Trade Regulation Rule on the Use of Consumer Reviews and Testimonials, 49364-49392 [2023-15581]

Download as PDF 49364 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules paragraph (k) of this AD and email to: ANEAD-AMOC@faa.gov. (2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/ certificate holding district office. (k) Additional Information For more information about this AD, contact Sungmo Cho, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des Moines, WA 98198; phone: (781) 238–7241; email: sungmo.d.cho@faa.gov. (l) Material Incorporated by Reference (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51. (2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise. (i) European Union Aviation Safety Agency AD 2023–0027, dated January 31, 2023. (ii) [Reserved] (3) For EASA AD 2023–0027, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email: ADs@easa.europa.eu; website: easa.europa.eu. You may find this EASA AD on the EASA website at ad.easa.europa.eu. (4) You may view this service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 1200 District Avenue, Burlington, MA 01803. For information on the availability of this material at the FAA, call (817) 222–5110. (5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email fr.inspection@nara.gov, or go to: www.archives.gov/federal-register/cfr/ibrlocations.html. Issued on July 21, 2023. Victor Wicklund, Deputy Director, Compliance & Airworthiness Division, Aircraft Certification Service. [FR Doc. 2023–15910 Filed 7–28–23; 8:45 am] BILLING CODE 4910–13–P FEDERAL TRADE COMMISSION 16 CFR Part 465 RIN 3084–AB76 ddrumheller on DSK120RN23PROD with PROPOSALS1 Trade Regulation Rule on the Use of Consumer Reviews and Testimonials Federal Trade Commission. Notice of proposed rulemaking; request for public comment. AGENCY: ACTION: The Federal Trade Commission (‘‘FTC or ‘‘Commission’’) commences a rulemaking to promulgate a trade regulation rule entitled ‘‘Rule on the Use of Consumer Reviews and Testimonials,’’ which would prohibit SUMMARY: VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 certain specified unfair or deceptive acts or practices involving consumer reviews or testimonials. The Commission finds such practices to be prevalent based on the comments it received in response to an advance notice of proposed rulemaking and other information discussed in this publication. The Commission now solicits written comment, data, and arguments concerning the utility and scope of the proposed trade regulation rule to prohibit the specified unfair or deceptive acts or practices. DATES: Comments must be received on or before September 29, 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 Testimonials NPRM, R311003’’ 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 F), Washington, DC 20580. FOR FURTHER INFORMATION CONTACT: Michael Ostheimer, Attorney, Federal Trade Commission, Bureau of Consumer Protection, Advertising Practices Division, (202) 326–2699, mostheimer@ ftc.gov. SUPPLEMENTARY INFORMATION: The Commission invites interested parties to submit data, views, and arguments on the proposed Rule on the Use of Consumer Reviews and Testimonials (‘‘proposed Rule’’) and, specifically, on the questions set forth in Section X of this notice of proposed rulemaking (‘‘NPRM’’). The comment period will remain open until September 29, 2023.1 To the extent practicable, all comments will be available on the public record and posted at the docket for this rulemaking on https:// www.regulations.gov. If interested parties request to present their position orally, the Commission will hold an informal hearing, as specified in Section 18(c) of the FTC Act, 15 U.S.C. 57a(c). Persons interested in making a presentation at an informal hearing must file a comment expressly requesting a hearing in response to this publication, containing a statement identifying their interests in the proceeding and any proposals to add 1 The Commission elects not to provide a separate, second comment period for rebuttal comments. See 16 CFR 1.11(e) (‘‘The Commission may in its discretion provide for a separate rebuttal period following the comment period.’’). PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 disputed issues of material fact necessary to be resolved during an informal hearing. The comment should describe why the person thinks the informal hearing is warranted and how they would participate, and include a summary of their expected testimony. Interested persons’ comments may also, without requesting an informal hearing, expressly request to speak at any informal hearing that is held, which may happen if another commenter requests an informal hearing or if the Commission on its own elects to hold one. If an informal hearing is held, the Commission will publish a separate notice in accordance with 16 CFR 1.12(a) (‘‘initial notice of informal hearing’’). I. Background The Commission published, on November 8, 2022, an advance notice of proposed rulemaking (‘‘ANPR’’) under the authority of Section 18(a)(1)(B) of the FTC Act, 15 U.S.C. 57a(a)(1)(B); 2 which authorizes the Commission to promulgate, modify, or 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). The ANPR described the Commission’s history of educating industry and consumers about the use of deceptive reviews and testimonials and of taking law enforcement action against certain unfair or deceptive acts or practices involving consumer reviews or testimonials.3 Specifically, the ANPR discussed: (a) the use of reviews or endorsements by people who do not exist, who did not actually use or test the product or service, or who were misrepresenting their experience with it; (b) review 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; (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 2 Fed. Trade Comm’n, ANPR: Trade Regulation Rule on the Use of Reviews and Endorsements (‘‘ANPR’’), 87 FR 67424 (Nov. 8, 2022), https:// www.federalregister.gov/documents/2022/11/08/ 2022-24139/trade-regulation-rule-on-the-use-ofreviews-and-endorsements. 3 The ANPR was entitled ‘‘Trade Regulation Rule Concerning Reviews and Endorsements.’’ The Commission has decided to change the name of the proposed rule to ‘‘Trade Regulation Rule on the Use of Consumer Reviews and Testimonials,’’ to better reflect its content. E:\FR\FM\31JYP1.SGM 31JYP1 ddrumheller on DSK120RN23PROD with PROPOSALS1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules 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; (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; (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; (g) the suppression of customer reviews by physical threat or unjustified legal threat; and (h) selling, distributing, or buying followers, subscribers, views, and other indicators of social media influence. The ANPR also asked a series of questions to inform the Commission’s determination about whether it has reason to believe that such practices are prevalent and, if so, whether and how to proceed with an NPRM.4 During the 60-day comment period, the Commission received 42 responsive comments. Based on the substance of these comments, as well as the Commission’s history of enforcement and other information discussed below, the Commission is now exercising its authority under Section 18(a)(1)(B) of the FTC Act to propose a trade regulation rule that defines conduct that, in the context of consumer reviews or testimonials, constitutes unfair or deceptive acts or practices. The Commission has reason to believe that certain unfair or deceptive practices involving consumer reviews or testimonials are prevalent 5 and that proceeding with this rulemaking is in the public interest. After reviewing the comments and because the Commission believes it would be in the public interest to move forward expeditiously with this rulemaking proceeding, the Commission has decided to issue this NPRM without holding the public workshops originally contemplated in the ANPR. Upon reviewing the ANPR comments, the Commission determined that conducting public workshops at that stage of the proceeding would not provide additional unique viewpoints or issues. Instead, by issuing this NPRM 4 ANPR, 87 FR at 67427. 15 U.S.C. 57a(b)(3) (‘‘The Commission shall issue a notice of proposed rulemaking pursuant to paragraph (1)(A) only where it has reason to believe that the unfair or deceptive acts or practices which are the subject of the proposed rulemaking are prevalent.’’). 5 See VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 and analyzing the comments submitted in response, the Commission will be able to further develop the record, receive comments on potential alternatives, and decide whether additional events or methods are needed to facilitate public participation in the rulemaking process. Below, after discussing the comments, setting out the evidence of prevalence, and explaining its considerations in developing the proposed Rule, the Commission poses specific questions for comment and provides the text of the proposed Rule. II. Summary of Comments to ANPR The Commission received 42 responsive comments in response to the ANPR.6 Twenty-nine comments supported the Commission proceeding with a rulemaking. Four comments expressed the view that a rulemaking was unnecessary, premature, or should not apply to the commenter’s constituents. One commenter expressed skepticism about the utility of a rulemaking. The remaining commenters did not express a clear view on the merits of proceeding or did not address the question. Fifteen comments came from individual consumers. Seven comments were submitted by trade associations, five by review platform operators and one by an employee of one such operator, three by small businesses and one by a small business employee, three by consumer advocacy organizations, three by entities dedicated to fighting fake reviews, one by a public interest research center, one by a think tank, one by academic researchers, and one by an insurance marketing organization. The 15 individual consumers expressed significant concerns about fake consumer reviews and testimonials.7 One consumer comment 6 The comments are publicly available on this rulemaking’s docket at https://www.regulations.gov/ docket/FTC-2022-0070/comments. 7 Anonymous Cmt. on Trade Regulation Rule on the Use of Reviews and Endorsements (‘‘Cmt. on ANPR’’) (Nov. 15, 2022), https:// www.regulations.gov/comment/FTC-2022-00700006 (‘‘Anonymous Consumer A Cmt.’’); Mahzer Zaim, Cmt. on ANPR (Nov. 21, 2022), https:// www.regulations.gov/comment/FTC-2022-00700008 (‘‘Zaim Cmt.’’); Jill Monday, Cmt. on ANPR (Dec. 3, 2022), https://www.regulations.gov/ comment/FTC-2022-0070-0010 (‘‘Monday Cmt.’’); Donald Kelly, Cmt. on ANPR, (Dec. 7, 2022), https://www.regulations.gov/comment/FTC-20220070-0012 (‘‘Kelly Cmt.’’); Heather Earl, Cmt. on ANPR (Dec. 11, 2022), https://www.regulations.gov/ comment/FTC-2022-0070-0013; Andrea Sliger, Cmt. on ANPR (Dec. 11, 2022), https:// www.regulations.gov/comment/FTC-2022-00700014; Merrill Ahrens, Cmt. on ANPR (Dec. 11, 2022), https://www.regulations.gov/comment/FTC2022-0070-0015; Diane Dauite, Cmt. on ANPR (Dec. 11, 2022), https://www.regulations.gov/comment/ PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 49365 declared: ‘‘this rule to extend the FTC power over fraudulent and paid for testimonies and reviews is a necessity. I think . . . protection against these types of scams is an integral need to the people of the United States.’’ 8 Consumer commenters wrote about the difficulty that many consumers have in identifying fake reviews.9 One consumer who selected an auto repair shop based upon misleading reviews written by the shop’s employees or their spouses spoke of having been personally harmed by deceptive reviews.10 Two consumer comments said that truthful negative reviews are valuable and should not be suppressed.11 Two additional consumer commenters spoke of the need to punish and deter bad actors.12 The four comments from small businesses or a small business employee were from Ubiquitous Advising, LLC, (‘‘Ubiquitous Advising’’), Patrick’s Pet Care, an anonymous small business that sells products through a particular online marketplace, and Tammy Provencal, who is a small business employee.13 Ubiquitous Advising supports the rulemaking, and commented that fake reviews cause more damage than anyone can imagine.14 It also said that review FTC-2022-0070-0016 (‘‘Dauite Cmt.’’); Stephanie Smith, Cmt. on ANPR (Dec. 12, 2022), https:// www.regulations.gov/comment/FTC-2022-00700017 (‘‘Smith Cmt.’’); Anonymous, Cmt. on ANPR (Dec. 13, 2022), https://www.regulations.gov/ comment/FTC-2022-0070-0018 (‘‘Anonymous Consumer B Cmt.’’); Jim Zevely, Cmt. on ANPR (Dec. 17, 2022), https://www.regulations.gov/ comment/FTC-2022-0070-0019 (‘‘Zevely Cmt.’’); Frank Evelhoch II, Cmt. on ANPR (Dec. 17, 2022), https://www.regulations.gov/comment/FTC-20220070-0021 (‘‘Evelhoch Cmt.’’); Anonymous, Cmt. on ANPR (Dec. 26, 2022), https://www.regulations.gov/ comment/FTC-2022-0070-0022 (‘‘Anonymous Consumer C Cmt.’’); Judy Draper, Cmt. on ANPR (Dec. 28, 2022), https://www.regulations.gov/ comment/FTC-2022-0070-0023; Anonymous, Cmt. on ANPR (Dec. 31, 2022), https:// www.regulations.gov/comment/FTC-2022-00700025 (‘‘Anonymous Consumer D Cmt.’’). 8 Anonymous Consumer A Cmt. at 1. 9 Kelly Cmt. at 1; Smith Cmt. at 1; Zevely Cmt. at 1; Evelhoch Cmt. at 1; Anonymous Consumer D Cmt. at 1. 10 Monday Cmt. at 1. 11 Dauite Cmt. at 1; Anonymous Consumer B Cmt. at 1. 12 Zaim Cmt. at 2; Anonymous Consumer C Cmt. at 1. 