Trade Regulation Rule on the Use of Reviews and Endorsements, 67424-67430 [2022-24139]

Download as PDF 67424 Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Proposed Rules consumers, including the Telemarketing Sales Rule (‘‘TSR’’), the Funeral Rule, the Restore Online Shoppers’ Confidence Act (‘‘ROSCA’’), and the Rule Concerning the Use of Prenotification Negative Option Plans (‘‘Negative Option Rule’’). Is there evidence that we have been unable to address specific types of deceptive and unfair pricing practices, for example in the marketing of negative option transactions, with these marketingspecific rules? Do we need a rule that covers all transactions? If industryspecific rules have not prevented harm from pricing practices, how would additional rules bring about greater compliance? • The Funeral Rule’s goals are to lower barriers to price competition in the funeral goods and services market and to facilitate informed consumer choice. One way the Funeral Rule helps achieve these goals is to require funeral providers to ‘‘unbundle’’ the goods and services they sell and instead to offer them on an itemized basis. But this ANPR takes the opposite approach by favoring up-front, all-in pricing. How might this ANPR impact price transparency and competition? lotter on DSK11XQN23PROD with PROPOSALS1 Basis for the Rule • Section 18 rules must be based on ‘‘prevalent’’ deceptive or unfair practices. Notably, this ANPR references several potentially deceptive and unfair fees that have been the subject of FTC workshops, business guidance, and even investigations, but not enforcement actions. Can the FTC meet the requisite showing of prevalence without any underlying FTC enforcement? • What evidence, beyond law enforcement, can be used to demonstrate prevalence? Can a showing of prevalence be satisfied by a workshop or roundtable? News articles? Flawed Assumptions and Vague Definitions • The ANPR defines the term ‘‘junk fees’’ to include ‘‘fees for goods or services that are deceptive or unfair . . . whether or not the fees are described as corresponding to goods or services that have independent value to the consumer.’’ How should the Commission determine whether fees correspond to goods and services that consumers value? What percentage of consumers should be the threshold? A majority of consumers? A significant minority? • Do fees sometimes viewed as unnecessary by consumers reflect attempts by businesses to recover incremental costs? Is it reasonable for businesses to impose fees to recover VerDate Sep<11>2014 16:18 Nov 07, 2022 Jkt 259001 incremental costs? What percentage of incremental costs can a business recover before it becomes a ‘‘junk fee’’? • The ANPR defines ‘‘junk fees’’ to include ‘‘goods or services that consumers would reasonably assume to be included within the overall advertised price.’’ What evidence does the FTC need to demonstrate consumer expectations about what services, products, or fees are covered by a published price? Should the FTC be required to demonstrate quantitative or qualitative measures of consumer expectations? • The ANPR defines ‘‘hidden fees’’ as fees that ‘‘are deceptive or unfair, including because they are disclosed only at a later stage in the consumer’s purchasing process or not at all.’’ At what point in a transaction should fees be disclosed to consumers? Is disclosing a fee before a consumer makes a purchase too late? Should disclosures occur at the same point in a transaction regardless of the industry or market? Why or why not? • The ANPR indicates that the Commission is exploring the ‘‘costs and benefits of a rule that would require upfront inclusion of any mandatory fees whenever consumers are quoted a price for a good or service.’’ How would this proposal work for dynamic fees, like shipping and handling, that are based on consumer input? • The ANPR asserts that ‘‘junk fees . . . facilitate inflation.’’ What evidence points to a connection between fees and inflation? Impact on Competition • To what extent does competition discipline suboptimal pricing practices? • Would a government requirement for all-in pricing facilitate coordination among regulated companies in the same industry? • Could a potential rule incentivize all-in pricing and the bundling of products and services, which would then require consumers to pay for goods and services they may not want or need? Opportunity Costs • In 2022, including proposals that I anticipate will be voted out during the open Commission meeting, the FTC has initiated the rulemaking process for a total of six new rules. These massive regulatory undertakings require substantial FTC resources. To what extent does our current rulemaking agenda divert resources from our primary law enforcement mandate? Are there other risks associated with our apparent attempt to become a powerful legislature? PO 00000 Frm 00028 Fmt 4702 Sfmt 4702 Æ Are there existing or emerging threats to consumers and competition we are not pursuing because resources are focused on rules instead of cases? Æ Will the credibility of the FTC be tarnished if we pursue broad rulemaking efforts without qualitative and quantitative evidence of consumer injury? [FR Doc. 2022–24326 Filed 11–7–22; 8:45 am] BILLING CODE 6750–01–P FEDERAL TRADE COMMISSION 16 CFR Part 465 Trade Regulation Rule on the Use of Reviews and Endorsements Federal Trade Commission. ACTION: Advance notice of proposed rulemaking; request for public comment. AGENCY: The Federal Trade Commission (the ‘‘Commission’’) proposes to commence a rulemaking proceeding to address certain deceptive or unfair uses of reviews and endorsements. The Commission is soliciting written comment, data, and arguments concerning the need for such a rulemaking to prevent unfair or deceptive marketing utilizing reviews and endorsements. In addition, the Commission solicits comment on how the Commission can ensure the broadest participation by affected interests in the rulemaking process. DATES: Comments must be received on or before January 9, 2023. ADDRESSES: Interested parties may file a comment online or on paper by following the instructions in the Comment Submissions part of the SUPPLEMENTARY INFORMATION section below. Write ‘‘Reviews and Endorsements ANPR, P214504’’ on your comment, and file your comment online at https://www.regulations.gov. If you prefer to file your comment on paper, mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC– 5610 (Annex B), Washington, DC 20580. FOR FURTHER INFORMATION CONTACT: Michael Ostheimer (202–326–2699), mostheimer@ftc.gov, or Michael Atleson (202–326–2962), matleson@ftc.gov, Division of Advertising Practices, Bureau of Consumer Protection, Federal Trade Commission, Room CC–10603, 600 Pennsylvania Avenue NW, Washington, DC 20580. SUPPLEMENTARY INFORMATION: SUMMARY: E:\FR\FM\08NOP1.SGM 08NOP1 Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Proposed Rules I. General Background Information The Commission is publishing this advance notice of proposed rulemaking pursuant to Section 18 of the Federal Trade Commission (‘‘FTC’’) Act, 15 U.S.C. 57a, and the provisions of Part 1, Subpart B of the Commission’s Rules of Practice, 16 CFR 1.7–1.20, and 5 U.S.C. 553. This authority permits the Commission to promulgate, modify, and repeal trade regulation rules that define with specificity acts or practices that are unfair or deceptive in or affecting commerce within the meaning of Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1). II. Objectives the Commission Seeks To Achieve and Possible Regulatory Alternatives A. Rulemaking Addressing Endorsements and Testimonials lotter on DSK11XQN23PROD with PROPOSALS1 1. Background Fake and deceptive reviews and other endorsements have long been problematic, and we have no reason to believe the market will correct this problem on its own. The commercial incentives to engage in such misconduct can be large. It can be difficult for anyone—including consumers, competitors, platforms, and researchers—to distinguish real from fake and determine the truth in this area. Further, some platforms may have mixed incentives to deal effectively with the problematic reviews and, despite some platforms purporting to take enforcement of problematic reviews seriously, fake and deceptive reviews continue to flourish on those very platforms. The sheer number of people engaged in fraudulent or deceptive reviews and endorsements makes them even more difficult to combat, especially given such content is often created by individuals or small companies, some of whom are located abroad. Although the Commission has brought several cases involving reviews and other endorsements under Section 5 of the FTC Act, 15 U.S.C. 45, our current remedial authority is limited. Monetary relief is no longer available under Section 13(b),1 disgorgement is not available under Section 19(b), 15 U.S.C. 57b(b), and, while the Commission has deployed new tools to combat this problem, in many cases, it remains difficult to obtain monetary relief.2 1 AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021). 2 In October 2021, the Commission announced the issuance of a Notice of Penalty Offenses which can allow the FTC to obtain civil penalties from marketers that use fake reviews. See www.ftc.gov/ VerDate Sep<11>2014 16:18 Nov 07, 2022 Jkt 259001 Under these circumstances, the availability of a civil penalty remedy may provide a potent deterrent. We believe initiating a Magnuson-Moss rulemaking to address certain types of clear Section 5 violations involving reviews and endorsements would benefit consumers, help level the playing field, and not burden legitimate marketers. The rule would be designed to deter bad actors, simplify our enforcement burdens by spelling out prohibitions plainly, and subject violators to civil penalties. The Commission has well-established guidance on endorsements and testimonials. In particular, the Endorsement Guides reportedly remain very helpful to legitimate actors in the marketplace,3 but Commission guides are not enforceable regulations. Truly bad actors will not be deterred by Commission guidance, but the possibility of substantial civil penalties changes the economic incentives and may provide greater deterrence as to both legitimate and bad actors. 2. Objectives and Regulatory Alternatives The Commission requests input on whether and how it should use its authority under Section 18 of the FTC Act, 15 U.S.C. 57a, to address certain inarguably deceptive or unfair commercial acts or practices involving reviews or other endorsements. The Commission does not propose to cover every issue addressed in the Endorsement Guides. Specifically, the Commission proposes addressing the following practices, many of which have been the subject of Commission investigations or law enforcement actions: (a) reviews or endorsements by enforcement/penalty-offenses/endorsements. Such notices, however, are limited to practices addressed in prior fully litigated administrative decisions, only apply to marketers that engaged in covered misconduct after receipt of the notice, and do not provide for or allow consumer redress. The Commission can still obtain consumer redress through Section 19(a)(2) of the FTC Act if the Commission can satisfy a court that a reasonable person would have known the act or practice at issue was dishonest or fraudulent. See, e.g., Order at 2–4, Fashion Nova LLC, No. C–4759 (Mar. 18, 2022) (company that suppressed negative reviews agreed to pay $4.2 million). If the marketer refuses to settle, such relief can only be obtained in federal court after a fully litigated administrative decision. Furthermore, redress in matters involving deceptive review practices can be very difficult to calculate and disgorgement and civil penalties are not available through such proceedings. 