FTC warns companies it's cracking down on fake online reviews

FTC warns companies it's cracking down on fake online reviews
© Greg Nash

The Federal Trade Commission (FTC) on Wednesday warned businesses against the use of fake reviews and misleading endorsements, saying it was prepared to penalize companies that are caught misrepresenting their products.

"The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace. Fake online reviews and other deceptive endorsements often tout products throughout the online world," the FTC said in a press release.

The FTC said it sent Notice of Penalty Offenses to more than 700 companies and was "placing them on notice." These companies face fines of up to $43,792 per violation that the agency finds any. This is the maximum civil penalty for violating laws that the FTC enforces. This amount was increased at the beginning of 2021 from a previous penalty of $43,280.

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Companies can incur these penalties for numerous reasons including: falsely claiming an endorsement from a third party; misrepresenting whether an endorser actually uses the product; making deceptive performance claims; failing to disclose connections with an endorser; and misrepresenting typical consumer experience with their product.

Director of the FTC’s Bureau of Consumer Protection Samuel Levin said fake reviews and misleading endorsements undercut "honest businesses" and added that "advertisers will pay a price if they engage in these deceptive practices.”

The FTC noted that a company receiving a notice is not indicative that they have done anything wrong. Among the companies that received a notice in October were Apple Inc., AstraZeneca Pharmaceuticals, Comcast, Facebook, Google and Netflix.

Last week, the FTC similarly sent out a warning to for-profit colleges, saying it would impose “significant sanctions” on schools that engage in unlawful practices. The agency said notified 70 for-profit schools that it was "cracking down on any false promises they make about their graduates’ job and earnings prospects and other outcomes and will hit violators with significant financial penalties.”