13 Ubiquitous Advising, LLC, Cmt. on ANPR (Dec. 29, 2022), https://www.regulations.gov/comment/ FTC-2022-0070-0024 (‘‘Ubiquitous Advising Cmt.’’); Patrick’s Pet Care, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-20220070-0032 (‘‘Patrick’s Pet Care Cmt.’’); Anonymous, Cmt. on ANPR (Nov. 28, 2022), https:// www.regulations.gov/comment/FTC-2022-00700009 (‘‘Anonymous Business Cmt.’’); Tammy Provencal, Cmt. on ANPR (Jan. 9, 2023), https:// www.regulations.gov/comment/FTC-2022-00700042 (‘‘Provencal Cmt.’’). 14 Ubiquitous Advising Cmt. at 1–2. E:\FR\FM\31JYP1.SGM 31JYP1 49366 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules suppression is just as bad, with businesses threatening, bullying, or suing consumers who are trying to warn other consumers, even when there is zero chance of those businesses winning such a lawsuit.15 Ubiquitous Advising described a company in its local area that is constantly threatening and bullying reviewers.16 Patrick’s Pet Care did not indicate clearly whether it supports the rulemaking but complained about being attacked with negative reviews.17 It suggested that people should not be able to post anonymous, non-traceable reviews and that platforms should disclose the names of reviewers.18 The anonymous small business that submitted a comment did not address the proposed rulemaking and asserted that a particular online marketplace was manipulating the placement of negative reviews.19 The small business employee supports the rulemaking and stated that a competitor is giving incentives for 5star reviews.20 The five review platforms that submitted comments, Yelp, Inc. (‘‘Yelp’’), Trustpilot A/S (‘‘Trustpilot’’), Google LLC (‘‘Google’’), Tripadvisor LLC (‘‘Tripadvisor’’), and Amazon.com, Inc. (‘‘Amazon’’), wrote of the importance of reviews to consumers and the lengths to which they go to stop and combat fake reviews.21 These comments conveyed information both about the prevalence and harm caused by fake review practices. Yelp, which supports civil penalties for ‘‘businesses and individuals who author, arrange for or pay for deceptive reviews,’’ 22 said that an overwhelming majority of consumers who read reviews (83 percent) say they trust online 15 Id. at 1. 16 Id. 17 Patrick’s Pet Care Cmt. at 1–2. at 2. 19 Anonymous Business Cmt. at 1–2. 20 Provencal Cmt. at 1. 21 Yelp, Inc., Cmt. on ANPR (Jan. 6, 2023), https:// www.regulations.gov/comment/FTC-2022-00700028 (‘‘Yelp Cmt.’’); Trustpilot A/S, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/ comment/FTC-2022-0070-0031 (‘‘Trustpilot Cmt.’’); Google LLC, Cmt. on ANPR, (Jan. 9, 2023), https:// www.regulations.gov/comment/FTC-2022-00700034 (‘‘Google Cmt.’’); Tripadvisor LLC, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/ comment/FTC-2022-0070-0036 (‘‘Tripadvisor Cmt.’’); Amazon.com, Inc., Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC2022-0070-0041 (‘‘Amazon Cmt.’’). 22 Yelp Cmt. at 12. At the same time, Yelp said that because ‘‘such deceptive review practices are already illegal under Section 5 of the FTC Act,’’ it ‘‘recommends against additional rulemaking that is specifically directed toward liability for deceptive reviews.’’ The Commission has difficulty reconciling these two comments as the Commission could not adopt new civil penalties without rulemaking. ddrumheller on DSK120RN23PROD with PROPOSALS1 18 Id. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 reviews about local businesses.23 In one Yelp survey, 71 percent of respondents said they would no longer visit a business if they learned the business has fake or compensated online reviews.24 As a first line of defense, Yelp uses automated software systems in order to detect biased reviews and ‘‘flags a significant percentage of reviews—about 19% based on Yelp’s most recent . . . figures—as ‘not recommended.’ ’’ 25 Yelp said that groups to facilitate the buying, selling, or exchange of fake reviews exist on various online platforms (e.g., Facebook, Instagram, Twitter).26 In 2021, Yelp made more than 1,000 reports to online platforms warning them of nearly 950 suspicious groups, posts, or individuals found on their sites.27 Yelp also wrote that ‘‘abusive and questionable or unjustified legal threats are another form of review suppression that Yelp constantly confronts’’ and that its 2021 data shows a majority of such threat alerts ‘‘stemmed from beauty and health categories—businesses consumers often turn to when making critical life decisions or that can otherwise be sensitive in nature.’’ 28 Trustpilot, a Danish company operating a website that hosts reviews of businesses worldwide, did not appear to support or oppose the rulemaking. It said that of the 46.7 million Trustpilot reviews written globally in 2021, it removed 2.7 million fake reviews.29 In 2021, Trustpilot identified and took action against more than 60,000 reviews about United States businesses that were submitted by accounts it deemed to be companies or individuals who offered fake reviews for sale online.30 It noted that it is appropriate for consumers to review a service provider with which they have had an experience even if they did not make a purchase.31 In 2021, Trustpilot detected and removed as biased just over 8,000 reviews for United States businesses written by owners, officers, or employees of the company reviewed, or their family members.32 Trustpilot stated that such behavior does not necessarily reflect intentional fraud.33 It commented that it is aware of cases 23 Id. 34 Id. at 4. 26 Id. at 6. at 8. 27 Id. at 11–12. Cmt. at 2. Trustpilot noted that it defines ‘‘fake reviews’’ more broadly than was used in the FTC’s ANPR. 30 Id. at 3. 31 Id. at 3–4. 32 Id. at 7. 33 Id. PO 00000 at 8. at 9. 36 Id. at 16. 37 Id. at 17. 38 Google Cmt. at 9. 39 Id. at 1, 2, 9. 40 Id. at 1. 41 Id. at 3. 42 Id. 43 Id. 44 Id. at 3, 6. 45 Id. at 8. 46 Id. 35 Id. 24 Id. 25 Id. outside of Trustpilot in which the suppression of negative reviews has occurred on retailer or business websites.34 It has seen some cases, mostly outside of the US, in which businesses have threatened reviewers if they do not delete a negative review.35 In response to the ANPR, Trustpilot said it is possible that, before moving to regulation, there may be benefits in seeking to maximize the effects of other steps, such as educating businesses and consumers or developing codes of conduct.36 It noted that while regulation could send a strong signal, it may face the challenge of being quite static in a dynamic and fast-paced environment.37 Google supports the rulemaking.38 It said that fake reviews undermine users’ confidence in the information available on its platform.39 Google uses both automated systems and human operators to monitor compliance with its policies and identify and remove fake reviews.40 Spammers constantly evolve their tactics, so distinguishing between fake and authentic reviews is an ongoing battle.41 For example, in response to advances in Google’s detection and mitigation capabilities, bad actors have adapted, such as by using Virtual Private Networks (‘‘VPNs’’) to evade routine detection.42 Google said that businesses may also have strong incentives to buy positive reviews, which exacerbates the problem.43 In addition, many reviews displayed on its platform are sourced or surfaced from third parties (e.g., from the merchant website where consumers purchased the product or service), and it can be more difficult to detect when such reviews are fake because Google lacks access to some signals of inauthentic activity, such as the account that created the review being used to post duplicate content.44 In 2022, Google removed millions of reviews from Google Play that it determined to be fake, inorganic, or otherwise malicious.45 In 2021, users submitted around one billion Google Maps reviews and Google blocked or removed more than 95 million of them for violating its policies.46 Google also removed another one million reviews that were reported 28 Id. 29 Trustpilot Frm 00011 Fmt 4702 Sfmt 4702 E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules directly to it, and it disabled more than one million user accounts due to policyviolating activity.47 Google urged the Commission to focus on those posting fake reviews rather than on the platforms.48 Tripadvisor agrees that deceptive actions by bad actors harm consumers and honest businesses.49 In 2021, of the 26 million reviews submitted to Tripadvisor, it identified 3.6 percent as violating its fraud guidelines.50 It said that in certain scenarios it can be difficult to distinguish authentic reviews from fake.51 Tripadvisor also said that efforts to suppress negative reviews, including by threatening reviewers, is one of the problems that plague the online consumer review ecosystem.52 Finally, it believes that targeted authority for the FTC to impose financial penalties on bad actors can be an element of a comprehensive effort to improve the consumer information ecosystem, but that any provision that authorizes the assessment of a financial penalty must be appropriately targeted in both design and enforcement at those who knowingly engage in clearly deceptive and fraudulent practices.53 Amazon did not state support for or opposition to the rulemaking. Amazon said that in 2021 alone, it invested more than $900 million and employed more than 12,000 people who were dedicated to protecting customers and its store from fraud and other forms of abuse.54 Amazon stated that it proactively stopped more than 200 million suspected fake reviews in 2020 alone.55 Amazon also noted that fraudsters approach its customers through their own websites and on social media and solicit them to write misleading reviews in exchange for money, free products, or other incentives.56 In 2021, Amazon reported more than 16,000 social media groups that were buying or exchanging misleading reviews to the social media sites that hosted them, including Facebook, Twitter, and Instagram, resulting in the removal of groups with more than 11 million members.57 In July 2022, Amazon sued more than 10,000 such Facebook groups.58 Amazon encouraged the FTC to increase the use of its existing authority to pursue fake review brokers, collaborate with other regulators to combat bad actors who facilitate review abuse, continue to provide guidance to legitimate businesses, and educate consumers about how to identify and report fake reviews.59 An individual Amazon employee working in the Amazon Risk department for the past 10 years submitted a comment.60 The commenter personally reviewed thousands of seller and buyer accounts for review abuse and said there is no dispute that deceptive reviews are widespread and harmful to customers.61 The commenter is ‘‘skeptical about whether the regulation will be effective’’ because most online platforms and shopping websites do not require customers to register using real identities in order to leave reviews and because Section 230 of the Communications Decency Act (47 U.S.C. 230) immunizes internet service providers, like Google and Facebook, from lawsuits ‘‘based on claims related to content published by third-parties using their service[s].’’ 62 The academic researchers who submitted a comment were Rajvardhan Oak and Zubair Shafiq from the University of California Davis, who had examined reviews on online marketplaces.63 They infiltrated an ‘‘incentivized review service geared towards Amazon.com’’ and discovered solicitations for incentivized five-star reviews for 242,000 products.64 They found more than 250 groups on Facebook in which reviews were brokered, the largest of which had around 550,000 members.65 Over the six weeks that they tracked products for which incentivized reviews were sought, no reviews were removed from nearly 50 percent of those products.66 Although Amazon delists products suspected of seeking incentivized reviews, only 25 of the 1,600 products they were tracking were removed by Amazon during the six-week period.67 They also said that, in response to Amazon’s lawsuits against Facebook groups, group administrators and agents simply created alternate communication channels, such as Signal/Telegram 59 Id. 60 Miao Zhao, Cmt. on ANPR (Dec. 19, 2022), https://www.regulations.gov/comment/FTC-20220070-0020 (‘‘Zhao Cmt.’’) at 1. 61 Id. 62 Id. at 1–2. 63 Rajvardhan Oak and Zubair Shafiq, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/ comment/FTC-2022-0070-0030 (‘‘Oak & Shafiq Cmt.’’) at 1. 64 Id. at 3–4. 65 Id. at 4. 66 Id. at 7–8. 67 Id. at 8. ddrumheller on DSK120RN23PROD with PROPOSALS1 47 Id. 48 Id. at 9. 49 Tripadvisor Cmt. at 7. 50 Id. 51 Id. at 5–6. 52 Id. at 11. 53 Id. at 10. 54 Amazon Cmt. at 2. 55 Id. 56 Id. at 2. 57 Id. 58 Id. at 3. