FTC bans phony online reviews, seeks to deter AI-generated fakes

Businesses that buy, sell or promote phony online reviews now run the risk of incurring hefty financial penalties, the Federal Trade Commission said in announcing a ban on such practices. 

The final rule issued by the federal watchdog on Wednesday prohibits marketers from engaging in deceptive practices including using AI-generated reviews, censoring negative reviews and paying third parties for positive ones. 

"Fake reviews not only waste people's time and money, but also pollute the marketplace and divert business away from honest competitors," FTC Chair Lina M. Khan said in a news release. "By strengthening the FTC's toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice and promote markets that are fair, honest and competitive."

The problem is widespread, with new types of artificial intelligence tools able to write human-sounding, bogus product reviews, enabling bad actors to crank out far more fake ratings. 

Amazon proactively blocked more than 250 million suspected fake reviews from its store in 2023, the retailing giant said last month while announcing a joint lawsuit with the Better Business Bureau against one alleged broker of fake reviews. The action is not the first such suit filed by Amazon, which in 2022 accused administrators of more than 10,000 Facebook groups of coordinating fake reviews for money or free products.

Yelp reported more than 950 people to be engaged in deceptive review practices on its site in 2021. 

According to a U.S. PIRG estimate, between 30% and 40% of online reviews are "concocted or are in some way not genuine." Bogus reviews soared during the pandemic as U.S. shoppers turned to the internet for the bulk of their purchases instead of risking contact with others in stores, the consumer advocacy group noted. 

"We're using all available means to attack deceptive advertising in the digital age," said Samuel Levine, Director of the FTC's Bureau of Consumer Protection said in a statement in late June, when the agency first proposed its new rule. "The rule would trigger civil penalties for violators and should help level the playing field for honest companies."

Enforcement of the FTC's new rule starts 60 days after its publication in the Federal Register. 

Violators face a maximum civil penalty of $51,744 per violation, although courts can impose lesser amounts depending on the specifics of the case.