Tech

FTC fires warning shot at 700 leading companies about fake reviews

The Federal Trade Commission (FTC) says it will fine companies for using fake online reviews or other deceptive endorsements to deceive their customers.

The US government agency announced this on Wednesday after it sent letters warning over 700 leading companies not to use such unlawful practices in their online marketing and advertising campaigns, given that they could trigger steep penalties.

“Receipt of the notice puts your company on notice that engaging in conduct described therein could subject the company to civil penalties of up to $43,792 per violation,” said Serena Viswanathan, FTC Associate Director, in the letter.

“FTC staff is not singling out your company or suggesting that you have engaged in deceptive or unfair conduct. 

“We are widely distributing similar letters and the notice to large companies, top advertisers, leading retailers, top consumer product companies, and major advertising agencies.”

They were also asked to distribute the letter and the notice of penalty offenses to all subsidiaries selling services and products within the United States’ borders.

The complete list of companies that received FTC’s warning letter includes many high-profile companies, including Adobe, Amazon, Apple, AT&T, BestBuy, Burger King, Chipotle, Dell, eBay, Expedia, Google, KFC, Macy’s, Microsoft, McDonald’s, PayPal, Tesla, Uber, UPS, Valve, Walgreen, Walmart, Wendy’, Yelp, and many others.

As detailed in the notice received by hundreds of companies this week, the unlawful acts and practices that could lead to penalties include: 

  • falsely claiming an endorsement by a third party; misrepresenting that an endorser is an actual user, a current user, or a recent user; continuing to use an endorsement without good reason to believe that the endorser continues to subscribe to the views presented; 
  • misrepresenting that an endorsement represents the experience, views, or opinions of users or purported users; 
  • using an endorsement to make deceptive performance claims; 
  • failing to disclose an unexpected material connection with an endorser; 
  • and misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.

This warning was triggered by an explosion of deceptive endorsements and reviews across online marketplaces, a trend further amplified in recent years by social media making it increasingly hard to differentiate between advertising and authentic content.

FTC issued its first penalty offense concerning endorsements in 1941 against Wilbert W. Haase Co., Inc and the last one in 1984 against Cliffdale Assocs., Inc.

“Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses,” added Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.

“Advertisers will pay a price if they engage in these deceptive practices.”

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