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 49367 groups, and circulated the details of the alternatives.68 The Commission received comments from three entities dedicated to fighting fake reviews: the Transparency Company, Fake Review Watch, and Fakespot, Inc.69 All three commenters asserted that the strategies that are currently being used by review platforms are insufficient.70 The Transparency Company, which supports a rulemaking, said that its research suggests that the major review websites are unable to detect a majority of fake reviews online.71 It estimated that 8.5 percent of published reviews— for all industries—are fake, and provided a link to its fake review research, which asserted that 10.7 percent of Google reviews, 7.1 percent of Yelp reviews, and 5.2 percent of Tripadvisor reviews were fake.72 The comment noted that 54 percent of consumers say that they would not buy a product if they suspected it to have fake reviews and estimated that consumer injury from fake reviews is approximately $5 billion per year.73 It documented over 1,000 examples of fake negative reviews causing injury to competition and it estimates that thousands of lawyers are hired each year to send demand letters to and intimidate the authors of negative consumer reviews.74 The comment identified platform actions that have been effective in reducing consumer harm associated with fake reviews but said that ending online review fraud would require, among other things, the authentication of consumer reviewers.75 Fake Review Watch, which supports a rulemaking, said that there is a robust black market for paid for (or traded for) reviews on Google, Yelp, Facebook, Trustpilot, and numerous other review sites and that many of the transactions are conducted on social media.76 It 68 Id. 69 The Transparency Company, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/ comment/FTC-2022-0070-0044 (‘‘Transparency Company Cmt.’’); Fake Review Watch, Cmt. on ANPR (Jan. 5, 2023), https://www.regulations.gov/ comment/FTC-2022-0070-0026 (‘‘Fake Review Watch Cmt.’’); Fakespot, Inc., Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/ FTC-2022-0070-0035 (‘‘Fakespot Cmt.’’). 70 Transparency Company Cmt. at 9, 18; Fake Review Watch Cmt. at 2; Fakespot Cmt. at 1–2. 71 Transparency Company Cmt. at 9. 72 Id.; Uberall, The State of Online Review Fraud: An Analysis of 4 Million Reviews on Google, Facebook, Yelp and Tripadvisor at 15, https:// join.momentfeed.com/hubfs/ 2021%20Fake%20Reviews/FakeReviews_ Report.pdf. 73 Transparency Company Cmt. at 16, 18. 74 Transparency Company Cmt. at 16. 75 Id. at 18–20. 76 Fake Review Watch Cmt. at 1, 9. E:\FR\FM\31JYP1.SGM 31JYP1 49368 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules stated that fake reviews are commonplace and often difficult to detect without examining review profile histories across multiple businesses.77 Fake Review Watch has observed over 100 Facebook groups operating as review exchanges, with hundreds or thousands of members each.78 The comment also asserted that Google: (a) often allows profiles that posted fake reviews to remain active even after it removes those reviews, (b) provides no alerts to consumers about businesses with fake reviews, and (c) makes fake review detection more difficult by allowing profiles to choose not to display all of their reviews and by not displaying the dates of reviews.79 The comment also complained about reviews by Yelp Elite members,80 which Fake Review Watch asserted are automatically recommended and not subject to evaluation by Yelp’s recommendation software, and about the inadequacy of Yelp’s consumer alerts.81 Fake Review Watch said that regulators should require review sites to tell consumers everything they know about a business’s reviews and to post notices reminding consumers that the site cannot guarantee the truthfulness and accuracy of any review.82 Fakespot did not state support for or opposition to a rulemaking. In its comment, Fakespot opined that sellers posting fake reviews and fake review farms are among the malicious actors generating fake online content that, in the last five years, has led to a ‘‘dramatic deterioration’’ of trust between sellers, platforms, and consumers.83 The three consumer advocacy organizations that submitted comments, Truth in Advertising, Inc. (‘‘TINA’’), the U.S. Public Interest Research Group (‘‘US PIRG’’), and the National Consumers League (‘‘NCL’’), all advocated for a rulemaking.84 77 Id. at 1. 78 Id. 79 Id. at 3. ddrumheller on DSK120RN23PROD with PROPOSALS1 80 According to Yelp, Yelp Elite members are chosen ‘‘based on a number of things, including well-written reviews, high quality photos, a detailed personal profile, and a history of playing well with others.’’ https://www.yelp-support.com/ article/What-is-Yelps-Elite-Squad?l=en_US. 81 Id. at 4–5. 82 Id. at 9. 83 Fakespot Cmt. at 1. 84 Truth in Advertising, Inc., Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/ FTC-2022-0070-0029 (‘‘TINA Cmt.’’) at 1; U.S. Public Interest Research Group, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/ FTC-2022-0070-0045 (‘‘US PIRG Cmt.’’) at 2; National Consumers League, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC2022-0070-0039 (‘‘NCL Cmt.’’) at 1. Electronic Privacy Information Center (‘‘EPIC’’), which is a public interest research center, submitted a VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 TINA said that fake reviews are an insidious problem, primarily because consumers have come to rely heavily on reviews in making their online purchasing decisions, and it provided numerous citations to publications regarding the importance of reviews to consumer decision making.85 It stated that incentives to generate early, positive reviews have led to a proliferation of false and fake reviews— a deceptive marketing tactic that will only continue to flourish if not effectively reined in by regulators.86 TINA said that, given the Supreme Court’s AMG Capital Management decision, a rule would substantially improve the agency’s ability to combat and deter deception and unfairness in this area.87 US PIRG cited findings by industry observers that 30 to 40 percent of online reviews are not genuine, and stated that consumers have no way of knowing which reviews are legitimate.88 It asserted that fake reviews harm both consumers who are trying to make informed buying decisions and honest businesses, and that, when consumers lose confidence in reviews, legitimate positive reviews do not mean as much.89 It said that the marketplace is poisoned by outright fake reviews, reviews written in exchange for free items, fake negative reviews written about competitors, review suppression, reviews or endorsements written for consideration, and misrepresentations that a website or a certification or a seal is independent.90 NCL said that millions of consumers use reviews every day to inform billions of dollars in purchasing decisions involving both online and offline businesses.91 It cited an estimate that in 2021, fraudulent reviews cost U.S. consumers $28 billion.92 NCL also cited a different study which said that, by deceiving buyers into purchasing lower quality and potentially unsafe products, fake reviews lead to $0.12 of consumer welfare lost for every $1 spent online.93 It said that the practices outlined in the ANPR were all unfair and deceptive, that the sellers and service providers comment supporting a rulemaking. Its comment focused mainly on endorsements by police organizations of one product. Electronic Privacy Information Center, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-20220070-0043. 85 TINA Cmt. at 2–3. 86 Id. at 3. 87 Id. at 3. 88 US PIRG Cmt. at 1. 89 Id. 90 Id. at 1–2. 91 NCL Cmt. at 1. 92 Id. at 2. 93 Id. PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 that do not use fake reviews are at a competitive disadvantage, that the effects of a fake review may last up to a month after its deletion or detection, and that the threat of fake negative reviews is being used to extort honest businesses.94 NCL also asked the Commission to require platforms to implement measures to combat the unfair and deceptive uses of reviews, endorsements, and indicators of social media influence, possibly requiring purchase verification before allowing a user to leave a review and the active policing of reviews.95 Finally, NCL suggested that the FTC explore options for holding platforms accountable for allowing organized review fraud to flourish.96 The seven trade associations that submitted comments, the North American Insulation Manufacturers Association (‘‘NAIMA’’), the American Dental Association (‘‘ADA’’), the Computer & Communications Industry Association (‘‘CCIA’’), the Travel Technology Association (‘‘Travel Tech’’), the National Automobile Dealers Association (‘‘NADA’’), the National Retail Federation (‘‘NRF’’), and the Association of National Advertisers (‘‘ANA’’),97 took widely divergent positions on a rulemaking. NAIMA and ADA both support a rulemaking.98 With respect to reviews or other endorsements by nonexistent individuals, NAIMA said that it has challenged misleading claims that were ‘‘supported by avatars or entities that there was no chance of making real contact with.’’ 99 It also asserted that testimonials by those misrepresenting their experiences with products are plentiful.100 Finally, NAIMA stated that it regularly challenges statements about 94 Id. 95 Id. at 3–4. at 4. 96 Id. 97 North American Insulation Manufacturers Association, Cmt. on ANPR (Jan. 9, 2023), https:// www.regulations.gov/comment/FTC-2022-00700037 (‘‘NAIMA Cmt.’’); American Dental Association, Cmt. on ANPR (Jan. 5, 2023), https:// www.regulations.gov/comment/FTC-2022-00700027 (‘‘ADA Cmt.’’); Computer & Communications Industry Association, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-20220070-0047 (‘‘CCIA Cmt.’’); Travel Technology Association, Cmt. on ANPR (Jan. 9, 2023), https:// www.regulations.gov/comment/FTC-2022-00700046 (‘‘Travel Tech Cmt.’’); National Automobile Dealers Association, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-20220070-0038 (‘‘NADA Cmt.’’); National Retail Federation, Cmt. on ANPR (Jan. 9, 2023), https:// www.regulations.gov/comment/FTC-2022-00700039 (‘‘NRF Cmt.’’); Association of National Advertisers, Cmt. on ANPR (Jan. 9, 2023), https:// www.regulations.gov/comment/FTC-2022-00700040 (‘‘ANA Cmt.’’). 98 NAIMA Cmt. at 1; ADA Cmt. at 1. 99 NAIMA Cmt. at 2. 100 Id. E:\FR\FM\31JYP1.SGM 31JYP1 ddrumheller on DSK120RN23PROD with PROPOSALS1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules its members’ products ‘‘that appear on standalone websites which falsely claim to be independent reviewers.’’ 101 ADA wants the FTC to allow dentists to disclose patient information in responding to reviews and to require that reviewers identify themselves.102 It is unclear whether Travel Tech or CCIA support a rulemaking. Travel Tech commented that the integrity of reviews is essential to maintain the trust and confidence of the customers of Travel Tech members.103 It stated that the overwhelming majority of reviews are legitimate and that Travel Tech members have systems in place to address the minority of reviews that can be harmful to consumers or travelrelated operators and providers.104 Travel Tech recommended that the Commission utilize its existing authority to combat nefarious paid review-generation sites, referred to as ‘‘click farms.’’ 105 CCIA said that any proposed rulemaking should focus on bad actors engaging in fraudulent behavior, not legitimate endorsements that happen to occur through social media.106 NADA commented that rulemaking is unnecessary because the Commission did not identify any harmful market conduct for which remedies to protect consumers do not exist under current Federal and state law and because monetary penalty authority alone is not reason enough to issue a rule.107 Its comment continued that, if the rulemaking proceeds, the Commission should stick to its stated goal of addressing ‘‘certain types of clear Section 5 violations involving reviews and endorsements’’ to ‘‘benefit consumers, help level the playing field, and not burden legitimate marketers.’’ 108 With respect to any potential rule provision addressing businesses writing, soliciting, or publishing reviews by their employees or family members, NADA asked that the FTC make clear that a violation ‘‘only arises when the business, and not another entity, affirmatively writes, solicits, and publishes reviews that fail to provide clear and conspicuous disclosures of those relationships’’ and that the FTC define the term ‘‘relative.’’ 109 The comment asserted that businesses may legitimately ‘‘seek to remove reviews or comments that are 101 Id. 102 ADA Cmt. at 1. 103 Travel Tech Cmt. at 1. 104 Id. at 3. 105 Id. at 4. 106 CCIA Cmt. at 4. 107 NADA Cmt. at 1–2. 108 Id. at 3. 109 Id. VerDate Sep<11>2014 16:48 Jul 28, 2023 off topic or include false statements, advertisements, inappropriate language, or confidential or personal identification information’’ or to ‘‘remove comments or review functions on their own websites or certain social media posts.’’ 110 NADA also posited other practices that they considered legitimate and did not want prohibited under a possible rule: (a) responding on a comment thread to each negative review, offering an explanation, making customers whole, and asking any successfully satisfied customers to respond on the thread with their satisfaction or update their previously negative review; (b) surveying customer satisfaction and prompting only satisfied customers to leave reviews; (c) reaching out to consumers in an effort to change reviews by addressing their issues, sometimes giving customers something of value in satisfaction of their problems; or (d) highlighting fivestar reviews from satisfied customers on a dealer’s websites.111 NADA said it understood that some third-party review websites promoted their services to businesses and if a business did not purchase those services, it would have a negative effect on the consumer reviews shown for the business.112 Finally, NADA said that the FTC should directly engage with review websites, ecommerce sites, and consumer brands through public workshop conferences.113 NRF opposed additional regulation of retailers but not of fake review brokers.114 It believes that the issue of fake and misleading reviews is important but that fake review brokers are much more likely to mislead consumers and create issues for retailers given the potential for brokers to submit fake reviews in volume.115 NRF said that the fraudulent tactics employed by review brokers can include: (a) using ‘‘bots’’ and artificial intelligence tools to generate reviews on behalf of nonexistent consumers; (b) posting identical, or substantially identical, reviews for multiple different products and/or under multiple consumer accounts; (c) flooding social media platforms such as Twitter, Instagram, and Facebook with false review content, whether as standalone posts or as comments or replies to genuine reviews or consumer questions; (d) creating and operating social media groups or standalone websites that purport to offer benefits like refunds or coupons in exchange for specified types of reviews or ratings; and (e) reimbursing consumers for what would otherwise appear to be bona-fide purchases in exchange for positive 5-star reviews and ratings.116 NRF opposed requiring retailers to restrict consumer reviews to verified purchasers.117 It also opposed blanket approaches such as ‘‘requiring manual review of every consumer review and the poster’s profile’’ or approaches that ‘‘risk inadvertent discriminatory or disparate deletion of reviews based on implicit biases towards certain consumer classes.’’ 