On August 14, 2024, the Federal Trade Commission (FTC) issued its Rule on the Use of Consumer Reviews and Testimonials,1 effective October 21, 2024, which applies to businesses and others involved with reviews, testimonials, and endorsements and specifies various prohibitions. The FTC is empowered to enforce the rule and pursue civil penalties against violators.
In 2023, the FTC released the updated publication, Guides Concerning Use of Endorsements and Testimonials in Advertising, accompanied by the FTC’s Endorsement Guides: What People Are Asking. These publications are well known in the marketing community and are commonly incorporated into advertising practices and contracts involving influencers. This 2024 rule strengthens the FTC’s enforcement tools, providing the FTC with the authority to seek civil penalties against violators.
Covered Entities
The rule has certain prohibitions that are binding upon:
- businesses—individuals and entities that sell products or services;
- employees, owners, executives, and managing members of a business; and
- anyone who violates the rule’s prohibitions regarding fake indicators of social media influence.
Notably, the rule’s definition of “business” is not limited to product manufacturers and providers of services purchased by end users. As explained by the supplementary information published with the rule, advertisers, advertising agencies, public relations firms, review brokers, reputation management companies, and similar entities are covered by the rule’s definition of “business” because they are engaged in the sale of services. To the extent that endorsers sell reviews or testimonials, they, too, would fall within the scope of this definition.
Key Prohibitions
In summary, the rule generally prohibits:
- a business from writing, creating, selling, purchasing, or disseminating a consumer review, consumer testimonial, or celebrity testimonial that materially misrepresents, expressly or by implication:
- that the reviewer or testimonialist exists;
- that the reviewer or testimonialist used or otherwise had experience with the product, service, or business that is the subject of the review or testimonial; or
- the reviewer’s or testimonialist’s experience with the product, service, or business that is the subject of the review or testimonial.
- an officer or manager of a business from writing or creating a consumer review or consumer testimonial about the business or one of the products or services it sells that fails to have a clear and conspicuous disclosure of the officer’s or manager’s material relationship to the business, unless, in the case of a consumer testimonial, the relationship is otherwise clear to the audience;
- a business from disseminating a consumer testimonial about the business or one of the products or services it sells by one of its officers, managers, employees, or agents, which fails to have a clear and conspicuous disclosure of the testimonialist’s material relationship to the business;
- an officer or manager of a business from soliciting or demanding a consumer review about the business or one of the products or services it sells from any of their immediate relatives or from any employee or agent of the business;
- a business from materially misrepresenting, expressly or by implication, that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions;
- anyone from using an unfounded or groundless legal threat, physical threat, intimidation, or public false accusation in response to a consumer review that is made with the knowledge that the accusation was false or made with reckless disregard as to its truth or falsity in an attempt to:
- prevent a review or any portion thereof from being written or created; or
- cause a review or any portion thereof to be removed.
- a business from materially misrepresenting, expressly or by implication, that the consumer reviews of products or services it sells represent most or all the reviews submitted to its website or platform when reviews are being suppressed (i.e., not displayable) based upon their ratings or their negative sentiments;
- anyone from selling or distributing fake indicators of social media influence that they knew or should have known to be fake and that can be used by individuals or businesses to materially misrepresent their influence or importance for a commercial purpose; and
- anyone from purchasing or procuring fake indicators of social media influence that they knew or should have known to be fake and that materially misrepresent their influence or importance for a commercial purpose.
The rule provides an expansive definition of “fake indicators of social media influence,” covering “indicators of social media influence generated by bots, social media influence generated by bots, purported individual accounts not associated with a real individual, accounts created with a real individual’s personal information without their consent, or hijacked accounts, or that otherwise do not reflect a real individual’s or entity’s activities, opinions, findings, or experiences.” Businesses and individuals should take caution before buying, selling, or distributing followers and likes for social media accounts.
To comply with this rule, businesses and individuals should assess their internal operations and external communications, including their website and platform interfaces, advertising content, and marketing messaging. The assessment should include a review of their contract templates and terms of engagement for influencers and other providers of user-generated content. Businesses should update and align their contract templates with this rule. Notably, this rule provides several exceptions to the prohibitions generally described above. Therefore, a compliance plan should involve an analysis of the business’s particular marketing practices in view of these exceptions.
For more information about the FTC’s Rule on the Use of Consumer Reviews and Testimonials, please contact Renato Smith-Bornfreedom, Data Security & Technology Practice Area co-chair, at rsmith@barclaydamon.com, or another member of the firm’s Data Security & Technology Practice Area.
116 C.F.R. Part 465 (2024).