3 Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 CFR part 255. In an ongoing regulatory review of the Endorsement Guides, the Commission received over one hundred public comments, most of which noted the Guides are beneficial and should be retained, and none of which disagreed. See 87 FR 44288, 44289–44290 (July 26, 2022). PO 00000 Frm 00029 Fmt 4702 Sfmt 4702 67425 people who do not exist, who did not actually use or test the product or service, or who are misrepresenting their experience with it; 4 (b) review 4 The Commission has challenged fabricated consumer reviews. See, e.g., Complaint 9–17, FTC v. Roomster Corp., No. 1:22–CV–07389 (S.D.N.Y. Aug. 30, 2022) (purchase and sale of fake app store and other reviews for room and roommate finder app and platform); Complaint at 2–4, Sunday Riley Modern Skincare, LLC, No. C–4729 (Nov. 6, 2020) (company personnel created fake accounts to write fake reviews of company’s products on third-party retailer’s website); Complaint at 12–13, 15–16, Shop Tutors, Inc., No. C–4719 (Feb. 3, 2020) (reviews of LendEDU were fabricated by its employees, other associates, or their friends and published on a thirdparty website); Complaint at 20, FTC v. Cure Encapsulations, Inc., No. 1:19–cv–00982 (E.D.N.Y. Feb. 26, 2019) (Amazon reviews of defendants’ product were fabricated by one or more third parties whom defendants had paid to generate reviews). It has similarly challenged fictitious endorsements. See, e.g., Complaint at 14, 19, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv–3423 (D. Colo. Dec 5, 2019) (fake consumer testimonials); Complaint at 20–22, 31, Global Cmty. Innovations LLC, No. 5:19–CV–00788 (N.D. Ohio Apr. 10, 2019) (fake consumer testimonials); Complaint at 27–28, 43, Jason Cardiff (Redwood Sci. Techs., Inc.), No. ED 18–cv–02104 SJO (C.D. Cal. Oct. 24, 2018) (testimonials in infomercial were paid actors who had not used defendants’ product); Complaint at 12–3, 20, FTC v. Mktg. Architects, Inc., No. 2:18– cv–00050–NT (D. Me. Feb. 5, 2018) (fake testimonials); Complaint at 14, 21, FTC v. Health Rsch. Labs., LLC, No. 2:17–cv–00467–JDL (D. Me. Nov. 30, 2017) (fake consumer testimonials and expert endorsements); Complaint at 13, 18, 28, XXL Impressions LLC, No. 1:17–cv–00067–NT (D. Me. Feb. 22, 2017) (defendants do not know whether consumer endorsers of their products who appeared in their ads actually exist); Complaint at 5, 7, 12– 13, FTC v. Anthony Dill, No. 2:16–cv–00023–GZS (D. Me. Jan. 19, 2016) (fake testimonials); Amended Complaint at 38–39, 43–44, FTC v. Lisa Levey, No. 03–4670 GAF (C.D. Cal. Mar. 8, 2004) (fictitious expert endorsements). It has also challenged false claims that specific celebrities endorsed specific products, services, or businesses. See, e.g., Complaint at 15, 19–20, 30–31, Global Cmty. Innovations LLC, No. 5:19–CV–00788 (N.D. Ohio Apr. 10, 2019); Complaint at 5, 18–20, 22–23, 36, FTC v. Tarr, Inc., No. 3:17–cv–02024–LAB–KSC (S.D. Cal. Oct. 3, 2017); Complaint at 13–15, 18, Sales Slash, LLC, No CV15–03107 (C.D. Cal. Apr. 27, 2015); Complaint at 2, 4–5, Norm Thompson Outfitters, Inc., No. C–4495 (Sept. 29, 2014); The Raymond Lee Org., Inc., 92 F.T.C. 489 (1978) (use of the names, photographs and words of public officials, including members of the Congress, misled consumers that the officials recommended or endorsed the business). It has similarly challenged false claims of endorsements by specific entities. See, e.g., Complaint at 15–16, 18, FTC v. Mercola.com, LLC, No. 1:16–cv–04282 (N.D. Ill. Apr. 13, 2016) (misrepresentation the FDA endorsed the use of indoor tanning systems as safe); Mytinger & Casselberry, Inc., 57 F.T.C. 717, 743–46 (1960) (misrepresentation that a consent decree restraining respondents from making certain claims was an endorsement by the U.S. government of its product); Trade Union Courier Publ’g Corp., 51 F.T.C. 1275, 1300–03 (1955) (misrepresentation that newspaper was endorsed by the American Federation of Labor when it was only endorsed by some unions within the AFL); Ar-Ex Cosms., Inc., 48 F.T.C. 800, 806 (1952) (misrepresentation that lipstick had been recommended by Consumers’ Research); A. P. W. Paper Co., Inc., 38 F.T.C. 1, 15– 17 (1944) (misrepresentation that product was endorsed by the American Red Cross); Wilbert W. E:\FR\FM\08NOP1.SGM Continued 08NOP1 67426 Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS1 hijacking, where a seller steals or repurposes reviews of another product; (c) marketers offering compensation or other incentives in exchange for, or conditioned on, the writing of positive or negative consumer reviews; 5 (d) owners, officers, or managers of a company: (i) writing reviews or testimonials of their own products or services, or publishing testimonials by their employees or family members, which fail to provide clear and conspicuous disclosures of those relationships, or (ii) soliciting reviews from employees or relatives without instructing them to disclose their relationships; 6 (e) the creation or Haase Co., Inc., 33 F.T.C. 662, 681–83 (1941) (misrepresentation that insurance company had endorsed burial vault business and its vaults). Furthermore, the Commission has challenged advertisements that misrepresent endorsers’ experiences. See, e.g., Complaint at 14, 18, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv–3423 (testimonialists had used a prior product formulation that contained substantially different ingredients); Complaint at 22, 25, NextGen Nutritionals, LLC, No. 8:17–cv–2807–T–36AEP (M.D. Fla. Jan. 9, 2018) (testimonials in ads misrepresented the actual experiences of customers); Complaint at 22–24, 27, FTC v. Russel T. Dalbey, No. 1:11–cv–01396–CMA—KLM (D. Colo. May 26, 2011) (testimonials misrepresented earnings from brokering promissory notes using defendants’ system); Computer Bus. Servs., Inc., 123 F.T.C. 75, 78–79 (1997) (testimonials by purchasers of home-based business ventures did not reflect their actual experiences); R. J. Reynolds Tobacco Co., 46 F.T.C. 706, 731–32 (1950) (endorsements communicated endorsers exclusively smoked Camel cigarettes whereas they did not smoke cigarettes, did not smoke Camels exclusively, or could not tell the difference between Camels and other cigarettes). 5 The Commission has challenged giving an incentive for a review or endorsement and requiring that it be positive. See, e.g., Complaint at 14, 19– 20, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv– 3423 (offered consumer endorsers with free product in exchange for ‘‘especially positive and inspiring’’ reviews); Complaint at 5–6, 8, Urthbox, Inc., No. C– 4676 (Apr. 3, 2019) (deceptively provided compensation for the posting of positive reviews on the BBB’s website and other third-party websites); Complaint at 2–3, AmeriFreight, Inc., No. C–4518 (Feb. 27, 2015) (every month past customers were encouraged to submit reviews of respondent’s services in order to be eligible for a $100 ‘‘Best Monthly Review Award’’, given to ‘‘the review with the most captivating subject line and best content’’ and that they should ‘‘be creative and try to make your review stand out for viewers to read!’’). 6 The Commission has challenged such conduct. See, e.g., Complaint at 2–4, Sunday Riley Modern Skincare, LLC, No. C–4729 (Nov. 6, 2020) (company owner and managers asked company employees to write product reviews on third-party retailer’s website); Complaint at 15, 19–20, FTC v. Health Ctr., Inc., No. 2:20–cv–00547 (D. Nev. Mar. 19, 2020) (defendants used testimonials from their employees that purported to be from ordinary consumers); Complaint at 14, 19, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv–3423 (ads include testimonial by 50% owner and officer); Complaint at 5–6, 8–9, Mikey & Momo, Inc., No. C– 4655 (May 3, 2018) (Amazon reviews written by company officer and her relatives); Complaint at 21, 25–26, FTC v. NutriMost LLC, No. 2:17–cv–00509– NBF (W.D. Pa. Apr. 20, 2017) (testimonials in ads were from licensees or franchisees, their relatives, VerDate Sep<11>2014 16:18 Nov 07, 2022 Jkt 259001 operation of websites, organizations, or entities that purportedly provide independent reviews or opinions of products or services but are, in fact, created and controlled by the companies offering the products or services; 7 (f) misrepresenting that the consumer reviews displayed represent most or all of the reviews submitted when, in fact, reviews are being suppressed based upon their negativity; 8 (g) the or their employees); Complaint at 10, 12, FTC v. Aura Labs, Inc., No. 8:16–cv–02147 (C.D. Cal. Dec. 12, 2016) (app store review and website testimonials by CEO or relatives of Chairman); Complaint at 25–27, 32–33, FTC v. Universal City Nissan, Inc., No. 2:16–cv–07329 (C.D. Cal. Sept. 29, 2016) (customer reviews on third-party websites written by managers); Complaint at 19, 21, FTC v. Genesis Today, Inc., No. 1:15–cv–00062 (W.D. Tex. Jan. 26, 2015) (video testimonials to which defendants’ promotional materials linked were provided by defendants’ employees); Complaint at 10, U.S. v. Spokeo, Inc., No. 2:12–cv–05001–MMM– SH (C.D. Cal. June 7, 2012) (defendant directed its employees to draft endorsements and post them on news and technology websites); Gisela Flick, 116 F.T.C. 1108, 113–14 (1993) (infomercial endorsement by company’s Athletic Director). 7 The Commission has challenged sellers who control websites claiming to provide independent opinions of products. See, e.g., Complaint at 2, 8– 9, Son Le., No. C–4619 (May 31, 2020) (respondents operated purportedly independent websites that reviewed their own trampolines); Complaint at 19– 20, 28, FTC v. Roca Labs, Inc., No. 8:15–cv–02231– MSS–TBM (M.D. Fla. Sept. 24, 2015) (defendants operated Gastricbypass.me website, a purported independent, objective resource, which endorsed defendants’ products); Complaint at 21–25, 28, FTC v. NourishLife, LLC, No. 1:15–cv–00093 (N.D. Ill. Jan. 7, 2015) (defendants operated Apraxia Research website, a purported independent, objective resource, which endorsed a type of supplement sold only by defendants). It has also challenged sellers who control purportedly independent organizations or entities that reviewed or approved the sellers’ products or services. See, e.g., Complaint at 3–5, Bollman Hat Co., No. C–4643 (Jan. 23, 2018) (respondents created seal misrepresenting that independent organization endorsed their products as made in the United States); Complaint at 18–20, 26, NextGen Nutritionals, LLC, No. 8:17–cv–2807– T–36AEP (M.D. Fla. Jan. 9, 2018) (misrepresentation that sites displaying the Certified Ethical Site Seal were verified by an independent, third-party program); Complaint at 2–4, Moonlight Slumber, LLC, No. C–4634 (Sept. 28, 2017) (respondent misrepresented that baby mattresses had been certified by Green Safety Shield, when in fact the shield was its own designation); Complaint at 4–6, Benjamin Moore & Co., Inc., No. C–4646 (July 11, 2017) (respondent used seal of its own creation to misrepresent that paints had been endorsed or certified by independent third party); Complaint at 2–4, ICP Constr. Inc., No. 4648 (July 11, 2017) (same); Complaint at 2–3, Ecobaby Organics, Inc., No. C–4416 (July 25, 2013) (manufacturer misrepresented seal was awarded by industry association when in fact it created and controlled that association); Complaint at 2–4, Nonprofit Mgmt. LLC, No. C–4315 (Jan. 11, 2011) (respondents misrepresented their seal program was endorsed by two associations when in fact a respondent owned and operated them); Complaint at 34, 37, FTC v. A. Glenn Braswell, No. 2:03–cv–03700–DT–PJW (C.D. Cal. May 27, 2003) (defendants established Council on Natural Nutrition and then misrepresented it was an independent organization of experts who had endorsed defendants’ products). 8 The Commission has challenged the suppression of customer reviews based upon their PO 00000 Frm 00030 Fmt 4702 Sfmt 4702 suppression of customer reviews by physical threat or unjustified legal threat; 9 or (h) selling, distributing, or buying, followers, subscribers, views, and other indicators of social media influence.10 The Commission hopes that by focusing on practices most clearly and inarguably deceptive or unfair, it can streamline its rulemaking, benefit consumers, and not burden legitimate marketers. The Commission seeks comment on, among other things, the prevalence of each of the above practices, the costs and benefits of a rule that would address them, and alternatives to such a rulemaking, such as the publication of additional consumer and business education. In their replies, commenters should provide any available evidence and data that supports their position, such as empirical data, consumer perception studies, and consumer complaints. 3. The Rulemaking Process The Commission seeks the broadest participation by the affected interests in the rulemaking. To that end, the Commission will proceed through an ‘‘open rulemaking,’’ which will provide all affected interests numerous opportunities to submit comments and to participate in the rulemaking process. The Commission encourages all interested parties to submit written comments. The Commission also expects the affected interests to assist the Commission in analyzing various options and in drafting a proposed rule. The Commission believes public workshop conferences to discuss the various issues involving the rule are a productive and efficient means to develop the record and explore various alternatives. The Commission will also use public workshop conferences to assist the Commission in drafting a proposed rule. negativity. See Complaint at 1–2, Fashion Nova LLC, No. C–4759 (Mar. 18, 2022). Commission staff has also addressed the issue in a closing letter. See Letter from Serena Viswanathan, Acting Associate Director, Division of Advertising Practices to Amy R. Mudge and Randall M. Shaheen, Counsel for Yotpo, Ltd. (Nov. 17, 2020), https://www.ftc.gov/ system/files/documents/closing_letters/nid/202_ 3039_yotpo_closing_letter.pdf. 9 The Commission has challenged review suppression through threats and intimidation as unfair. See Complaint at 8–10, 12, World Patent Mktg., Inc., No. 1:17–cv–20848–DPG (S.D. Fla. Mar. 6, 2017). 