118 NRF said that if a retailer is actually acting in bad faith (whether by itself or by intentionally engaging a fake review broker to act on its behalf), the FTC can take the step of ‘‘filing a complaint and bringing formal enforcement action seeking monetary damages as it has done several times this year alone.’’ 119 It accordingly believes that no new enforcement mechanism is necessary for the Commission to ensure retailers comply with existing law, or to hold them accountable for violations.120 ANA asserted that a rulemaking is premature, while making clear that ‘‘ANA does not take the position that fake reviews may not produce economic injury.’’ 121 It asserted that the ‘‘FTC has not demonstrated evidence of prevalence and has not identified a particular industry that would justify embarking upon rulemaking that would be sufficient, clear, narrowly tailored, easy to enforce, and not burdensome to legitimate marketers.’’ 122 ANA appeared to agree that some of the practices challenged in past FTC cases involving the offering of compensation or other incentives in exchange for, or conditioned on, the writing of positive consumer reviews are problematic and deceptive.123 It sought to distinguish such practices from other practices that, according to ANA, do not obviously cause consumer harm, such as review gating or the ‘‘mere solicitation of positive reviews.’’ 124 The Commission also received a comment from an insurance marketing organization, Family First Life LLC (‘‘Family First Life’’), which supported ‘‘a narrowly tailored rule [that] would benefit consumers, help level the playing field, and not burden legitimate 116 Id. 117 Id. at 2–3. at 6. 118 Id. 110 Id. 119 Id. 111 Id. 120 Id. at 3–4. 112 Id. at 4 n.12. 113 Id. at 5. 114 NRF Cmt. at 1. 115 Id. at 2. Jkt 259001 PO 00000 Frm 00014 Fmt 4702 at 7. Cmt. at 2, 4. 122 Id. at 1–2. 123 Id. at 6. 124 Id. at 7. 121 ANA Sfmt 4702 49369 E:\FR\FM\31JYP1.SGM 31JYP1 49370 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS1 marketers.’’ 125 It recommended that any regulation ‘‘be tailored to exclude situations where an employee or independent contractor is leaving a review of their experience working with their employer or principal.’’ 126 Family First Life pointed out that when someone ‘‘writes a review of her own personal experience working with a company on workplace-review platforms, such as Glassdoor or Indeed,’’ concerns about the reviewer’s undisclosed relationship to the company are absent because, on such platforms, ‘‘there is an obvious and assumed relationship between the reviewer and the company.’’ 127 Family First Life commented that the ‘‘FTC should not write a rule that sweeps in and penalizes any review just because the reviewer was offered an incentive to write it—without otherwise dictating what the review says.’’ 128 Family First Life also stated that the ‘‘FTC should include in any proposed regulation it promulgates a safe harbor for truthful reviews that are incentivized but not influenced, controlled, or conditioned by the entity offering the incentive.’’ 129 Finally, it asserted that the FTC should not treat platforms’ determinations of policy violations as evidence of rule breaking.130 The Commission also received a comment from a non-partisan think tank, the Center for Data Innovation (‘‘CDI’’).131 As part of its comment, CDI asserted that regulation is premature because there are no widely accepted best practices for platforms and platforms are still experimenting with solutions.132 CDI acknowledged that researchers studying deceptive reviews found that fake reviews do have a large presence online and a significant impact on commerce, citing research and reports that included the following findings, among others: (a) ‘‘around five percent of reviews left for a private-label apparel company were posted by individuals who did not purchase products’’; (b) ‘‘around 4 percent of online reviews [we]re fake in 2021’’; (c) fake reviews impact nearly $152 billion in global e-commerce revenue; (d) Yelp flagged and filtered out around 16 percent of reviews in 2016; and (e) 20 125 Family First Life LLC, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC2022-0070-0049 (‘‘Family First Life Cmt.’’) at 1–2. 126 Id. at 9. 127 Id. at 9–10. 128 Id. at 12–13. 129 Id. at 14. 130 Id. at 18. 131 Center for Data Innovation, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/ comment/FTC-2022-0070-0048 (‘‘CDI Cmt.’’). 132 Id. at 5. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 percent of 41,572 reviews on Tripadvisor were suspicious.133 It noted that an artificial intelligence (‘‘AI’’) system is able to write reviews that are nearly indistinguishable from reviews written by people.134 CDI commented that fake review brokers help facilitate the creation of fake reviews by connecting bad actors with reviewers, often using ‘‘large groups on websites such as Facebook to find reviewers willing to write reviews in exchange for free products or compensation.’’ 135 The comment asserted that the review broker dictates the rating and what the review should say and then pays the reviewer only once the review is accepted and posted.136 CDI proposed that, instead of engaging in a rulemaking, the FTC should establish partnerships with review companies, e-commerce platforms, and social media companies to establish voluntary best practices to detect and prevent fake reviews.137 III. Prevalence of the Consumer Review and Testimonial Practices at Issue A. Fake or False Consumer Reviews or Testimonials Comments from the platforms support a finding that fake consumer reviews are prevalent. In 2020, Amazon asserted it proactively stopped more than 200 million suspected fake reviews.138 In 2021, according to the company, Google blocked or removed more than 95 million Google Maps reviews for policy violations; in 2022, it removed millions of fake, inorganic, or otherwise malicious Google Play reviews.139 Yelp commented that, in 2021, its recommendation software identified about 19 percent of reviews as ‘‘not recommended.’’ 140 In 2021, Tripadvisor reportedly flagged 3.6 percent of reviews submitted (or about one million reviews) as fraudulent.141 Trustpilot stated that in 2021, accounts deemed to be review sellers submitted more than 60,000 reviews of U.S. businesses; it identified and filtered the reviews and blocked the accounts associated with them.142 Several comments spoke about the prevalence of consumer review rings on various online platforms (e.g., Facebook, Instagram, Twitter) that facilitate the buying, selling, or exchange of fake PO 00000 at 3. at 3–4. 135 Id. at 5. 136 Id. 137 Id. at 5–6. 138 Amazon Cmt. at 2. 139 Google Cmt. at 8. 140 Yelp Cmt. at 6. 141 Tripadvisor Cmt. at 7. 142 Trustpilot Cmt. at 3. reviews. In 2021, Amazon reported more than 16,000 abusive review-related groups to social media sites, leading to the removal of groups with more than 11 million members.143 In July 2022, Amazon sued administrators of more than 10,000 Facebook groups that attempted to orchestrate fake reviews on Amazon.com in exchange for money or free products.144 In 2021, Yelp reported almost 950 suspicious groups, posts, or individuals to online platforms.145 Fake Review Watch has accessed more than 100 Facebook review exchange groups, each with hundreds or thousands of participants.146 The comment from the Amazon employee who reviewed thousands of accounts for review abuse said that deceptive reviews are widespread.147 Other comments suggest the platforms may be underestimating the extent of the fake review problem. The Transparency Company estimated 8.5 percent of published consumer reviews are fake.148 The Fake Review Watch comment explained reviews written by Yelp Elite members are not subject to evaluation by Yelp’s automatic software and there is a robust market for Yelp Elite Reviews.149 US PIRG asserted 30 to 40 percent of online reviews are fabricated or otherwise not genuine.150 The UC Davis researchers found that nearly 50 percent of the products sold on Amazon.com by those seeking incentivized reviews did not have any of their reviews removed during the sixweek period the researchers tracked them.151 CDI cited research regarding the prevalence of fake reviews, including findings that ‘‘around five percent of reviews left for a private-label apparel company were posted by individuals who did not purchase products,’’ ‘‘around 4 percent of online reviews [we]re fake in 2021,’’ and, based on a third-party analysis of 41,572 reviews, around 20 percent of Tripadvisor reviews were suspicious.152 Numerous research reports, several of which are cited in the comments, further establish the prevalence of fake reviews. For example, in 2020, the Department of Homeland Security issued a report that focused on counterfeit and pirated goods but also found that ‘‘the ratings systems across platforms have been gamed, and the 133 Id. 143 Amazon 134 Id. 144 Id. Frm 00015 Fmt 4702 Sfmt 4702 Cmt. at 2. at 3. 145 Yelp Cmt. at 8. 146 Fake Review Watch Cmt. at 1. 147 Zhao Cmt. at 1. 148 Transparency Company Cmt. at 9. 149 Fake Review Watch Cmt. at 4. 150 US PIRG Cmt. at 1. 151 Oak & Shafiq Cmt. at 7–8. 152 CDI Cmt. at 3. E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS1 proliferation of fake reviews and counterfeit goods on third-party marketplaces now threatens the trust mechanism itself.’’ 153 An Uberall report from 2021 estimated 10.7 percent of Google reviews, 7.1 percent of Yelp reviews, and 5.2 percent of Tripadvisor reviews were fake.154 A 2021 joint report by the University of Baltimore and CHEQ AI Technologies Ltd., a company that provides online security services, described the ‘‘booming market’’ for fake reviews and estimated, based on self-reporting from several major platforms, four percent of global reviews are fake.155 Also in 2021, Fakespot released a report finding that, in 2020, nearly 37.6 percent of reviews on Walmart.com were unreliable, with the figure at 27.6 percent for Amazon.com.156 Further, in its most recent annual local consumer review survey, BrightLocal reported 54 percent of consumers were confident they saw fake reviews on Amazon.com in 2022, with the figures being 50 percent for Google and 42 percent for Facebook.157 Academic research—some of which, again, is cited in the comments—has also repeatedly confirmed the prevalence of fake reviews.158 153 See, e.g., Department of Homeland Security, Combating Trafficking in Counterfeit and Pirated Goods (2020), https://www.dhs.gov/sites/default/ files/publications/20_0124_plcy_counterfeitpirated-goods-report_01.pdf. 154 See ‘‘Fake Reviews: How Big a Problem Exactly?,’’ Oct. 28, 2021, https://uberall.com/en-us/ resources/blog/how-big-a-problem-are-fake-reviews. Notably, these percentages refer to reviews that were not blocked by these platforms before publication. 155 See University of Baltimore and CHEQ, ‘‘The Economic Cost of Bad Actors on the Internet: Fake Online Reviews 2021,’’ https:// f.hubspotusercontent00.net/hubfs/5228455/ Research/ Fake%20Online%20Reviews%202021.pdf. 156 See Fakespot, ‘‘2021 Fakespot US Online Shopping, Ratings & Reviews Analysis Report,’’ https://www.fakespot.com/2021holidayreport. 157 See Sammy Paget, ‘‘Local Consumer Review Survey 2023,’’ Feb. 7, 2023, https:// www.brightlocal.com/research/local-consumerreview-survey/. 158 See, e.g., Jesper Akesson et al., ‘‘The Impact of Fake Reviews on Demand and Welfare,’’ National Bureau of Economic Research Conference, July 20, 2022, https://conference.nber.org/conf_papers/ f166391.pdf; Sherry He et al., ‘‘The Market for Fake Reviews,’’ 2021, https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=3664992; Devesh Raval, ‘‘Do Bad Businesses Get Good Reviews? Evidence from Online Review Platforms,’’ 2020, https:// deveshraval.github.io/reviews.pdf; Renee DiResta, ‘‘Manipulating Consumption,’’ 2018, https:// medium.com/@noupside/manipulatingconsumption-42f2e9013d0b; Ted Lappas et al., ‘‘The Impact of Fake Reviews on Online Visibility: A Vulnerability Assessment of the Hotel Industry,’’ 2016, https://pubsonline.informs.org/doi/abs/ 10.1287/isre.2016.0674; Michael Luca and Georgios Zervas, ‘‘Fake It Till You Make It: Reputation, Competition, and Yelp Review Fraud,’’ 62(12) Mgmt. Sci. Dec. 3412–27 (2016), https:// dash.harvard.edu/handle/1/22836596. