October

The Federal Trade Commission unanimously voted on Wednesday to prohibit marketers from utilizing fabricated endorsements, such as those generated through advanced AI technology, and other deceptive tactics to advance their products and services.

All five FTC commissioners endorsed the definitive regulation, which will come into force 60 days subsequent to its proclamation in the Federal Register, the official compendium of governmental directives and notifications.

Typically, decrees are promulgated expeditiously subsequent to their endorsement, signifying that consumers can anticipate the enactment of FTC’s prohibition on fake reviews commencing in mid-October.

Lina Khan, the FTC Chair, articulated, “Spurious reviews not only squander individuals’ time and financial resources, but also contaminate the market and divert patronage from forthright competitors.” Khan accentuated that the regulation also proscribes the payment for either favorable or unfavorable appraisals to mendaciously augment or detract from a merchandise. Moreover, marketers are barred from inflating their own impact by, for instance, remunerating bots to inflate their adherent count.

Contraventions of the regulation could engender fines for each transgression, as stipulated in the regulation. Consequently, for an e-commerce platform with myriad reviews, penalties for counterfeit or manipulated evaluations could swiftly accumulate.

The prevalence of automated chatbots like ChatGPT in generating user reviews for online products has surged with the ascendance of e-commerce. Regrettably, consumers at times procure items predicated on spurious accolades or deceitful pledges.

Although bogus endorsements are already illicit, certain e-commerce entities have endeavored to combat this deceptive marketing stratagem autonomously.

For example, Amazon litigated against over 10,000 administrators of Facebook groups in July 2022 for brokering counterfeit appraisals.

Amazon was unavailable for immediate commentary on CNBC’s inquiry regarding the FTC’s innovative directive.

Under the FTC’s fresh regulation, corporations that might have engaged in self-regulation historically will now be subjected to more stringent governmental monitoring.

In lieu of individual prosecutions through the Department of Justice, this regulation will enhance the FTC’s capacity to enforce the prohibition internally.

Coinciding with the White House’s inaugural “Creator Economy Conference,” the disclosure transpired on the same day. At this symposium, Biden administration officials convened with 100 online influencers and digital content connoisseurs to heed concerns regarding the sector.