10 The Commission has challenged the sale of fake indicators of social media influence, such as fake Twitter followers. See Complaint at 5, FTC v. Devumi, LLC, No. 9:19–cv–81419–RKA (S.D. Fla. Oct. 18, 2019). E:\FR\FM\08NOP1.SGM 08NOP1 Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Proposed Rules 4. Public Workshop Conferences In order to facilitate the greatest participation by the public in the rulemaking process, Commission staff will hold several public workshop conferences to discuss the issues noted above. Staff will announce a schedule of these conferences after the close of the comment period. lotter on DSK11XQN23PROD with PROPOSALS1 III. Request for Comments Members of the public are invited to comment on any issues or concerns they believe are relevant or appropriate to the Commission’s consideration of the proposed rulemaking. The Commission requests factual data upon which the comments are based be submitted with the comments. In addition to the issues raised above, the Commission solicits public comment on the specific questions identified below. These questions are designed to assist the public and should not be construed as a limitation on the issues on which public comment may be submitted. Please identify the evidence and data source(s) that support each of your answers. Questions (1) How widespread is the marketing of products or services using: a. reviews or other endorsements by nonexistent individuals or by those who did not actually use or test the product or service; b. reviews or other endorsements by individuals who are misrepresenting their experiences with a product or service; c. review hijacking (where a seller steals or repurposes reviews from another product); d. paid or incentivized consumer reviews that were required to be positive or required to be negative (if of a competitor’s product); e. consumer reviews written by the owners, officers, or employees of the company offering the product or service, or their family members; or f. Websites or other organizations or devices that purportedly provide independent reviews or opinions of products or services but are in fact created and controlled by the companies offering the products or services? (2) How widespread is the suppression of negative consumer reviews: a. on retailer websites because the retailers filter out and do not publish negative reviews; or b. by marketers threatening the authors of the reviews (other than through the form contract provisions prohibited by the Consumer Review Fairness Act)? VerDate Sep<11>2014 16:18 Nov 07, 2022 Jkt 259001 (3) How widespread is: a. the sale of followers, subscribers, views, and other indicators of social media influence; b. the purchase and use for commercial purposes of followers, subscribers, views, and other indicators of social media influence? (4) For each of the practices described in Questions 1 through 3, above, does the practice cause consumer injury? If so, what evidence demonstrates such practices cause consumer injury? (5) For each of the practices described in Questions 1 through 3, above, does the practice cause injury to competition? If so, what evidence demonstrates such practices cause injury to competition? (6) For each of the practices described in Questions 1 through 3, above, are there circumstances in which such practices would not be deceptive or unfair? If so, what are those circumstances and could and should the Commission exclude such circumstances from the scope of any rulemaking? Why or why not? (7) Please provide any evidence concerning consumer perception of, or experience with, consumer reviews or other endorsements relevant to the practices described in Questions 1 through 3, above. (8) What existing laws and regulations, other than the FTC Act, if any, cover the practices described in Questions 1 through 3, above? How do those laws affect consumers? How do those laws affect businesses, particularly small businesses? (9) What actions, if any, have platforms taken to address the practices described in Questions 1 through 3, above? Have those actions been effective in reducing consumer harm associated with the practices described in Questions 1 through 3, above? Why or why not? (10) What actions have others taken to facilitate or enable the practices described in Questions 1 through 3, above? For example, what types of services specifically allow marketers to engage in these practices, and who is providing these services? (11) Is there a need for new regulatory provisions to prevent the practices described in Questions 1 through 3, above? If yes, why? If no, why not? What evidence supports your answer? (12) How should a rule addressing the practices described in Questions 1 through 3, above, be crafted to maximize the benefits to consumers while minimizing the costs to businesses under either approach? What evidence supports your answer? PO 00000 Frm 00031 Fmt 4702 Sfmt 4702 67427 (13) Do current or impending changes in technology or market practices affect whether and how a rulemaking should proceed? If so, what are such changes and how do they affect whether and how a rulemaking should proceed? (14) Are there foreign or international laws, regulations, or standards addressing reviews or endorsements the Commission should consider as to whether and how a rulemaking should proceed? If so, what are they? Should the Commission consider adopting, or avoiding, any of these? If so, why? If not, why not? (15) Should the Commission consider additional consumer and business education to reduce consumer harm associated with the practices described in Questions 1 through 3, above? If so, what should such education materials include, and how should the Commission communicate that information to consumers and businesses? (16) What alternatives to regulations should the Commission consider when addressing the practices described in Questions 1 through 3, above? Would those alternatives obviate the need for regulation? If so, why? If not, why not? What evidence supports your answer? (17) Are there other commercial acts or practices involving reviews or other endorsements that are inarguably deceptive or unfair that should be addressed in the proposed rulemaking? If so, describe the practices. How widespread are the practices? Please answer Questions 4 through 8, 10, 11, 14, and 15 with respect to the practices. IV. Comment Submissions You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before January 9, 2023. Write ‘‘Reviews and Endorsements ANPR, P214504’’ on your comment. Your comment— including your name and your state— will be placed on the public record of this proceeding, including, to the extent practicable, on the https:// www.regulations.gov website. Because of the agency’s heightened security screening, postal mail addressed to the Commission will be subject to delay. We strongly encourage you to submit your comments online through the https://www.regulations.gov website. To ensure the Commission considers your online comment, please follow the instructions on the webbased form. If you file your comment on paper, write ‘‘Reviews and Endorsements ANPR, P214504’’ on your comment and on the envelope, and mail your comment to the following address: E:\FR\FM\08NOP1.SGM 08NOP1 lotter on DSK11XQN23PROD with PROPOSALS1 67428 Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Proposed Rules Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex B), Washington, DC 20580. Because your comment will be placed on the public record, you are solely responsible for making sure your comment does not include any sensitive or confidential information. In particular, your comment should not contain sensitive personal information, such as your or anyone else’s Social Security number; date of birth; driver’s license number or other state identification number or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for making sure your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any ‘‘[t]rade secret or any commercial or financial information which . . . is privileged or confidential’’—as provided in Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule § 4.10(a)(2), 16 CFR 4.10(a)(2)—including in particular competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names. Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled ‘‘Confidential,’’ and must comply with FTC Rule § 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request and must identify the specific portions of the comment to be withheld from the public record. See FTC Rule § 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted publicly at www.regulations.gov—as legally required by FTC Rule § 4.9(b)—we cannot redact or remove your comment, unless you submit a confidentiality request that meets the requirements for such treatment under FTC Rule § 4.9(c), and the General Counsel grants that request. Visit the FTC website to read this document and the news release describing it. The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments it VerDate Sep<11>2014 16:18 Nov 07, 2022 Jkt 259001 receives on or before January 9, 2023. For information on the Commission’s privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/ privacy-policy. By direction of the Commission, Commissioner Wilson dissenting. April J. Tabor, Secretary. Note: The following statements will not appear in the Code of Federal Regulations. Statement of Chair Lina M. Khan Online shopping runs on reviews. When you’re in a brick-and-mortar store, you can see the inventory. If it’s a couch, you can sit on it. If it’s a TV, you can watch it. But when you’re shopping online, it’s much harder to know what you’re actually buying. That’s why reviews are so crucial. If 500 other people have bought something and say it works, you can have a lot more confidence. But what if those people were paid to leave those positive reviews? Or what if they’re bots? What if the seller is hiding a thousand one-star reviews? That’s the dilemma when you shop online. Reviews are essential, but it’s hard to know when they can be trusted. Precisely because of the importance of reviews, firms can face powerful incentives to game the system. Businesses have been caught leaving positive reviews for their own products or services, suppressing negative ones, and boosting bad reviews of their competitors.1 The incentives extend beyond the seller of the product itself. The platforms that host reviews may also, in some instances, benefit indirectly from fake ratings and endorsements and have financial incentives to turn a blind eye to misconduct that brings in revenue. These practices don’t only harm the consumers who place their trust in fake reviews. They also pollute the marketplace and put honest businesses at a competitive disadvantage. The Commission has brought several enforcement actions to address this issue. In January, for example, the Commission settled allegations that the fast-fashion company Fashion Nova had 1 See, e.g., Sherry He, et al., The Market for Fake Reviews, 41 Mktg. Sci. 896 (2020) (measuring the impact of fake reviews on Amazon sales); Theodore Lappas, et al., The Impact of Fake Reviews on Online Visibility: A Vulnerability Assessment of the Hotel Industry, 27 Info. Sys. Rsch. 940 (2016); Renee DiResta, Manipulating Consumption, Medium (Jun. 29, 2018), https://medium.com/@ noupside/manipulating-consumption42f2e9013d0b. PO 00000 Frm 00032 Fmt 4702 Sfmt 4702 suppressed negative reviews.2 And in August, the Commission, along with several state attorneys general, sued Roomster for allegedly flooding its rental listing marketplace with phony reviews.3 In addition to enforcement activity, the Commission has used other authorities to try to address market-wide problems with fake reviews. Last year, the Commission put more than 700 companies on notice regarding its litigated decisions in this area, which triggered the FTC’s penalty offense authority.4 This past May, the Commission also proposed revisions to tighten its guidelines for advertisers who use endorsements and reviews and to warn social media platforms about inadequate disclosure. With today’s advance notice of proposed rulemaking, the Commission is seeking comment from the public on whether rulemaking would be an appropriate way to address the problem more systemically. A rulemaking here would provide benefits beyond the agency’s other powers. The Supreme Court decision in AMG Capital Management, LLC v. FTC substantially limited our ability to seek monetary relief for harmed consumers.5 A rule against fake reviews could enable us to obtain civil penalties and return money to consumers injured as a result of 2 Press Release, Fed. Trade Comm’n, Fashion Nova will Pay $4.2 Million as part of Settlement of FTC Allegations it Blocked Negative Reviews of Products (Jan. 25, 2022), https://www.ftc.gov/newsevents/news/press-releases/2022/01/fashion-novawill-pay-42-million-part-settlement-ftc-allegationsit-blocked-negative-reviews. 3 Press Release, Fed. Trade Comm’n, FTC, States Sue Rental Listing Platform Roomster and Its Owners for Duping Prospective Renters with Fake Reviews and Phony Listings (Aug. 30, 2022), https://www.ftc.gov/news-events/news/pressreleases/2022/08/ftc-states-sue-rental-listingplatform-roomster-its-owners-duping-prospectiverenters-fake-reviews. In addition, in 2019, the FTC sued a company called Synovia for marketing a fake arthritis cure with fake testimonials and fake doctor endorsements. Press Release, Fed. Trade Comm’n, FTC Stops Marketers from Making False Arthritis Treatment Claims (Dec. 5, 2019), https:// wwhw.ftc.gov/news-events/news/press-releases/ 2019/12/ftc-stops-marketers-making-false-arthritistreatment-claims. In January of this year, the Commission settled with Vision Path for, among other things, failing to disclose that one of its own senior employees posted a positive review on the BBB website. Press Release, Fed. Trade Comm’n, Vision Path, Inc., Online Seller of Hubble Lenses, Settles Charges it Violated the Contact Lens Rule and FTC Act to Boost Sales (Jan. 28, 2022), https:// www.ftc.gov/news-events/news/press-releases/2022/ 01/vision-path-inc-online-seller-hubble-lensessettles-charges-it-violated-contact-lens-rule-ftc-act. 4 Fed. Trade Comm’n, Penalty Offenses Concerning Endorsements, https://www.ftc.gov/ enforcement/penalty-offenses/endorsements. 5 AMG Capital Mgmt. v. FTC, 141 S. Ct. 1341 (2021). E:\FR\FM\08NOP1.SGM 08NOP1 Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Proposed Rules deceptive or unfair reviews and endorsements. I am grateful to staff for their hard work on this ANPR. And I am happy to cast my vote in favor of beginning this process. It’s critical that the Commission use all its authorities in order to prohibit unfair or deceptive practices— and to help consumers who have been harmed by them. I look forward to hearing from the public and stakeholders as the agency embarks on the rulemaking process. Statement of Commissioner Rebecca Kelly Slaughter lotter on DSK11XQN23PROD with PROPOSALS1 Online reviews and endorsements of products and services play a powerful role in influencing consumer choices. From 1996 to 2018, 233 million product reviews were posted on Amazon alone.1 Last month, my own fridge unexpectedly broke down and I had to scramble to find a repairman. Like many consumers, I relied on online reviews and other endorsements to decide whom to hire for this important task. The importance of consumer reviews to modern commerce makes the problem of fake and deceptive reviews even more pernicious. Companies like Yelp flag about 25% of reviews as ‘‘less reliable’’ and a recent report found that 10.7% of all Google reviews are fake.2 These practices harm not only consumers, but also mom-and-pop businesses, like my new and excellent appliance repairman, who rely on online reviews to attract new customers. So, I’m pleased to support today’s publication of this Advance Notice of Proposed Rulemaking on Reviews and Endorsements to help ensure that people have accurate information about the products and services they buy. The ANPR asks important questions about the prevalence of these practices. Our inquiry here asks questions about practices from fake reviews by nonexistent people, or people who have never actually used the product, to review suppression, and the practice of buying followers or subscribers as an indicator of social media influence. I hope that an open inquiry into these practices will also be illuminating for 1 See Jianmo Lee et al., Justifying Recommendations using Distantly-Labeled Reviews and Fined-Grained Aspects, Empirical Methods in Natural Language Processing (EMNLP) 2019, https://research-it.wharton.upenn.edu/data/ amazon-user-review-database/. 