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 Numerous journalists, including from The Washington Post, The Wall Street Journal, CBC News, and CNBC, have also reported on such prevalence, sometimes having undertaken their own investigations.159 Further, Which?, a consumer advocacy group based in the United Kingdom, has issued several reports documenting fake and manipulated reviews across multiple platforms.160 159 See, e.g., Bob Segall, ‘‘Millions of those 5-star online reviews are fake; Here’s how to spot them,’’ WTHR, Feb. 15, 2022, https://www.wthr.com/ article/news/investigations/13-investigates/manyof-those-5-star-reviews-you-see-online-are-totallyfake-yelp-google-facebook-false-accounts/531f175843b-1316-494a-a746-5bdfcada43fa; Nicole Nguyen, ‘‘Fake Reviews and Inflated Ratings Are Still a Problem for Amazon,’’ Wall St. J., June 13, 2021, https://www.wsj.com/articles/fake-reviewsand-inflated-ratings-are-still-a-problem-for-amazon11623587313; Laura Sydell, ‘‘Fake patient reviews are making it increasingly hard to seek medical help on Google, Yelp and other directory sites,’’ Wash. Post, June 5, 2021, https:// www.washingtonpost.com/business/2021/06/04/ fake-medical-reviews-google-zocdoc-trustpilot/; Matthew Pierce et al., ‘‘Black market in Google reviews means you can’t believe everything you read,’’ CBC News, May 4, 2021 (finding that sale of reviews is a growing and widespread problem), https://www.cbc.ca/news/investigates/fake-reviewson-google-1.6033859; Natasha Lomas, ‘‘Apple urged to root out rating scams as developer highlights ugly cost of enforcement failure,’’ Tech Crunch, Feb. 3, 2021 (finding that selling fake App Store reviews ‘‘is a booming business’’), https://techcrunch.com/ 2021/02/03/apple-urged-to-root-out-rating-scamsas-developer-highlights-ugly-cost-of-enforcementfailure/; Katie Tarasov, ‘‘Amazon is filled with fake reviews and it’s getting harder to spot them,’’ CNBC, Sep. 6, 2020, https://www.cnbc.com/2020/ 09/06/amazon-reviews-thousands-are-fake-hereshow-to-spot-them.html; Greg Sterling, ‘‘Fake reviews problem is much worse than people know,’’ Search Engine Land, Apr. 22, 2020, https:// searchengineland.com/fake-reviews-problem-ismuch-worse-than-people-know-333331; Nick Fernandez, ‘‘It’s 2020 and the Google Play Store still has a major fake review problem,’’ Android Authority, Feb. 23, 2020, https:// www.androidauthority.com/play-store-fake-reviewproblem-1082191/; Eric Griffith, ‘‘39 Percent of Online Reviews Are Totally Unreliable,’’ PCMag, Nov. 7, 2019, https://www.pcmag.com/news/39percent-of-online-reviews-are-totally-unreliable; Elizabeth Dwoskin and Craig Timberg, ‘‘How merchants use Facebook to flood Amazon with fake reviews,’’ Wash. Post, Apr. 23, 2018, https:// www.washingtonpost.com/business/economy/howmerchants-secretly-use-facebook-to-flood-amazonwith-fake-reviews/2018/04/23/5dad1e30-4392-11e88569-26fda6b404c7_story.html. 160 See, e.g., Hannah Walsh, ‘‘Apple App store and Google Play flooded with fake reviews,’’ WHICH?, Mar. 9, 2023, https://www.which.co.uk/ news/article/apple-app-store-and-google-playflooded-with-fake-reviews-aEA138U8bUw6; Sara Spary, ‘‘How Facebook fuels Amazon’s fake reviews,’’ WHICH?, Jan. 13, 2022 (finding Facebook groups with more than 200,000 members facilitating the sale of fake Amazon reviews), https:// www.which.co.uk/news/2022/01/how-facebookfuels-amazons-fake-reviews/; Hannah Walsh, ‘‘How a thriving fake review industry is gaming Amazon marketplace,’’ WHICH?, Feb. 16, 2021 (finding a ‘‘thriving industry of review manipulation businesses’’ targeting the Amazon marketplace and trading on a ‘‘massive scale’’), https:// www.which.co.uk/news/2021/02/how-a-thriving- PO 00000 Frm 00016 Fmt 4702 Sfmt 4702 49371 More recently, concerns have been raised that generative artificial intelligence (‘‘AI’’) tools can be used to write product reviews.161 It has been reported that an AI chatbot is being used to create fake reviews.162 As the reporting notes, the widespread emergence of AI chatbots is likely to make it easier for bad actors to write fake reviews. The Commission has brought numerous cases involving allegedly fabricated consumer reviews. See, e.g., Complaint at 9–17, FTC v. Roomster Corp., No. 1:22–CV–07389 (S.D.N.Y. Aug. 30, 2022) (alleged 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 allegedly created fake accounts to write fake reviews of company’s products on third-party retailer’s website); Shop Tutors, Inc., 169 F.T.C. 476, 487–89 (2020) (reviews of LendEDU were allegedly 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.com reviews of defendants’ product were allegedly fabricated by one or more third parties whom defendants had paid to generate reviews); Complaint at 19, FTC v. Genesis Today, Inc., 1:15–cv–00062 (W.D. Tex. Jan. 26, 2015) (Amazon.com product reviews allegedly purchased by defendants); Complaint at 5, 8, FTC v. Dunlevy, No. 1:11–cv–01226–TWT (N.D. Ga. Apr. 4, 2011) (alleged fake consumer comments). State Attorneys General have also brought cases challenging allegedly fabricated consumer reviews. See, e.g., Complaint at 4, Washington v. Alderwood Surgical Ctr., LLC, No. 2:22– cv–01835 (W.D. Wash. Dec. 29, 2022) (creating allegedly fake positive reviews on Google, Yelp, and other review sites); Complaint at 17–22, State v. Amazon Home Warranty LLC, No. CV2021– 007632 (Ariz. Sup. Ct. Maricopa Cnty. May 10, 2021) (disseminated or caused the dissemination of allegedly fake favorable consumer reviews on thirdparty review websites, including on the fake-review-industry-is-gaming-amazonmarketplace/. 161 See, e.g., Chat GPT, ‘‘Reader Beware: This Gear Review Was Written by an AI Bot,’’ GearJunkie, Dec. 7, 2022, https://gearjunkie.com/ news/chat-gpt-ai-gear-review-msr-pocket-rocket. 162 See Annie Palmer, ‘‘People are using A.I. chatbots to write Amazon reviews,’’ CNBC, Apr. 25, 2023, https://www.cnbc.com/2023/04/25/amazonreviews-are-being-written-by-ai-chatbots.html. E:\FR\FM\31JYP1.SGM 31JYP1 ddrumheller on DSK120RN23PROD with PROPOSALS1 49372 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules BBB’s website); Assurance of Voluntary Compliance at 3–5, State v. Unified Holding Grp., LLC, No. 2020–06785 (C.P. Cumberland Cnty., Pa. Dec. 16, 2020) (alleged fabricated reviews on the BBB website); Complaint at 15, State v. US Air Ducts & Sky Builders, Inc., No. 19–2–24757–6–SEA (Wash. Sup. Ct. Kings Cnty., Sept. 20, 2019) (allegedly created fake Google reviews); Complaint at 8–9, State v. Mechs. Heating & Air Conditioning, LLC, No. 13108809 (Ga. Sup. Ct. Cobb Cnty., Oct. 11, 2013) (alleged fake favorable customer reviews, including on Yelp.com, Kudzu.com, and Google+Local.com). In September 2013, the New York Attorney General’s office announced settlements with 19 companies that allegedly either purchased fake reviews or arranged to have fake reviews posted for their clients.163 Numerous private lawsuits have involved purportedly fake consumer reviews. See, e.g., BHRS Grp., LLC v. Brio Water Tech., Inc., 553 F. Supp. 3d 793, 797 (C.D. Cal. 2021) (defendant allegedly enlisted individuals to purchase products for the purpose of leaving positive Amazon.com reviews of its products and negative Amazon.com reviews of plaintiff’s competing products); Marksman Sec. Corp. v. P.G. Sec., No. 19–62467–CIV–CAN, 2021 U.S. Dist. LEXIS 196580, at *43 (S.D. Fla. Oct. 12, 2021) (denying plaintiff’s motion for default and granting in part its motion for summary judgment in a case in which defendants paid for positive Google reviews from at least three individuals who never lived in a building that a defendant serviced); Rubinstein v. Ourian, No. 20–21948– CIV–MORE, 2021 U.S. Dist. LEXIS 171799, at *3–4 (S.D. Fla. Sep. 10, 2021) (order granting motions for summary judgment on claims and counterclaims in a case in which defendant allegedly purchased negative reviews of plaintiff plastic surgeon); RingCentral, Inc. v. Nextiva, Inc., No. 19–cv–02626–NC, 2021 U.S. Dist. LEXIS 114042, at *7–8 (N.D. Cal. June 17, 2021) (order denying plaintiff’s motion for summary judgment, and granting in part defendant’s motion for summary judgment in a case in which plaintiff alleged defendant posted fake positive reviews for itself and fake negative reviews of the plaintiff, and defendant made similar allegations about plaintiff); AlphaCard Sys. LLC v. Fery LLC, Civil 163 Press Release, A.G. Schneiderman Announces Agreement With 19 Companies To Stop Writing Fake Online Reviews And Pay More Than $350,000 In Fines, Sept. 23, 2013, https://ag.ny.gov/pressrelease/2013/ag-schneiderman-announcesagreement-19-companies-stop-writing-fake-onlinereviews. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 Action No. 19–20110 (MAS) (TJB), 2020 U.S. Dist. LEXIS 147059, at *2 (D.N.J. Aug. 14, 2020) (denying defendant’s motion to dismiss in a case in which defendant allegedly ‘‘placed’’ hundreds of phony Amazon.com customer reviews on defendant’s products); Stonecoat of Tex., LLC v. Procal Stone Design, LLC, Civil Action No. 4:17CV303, 2019 U.S. Dist. LEXIS 153115, at *7–8 (E.D. Tex. July 25, 2019) (denying motions for summary judgment on claims and counterclaims, and denying motion to strike attachments in a case in which plaintiffs allegedly directed employees and/or representatives to submit fake complaints/negative reviews about defendant and post fake positive reviews about plaintiff); Super Mario Plumbing v. Belodedov, No. 2:17–cv– 02545–TLN–AC, 2018 U.S. Dist. LEXIS 24514, at *1–3 (E.D. Cal. Feb. 14, 2018) (denying motion for preliminary injunction in a case in which defendant allegedly posted fake negative reviews about competitor plaintiff); SA Luxury Expeditions LLC v. Latin Am. for Less, LLC, No. C 14–04085 WHA, 2014 U.S. Dist. LEXIS 159520, at *1–2 (N.D. Cal. Nov. 12, 2014) (motion to dismiss held in abeyance in a case in which defendant allegedly posted fake negative consumer reviews about competitor plaintiff). The problem of fake reviews is not limited to the United States. Regulators in other countries, including Canada, the United Kingdom, and Germany, as well as international bodies like the Organisation for Economic Co-operation and Development (OECD), have all stated fake reviews are a growing, thriving, or substantial marketplace problem.164 The extent of fake reviews outside of the United States lends additional support to the conclusion that fake reviews are prevalent, but the 164 See, e.g., Competition Bureau Canada, ‘‘Honest Advertising in the Digital Age,’’ Jan. 22, 2020, https://www.canada.ca/en/competition-bureau/ news/2020/01/honest-advertising-in-the-digitalage.html; UK Competition and Markets Authority, ‘‘CMA expects Facebook and eBay to tackle sale of fake reviews,’’ June 21, 2019, https://www.gov.uk/ government/news/cma-expects-facebook-and-ebayto-tackle-sale-of-fake-reviews; Germany Federal Cartel Office, ‘‘Bundeskartellamt launches sector inquiry into user reviews,’’ May 23, 2019, https:// www.bundeskartellamt.de/SharedDocs/Meldung/ EN/Pressemitteilungen/2019/23_05_2019_SU_ Nutzerbwertungen.html; OECD, ‘‘Understanding Online Ratings and Reviews’’ at 14–15 (2019), https://www.oecd-ilibrary.org/science-andtechnology/understanding-online-consumer-ratingsand-reviews_eb018587-en; OECD, ‘‘Good Practice Guide on Online Consumer Ratings and Reviews’’ at 6 (2019) (noting evidence that some businesses post fake reviews ‘‘on a large scale’’), https:// www.oecd.org/officialdocuments/ publicdisplaydocumentpdf/?cote=DSTI/CP(2019)5/ FINAL&docLanguage=En. PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 Commission is not determining prevalence based upon such facts. The Commission has also challenged allegedly fictitious consumer testimonials that appear in advertising. See, e.g., Complaint at 15, 17–18, FTC v. Wellco, Inc., No. 1:21–cv–02081 (S.D.N.Y. Mar. 10, 2021) (testimonials allegedly copied from competitors’ websites); Shop Tutors, Inc., 169 F.T.C. 476, 488–89 (2020) (allegedly fabricated testimonials); Complaint at 14, 19, FTC v. A.S. Resch., LLC (Synovia), No. 1:19– cv–3423 (D. Colo. Dec. 5, 2019) (allegedly fake testimonials); Complaint at 20–22, 31, FTC v. Global Cmty. Innovations LLC, No. 5:19–CV–00788 (N.D. Ohio Apr. 10, 2019) (allegedly fake testimonials); Complaint at 12, 18, FTC v. Fat Giraffe Mktg. Grp. LLC, No. 2:19–cv–00063–CW (D. Utah Jan. 29, 2019) (the people featured in testimonials allegedly were not real customers); FTC v. Cardiff, No. ED 18– cv–02104–DMG (PLAx), 2020 U.S. Dist. LEXIS 210930, at *15–16 (C.D. Cal. Oct. 9, 2020) (granting in part FTC motion for summary judgment and finding testimonialists in infomercial had not used the product); Complaint at 12–13, 20, FTC v. Mktg. Architects, Inc., No. 2:18–cv–00050–NT (D. Me. Feb. 5, 2018) (allegedly fake testimonials); Complaint at 14, 21, FTC v. Health Res. Labs., LLC, No. 2:17–cv–00467–JDL (D. Me. Nov. 30, 2017) (allegedly fake testimonials); Complaint at 13, 18, 28, FTC v. XXL Impressions LLC, No. 1:17–cv–00067– NT (D. Me. Feb. 22, 2017) (defendants allegedly did 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) (allegedly fake testimonials); First Amended Complaint at 75, FTC v. Jeremy Johnson, No. 10– cv–2203–RLH (GWF) (D. Nev. Feb. 25, 2013) (defendants allegedly hired third parties to post fake positive online articles and web pages purportedly by consumers who had successfully used defendants’ product to find government grants); FTC v. Grant Connect, LLC, 827 F. Supp. 2d 1199, 1228 (D. Nev. 2011) (granting summary judgment on FTC’s deception count where defendants presented no evidence showing certain testimonials were genuine), aff’d in part and vacated in part on other grounds, 763 F.3d 1094 (9th Cir. 2014); Buckingham Prods., Inc., 106 F.T.C. 116 (1985) (testimonials allegedly do not represent actual and genuine testimonials from customers); Technobrands, Inc., 133 F.T.C. 647, 650, 654–55 (2002) (purported consumer endorsers allegedly did not exist); Plaza E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS1 Club, Inc., 80 F.T.C. 62 (1972) (testimonialist allegedly was not a member of respondents’ physical fitness facilities and unknown to respondents); New Standard Publ’g. Co., Inc., 47 F.T.C. 1350, 1366 (1951) (some of the testimonials and letters recommending encyclopedia allegedly were not genuine). The use of fake celebrity endorsements is widespread. A 2018 Better Business Bureau in-depth investigative study found many celebrity endorsements are fake.165 According to one news report, Ellen DeGeneres and Sandra Bullock both sued 100 anonymous defendants who fraudulently used their names in promoting an anti-aging serum and weight-loss products, and dozens of other celebrities’ names have been misappropriated in similar fashion.166 The FTC has challenged numerous allegedly false claims that specific celebrities endorsed certain products, services, or businesses. See, e.g., Complaint at 22–23, 27–28, 38–39, FTC v. Effen Ads, LLC, No. 2:19–cv–00945– RJS (D. Utah Nov. 26, 2019); 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 12–13, FTC v. Tachht, Inc., No. 8:16–cv–01397– JDW–AEP (M.D. Fla. June 1, 2016); Complaint at 13–15, 18, FTC v. 