The Federal Trade Commission (FTC) recently introduced a regulation titled “Trade Regulation Rule on the Use of Consumer Reviews and Testimonials,” which targets the pervasive issue of fake reviews and misleading endorsements in online marketplaces. As e-commerce continues to dominate retail, the role of consumer reviews has become increasingly critical. According to a study by BrightLocal, 79% of consumers trust online reviews as much as personal recommendations, however, this trust is being undermined by the growing presence of fraudulent reviews, which distort consumer perception and unfairly influence purchasing decisions.

The FTC’s new rule, finalized after extensive public consultation, aims to mitigate these deceptive practices by enforcing stricter guidelines on how businesses collect, manage, and display consumer reviews. The regulation prohibits the creation or dissemination of fake reviews, suppressing legitimate negative reviews, or any form of manipulation that misrepresents consumer feedback. Importantly, the rule also holds businesses accountable for the actions of third-party service providers, such as marketing agencies that may engage in deceptive practices on their behalf. This aspect of the rule is particularly significant, as it broadens the scope of liability and places an additional burden on businesses to ensure compliance not just within their operations but also through any external partners.

While the FTC’s intentions are laudable, the rule presents several challenges in terms of implementation and enforcement. One of the primary difficulties lies in the detection and identification of fake reviews. Fake reviews are becoming increasingly sophisticated, making them hard to distinguish from authentic ones. For example, some fake reviews are written by individuals who have actually purchased the product but were compensated in some way for leaving a positive review. This creates a gray area where the review may technically be based on a real purchase, but the content is biased due to undisclosed incentives. Additionally, the use of artificial intelligence to generate fake reviews further complicates detection efforts. AI-generated reviews can be highly convincing, mimicking the language and tone of genuine customer feedback to a degree that makes them nearly impossible to spot using traditional methods.

Moreover, the burden of compliance may disproportionately affect small and medium-sized enterprises (SMEs). Larger corporations typically have the resources to implement sophisticated review management systems and employ legal teams to navigate the complexities of the new rule. In contrast, SMEs may struggle with the financial and logistical demands of ensuring compliance. The rule requires businesses to actively monitor and verify the authenticity of their reviews, which can be an expensive and resource-intensive process. As a result, some SMEs may err on the side of caution by removing reviews that they cannot fully verify, even if those reviews are legitimate. This could ultimately harm their online reputation and reduce the diversity of consumer opinions available to potential buyers. The rule also extends liability to businesses for the actions of third-party services that manage their reviews. This provision is intended to prevent businesses from outsourcing deceptive practices to avoid direct culpability. However, this aspect of the rule introduces new risks for businesses, particularly those that rely on external agencies for marketing and review management. Even with thorough vetting, businesses may find it challenging to ensure that their partners fully comply with the FTC’s standards. The risk of penalties for non-compliance, whether intentional or accidental, could deter some businesses from engaging with third-party services altogether, or lead to increased costs as they seek out partners with proven track records of compliance.

For consumers, the rule is a double-edged sword. On the one hand, it aims to protect them from being misled by fraudulent reviews, which is undoubtedly a positive outcome. However, the rule could also lead to unintended consequences that may limit the availability and variety of consumer feedback. If businesses become overly cautious about the reviews they publish, there may be a reduction in the overall number of reviews available online. This could deprive consumers of valuable insights that help them make informed purchasing decisions. Furthermore, the rule might encourage businesses to implement more stringent review policies, potentially leading to the suppression of legitimate negative feedback out of fear of appearing non-compliant.

The FTC’s rule also does not fully address the root causes of the fake review problem. The motivation behind the generation of fake reviews often stems from the intense competition in online marketplaces, where businesses feel pressured to maintain a positive image to attract customers. As long as consumer behavior remains heavily influenced by reviews, the incentive to manipulate them will persist. This suggests that while the rule may reduce some instances of deception, it is unlikely to eliminate the problem entirely. The proliferation of fake reviews is a symptom of a larger issue within the e-commerce ecosystem, where the emphasis on reviews as a primary decision-making tool can drive businesses to engage in unethical practices to stay competitive.

The FTC’s decision is a positive step toward promoting transparency and protecting consumers, it also raises several concerns about its practical implementation. The challenges of identifying fake reviews, the burden on smaller businesses, and the potential unintended consequences for consumers all point to the complexity of the issue.

János Tamás Papp JD, PhD is an assistant professor at Pázmány Péter Catholic University, Hungary, and a legal expert at the Department of Online Platforms of the National Media and Infocommunications Authority of Hungary. He has taught civil and constitutional law since 2015 and became a founding member of the Media Law Research Group of the Department of Private Law. He earned his JD and PhD in Law at the Faculty of Law and Political Sciences of the Pázmány Péter Catholic University. His main research fields are freedom of speech, media law, and issues related to freedom of expression on online platforms. He has a number of publications regarding social media and the law, including a book titled „Regulation of Social Media Platforms in Protection of Democratic Discourses