2 See Ryan Kailath, ‘‘Some Amazon Reviews Are Too Good to Be Believed. They’re Paid For,’’ NPR (July 30, 2018), https://www.npr.org/2018/07/30/ 629800775/some-amazon-reviews-are-too-good-tobebelieved-theyre-paid-for; Greg Sterling, ‘‘Fake Reviews: How Big a Problem Exactly?’’, Uberall (Oct. 28, 2021), https://uberall.com/enus/resources/ blog/how-big-a-problem-are-fake-reviews. VerDate Sep<11>2014 16:18 Nov 07, 2022 Jkt 259001 the Commission. I’m troubled by the lack of transparency by platforms and the subsequent difficulty in addressing consumer harm. Companies like Amazon, for example, claim that less than 1% of their reviews are inauthentic, but this stands in stark contrast to consumer experiences and third-party estimates.3 Deceptive reviews waste people’s time and money. A recent survey has found that consumers estimated having wasted about $125 in the prior year due to ‘‘inaccurate’’ reviews.4 The FTC’s work on fake reviews and endorsements is a great example of our ‘‘every tool in the toolbox’’ approach to deterring unlawful conduct in the market. Our Endorsements Guides have been helpful in setting expectations for market participants about our enforcement priorities in this area. After the loss of our Section 13(b) authority the Commission announced a revised Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct around Endorsements and Testimonials last year, allowing the agency to collect civil penalties from those law violators to whom we have provided notice. And now, with this vote, we’ve begun the process of considering rules that could help ensure that consumers can trust the information they use to buy goods and services, online and offline. I want to thank BCP’s Division of Advertising Practices and the Office of the General Counsel for their partnership and hard work in developing this ANPR. I look forward to hearing more from the public. Dissenting Statement of Commissioner Christine S. Wilson Today the Commission votes to issue an Advance Notice of Proposed Rulemaking (‘‘ANPR’’) seeking comment on a proposed rule addressing fake and deceptive reviews and endorsements. The FTC has challenged these practices, and platforms have sought to combat them, but deception continues to flourish. I agree that these practices are unlawful, and I have supported the FTC’s enforcement and guidance in this area. Notably, the Commission recently authorized additional tools to address these issues—tools that we were chastised for not deploying sooner. Given recent deployment of those tools, as well as ongoing efforts to update our Endorsement Guides, I do not believe that initiating yet another Section 18 rulemaking is the best use of our scarce 3 See id. 4 Canvas8, ‘‘The Critical Role of Reviews in internet Trust,’’ 2020, Feb. 26, 2020, https:// business.trustpilot.com/guidesreports/build-trustedbrand/the-critical-role-of-reviews-in-internet-trust. PO 00000 Frm 00033 Fmt 4702 Sfmt 4702 67429 resources, particularly given the nature of the harm at issue here. And the opportunity cost of launching yet another rulemaking is high, because the division overseeing this rule is also charged with enforcement in the opioids arena. For these reasons, I dissent. I appreciate that our remedial authority is limited. The Commission cannot obtain civil penalties for firsttime violations of Section 5 of the FTC Act, and the Supreme Court’s decision in AMG ended the Commission’s use of Section 13(b) to obtain equitable monetary relief.1 But the harm that results from the deception at issue is speculative in nature. The ANPR acknowledges that redress in matters involving deceptive review practices can be difficult to calculate, and we know that many retailers and platforms have procedures in place to screen out and reject fake reviews. An endorsement or a review may sway a consumer to purchase a product or service, in part, and should be truthful. But, in cases involving deceptive endorsements or fake reviews, there often is no allegation that the product or service did not perform as represented. The endorsement or review in many cases is not the central claim.2 Moreover, the Commission already has a multi-pronged strategy in place to combat this issue. To educate businesses regarding their obligations, the Commission has published Guides Concerning the Use of Endorsements and Testimonials (‘‘Endorsement Guides’’) and a companion business guidance piece. Earlier this year, the Commission sought comment on potential updates and revisions to the Endorsement Guides.3 In October 2021, the Commission issued a Notice of Penalty Offenses which, as explained in the ANPR, may enable the Commission to obtain civil penalties from marketers that use fake or deceptive endorsements 1 AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021). 2 Last year, the Commission issued a Notice of Penalty Offenses for earnings claims and later authorized an Advanced Notice of Proposed Rulemaking seeking comment on a proposed rule. I supported both of those recommendations. Earning claims relate to the core functionality and efficacy of the product or service being marketed. The claims addressed in the earnings claims Notice of Penalty Offenses and the ANPR are typically fraudulent and significant monetary harm often results from the deception. For that reason, I was comfortable seeking comment on that proposed rule. 3 FTC Press Release: FTC Proposes to Strengthen Advertising Guidelines Against Fake and Manipulated Reviews (May 19, 2022), https:// www.ftc.gov/news-events/news/press-releases/2022/ 05/ftc-proposes-strengthen-advertising-guidelinesagainst-fake-manipulated-reviews. E:\FR\FM\08NOP1.SGM 08NOP1 67430 Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Proposed Rules or reviews.4 Commissioner statements issued at that time lauded the resurrection of these types of Notices, describing them as unique tools that the Commission had allowed to languish and that would to allow staff to pursue the full range of actions against bad actors.5 While the ANPR now downplays their likely impact, the agency invested non-trivial resources in drafting the Notice of Penalty Offenses, identifying potential recipients, and serving it on more than 700 entities.6 Rather than churning out another proposed rule, perhaps we should stay the course on these initiatives and devote the incremental resources to enforcement in other critical areas. The opportunity cost of yet another rulemaking should not be understated. Importantly, as noted above, the division that has responsibility for endorsements also oversees enforcement of the Opioid Addiction Recovery Fraud Prevention Act. Last year, after an 18month delay not caused by staff, the Commission announced its first case under this statute.7 For the second consecutive year, deaths from overdoses rose dramatically and now exceed the country’s peak deaths from AIDS, car crashes, and guns.8 Our citizens who lotter on DSK11XQN23PROD with PROPOSALS1 4 See www.ftc.gov/enforcement/penalty-offenses/ endorsements. 5 For example, Commissioner Chopra wrote that ‘‘this unique authority in consumer protection enforcement . . . that past Commissioners largely ignored, depriving our hardworking staff of the ability to pursue the full range of actions against bad actors . . . is particularly important given the Supreme Court’s recent ruling in AMG Capital Management.’’ Rohit Chopra, Prepared Remarks of Commissioner Rohit Chopra, Regarding the Resurrection of the FTC’s Penalty Offense Authority to Deter False Claims by For-Profit Colleges (Oct. 6, 2012), https://www.ftc.gov/system/files/documents/ public_statements/1597178/prepared_remarks_of_ commissioner_chopra_re_penalty_offense.pdf. He further observed that ‘‘[a]ctivating the FTC’s Penalty Offense Authority is one of many examples where the agency needs to put its tools to use, rather than letting them languish.’’ Id. Chair Khan agreed, tweeting that ‘‘@FTC is resurrecting its Penalty Offense Authority to put companies on notice that certain practices are unlawful and violators will be hit with significant financial penalties.’’ Lina Khan, @linakhanFTC, https://twitter.com/linakhanftc/ status/1445816849430634496. The Notice of Penalty Offenses for endorsements was issued on Oct. 13, 2021. 6 FTC Press Release, FTC Puts Hundreds of Businesses on Notice about Fake Reviews and other Misleading Endorsements (Oct. 13, 2021), https:// www.ftc.gov/news-events/news/press-releases/2021/ 10/ftc-puts-hundreds-businesses-notice-about-fakereviews-other-misleading-endorsements. 7 Christine S. Wilson, Concurring Statement of Commissioner Christine S. Wilson, R360 LLC (May 17, 2022), https://www.ftc.gov/system/files/ftc_gov/ pdf/2022-05-17-R360-Commissioner-WilsonStatement-FINAL.pdf. 8 Noah Weiland and Margot Sanger-Katz, ‘‘Overdose Deaths Continue Rising, With Fentanyl and Meth Key Culprits, NY Times (May 11, 2022), https://www.nytimes.com/2022/05/11/us/politics/ overdose-deaths-fentanyl-meth.html?action=click& VerDate Sep<11>2014 16:18 Nov 07, 2022 Jkt 259001 suffer from opioid addiction are some of the most vulnerable people in this country; we could use our power and authority to great benefit by devoting more resources to this area. Although I disagree with its issuance, it is worth noting that staff’s approach to this ANPR is laudable. Rather than employing an ‘‘everything but the kitchen sink’’ approach, the ANPR is carefully tailored to focus on practices that are likely to be clear violations of Section 5. For the reasons described in this statement, I cannot support its issuance. Accordingly, I dissent. Dated: November 2, 2022. Michael Hoenig, General Counsel. [FR Doc. 2022–24139 Filed 11–7–22; 8:45 am] Safety Zone; Potomac River, Between Charles County, MD and King George County, VA BILLING CODE 6750–01–P [FR Doc. 2022–24305 Filed 11–7–22; 8:45 am] BILLING CODE 7565–01–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket Number USCG–2022–0895] RIN 1625–AA00 Coast Guard, DHS. Notice of proposed rulemaking. AGENCY: DEPARTMENT OF THE INTERIOR ACTION: National Indian Gaming Commission The Coast Guard is proposing to establish a temporary safety zone for certain waters of the Potomac River. This action is necessary to provide for the safety of life on these navigable waters at the old Governor Harry W. Nice/Senator Thomas ‘‘Mac’’ Middleton Memorial (US–301) Bridge during demolition operations from February 1, 2023 through February 14, 2023. This proposed rulemaking would prohibit persons and vessels from being in the safety zone unless authorized by the Captain of the Port, Maryland-National Capital Region or a designated representative. We invite your comments on this proposed rulemaking. DATES: Comments and related material must be received by the Coast Guard on or before December 8, 2022. ADDRESSES: You may submit comments identified by docket number USCG– 2022–0895 using the Federal Decision Making Portal at https:// www.regulations.gov. See the ‘‘Public Participation and Request for Comments’’ portion of the SUPPLEMENTARY INFORMATION section for further instructions on submitting comments. 25 CFR Part 571 RIN 3141–AA68 Audit Standards National Indian Gaming Commission. AGENCY: ACTION: Proposed rule; correction. The National Indian Gaming Commission inadvertently referred to an incorrect RIN in a recent proposed rule published in the Federal Register concerning audit standards. This document corrects that error in the proposed rule. SUMMARY: This correction is effective November 8, 2022, and is applicable beginning October 21, 2022. DATES: FOR FURTHER INFORMATION CONTACT: Michael Hoenig, 202–632–7003. The proposed rule on audit standards used an incorrect RIN. The RIN used (RIN 3141–AA72) is assigned to Self Regulation of Class II Gaming Activities. The correct reference for the audit standards regulations is RIN 3141– AA68. SUPPLEMENTARY INFORMATION: Correction In proposed rule FR Doc. 2022–11482, beginning on page 33091 in the issue of June 1, 2022, make the following correction. On page 33091, correct the RIN in the document heading to read ‘‘RIN 3141–AA68’’. pgtype=Article&state=default&module=stylnopioid&variant=show&region=MAIN_CONTENT_ 1&block=storyline_levelup_swipe_recirc. PO 00000 Frm 00034 Fmt 4702 Sfmt 4702 SUMMARY: If you have questions about this proposed rulemaking, call or email Mr. Ron Houck, Sector Maryland-NCR, Waterways Management Division, U.S. Coast Guard: telephone 410–576–2674, email D05-DG-SectorMD-NCRPrevention-WWM@uscg.mil. SUPPLEMENTARY INFORMATION: FOR FURTHER INFORMATION CONTACT: I. Table of Abbreviations CFR Code of Federal Regulations COTP Captain of the Port DHS Department of Homeland Security E:\FR\FM\08NOP1.SGM 08NOP1