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); Complaint at 15– 17, FTC v. Central Coast Nutraceuticals, Inc., No. 10 C 4931 (N.D. Ill. Aug. 5, 2010); The Raymond Lee Org., Inc., 92 F.T.C. 489 (1978) (use of the names, photographs, and words of public officials, including members of Congress, allegedly misled consumers that the officials recommended or endorsed the business). Most recently, FTC staff published a blog post to warn consumers about scammers using fake Shark Tank celebrity testimonials and endorsements.167 165 See Better Business Bureau, Subscription Traps and Deceptive Free Trials Scam Millions with Misleading Ads and Fake Celebrity Endorsements (Dec. 12, 2018), https://www.bbb.org/article/ investigations/18929-subscription-traps-anddeceptive-free-trials-scam-millions-withmisleading-ads-and-fake-celebrity-endorsements. 166 See Randy Hutchinson, Opinion, Endorsements by stars such as Ellen DeGeneres and Sandra Bullock might be fake, The Tennessean, Jan. 8, 2020, https://www.tennessean.com/story/ opinion/2020/01/08/celebrity-endorsement-ofproducts-could-be/2834860001/. 167 See Karen Hobbs, Did your favorite Shark Tank celebrity really endorse THAT? Probably not, VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 Consumer reviews and testimonials that are not entirely fabricated can still misrepresent the experiences of the purported reviewers and testimonialists, and such misrepresentations are prevalent. This conclusion is reflected in NAIMA’s comment, which asserted testimonials by those misrepresenting their experiences with products are plentiful. The Commission has challenged many advertisements that allegedly misrepresented endorsers’ experiences. See, e.g., FTC v. Cardiff, 2020 U.S. Dist. LEXIS 210930, at *15–16, 48 (testimonialists had already lost weight without using the product); Complaint at 14, 18, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv–3423 (testimonialists had allegedly 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 allegedly did not represent the actual experiences of customers); Complaint at 22–24, 27, FTC v. Russell T. Dalbey, No. 1:11–cv– 01396–CMA–KLM (D. Colo. May 26, 2011) (testimonials allegedly misrepresented earnings from brokering promissory notes using defendants’ system); FTC v. Data Med. Capital, Inc., No. SA CV 99–1266 AHS (EEx), 2010 U.S. Dist. LEXIS 3344, *27 (C.D. Cal. Jan. 15, 2010) (testimonial for one defendant recycled as a fictitious testimonial for a different defendant); Complaint at 17, FTC v. Advanced Patch Techs., Inc., No. 104–CV–0670 (N.D. Ga. Mar. 10, 2004) (allegedly testimonialists attributed their weight loss to simply wearing the Pound A Patch but were also provided supervised exercise sessions three times per week); Esrim Ve Sheva Holding Corp., 132 F.T.C. 736, 740 (2001) (testimonial from respondent allegedly did not represent his actual findings and experience with the product); Computer Bus. Servs., Inc., 123 F.T.C. 75, 78–79 (1997) (testimonials by purchasers of homebased business ventures allegedly did not reflect their actual experiences); Twin Star Prods., Inc., 113 F.T.C. 847, 853–54 (1990) (endorsement allegedly did not reflect the honest opinions, findings, beliefs, or experience of the endorser); National Sys. Corp., 93 F.T.C. 58, 63–65 (1979) (some testimonials were allegedly untrue); Federated Sanitary Corp., 85 F.T.C. 130, 133 (1975) (alleging testimonials represented Fed. Trade Comm’n Consumer Blog (Feb. 17, 2023), https://consumer.ftc.gov/consumer-alerts/2023/02/ did-your-favorite-shark-tank-celebrity-reallyendorse-probably-not. PO 00000 Frm 00018 Fmt 4702 Sfmt 4702 49373 to be from salesmen, franchisees, or other distributors of respondents’ products were not made by such individuals, and a substantial number of purported testimonialists had never dealt with the respondents); Natpac, Inc., 79 F.T.C. 454, 459 (1971) (testimonial letters were allegedly prepared by respondents and signed before the purported authors had received the products and had time to evaluate them); P. Lorillard Co., 46 F.T.C. 735, 740 (1950) (alleging testimonials did not present or reflect the actual personal experiences, knowledge, or beliefs of the signers; some testimonialists did not smoke Old Gold cigarettes or any cigarettes; many testimonials were prewritten by respondent’s representatives; and many were known by the respondent to be false); R.J. Reynolds Tobacco Co., 46 F.T.C. 706, 731–32 (1950) (endorsements communicated that endorsers exclusively smoked Camel cigarettes when they did not smoke cigarettes, did not smoke Camels exclusively, or could not tell the difference between Camels and other cigarettes). Accordingly, based on the foregoing evidence, the Commission concludes fake consumer reviews and testimonials, as well as reviews and testimonials that otherwise misrepresent the experiences of the reviewers and testimonialists, are prevalent. B. Consumer Review or Testimonial Reuse or Repurposing One type of review deception known as ‘‘review hijacking’’ or ‘‘review reuse fraud’’ appears to primarily or solely affect online marketplaces with thirdparty sellers, such as Amazon.com. Vendors and third-party sellers on Amazon’s platform can make their own modifications to product pages, or request Amazon’s assistance to do so, using features referred to as ‘‘product merging’’ and ‘‘product variation.’’ Products that are substantially similar and that differ only in narrow, specific ways—such as color, size, or quantity— but that do not alter the core essence of the item, such as a shirt that comes in multiple colors and different sizes, may share a variation relationship. Products in a variation relationship share the same product detail page. Each product will appear as an alternative on the product detail page, and, when a shopper selects a different product in the variation relationship, the content of the product detail page, such as the pictured product, may change. The variation relationship enables buyers to compare and choose among product attributes from a single product detail E:\FR\FM\31JYP1.SGM 31JYP1 49374 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS1 page, thereby facilitating customer choice and ease of shopping. Some vendors and sellers abuse these features by repurposing a listing page for a product that has positive reviews (e.g., a shower caddy or a jar of honey) and using it to sell a completely unrelated product (e.g., a phone charger or a neck brace), thus inflating the star rating for the latter—and going unnoticed unless consumers read the individual reviews closely. By repurposing the page, the review hijacker is implicitly misrepresenting the repurposed reviews are for the second product and the product has more ratings and reviews than it does. The review hijacker may also be misrepresenting that the second product has a higher average star rating or that it has earned ‘‘Best Seller’’ or ‘‘Amazon’s Choice’’ badges. These claims are unquestionably deceptive and of no redeeming value to legitimate marketers. This problem has persisted since at least 2018 and is prevalent as reflected in reporting by Consumer Reports, The Verge, Buzzfeed News, and others.168 The reporting provides many examples of review hijacking found on Amazon.com across multiple product categories. The author of the Consumer Reports article stated that experts believe it is an ‘‘acute problem’’ and some legitimate Amazon.com sellers are overwhelmed with fighting it. The Verge article calls it a ‘‘common tactic’’ and quotes a former Amazon employee as saying ‘‘the problem is way bigger than people realize.’’ 169 The Commission recently brought its first case involving this type of review 168 See, e.g., Sara Spary, ‘‘Top-rated Amazon headphones boosted by ‘fake reviews’ for toys, mugs and umbrellas,’’ WHICH?, Apr. 7, 2022, https://www.which.co.uk/news/2022/04/top-ratedamazon-headphones-boosted-by-fake-reviews-fortoys-mugs-and-umbrellas/; Timothy B. Lee, ‘‘Amazon still hasn’t fixed its problem with baitand-switch reviews,’’ ARS Technica, Dec. 20, 2020, https://arstechnica.com/tech-policy/2020/12/ amazon-still-hasnt-fixed-its-problem-with-bait-andswitch-reviews/; Jon Keegan, ‘‘Is This Amazon Review Bullshit?,’’ The Markup, July 21, 2020, https://themarkup.org/ask-the-markup/2020/07/21/ how-to-spot-fake-amazon-product-reviews; Josh Dzieza, ‘‘Even Amazon’s own products are getting hijacked by imposter sellers,’’ The Verge, Aug. 29, 2019, https://www.theverge.com/2019/8/29/ 20837359/amazon-basics-fake-sellers-impostersthird-party-marketplace; Jake Swearingen, ‘‘Hijacked Reviews on Amazon Can Trick Shoppers,’’ Consumer Rep., Aug. 26, 2019, https:// www.consumerreports.org/customer-reviewsratings/hijacked-reviews-on-amazon-can-trickshoppers/; Nicole Nguyen, ‘‘Here’s Another Kind Of Review Fraud Happening On Amazon,’’ Buzzfeed News, May 29, 2018, https:// www.buzzfeednews.com/article/nicolenguyen/ amazon-review-reuse-fraud. 169 See Dzieza, ‘‘Even Amazon’s own products are getting hijacked by imposter sellers,’’ supra note 168. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 deception, suing a large vendor that boosted its newly launched products on Amazon.com. The vendor allegedly had Amazon establish variation relationships between the newer products and successful, established products that had more ratings and reviews, high average ratings, or ‘‘Amazon’s Choice’’ or ‘‘#1 Best Seller’’ badges. See Complaint at 1–6, The Bountiful Co., No. C–4791 (Apr. 10, 2023). Accordingly, based on the foregoing evidence, the Commission concludes that the unfair or deceptive reuse or repurposing of consumer reviews is prevalent. C. Buying Positive or Negative Consumer Reviews It is common for sellers or their agents to give incentives in exchange for reviews with the incentives conditioned on the sentiment of the reviews. In the review markets discussed in the comments and described above, prospective reviewers are offered free merchandise or money in exchange for 5-star reviews. Social media groups for procuring misleading reviews are prevalent. The UC Davis researchers found 242,000 products for which Amazon sellers solicited incentivized five-star Amazon.com reviews.170 In addition, the comment from the small business employee said that a competitor of the company for which she worked is providing incentives for 5-star reviews.171 In another academic study, UCLA researchers analyzed these review markets and resulting reviews on Amazon.com and found the market for fake reviews is large and the practice of buying and selling reviews is widespread.172 The Commission has brought cases in which a marketer allegedly provided an incentive for a review or endorsement that was required to be positive. See, e.g., Complaint at 14, 19–20, FTC v. A.S. Resch., LLC (Synovia), No. 1:19–cv– 3423 (allegedly offered consumer endorsers free product in exchange for ‘‘especially positive and inspiring’’ reviews); Complaint at 5–6, 8, Urthbox, Inc., No. C–4676 (Apr. 3, 2019) (allegedly 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) (allegedly past customers were regularly encouraged to submit reviews of respondent’s services in order to be & Shafiq Cmt. at 3–4. Cmt. at 1. 