No Faking! Click If You Love The FTC’s New Review Rules

How did the questionable restaurant down the street get so many great reviews? Paying for them? Generative AI? A free dessert for a review? That's what the Federal Trade Commission wants to know...and stop.

 On Wednesday (August 14, 2023), the FTC set final rules to fight the rise of fake reviews and testimonials appearing on review and retail sites. The commission prohibits several practices, with the key focus being to keep businesses from putting their thumb on the customer review scales. The prohibition includes limiting company-driven boosts of positive reviews via employee or contractor submissions, bots, incentives for positive reviews, outright paying someone to say nice things, or other efforts to create fake sunshine for their offerings. It also precludes companies from artificially suppressing negative reviews or driving negative reviews of competitors.

A not-so-cottage industry has arisen around the production of fake reviews. Amazon and other ecommerce sites have sought to limit fake reviews, through lawsuits, AI-driven technologies, and other efforts. Amazon claims to have blocked over 250 million fake reviews in 2023, revealing the scale of the problem (because Amazon didn’t likely catch all of the offenders).

While the new rule doesn't explicitly call out the use of generative AI to create fake reviews or boost ratings, you can bet the new innovation is on the minds of those facilitating or encouraging the new rules.

What About Influencers?

The increasing use of social video and influencers to review products will be an interesting test case for these new FTC rules. Influencer-based marketing has increased in use over the past few years, particularly with the growth of livestreams and short form video through TikTok, Facebook, Google, Instagram and other social platforms. Many creators have built deep, loyal followings among users interested in the influencer’s take on everything from makeup to power tools.

Amazon’s Creator University teaches influencers how to set up shoppable videos, enabling creators to capture a commission on viewer purchases. FTC regulations require disclosure if brands are paying or incenting influencers to promote products. Also, influencers are unlikely to maintain a substantial viewer following if they simply become shills for the highest paying brands. Yet, honest middling or negative reviews are unlikely to produce nearly the same commission payout as glowing endorsements – genuine or otherwise.

New innovations, and potential challenges, in influencer-related promotion are emerging in Asia. Livestream commerce is a huge business in China. Chinese financial services firm Everbright estimated that livestream e-commerce drove $63 billion in sales in 2019. This sector of China’s e-commerce industry has continued to grow, with livestream commerce – as well as the on-demand social video version – expanding into Europe, North America, and other regions. The latest advances in China now involve AI-created virtual avatars. These digital pitch people are fully controlled by the selling brand and designed to positively spin a product, much as any advertisement. However, as AI improves and consumers are less able to discern a human review from an AI-driven recommendation, the opportunity to sway influence will again be at stake.

If you like the new rule, be sure to give the FTC five stars. Unfortunately though, it won’t be giving out any more free desserts for positive reviews.