Agencies

FEDERAL TRADE COMMISSION

[Federal Register Volume 87, Number 215 (Tuesday, November 8, 2022)]
[Proposed Rules]
[Pages 67424-67430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24139]


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FEDERAL TRADE COMMISSION

16 CFR Part 465


Trade Regulation Rule on the Use of Reviews and Endorsements

AGENCY: Federal Trade Commission.

ACTION: Advance notice of proposed rulemaking; request for public 
comment.

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SUMMARY: The Federal Trade Commission (the ``Commission'') proposes to 
commence a rulemaking proceeding to address certain deceptive or unfair 
uses of reviews and endorsements. The Commission is soliciting written 
comment, data, and arguments concerning the need for such a rulemaking 
to prevent unfair or deceptive marketing utilizing reviews and 
endorsements. In addition, the Commission solicits comment on how the 
Commission can ensure the broadest participation by affected interests 
in the rulemaking process.

DATES: Comments must be received on or before January 9, 2023.

ADDRESSES: Interested parties may file a comment online or on paper by 
following the instructions in the Comment Submissions part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Reviews and 
Endorsements ANPR, P214504'' on your comment, and file your comment 
online at https://www.regulations.gov. If you prefer to file your 
comment on paper, mail your comment to the following address: Federal 
Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, 
Suite CC-5610 (Annex B), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Michael Ostheimer (202-326-2699), 
[email protected], or Michael Atleson (202-326-2962), 
[email protected], Division of Advertising Practices, Bureau of Consumer 
Protection, Federal Trade Commission, Room CC-10603, 600 Pennsylvania 
Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: 

[[Page 67425]]

I. General Background Information

    The Commission is publishing this advance notice of proposed 
rulemaking pursuant to Section 18 of the Federal Trade Commission 
(``FTC'') Act, 15 U.S.C. 57a, and the provisions of Part 1, Subpart B 
of the Commission's Rules of Practice, 16 CFR 1.7-1.20, and 5 U.S.C. 
553. This authority permits the Commission to promulgate, modify, and 
repeal trade regulation rules that define with specificity acts or 
practices that are unfair or deceptive in or affecting commerce within 
the meaning of Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

II. Objectives the Commission Seeks To Achieve and Possible Regulatory 
Alternatives

A. Rulemaking Addressing Endorsements and Testimonials

1. Background
    Fake and deceptive reviews and other endorsements have long been 
problematic, and we have no reason to believe the market will correct 
this problem on its own. The commercial incentives to engage in such 
misconduct can be large. It can be difficult for anyone--including 
consumers, competitors, platforms, and researchers--to distinguish real 
from fake and determine the truth in this area. Further, some platforms 
may have mixed incentives to deal effectively with the problematic 
reviews and, despite some platforms purporting to take enforcement of 
problematic reviews seriously, fake and deceptive reviews continue to 
flourish on those very platforms. The sheer number of people engaged in 
fraudulent or deceptive reviews and endorsements makes them even more 
difficult to combat, especially given such content is often created by 
individuals or small companies, some of whom are located abroad.
    Although the Commission has brought several cases involving reviews 
and other endorsements under Section 5 of the FTC Act, 15 U.S.C. 45, 
our current remedial authority is limited. Monetary relief is no longer 
available under Section 13(b),\1\ disgorgement is not available under 
Section 19(b), 15 U.S.C. 57b(b), and, while the Commission has deployed 
new tools to combat this problem, in many cases, it remains difficult 
to obtain monetary relief.\2\ Under these circumstances, the 
availability of a civil penalty remedy may provide a potent deterrent. 
We believe initiating a Magnuson-Moss rulemaking to address certain 
types of clear Section 5 violations involving reviews and endorsements 
would benefit consumers, help level the playing field, and not burden 
legitimate marketers. The rule would be designed to deter bad actors, 
simplify our enforcement burdens by spelling out prohibitions plainly, 
and subject violators to civil penalties.
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    \1\ AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).
    \2\ In October 2021, the Commission announced the issuance of a 
Notice of Penalty Offenses which can allow the FTC to obtain civil 
penalties from marketers that use fake reviews. See www.ftc.gov/enforcement/penalty-offenses/endorsements. Such notices, however, 
are limited to practices addressed in prior fully litigated 
administrative decisions, only apply to marketers that engaged in 
covered misconduct after receipt of the notice, and do not provide 
for or allow consumer redress. The Commission can still obtain 
consumer redress through Section 19(a)(2) of the FTC Act if the 
Commission can satisfy a court that a reasonable person would have 
known the act or practice at issue was dishonest or fraudulent. See, 
e.g., Order at 2-4, Fashion Nova LLC, No. C-4759 (Mar. 18, 2022) 
(company that suppressed negative reviews agreed to pay $4.2 
million). If the marketer refuses to settle, such relief can only be 
obtained in federal court after a fully litigated administrative 
decision. Furthermore, redress in matters involving deceptive review 
practices can be very difficult to calculate and disgorgement and 
civil penalties are not available through such proceedings.
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    The Commission has well-established guidance on endorsements and 
testimonials. In particular, the Endorsement Guides reportedly remain 
very helpful to legitimate actors in the marketplace,\3\ but Commission 
guides are not enforceable regulations. Truly bad actors will not be 
deterred by Commission guidance, but the possibility of substantial 
civil penalties changes the economic incentives and may provide greater 
deterrence as to both legitimate and bad actors.
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    \3\ Guides Concerning the Use of Endorsements and Testimonials 
in Advertising, 16 CFR part 255. In an ongoing regulatory review of 
the Endorsement Guides, the Commission received over one hundred 
public comments, most of which noted the Guides are beneficial and 
should be retained, and none of which disagreed. See 87 FR 44288, 
44289-44290 (July 26, 2022).
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2. Objectives and Regulatory Alternatives
    The Commission requests input on whether and how it should use its 
authority under Section 18 of the FTC Act, 15 U.S.C. 57a, to address 
certain inarguably deceptive or unfair commercial acts or practices 
involving reviews or other endorsements. The Commission does not 
propose to cover every issue addressed in the Endorsement Guides. 
Specifically, the Commission proposes addressing the following 
practices, many of which have been the subject of Commission 
investigations or law enforcement actions: (a) reviews or endorsements 
by people who do not exist, who did not actually use or test the 
product or service, or who are misrepresenting their experience with 
it; \4\ (b) review

[[Page 67426]]