172 He et al., ‘‘The Market for Fake Reviews,’’ supra note 158. PO 00000 170 Oak 171 Provencal Frm 00019 Fmt 4702 Sfmt 4702 eligible for a $100 ‘‘Best Monthly Review Award’’ given to ‘‘the review with the most captivating subject line and best content’’ and told that they should ‘‘be creative and try to make your review stand out for viewers to read!’’). Such conduct has also been challenged in private actions. See, e.g., Marksman Sec. Corp. v. P.G. Sec., 2021 U.S. Dist. LEXIS 196580, at *4 (denying plaintiff’s motion for default and granting in part its motion for summary judgment in which it was undisputed that defendants paid for positive Google reviews). Regulators in Australia, Denmark, and the United Kingdom, as well as the OECD, have issued guidelines or business guidance indicating companies should not provide incentives for giving positive reviews.173 While it may lend some additional support to the conclusion that the acts or practices are prevalent, the Commission is not concluding that the conduct is prevalent on the basis that other countries have taken actions. Accordingly, based on the foregoing evidence, the Commission concludes the giving of incentives for reviews conditioned on the sentiment of the reviews is prevalent. D. Insider Consumer Reviews and Testimonials It is quite common for a company’s owners, officers, managers, executives, employees, agents, or their relatives, to write consumer reviews or testimonials of its products or services. According to Trustpilot, in 2021, more than 8,000 reviews for U.S. businesses were written by their owners, officers, or employees, or their family members.174 In addition, an individual commenter complained of having relied upon misleading reviews written by a business’s employees or their spouses before selecting an auto repair shop.175 The Commission has challenged numerous instances of deceptive 173 Australian Competition & Consumer Commission, Online product and service reviews, https://www.accc.gov.au/business/advertising-andpromotions/online-product-and-service-reviews; Danish Consumer Ombudsman, Guidelines on publication of user reviews (2015), https:// www.forbrugerombudsmanden.dk/media/49717/ guidelines.pdf; United Kingdom Competition and Markets Authority, Online reviews and endorsements (2015), https://www.gov.uk/ government/consultations/online-reviews-andendorsements; OECD, Good Practice Guide on Online Consumer Ratings and Reviews (2019), https://www.oecd-ilibrary.org/science-andtechnology/good-practice-guide-on-onlineconsumer-ratings-and-reviews_0f9362cf-en. 174 Trustpilot Cmt. at 7. 175 Monday Cmt. at 1. E:\FR\FM\31JYP1.SGM 31JYP1 ddrumheller on DSK120RN23PROD with PROPOSALS1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules reviews allegedly written by company insiders. See, e.g., Complaint at 21, 26– 27, United States v. Vision Path, Inc., No. 1:22–cv–00176 (D.D.C. Jan. 25, 2022) (allegedly an executive of the company wrote a review on a thirdparty site and the co–CEO posted a public response thanking the reviewer); Complaint at 2–4, Sunday Riley Modern Skincare, LLC, No. C–4729 (Nov. 6, 2020) (company owner and managers allegedly asked company employees to write product reviews on third-party retailer’s website); Creaxion Corp., 167 F.T.C. 71, 78–79 (2019) (company allegedly conducted program that reimbursed individuals, including the CEO and other company employees, for purchasing its product and posting online reviews); Complaint at 5–6, 8–9, Mikey & Momo, Inc., No. C–4655 (May 3, 2018) (Amazon.com reviews allegedly written by company officer and her relatives); 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 allegedly written 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 allegedly written by managers); Complaint at 10, United States v. Spokeo, Inc., No. 2:12–cv–05001– MMM–SH (C.D. Cal. June 7, 2012) (allegedly defendant directed its employees to draft and post comments endorsing its products on news and technology websites; and comments were reviewed and edited by managers and then posted using account names provided by defendant); Reverb Commc’ns, Inc., 150 F.T.C. 782, 783–84 (2010) (owner of public relations agency, her managers, and employees allegedly wrote iTunes store reviews for clients’ games). At least one State Attorney General has challenged alleged insider reviews. See Complaint at 15, State v. US Air Ducts & Sky Builders, Inc., No. 19–2– 24757–6–SEA (Wash. Sup. Ct. Kings Cnty., Sept. 20, 2019) (Google reviews allegedly written by employees, relatives of employees, and the business owner). The Commission has also challenged testimonials allegedly written by insiders in numerous instances. See, e.g., Complaint at 15, 19–20, FTC v. Health Ctr., Inc., No. 2:20–cv–00547 (D. Nev. Mar. 19, 2020) (defendants allegedly 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 (D. Colo. 2019) (ads allegedly included a testimonial by a 50 VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 percent owner and officer); 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 allegedly from licensees or franchisees, their relatives, or their employees); Deutsch LA, Inc., 159 F.T.C. 1163, 1168–69 (2015) (public relations firm allegedly asked employees to tweet about client’s product); Complaint at 19, 21, FTC v. Genesis Today, Inc., No. 1:15–cv–00062 (W.D. Tex. Jan. 26, 2015) (allegedly defendants’ promotional materials linked to video testimonials by purported users of their weight-loss products that were provided by their employees); Complaint at 17, FTC v. Advanced Patch Techs., Inc., No. 104– CV–0670 (N.D. Ga. Mar. 10, 2004) (shopping mall segment of infomercial with testimonials from ‘‘real people’’ allegedly included at least one employee of the defendants or their agents); Brake Guard Prods., Inc., 125 F.T.C. 138, 191 (1998) (published testimonial was allegedly from a dealer/ distributor of the product); Gisela Flick, 116 F.T.C. 1108, 113–14 (1993) (alleged infomercial endorsement by company’s Athletic Director); Cliffdale Assocs., Inc., 103 F.T.C. 110, 144–45, 172 (1984) (testimonials were allegedly by business associates or relatives). Accordingly, based on the foregoing evidence, the Commission concludes the use of consumer reviews and testimonials written by company insiders—that is, consumer reviews and testimonials written by a company’s owners, officers, managers, executives, employees, agents, or their relatives—is prevalent. E. Company-Controlled Review Websites or Entities Numerous businesses have set up purportedly independent websites, organizations, or entities that review or endorse their own products. In numerous cases, the Commission has challenged sellers who allegedly misrepresented that the websites they controlled provided independent opinions of products. See, e.g., Complaint at 2, 8–9, Son Le, No. C–4619 (May 31, 2020) (respondents allegedly operated purportedly independent websites that reviewed their own trampolines); FTC v. Roca Labs, Inc., 345 F. Supp. 3d 1375, 1389–90 (M.D. Fla. 2018) (defendants operated a purportedly independent, objective website that endorsed defendants’ products); Complaint at 21–25, 28, FTC v. NourishLife, LLC, No. 1:15–cv–00093 (N.D. Ill. Jan. 7, 2015) (defendants allegedly operated a purportedly independent, scientific research website PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 49375 that endorsed a supplement sold only by defendants). The Commission has also challenged sellers who allegedly created purportedly independent organizations or entities that supposedly reviewed or approved their products or services. See, e.g., Complaint at 3–5, Bollman Hat Co., No. C–4643 (Jan. 23, 2018) (respondents allegedly created a U.S.origin seal misrepresenting that an 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) (alleged 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 represented its baby mattresses had been certified by Green Safety Shield and failed to disclose the shield was its own designation); Complaint at 4–6, Benjamin Moore & Co., Inc., No. C–4646 (July 11, 2017) (respondent allegedly used a ‘‘Green Promise’’ 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 allegedly misrepresented that seal-providing association was an independent, thirdparty certifier when it created and controlled that association); Nonprofit Mgmt. LLC, 151 F.T.C. 144, 148–49 (2011) (respondents allegedly misrepresented their seal program was endorsed by two independent associations when respondents 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 allegedly established the Council on Natural Nutrition and then misrepresented it was an independent organization of experts who had endorsed defendants’ products); Nat’l Media Corp., 116 F.T.C. 549, 559–60 (1993) (respondents allegedly claimed the National Association of Advertising Producers was an existing, independent organization that evaluates commercials for their integrity and excellence); Revco, D.S., Inc., 67 F.T.C. 1158, 1163, 1208–18, 1250–51 (1965) (respondents allegedly created and controlled Consumer Protective Institute and gave their products its seal of approval). Accordingly, based on the foregoing evidence, the Commission concludes the practice of marketers setting up E:\FR\FM\31JYP1.SGM 31JYP1 49376 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules purportedly independent websites, organizations, or entities to review or endorse their own products is prevalent. F. Review Suppression ddrumheller on DSK120RN23PROD with PROPOSALS1 The ANPR addressed two types of review suppression. One type involves a seller’s website representing that the consumer reviews displayed represent most or all of the reviews submitted when, in fact, reviews are being suppressed based upon their negativity. Trustpilot commented that it was aware of the suppression of negative reviews on retailer or business websites.176 In a recent case, the Commission alleged a retailer suppressed hundreds of thousands of 1-, 2-, and 3-star reviews submitted to its website. See Complaint at 1–2, Fashion Nova, LLC, No. C–4759 (Mar. 18, 2022). Staff also publicly addressed this issue in a 2020 closing letter to Yotpo, the company that provided review management services to Fashion Nova and numerous other merchants.177 FTC staff’s investigation of Yotpo revealed more than 4,500 Yotpo merchant clients were only automatically publishing 4- or 5-star reviews. Of the 1-star reviews submitted to merchants not automatically publishing 1-star reviews, just 21 percent were published; and of the 2star reviews submitted to merchants not automatically publishing 2-star reviews, just 31 percent were published. After FTC staff began investigating Yotpo, it implemented clear and prominent guidance to its clients on their need to promptly post reviews, including negative reviews, and began to automatically post negative reviews that have not been promptly reviewed and acted upon by its clients.178 Foreign consumer protection entities have brought several actions involving companies that prevented the publication of negative reviews. An online health-care booking service in Australia, which published patient reviews, admitted it did not publish approximately 17,000 reviews and edited another 3,000 reviews either to remove negative aspects or to embellish positive aspects.179 An Australian court found a home building company held back bad reviews from its review websites to give a more favorable 176 Trustpilot Cmt. at 8. https://www.ftc.gov/system/files/ documents/closing_letters/nid/202_3039_yotpo_ closing_letter.pdf. 178 See id. 179 See ‘‘HealthEngine to pay $2.9 million for misleading reviews and patient referrals,’’ Australian Competition & Consumer Commission, Aug. 20, 2020, https://www.accc.gov.au/mediarelease/healthengine-to-pay-29-million-formisleading-reviews-and-patient-referrals. 177 See VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 impression of its services.180 A New Zealand holiday home rental website pleaded guilty and was fined for removing negative comments about rental properties and its maintenance and management of them, and not publishing any reviews that gave a rating below 3.5 stars.181 The United Kingdom’s Competition and Markets Authority secured an undertaking from an online knitwear retailer that did not publish all genuine, relevant, and lawful reviews submitted by its customers.182 The problem is sufficiently prevalent that an EU Directive prohibits ‘‘publishing only positive reviews and deleting the negative ones.’’ 183 These foreign actions lend additional support to the conclusion that the conduct is prevalent, but the Commission is not determining prevalence based upon such actions. The other type of review suppression addressed in the ANPR is suppression by unjustified legal threat or physical threat. The comments in response to the ANPR support a determination that such review suppression is prevalent. Yelp said it ‘‘constantly confronts’’ the use of ‘‘abusive and questionable or unjustified legal threats’’ to suppress reviews.184 Trustpilot has seen cases, mostly outside of the United States, where businesses have threatened consumers if they do not delete negative reviews.185 A comment from Ubiquitous Advising described a company in its local area that is constantly threatening and bullying reviewers in order to suppress bad reviews.186 The Transparency Company said every year thousands of lawyers are hired to intimidate the authors of negative reviews.187 In a case against Roca Labs, Inc., the Commission successfully challenged as unfair the defendants’ threats to enforce—and their actual enforcement 180 See ‘‘Aveling Homes ordered to pay penalties of $380,000 for misleading review websites,’’ Australian Competition & Consumer Commission, Nov. 30, 2017, https://www.accc.gov.au/mediarelease/aveling-homes-ordered-to-pay-penalties-of380000-for-misleading-review-websites. 181 See ‘‘Bachcare fined for removing negative comments in online reviews,’’ RNZ, Dec. 20, 2019, https://www.rnz.co.nz/news/national/405929/ bachcare-fined-for-removing-negative-comments-inonline-reviews. 182 See ‘‘Retailer hosting reviews on its website: improvement of practices,’’ Competition and Markets Authority, Aug. 11, 2016, https:// www.gov.uk/cma-cases/retailer-hosting-reviews-onits-website-improvement-of-practices. 