hijacking, where a seller steals or repurposes reviews of another 
product; (c) marketers offering compensation or other incentives in 
exchange for, or conditioned on, the writing of positive or negative 
consumer reviews; \5\ (d) owners, officers, or managers of a company: 
(i) writing reviews or testimonials of their own products or services, 
or publishing testimonials by their employees or family members, which 
fail to provide clear and conspicuous disclosures of those 
relationships, or (ii) soliciting reviews from employees or relatives 
without instructing them to disclose their relationships; \6\ (e) the 
creation or operation of websites, organizations, or entities that 
purportedly provide independent reviews or opinions of products or 
services but are, in fact, created and controlled by the companies 
offering the products or services; \7\ (f) misrepresenting that the 
consumer reviews displayed represent most or all of the reviews 
submitted when, in fact, reviews are being suppressed based upon their 
negativity; \8\ (g) the suppression of customer reviews by physical 
threat or unjustified legal threat; \9\ or (h) selling, distributing, 
or buying, followers, subscribers, views, and other indicators of 
social media influence.\10\ The Commission hopes that by focusing on 
practices most clearly and inarguably deceptive or unfair, it can 
streamline its rulemaking, benefit consumers, and not burden legitimate 
marketers.
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    \4\ The Commission has challenged fabricated consumer reviews. 
See, e.g., Complaint 9-17, FTC v. Roomster Corp., No. 1:22-CV-07389 
(S.D.N.Y. Aug. 30, 2022) (purchase and sale of fake app store and 
other reviews for room and roommate finder app and platform); 
Complaint at 2-4, Sunday Riley Modern Skincare, LLC, No. C-4729 
(Nov. 6, 2020) (company personnel created fake accounts to write 
fake reviews of company's products on third-party retailer's 
website); Complaint at 12-13, 15-16, Shop Tutors, Inc., No. C-4719 
(Feb. 3, 2020) (reviews of LendEDU were fabricated by its employees, 
other associates, or their friends and published on a third-party 
website); Complaint at 20, FTC v. Cure Encapsulations, Inc., No. 
1:19-cv-00982 (E.D.N.Y. Feb. 26, 2019) (Amazon reviews of 
defendants' product were fabricated by one or more third parties 
whom defendants had paid to generate reviews). It has similarly 
challenged fictitious endorsements. See, e.g., Complaint at 14, 19, 
FTC v. A.S. Resch., LLC (Synovia), No. 1:19-cv-3423 (D. Colo. Dec 5, 
2019) (fake consumer testimonials); Complaint at 20-22, 31, Global 
Cmty. Innovations LLC, No. 5:19-CV-00788 (N.D. Ohio Apr. 10, 2019) 
(fake consumer testimonials); Complaint at 27-28, 43, Jason Cardiff 
(Redwood Sci. Techs., Inc.), No. ED 18-cv-02104 SJO (C.D. Cal. Oct. 
24, 2018) (testimonials in infomercial were paid actors who had not 
used defendants' product); Complaint at 12-3, 20, FTC v. Mktg. 
Architects, Inc., No. 2:18-cv-00050-NT (D. Me. Feb. 5, 2018) (fake 
testimonials); Complaint at 14, 21, FTC v. Health Rsch. Labs., LLC, 
No. 2:17-cv-00467-JDL (D. Me. Nov. 30, 2017) (fake consumer 
testimonials and expert endorsements); Complaint at 13, 18, 28, XXL 
Impressions LLC, No. 1:17-cv-00067-NT (D. Me. Feb. 22, 2017) 
(defendants do not know whether consumer endorsers of their products 
who appeared in their ads actually exist); Complaint at 5, 7, 12-13, 
FTC v. Anthony Dill, No. 2:16-cv-00023-GZS (D. Me. Jan. 19, 2016) 
(fake testimonials); Amended Complaint at 38-39, 43-44, FTC v. Lisa 
Levey, No. 03-4670 GAF (C.D. Cal. Mar. 8, 2004) (fictitious expert 
endorsements). It has also challenged false claims that specific 
celebrities endorsed specific products, services, or businesses. 
See, e.g., Complaint at 15, 19-20, 30-31, Global Cmty. Innovations 
LLC, No. 5:19-CV-00788 (N.D. Ohio Apr. 10, 2019); Complaint at 5, 
18-20, 22-23, 36, FTC v. Tarr, Inc., No. 3:17-cv-02024-LAB-KSC (S.D. 
Cal. Oct. 3, 2017); Complaint at 13-15, 18, Sales Slash, LLC, No 
CV15-03107 (C.D. Cal. Apr. 27, 2015); Complaint at 2, 4-5, Norm 
Thompson Outfitters, Inc., No. C-4495 (Sept. 29, 2014); The Raymond 
Lee Org., Inc., 92 F.T.C. 489 (1978) (use of the names, photographs 
and words of public officials, including members of the Congress, 
misled consumers that the officials recommended or endorsed the 
business). It has similarly challenged false claims of endorsements 
by specific entities. See, e.g., Complaint at 15-16, 18, FTC v. 
Mercola.com, LLC, No. 1:16-cv-04282 (N.D. Ill. Apr. 13, 2016) 
(misrepresentation the FDA endorsed the use of indoor tanning 
systems as safe); Mytinger & Casselberry, Inc., 57 F.T.C. 717, 743-
46 (1960) (misrepresentation that a consent decree restraining 
respondents from making certain claims was an endorsement by the 
U.S. government of its product); Trade Union Courier Publ'g Corp., 
51 F.T.C. 1275, 1300-03 (1955) (misrepresentation that newspaper was 
endorsed by the American Federation of Labor when it was only 
endorsed by some unions within the AFL); Ar-Ex Cosms., Inc., 48 
F.T.C. 800, 806 (1952) (misrepresentation that lipstick had been 
recommended by Consumers' Research); A. P. W. Paper Co., Inc., 38 
F.T.C. 1, 15-17 (1944) (misrepresentation that product was endorsed 
by the American Red Cross); Wilbert W. Haase Co., Inc., 33 F.T.C. 
662, 681-83 (1941) (misrepresentation that insurance company had 
endorsed burial vault business and its vaults). Furthermore, the 
Commission has challenged advertisements that misrepresent 
endorsers' experiences. See, e.g., Complaint at 14, 18, FTC v. A.S. 
Resch., LLC (Synovia), No. 1:19-cv-3423 (testimonialists had used a 
prior product formulation that contained substantially different 
ingredients); Complaint at 22, 25, NextGen Nutritionals, LLC, No. 
8:17-cv-2807-T-36AEP (M.D. Fla. Jan. 9, 2018) (testimonials in ads 
misrepresented the actual experiences of customers); Complaint at 
22-24, 27, FTC v. Russel T. Dalbey, No. 1:11-cv-01396-CMA--KLM (D. 
Colo. May 26, 2011) (testimonials misrepresented earnings from 
brokering promissory notes using defendants' system); Computer Bus. 
Servs., Inc., 123 F.T.C. 75, 78-79 (1997) (testimonials by 
purchasers of home-based business ventures did not reflect their 
actual experiences); R. J. Reynolds Tobacco Co., 46 F.T.C. 706, 731-
32 (1950) (endorsements communicated endorsers exclusively smoked 
Camel cigarettes whereas they did not smoke cigarettes, did not 
smoke Camels exclusively, or could not tell the difference between 
Camels and other cigarettes).
    \5\ The Commission has challenged giving an incentive for a 
review or endorsement and requiring that it be positive. See, e.g., 
Complaint at 14, 19-20, FTC v. A.S. Resch., LLC (Synovia), No. 1:19-
cv-3423 (offered consumer endorsers with free product in exchange 
for ``especially positive and inspiring'' reviews); Complaint at 5-
6, 8, Urthbox, Inc., No. C-4676 (Apr. 3, 2019) (deceptively provided 
compensation for the posting of positive reviews on the BBB's 
website and other third-party websites); Complaint at 2-3, 
AmeriFreight, Inc., No. C-4518 (Feb. 27, 2015) (every month past 
customers were encouraged to submit reviews of respondent's services 
in order to be eligible for a $100 ``Best Monthly Review Award'', 
given to ``the review with the most captivating subject line and 
best content'' and that they should ``be creative and try to make 
your review stand out for viewers to read!'').
    \6\ The Commission has challenged such conduct. See, e.g., 
Complaint at 2-4, Sunday Riley Modern Skincare, LLC, No. C-4729 
(Nov. 6, 2020) (company owner and managers asked company employees 
to write product reviews on third-party retailer's website); 
Complaint at 15, 19-20, FTC v. Health Ctr., Inc., No. 2:20-cv-00547 
(D. Nev. Mar. 19, 2020) (defendants used testimonials from their 
employees that purported to be from ordinary consumers); Complaint 
at 14, 19, FTC v. A.S. Resch., LLC (Synovia), No. 1:19-cv-3423 (ads 
include testimonial by 50% owner and officer); Complaint at 5-6, 8-
9, Mikey & Momo, Inc., No. C-4655 (May 3, 2018) (Amazon reviews 
written by company officer and her relatives); Complaint at 21, 25-
26, FTC v. NutriMost LLC, No. 2:17-cv-00509-NBF (W.D. Pa. Apr. 20, 
2017) (testimonials in ads were from licensees or franchisees, their 
relatives, or their employees); Complaint at 10, 12, FTC v. Aura 
Labs, Inc., No. 8:16-cv-02147 (C.D. Cal. Dec. 12, 2016) (app store 
review and website testimonials by CEO or relatives of Chairman); 
Complaint at 25-27, 32-33, FTC v. Universal City Nissan, Inc., No. 
2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (customer reviews on third-
party websites written by managers); Complaint at 19, 21, FTC v. 
Genesis Today, Inc., No. 1:15-cv-00062 (W.D. Tex. Jan. 26, 2015) 
(video testimonials to which defendants' promotional materials 
linked were provided by defendants' employees); Complaint at 10, 
U.S. v. Spokeo, Inc., No. 2:12-cv-05001-MMM-SH (C.D. Cal. June 7, 
2012) (defendant directed its employees to draft endorsements and 
post them on news and technology websites); Gisela Flick, 116 F.T.C. 
1108, 113-14 (1993) (infomercial endorsement by company's Athletic 
Director).
    \7\ The Commission has challenged sellers who control websites 
claiming to provide independent opinions of products. See, e.g., 
Complaint at 2, 8-9, Son Le., No. C-4619 (May 31, 2020) (respondents 
operated purportedly independent websites that reviewed their own 
trampolines); Complaint at 19-20, 28, FTC v. Roca Labs, Inc., No. 
8:15-cv-02231-MSS-TBM (M.D. Fla. Sept. 24, 2015) (defendants 
operated Gastricbypass.me website, a purported independent, 
objective resource, which endorsed defendants' products); Complaint 
at 21-25, 28, FTC v. NourishLife, LLC, No. 1:15-cv-00093 (N.D. Ill. 
Jan. 7, 2015) (defendants operated Apraxia Research website, a 
purported independent, objective resource, which endorsed a type of 
supplement sold only by defendants). It has also challenged sellers 
who control purportedly independent organizations or entities that 
reviewed or approved the sellers' products or services. See, e.g., 
Complaint at 3-5, Bollman Hat Co., No. C-4643 (Jan. 23, 2018) 
(respondents created seal misrepresenting that independent 
organization endorsed their products as made in the United States); 
Complaint at 18-20, 26, NextGen Nutritionals, LLC, No. 8:17-cv-2807-
T-36AEP (M.D. Fla. Jan. 9, 2018) (misrepresentation that sites 
displaying the Certified Ethical Site Seal were verified by an 
independent, third-party program); Complaint at 2-4, Moonlight 
Slumber, LLC, No. C-4634 (Sept. 28, 2017) (respondent misrepresented 
that baby mattresses had been certified by Green Safety Shield, when 
in fact the shield was its own designation); Complaint at 4-6, 
Benjamin Moore & Co., Inc., No. C-4646 (July 11, 2017) (respondent 
used seal of its own creation to misrepresent that paints had been 
endorsed or certified by independent third party); Complaint at 2-4, 
ICP Constr. Inc., No. 4648 (July 11, 2017) (same); Complaint at 2-3, 
Ecobaby Organics, Inc., No. C-4416 (July 25, 2013) (manufacturer 
misrepresented seal was awarded by industry association when in fact 
it created and controlled that association); Complaint at 2-4, 
Nonprofit Mgmt. LLC, No. C-4315 (Jan. 11, 2011) (respondents 
misrepresented their seal program was endorsed by two associations 
when in fact a respondent owned and operated them); Complaint at 34, 
37, FTC v. A. Glenn Braswell, No. 2:03-cv-03700-DT-PJW (C.D. Cal. 
May 27, 2003) (defendants established Council on Natural Nutrition 
and then misrepresented it was an independent organization of 
experts who had endorsed defendants' products).
    \8\ The Commission has challenged the suppression of customer 
reviews based upon their negativity. See Complaint at 1-2, Fashion 
Nova LLC, No. C-4759 (Mar. 18, 2022). Commission staff has also 
addressed the issue in a closing letter. See Letter from Serena 
Viswanathan, Acting Associate Director, Division of Advertising 
Practices to Amy R. Mudge and Randall M. Shaheen, Counsel for Yotpo, 
Ltd. (Nov. 17, 2020), https://www.ftc.gov/system/files/documents/closing_letters/nid/202_3039_yotpo_closing_letter.pdf.
    \9\ The Commission has challenged review suppression through 
threats and intimidation as unfair. See Complaint at 8-10, 12, World 
Patent Mktg., Inc., No. 1:17-cv-20848-DPG (S.D. Fla. Mar. 6, 2017).
    \10\ The Commission has challenged the sale of fake indicators 
of social media influence, such as fake Twitter followers. See 
Complaint at 5, FTC v. Devumi, LLC, No. 9:19-cv-81419-RKA (S.D. Fla. 
Oct. 18, 2019).
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    The Commission seeks comment on, among other things, the prevalence 
of each of the above practices, the costs and benefits of a rule that 
would address them, and alternatives to such a rulemaking, such as the 
publication of additional consumer and business education. In their 
replies, commenters should provide any available evidence and data that 
supports their position, such as empirical data, consumer perception 
studies, and consumer complaints.
3. The Rulemaking Process
    The Commission seeks the broadest participation by the affected 
interests in the rulemaking. To that end, the Commission will proceed 
through an ``open rulemaking,'' which will provide all affected 
interests numerous opportunities to submit comments and to participate 
in the rulemaking process. The Commission encourages all interested 
parties to submit written comments.
    The Commission also expects the affected interests to assist the 
Commission in analyzing various options and in drafting a proposed 
rule. The Commission believes public workshop conferences to discuss 
the various issues involving the rule are a productive and efficient 
means to develop the record and explore various alternatives. The 
Commission will also use public workshop conferences to assist the 
Commission in drafting a proposed rule.

[[Page 67427]]

4. Public Workshop Conferences
    In order to facilitate the greatest participation by the public in 
the rulemaking process, Commission staff will hold several public 
workshop conferences to discuss the issues noted above. Staff will 
announce a schedule of these conferences after the close of the comment 
period.

III. Request for Comments

    Members of the public are invited to comment on any issues or 
concerns they believe are relevant or appropriate to the Commission's 
consideration of the proposed rulemaking. The Commission requests 
factual data upon which the comments are based be submitted with the 
comments. In addition to the issues raised above, the Commission 
solicits public comment on the specific questions identified below. 
These questions are designed to assist the public and should not be 
construed as a limitation on the issues on which public comment may be 
submitted. Please identify the evidence and data source(s) that support 
each of your answers.

Questions

    (1) How widespread is the marketing of products or services using:
    a. reviews or other endorsements by nonexistent individuals or by 
those who did not actually use or test the product or service;
    b. reviews or other endorsements by individuals who are 
misrepresenting their experiences with a product or service;
    c. review hijacking (where a seller steals or repurposes reviews 
from another product);
    d. paid or incentivized consumer reviews that were required to be 
positive or required to be negative (if of a competitor's product);
    e. consumer reviews written by the owners, officers, or employees 
of the company offering the product or service, or their family 
members; or
    f. Websites or other organizations or devices that purportedly 
provide independent reviews or opinions of products or services but are 
in fact created and controlled by the companies offering the products 
or services?
    (2) How widespread is the suppression of negative consumer reviews:
    a. on retailer websites because the retailers filter out and do not 
publish negative reviews; or
    b. by marketers threatening the authors of the reviews (other than 
through the form contract provisions prohibited by the Consumer Review 
Fairness Act)?
    (3) How widespread is:
    a. the sale of followers, subscribers, views, and other indicators 
of social media influence;
    b. the purchase and use for commercial purposes of followers, 
subscribers, views, and other indicators of social media influence?
    (4) For each of the practices described in Questions 1 through 3, 
above, does the practice cause consumer injury? If so, what evidence 
demonstrates such practices cause consumer injury?
    (5) For each of the practices described in Questions 1 through 3, 
above, does the practice cause injury to competition? If so, what 
evidence demonstrates such practices cause injury to competition?
    (6) For each of the practices described in Questions 1 through 3, 
above, are there circumstances in which such practices would not be 
deceptive or unfair? If so, what are those circumstances and could and 
should the Commission exclude such circumstances from the scope of any 
rulemaking? Why or why not?
    (7) Please provide any evidence concerning consumer perception of, 
or experience with, consumer reviews or other endorsements relevant to 
the practices described in Questions 1 through 3, above.
    (8) What existing laws and regulations, other than the FTC Act, if 
any, cover the practices described in Questions 1 through 3, above? How 
do those laws affect consumers? How do those laws affect businesses, 
particularly small businesses?
    (9) What actions, if any, have platforms taken to address the 
practices described in Questions 1 through 3, above? Have those actions 
been effective in reducing consumer harm associated with the practices 
described in Questions 1 through 3, above? Why or why not?
    (10) What actions have others taken to facilitate or enable the 
practices described in Questions 1 through 3, above? For example, what 
types of services specifically allow marketers to engage in these 
practices, and who is providing these services?
    (11) Is there a need for new regulatory provisions to prevent the 
practices described in Questions 1 through 3, above? If yes, why? If 
no, why not? What evidence supports your answer?
    (12) How should a rule addressing the practices described in 
Questions 1 through 3, above, be crafted to maximize the benefits to 
consumers while minimizing the costs to businesses under either 
approach? What evidence supports your answer?
    (13) Do current or impending changes in technology or market 
practices affect whether and how a rulemaking should proceed? If so, 
what are such changes and how do they affect whether and how a 
rulemaking should proceed?
    (14) Are there foreign or international laws, regulations, or 
standards addressing reviews or endorsements the Commission should 
consider as to whether and how a rulemaking should proceed? If so, what 
are they? Should the Commission consider adopting, or avoiding, any of 
these? If so, why? If not, why not?
    (15) Should the Commission consider additional consumer and 
business education to reduce consumer harm associated with the 
practices described in Questions 1 through 3, above? If so, what should 
such education materials include, and how should the Commission 
communicate that information to consumers and businesses?
    (16) What alternatives to regulations should the Commission 
consider when addressing the practices described in Questions 1 through 
3, above? Would those alternatives obviate the need for regulation? If 
so, why? If not, why not? What evidence supports your answer?
    (17) Are there other commercial acts or practices involving reviews 
or other endorsements that are inarguably deceptive or unfair that 
should be addressed in the proposed rulemaking? If so, describe the 
practices. How widespread are the practices? Please answer Questions 4 
through 8, 10, 11, 14, and 15 with respect to the practices.

IV. Comment Submissions

    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before January 9, 2023. 
Write ``Reviews and Endorsements ANPR, P214504'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the https://www.regulations.gov website.
    Because of the agency's heightened security screening, postal mail 
addressed to the Commission will be subject to delay. We strongly 
encourage you to submit your comments online through the https://www.regulations.gov website. To ensure the Commission considers your 
online comment, please follow the instructions on the web-based form.
    If you file your comment on paper, write ``Reviews and Endorsements 
ANPR, P214504'' on your comment and on the envelope, and mail your 
comment to the following address:

[[Page 67428]]

Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW, Suite CC-5610 (Annex B), Washington, DC 20580.
    Because your comment will be placed on the public record, you are 
solely responsible for making sure your comment does not include any 
sensitive or confidential information. In particular, your comment 
should not contain sensitive personal information, such as your or 
anyone else's Social Security number; date of birth; driver's license 
number or other state identification number or foreign country 
equivalent; passport number; financial account number; or credit or 
debit card number. You are also solely responsible for making sure your 
comment does not include any sensitive health information, such as 
medical records or other individually identifiable health information. 
In addition, your comment should not include any ``[t]rade secret or 
any commercial or financial information which . . . is privileged or 
confidential''--as provided in Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule Sec.  4.10(a)(2), 16 CFR 4.10(a)(2)--including in 
particular competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule Sec.  4.9(c). In 
particular, the written request for confidential treatment that 
accompanies the comment must include the factual and legal basis for 
the request and must identify the specific portions of the comment to 
be withheld from the public record. See FTC Rule Sec.  4.9(c). Your 
comment will be kept confidential only if the General Counsel grants 
your request in accordance with the law and the public interest. Once 
your comment has been posted publicly at www.regulations.gov--as 
legally required by FTC Rule Sec.  4.9(b)--we cannot redact or remove 
your comment, unless you submit a confidentiality request that meets 
the requirements for such treatment under FTC Rule Sec.  4.9(c), and 
the General Counsel grants that request.
    Visit the FTC website to read this document and the news release 
describing it. The FTC Act and other laws the Commission administers 
permit the collection of public comments to consider and use in this 
proceeding as appropriate. The Commission will consider all timely and 
responsive public comments it receives on or before January 9, 2023. 
For information on the Commission's privacy policy, including routine 
uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

    By direction of the Commission, Commissioner Wilson dissenting.
April J. Tabor,
Secretary.

    Note: The following statements will not appear in the Code of 
Federal Regulations.

Statement of Chair Lina M. Khan

    Online shopping runs on reviews. When you're in a brick-and-mortar 
store, you can see the inventory. If it's a couch, you can sit on it. 
If it's a TV, you can watch it. But when you're shopping online, it's 
much harder to know what you're actually buying. That's why reviews are 
so crucial. If 500 other people have bought something and say it works, 
you can have a lot more confidence.
    But what if those people were paid to leave those positive reviews? 
Or what if they're bots? What if the seller is hiding a thousand one-
star reviews?
    That's the dilemma when you shop online. Reviews are essential, but 
it's hard to know when they can be trusted. Precisely because of the 
importance of reviews, firms can face powerful incentives to game the 
system. Businesses have been caught leaving positive reviews for their 
own products or services, suppressing negative ones, and boosting bad 
reviews of their competitors.\1\ The incentives extend beyond the 
seller of the product itself. The platforms that host reviews may also, 
in some instances, benefit indirectly from fake ratings and 
endorsements and have financial incentives to turn a blind eye to 
misconduct that brings in revenue.
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    \1\ See, e.g., Sherry He, et al., The Market for Fake Reviews, 
41 Mktg. Sci. 896 (2020) (measuring the impact of fake reviews on 
Amazon sales); Theodore Lappas, et al., The Impact of Fake Reviews 
on Online Visibility: A Vulnerability Assessment of the Hotel 
Industry, 27 Info. Sys. Rsch. 940 (2016); Renee DiResta, 
Manipulating Consumption, Medium (Jun. 29, 2018), https://medium.com/@noupside/manipulating-consumption-42f2e9013d0b.
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    These practices don't only harm the consumers who place their trust 
in fake reviews. They also pollute the marketplace and put honest 
businesses at a competitive disadvantage.
    The Commission has brought several enforcement actions to address 
this issue. In January, for example, the Commission settled allegations 
that the fast-fashion company Fashion Nova had suppressed negative 
reviews.\2\ And in August, the Commission, along with several state 
attorneys general, sued Roomster for allegedly flooding its rental 
listing marketplace with phony reviews.\3\
---------------------------------------------------------------------------

    \2\ Press Release, Fed. Trade Comm'n, Fashion Nova will Pay $4.2 
Million as part of Settlement of FTC Allegations it Blocked Negative 
Reviews of Products (Jan. 25, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/01/fashion-nova-will-pay-42-million-part-settlement-ftc-allegations-it-blocked-negative-reviews.
    \3\ Press Release, Fed. Trade Comm'n, FTC, States Sue Rental 
Listing Platform Roomster and Its Owners for Duping Prospective 
Renters with Fake Reviews and Phony Listings (Aug. 30, 2022), 
https://www.ftc.gov/news-events/news/press-releases/2022/08/ftc-states-sue-rental-listing-platform-roomster-its-owners-duping-prospective-renters-fake-reviews. In addition, in 2019, the FTC sued 
a company called Synovia for marketing a fake arthritis cure with 
fake testimonials and fake doctor endorsements. Press Release, Fed. 
Trade Comm'n, FTC Stops Marketers from Making False Arthritis 
Treatment Claims (Dec. 5, 2019), https://wwhw.ftc.gov/news-events/news/press-releases/2019/12/ftc-stops-marketers-making-false-arthritis-treatment-claims. In January of this year, the Commission 
settled with Vision Path for, among other things, failing to 
disclose that one of its own senior employees posted a positive 
review on the BBB website. Press Release, Fed. Trade Comm'n, Vision 
Path, Inc., Online Seller of Hubble Lenses, Settles Charges it 
Violated the Contact Lens Rule and FTC Act to Boost Sales (Jan. 28, 
2022), https://www.ftc.gov/news-events/news/press-releases/2022/01/vision-path-inc-online-seller-hubble-lenses-settles-charges-it-violated-contact-lens-rule-ftc-act.
---------------------------------------------------------------------------

    In addition to enforcement activity, the Commission has used other 
authorities to try to address market-wide problems with fake reviews. 
Last year, the Commission put more than 700 companies on notice 
regarding its litigated decisions in this area, which triggered the 
FTC's penalty offense authority.\4\ This past May, the Commission also 
proposed revisions to tighten its guidelines for advertisers who use 
endorsements and reviews and to warn social media platforms about 
inadequate disclosure.
---------------------------------------------------------------------------

    \4\ Fed. Trade Comm'n, Penalty Offenses Concerning Endorsements, 
https://www.ftc.gov/enforcement/penalty-offenses/endorsements.
---------------------------------------------------------------------------

    With today's advance notice of proposed rulemaking, the Commission 
is seeking comment from the public on whether rulemaking would be an 
appropriate way to address the problem more systemically. A rulemaking 
here would provide benefits beyond the agency's other powers. The 
Supreme Court decision in AMG Capital Management, LLC v. FTC 
substantially limited our ability to seek monetary relief for harmed 
consumers.\5\ A rule against fake reviews could enable us to obtain 
civil penalties and return money to consumers injured as a result of

[[Page 67429]]

deceptive or unfair reviews and endorsements.
---------------------------------------------------------------------------

    \5\ AMG Capital Mgmt. v. FTC, 141 S. Ct. 1341 (2021).
---------------------------------------------------------------------------

    I am grateful to staff for their hard work on this ANPR. And I am 
happy to cast my vote in favor of beginning this process. It's critical 
that the Commission use all its authorities in order to prohibit unfair 
or deceptive practices--and to help consumers who have been harmed by 
them. I look forward to hearing from the public and stakeholders as the 
agency embarks on the rulemaking process.

Statement of Commissioner Rebecca Kelly Slaughter

    Online reviews and endorsements of products and services play a 
powerful role in influencing consumer choices. From 1996 to 2018, 233 
million product reviews were posted on Amazon alone.\1\ Last month, my 
own fridge unexpectedly broke down and I had to scramble to find a 
repairman. Like many consumers, I relied on online reviews and other 
endorsements to decide whom to hire for this important task. The 
importance of consumer reviews to modern commerce makes the problem of 
fake and deceptive reviews even more pernicious. Companies like Yelp 
flag about 25% of reviews as ``less reliable'' and a recent report 
found that 10.7% of all Google reviews are fake.\2\ These practices 
harm not only consumers, but also mom-and-pop businesses, like my new 
and excellent appliance repairman, who rely on online reviews to 
attract new customers.
---------------------------------------------------------------------------

    \1\ See Jianmo Lee et al., Justifying Recommendations using 
Distantly-Labeled Reviews and Fined-Grained Aspects, Empirical 
Methods in Natural Language Processing (EMNLP) 2019, https://research-it.wharton.upenn.edu/data/amazon-user-review-database/.
    \2\ See Ryan Kailath, ``Some Amazon Reviews Are Too Good to Be 
Believed. They're Paid For,'' NPR (July 30, 2018), https://www.npr.org/2018/07/30/629800775/some-amazon-reviews-are-too-good-to-bebelieved-theyre-paid-for; Greg Sterling, ``Fake Reviews: How 
Big a Problem Exactly?'', Uberall (Oct. 28, 2021), https://uberall.com/enus/resources/blog/how-big-a-problem-are-fake-reviews.
---------------------------------------------------------------------------

    So, I'm pleased to support today's publication of this Advance 
Notice of Proposed Rulemaking on Reviews and Endorsements to help 
ensure that people have accurate information about the products and 
services they buy. The ANPR asks important questions about the 
prevalence of these practices. Our inquiry here asks questions about 
practices from fake reviews by non-existent people, or people who have 
never actually used the product, to review suppression, and the 
practice of buying followers or subscribers as an indicator of social 
media influence.
    I hope that an open inquiry into these practices will also be 
illuminating for the Commission. I'm troubled by the lack of 
transparency by platforms and the subsequent difficulty in addressing 
consumer harm. Companies like Amazon, for example, claim that less than 
1% of their reviews are inauthentic, but this stands in stark contrast 
to consumer experiences and third-party estimates.\3\ Deceptive reviews 
waste people's time and money. A recent survey has found that consumers 
estimated having wasted about $125 in the prior year due to 
``inaccurate'' reviews.\4\
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    \3\ See id.
    \4\ Canvas8, ``The Critical Role of Reviews in internet Trust,'' 
2020, Feb. 26, 2020, https://business.trustpilot.com/guidesreports/build-trusted-brand/the-critical-role-of-reviews-in-internet-trust.
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    The FTC's work on fake reviews and endorsements is a great example 
of our ``every tool in the toolbox'' approach to deterring unlawful 
conduct in the market. Our Endorsements Guides have been helpful in 
setting expectations for market participants about our enforcement 
priorities in this area. After the loss of our Section 13(b) authority 
the Commission announced a revised Notice of Penalty Offenses 
Concerning Deceptive or Unfair Conduct around Endorsements and 
Testimonials last year, allowing the agency to collect civil penalties 
from those law violators to whom we have provided notice. And now, with 
this vote, we've begun the process of considering rules that could help 
ensure that consumers can trust the information they use to buy goods 
and services, online and offline.
    I want to thank BCP's Division of Advertising Practices and the 
Office of the General Counsel for their partnership and hard work in 
developing this ANPR. I look forward to hearing more from the public.

Dissenting Statement of Commissioner Christine S. Wilson

    Today the Commission votes to issue an Advance Notice of Proposed 
Rulemaking (``ANPR'') seeking comment on a proposed rule addressing 
fake and deceptive reviews and endorsements. The FTC has challenged 
these practices, and platforms have sought to combat them, but 
deception continues to flourish. I agree that these practices are 
unlawful, and I have supported the FTC's enforcement and guidance in 
this area. Notably, the Commission recently authorized additional tools 
to address these issues--tools that we were chastised for not deploying 
sooner. Given recent deployment of those tools, as well as ongoing 
efforts to update our Endorsement Guides, I do not believe that 
initiating yet another Section 18 rulemaking is the best use of our 
scarce resources, particularly given the nature of the harm at issue 
here. And the opportunity cost of launching yet another rulemaking is 
high, because the division overseeing this rule is also charged with 
enforcement in the opioids arena. For these reasons, I dissent.
    I appreciate that our remedial authority is limited. The Commission 
cannot obtain civil penalties for first-time violations of Section 5 of 
the FTC Act, and the Supreme Court's decision in AMG ended the 
Commission's use of Section 13(b) to obtain equitable monetary 
relief.\1\ But the harm that results from the deception at issue is 
speculative in nature. The ANPR acknowledges that redress in matters 
involving deceptive review practices can be difficult to calculate, and 
we know that many retailers and platforms have procedures in place to 
screen out and reject fake reviews. An endorsement or a review may sway 
a consumer to purchase a product or service, in part, and should be 
truthful. But, in cases involving deceptive endorsements or fake 
reviews, there often is no allegation that the product or service did 
not perform as represented. The endorsement or review in many cases is 
not the central claim.\2\
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    \1\ AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).
    \2\ Last year, the Commission issued a Notice of Penalty 
Offenses for earnings claims and later authorized an Advanced Notice 
of Proposed Rulemaking seeking comment on a proposed rule. I 
supported both of those recommendations. Earning claims relate to 
the core functionality and efficacy of the product or service being 
marketed. The claims addressed in the earnings claims Notice of 
Penalty Offenses and the ANPR are typically fraudulent and 
significant monetary harm often results from the deception. For that 
reason, I was comfortable seeking comment on that proposed rule.
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    Moreover, the Commission already has a multi-pronged strategy in 
place to combat this issue. To educate businesses regarding their 
obligations, the Commission has published Guides Concerning the Use of 
Endorsements and Testimonials (``Endorsement Guides'') and a companion 
business guidance piece. Earlier this year, the Commission sought 
comment on potential updates and revisions to the Endorsement 
Guides.\3\ In October 2021, the Commission issued a Notice of Penalty 
Offenses which, as explained in the ANPR, may enable the Commission to 
obtain civil penalties from marketers that use fake or deceptive 
endorsements

[[Page 67430]]

or reviews.\4\ Commissioner statements issued at that time lauded the 
resurrection of these types of Notices, describing them as unique tools 
that the Commission had allowed to languish and that would to allow 
staff to pursue the full range of actions against bad actors.\5\ While 
the ANPR now downplays their likely impact, the agency invested non-
trivial resources in drafting the Notice of Penalty Offenses, 
identifying potential recipients, and serving it on more than 700 
entities.\6\ Rather than churning out another proposed rule, perhaps we 
should stay the course on these initiatives and devote the incremental 
resources to enforcement in other critical areas.
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    \3\ FTC Press Release: FTC Proposes to Strengthen Advertising 
Guidelines Against Fake and Manipulated Reviews (May 19, 2022), 
https://www.ftc.gov/news-events/news/press-releases/2022/05/ftc-proposes-strengthen-advertising-guidelines-against-fake-manipulated-reviews.
    \4\ See www.ftc.gov/enforcement/penalty-offenses/endorsements.
    \5\ For example, Commissioner Chopra wrote that ``this unique 
authority in consumer protection enforcement . . . that past 
Commissioners largely ignored, depriving our hardworking staff of 
the ability to pursue the full range of actions against bad actors . 
. . is particularly important given the Supreme Court's recent 
ruling in AMG Capital Management.'' Rohit Chopra, Prepared Remarks 
of Commissioner Rohit Chopra, Regarding the Resurrection of the 
FTC's Penalty Offense Authority to Deter False Claims by For-Profit 
Colleges (Oct. 6, 2012), https://www.ftc.gov/system/files/documents/public_statements/1597178/prepared_remarks_of_commissioner_chopra_re_penalty_offense.pdf. He 
further observed that ``[a]ctivating the FTC's Penalty Offense 
Authority is one of many examples where the agency needs to put its 
tools to use, rather than letting them languish.'' Id. Chair Khan 
agreed, tweeting that ``@FTC is resurrecting its Penalty Offense 
Authority to put companies on notice that certain practices are 
unlawful and violators will be hit with significant financial 
penalties.'' Lina Khan, @linakhanFTC, https://twitter.com/linakhanftc/status/1445816849430634496. The Notice of Penalty 
Offenses for endorsements was issued on Oct. 13, 2021.
    \6\ FTC Press Release, FTC Puts Hundreds of Businesses on Notice 
about Fake Reviews and other Misleading Endorsements (Oct. 13, 
2021), https://www.ftc.gov/news-events/news/press-releases/2021/10/ftc-puts-hundreds-businesses-notice-about-fake-reviews-other-misleading-endorsements.
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    The opportunity cost of yet another rulemaking should not be 
understated. Importantly, as noted above, the division that has 
responsibility for endorsements also oversees enforcement of the Opioid 
Addiction Recovery Fraud Prevention Act. Last year, after an 18-month 
delay not caused by staff, the Commission announced its first case 
under this statute.\7\ For the second consecutive year, deaths from 
overdoses rose dramatically and now exceed the country's peak deaths 
from AIDS, car crashes, and guns.\8\ Our citizens who suffer from 
opioid addiction are some of the most vulnerable people in this 
country; we could use our power and authority to great benefit by 
devoting more resources to this area.
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    \7\ Christine S. Wilson, Concurring Statement of Commissioner 
Christine S. Wilson, R360 LLC (May 17, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/2022-05-17-R360-Commissioner-Wilson-Statement-FINAL.pdf.
    \8\ Noah Weiland and Margot Sanger-Katz, ``Overdose Deaths 
Continue Rising, With Fentanyl and Meth Key Culprits, NY Times (May 
11, 2022), https://www.nytimes.com/2022/05/11/us/politics/overdose-deaths-fentanyl-meth.html?action=click&pgtype=Article&state=default&module=styln-opioid&variant=show®ion=MAIN_CONTENT_1&block=storyline_levelup_swipe_recirc.
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    Although I disagree with its issuance, it is worth noting that 
staff's approach to this ANPR is laudable. Rather than employing an 
``everything but the kitchen sink'' approach, the ANPR is carefully 
tailored to focus on practices that are likely to be clear violations 
of Section 5. For the reasons described in this statement, I cannot 
support its issuance.
    Accordingly, I dissent.

[FR Doc. 2022-24139 Filed 11-7-22; 8:45 am]
BILLING CODE 6750-01-P

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