183 See Directive (EU) 2019/2161 of the European Parliament and of the Council, Nov. 27, 2019, https://eur-lex.europa.eu/eli/dir/2019/2161/oj. 184 Yelp Cmt. at 11. 185 Trustpilot Cmt. at 9. 186 Ubiquitous Advising Cmt. at 1. 187 Transparency Company Cmt. at 16. PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 of—non-disparagement clauses in form contracts that were intended to suppress customers’ negative reviews.188 A subsequent FTC case against World Patent Marketing challenged alleged review suppression through physical intimidation as unfair.189 According to the Commission’s complaint, the defendants in that matter ‘‘cultivate[d] a threatening atmosphere through emails to would-be complainants.’’ 190 For example, they distributed, through an email to all of their then-existing customers, a blog post discussing an incident that purportedly occurred in their offices: A consumer that allegedly wanted to speak with them about an invention idea was stopped, detained, and expelled by their ‘‘intimidating security team, all ex-Israeli Special Ops and trained in Krav Maga, one of the most deadly of the martial arts.’’ 191 The post continued: ‘‘The World Patent Marketing Security Team are the kind of guys who are trained to knockout first and ask questions later.’’ State Attorneys General have also challenged the alleged use of unjustified legal threats in attempts to have consumers remove negative reviews. See, e.g., Complaint at 12–14, Maine v. Liberty Bell Moving & Storage, Inc., 2:2022cv00204 (D. Me. July 8, 2022); Complaint at 4, Washington v. Alderwood Surgical Ctr., LLC. A State Attorney General challenged the alleged suppression of negative reviews through intimidation, albeit not physical intimidation, and false accusations. Complaint at 5–7 and Appendices A–C, State v. Mechs. Heating & Air Conditioning, LLC (alleged publishing or threatening to publish the names, home addresses, telephone numbers, email addresses, and photographs of consumers who wrote negative reviews, together with accusations that the consumers engaged in illegal or unethical activities or otherwise maligning their character). Accordingly, based on the foregoing evidence, the Commission concludes the types of review suppression discussed above are prevalent. G. Indicators of Social Media Influence In order to sell or market themselves or their products or services, some individuals and businesses misrepresent their social media influence by buying fake followers, fake subscribers, fake 188 See FTC v. Roca Labs, Inc., 345 F. Supp. 3d at 1393–96. 189 See Complaint at 8–10, 12, FTC v. World Patent Mktg., Inc., No. 1:17–cv–20848–DPG (S.D. Fla. Mar. 6, 2017). 190 Id. at 9. 191 Id. E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS1 views, and other similar inauthentic indicators of such influence. The Commission addressed the alleged sale and use of such fake and inauthentic indicators in complaint against Devumi, LLC.192 In that matter, the Commission alleged that, by selling and distributing these indicators to users of various social media platforms, the defendants enabled the purchasers to ‘‘exaggerate and misrepresent their social media influence,’’ thereby providing the means and instrumentalities for the purchasers to engage in deception.193 For example, the defendants allegedly sold fake Twitter followers to actors, athletes, musicians, writers, and other individuals who wanted to increase their appeal as influencers and to motivational speakers, law firm partners, investment professionals, experts, and other individuals who wanted to boost their credibility to potential clients for their services.194 At least one State Attorney General has brought a case challenging the alleged misuse of fake indicators of social media influence for commercial purposes. In December 2022, the Washington State Attorney General filed suit against a plastic surgery provider accused of buying tens of thousands of fake ‘‘followers’’ on Instagram and thousands of fake ‘‘likes’’ on Instagram and other social media to create a false appearance of popularity in its advertising to consumers.195 Platforms have also sued the sellers of fake indicators of social media influence. In April 2019, Facebook, Inc., and Instagram LLC sued the operators of websites offering fake engagement services.196 The operators allegedly used a network of computers or ‘‘bots’’ and Instagram accounts to provide fake ‘‘likes,’’ ‘‘views,’’ and ‘‘followers’’ to their customers’ Instagram accounts.197 Both the FTC and an independent organization have analyzed bots, inauthentic social media accounts, and fake followers. In July 2020, the Commission issued a report to Congress, titled ‘‘Social Media Bots and Deceptive Advertising.’’ 198 The report stated 192 See Complaint at 5, FTC v. Devumi, LLC, No. 9:19–cv–81419–RKA (S.D. Fla. Oct. 18, 2019). 193 Id. at 5. 194 Id. at 3–4. 195 Complaint at 4, Washington v. Alderwood Surgical Ctr., LLC. 196 Complaint at 1, 5–9, Facebook, Inc. v. Arend Nollen, No. 3:19–cv–02262 (N.D. Cal. Apr. 25, 2019). 197 Id. at 8–9. 198 See Social Media Bots and Deceptive Advertising: Federal Trade Commission Report to Congress, https://www.ftc.gov/system/files/ documents/reports/social-media-bots-advertisingftc-report-congress/socialmediabotsreport.pdf. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 social media companies have reported removing or disabling billions of inauthentic accounts, the online advertising industry has taken steps to curb bot and influencer fraud, and the computing community is designing sophisticated social bot detection methods, but nonetheless, use of social media bots remains a serious issue.199 A 2023 report by the NATO Strategic Communications Centre of Excellence, which analyzed the market for inauthentic social media accounts and fake followers for several years, found it is as fast and cheap to buy them now as several years ago, and the platforms’ ability to detect and remove them is declining overall.200 Citing TikTok’s own reports that it had removed 1.4 billion fake followers in the second quarter of 2022, the researchers stated the total number of fake followers on that platform during that period was likely much higher, given their experiments found only five percent of all purchased fake engagement was identified and removed in a four-week period. Further, in a 2022 study, researchers found that fake views of YouTube videos are widespread, and that the platform does not correct them quickly.201 Accordingly, based on the foregoing evidence, the Commission concludes the sale and misuse of fake indicators of social media influence for commercial purposes is prevalent. IV. Reasons for the Proposed Rule on the Use of Consumer Reviews and Testimonials The Commission believes the proposed Rule will substantially improve its ability to combat certain specified, clearly unfair or deceptive acts or practices involving consumer reviews or testimonials. Although such at 5. NATO Strategic Communications Centre of Excellence, ‘‘Social Media Manipulation 2022/ 2023: Assessing the Ability of Social Media Companies to Combat Platform Manipulation,’’ January 2023, https://stratcomcoe.org/publications/ social-media-manipulation-20222023-assessing-theability-of-social-media-companies-to-combatplatform-manipulation/272. See also Johan Lindquist and Esther Weltevrede, ‘‘Negotiating Authenticity in the Market for Fake Followers on Social Media,’’ Social Science Research Council, Oct. 5, 2021 (describing ability of manipulation services to evade platform detection), https:// items.ssrc.org/beyond-disinformation/negotiatingauthenticity-in-the-market-for-fake-followers-onsocial-media/; Joseph Cox, ‘‘All of My TikTok Followers Are Fake,’’ Vice Motherboard, Aug. 13, 2020 (describing the speed and ease of buying fake followers in bulk), https://www.vice.com/en/article/ z3e8na/get-buy-tiktok-followers-likes-views-cheapeasy. 201 See Maria Castaldo et al., ‘‘Doing data science with platforms crumbs: an investigation into fakes views on YouTube,’’ Sep. 28, 2022, https://doi.org/ 10.48550/arXiv.2210.01096. PO 00000 199 Id. 200 See Frm 00022 Fmt 4702 Sfmt 4702 49377 practices are already unlawful under Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, the proposed Rule may increase deterrence against these practices in the first instance and will allow the Commission to seek civil penalties against the violators and more readily obtain monetary redress for their victims. As discussed below, the proposed Rule would accomplish these goals without significantly burdening honest businesses and provide benefits to consumers and honest competitors. The Commission’s objective in commencing this rulemaking is to deter certain clearly unfair or deceptive acts or practices involving consumer reviews or testimonials, and expand the remedies available to it in instances where such practices are uncovered. A recent U.S. Supreme Court decision,202 which overturned 40 years of precedent from the U.S. Circuit Courts of Appeal uniformly holding that the Commission could take action under Section 13(b) of the FTC Act, 15 U.S.C. 53(b), to return money unlawfully taken from consumers through unfair or deceptive acts or practices, has made it significantly more difficult for the Commission to return money to injured consumers.203 Without Section 13(b) as it had historically been understood, the only method the Commission has to return money unlawfully taken from consumers is Section 19 of the FTC Act, 15 U.S.C. 57b, which provides two paths for consumer redress. The longer path, under Section 19(a)(2), requires the Commission to first issue a final cease-and-desist order—including any resulting appeal. Then, to recover money for consumers, the Commission must prove separately in Federal court that the violator engaged in fraudulent or dishonest conduct.204 The shorter path to monetary relief is under Section 19(a)(1), which allows the Commission to recover redress directly through a Federal court action and is available only when the Commission alleges violation of a rule.205 None of the Commission’s cases challenging deceptive consumer reviews or testimonials has involved other misconduct for which the Commission 202 See AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1352 (2021). 203 See ANPR, 87 FR at 67425 & n.1 (discussing AMG Cap. Mgmt.). 204 See 15 U.S.C. 57b(a)(2) (‘‘If the Commission satisfies the court that the act or practice to which the cease-and-desist order relates is one which a reasonable man would have known under the circumstances was dishonest or fraudulent, the court may grant relief.’’). 205 Compare 15 U.S.C. 57b(a)(1) (rule violations), with id. 57b(a)(2) (Section 5 violations). E:\FR\FM\31JYP1.SGM 31JYP1 49378 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules sought civil penalties under any of the rules it enforces. In addition, the longer path to redress under Section 19(a)(2) provides relief only to redress consumer injury, which may be difficult to quantify in certain circumstances. By contrast, with a rule violation, the shorter path to redress under Section 19(a)(1) also gives the Commission the ability to obtain civil penalties, which punish the wrongdoer, provide general and specific deterrence, and do not require quantifiable proof of consumer injury. Outlawing egregious review and testimonial practices by rule expands the Commission’s enforcement toolkit and allows it to deliver on its mission by stopping and deterring harmful conduct and, in some cases, making American consumers whole when they have been wronged. Because fake reviews and the other unfair or deceptive review and testimonial practices described here are so prevalent and so harmful, the unlocking of additional remedies through this rulemaking, particularly the ability to seek civil penalties against violators and obtain redress for consumers or others injured by the conduct, will allow the Commission to more effectively police harmful review and testimonial practices that plague consumers and honest businesses. V. Overview and Scope of Proposed Rule on the Use of Consumer Reviews and Testimonials ddrumheller on DSK120RN23PROD with PROPOSALS1 A. Key Definitions Proposed § 465.1 would provide definitions for 12 terms as they appear in proposed 16 CFR part 465, including, among others, definitions for the terms ‘‘consumer reviews,’’ ‘‘consumer testimonials,’’ and ‘‘celebrity testimonials.’’ The term ‘‘consumer review’’ is defined in proposed § 465.1(d) as a consumer’s evaluation, or a purported consumer’s evaluation, of a product, service, or business that is submitted by the consumer, or purported consumer, and that is published to a website or platform dedicated in whole or in part to receiving and displaying such reviews. The definition states that consumer reviews include consumer ratings, regardless of whether they include any text or narrative. The definition includes ‘‘purported consumers’’ so that it covers reviews by authors who do not exist. It does not include all consumer evaluations of products or services, such as a blog post or other social media post evaluating a product; it is limited to those submitted to a website or platform or portion VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 thereof dedicated to such reviews. Such websites and platforms would include, among other things, third-party review platforms and advertiser and retailer websites that collect and display consumer reviews. A consumer review submitted and published to one website that is republished on a second website is still a consumer review as republished. A consumer review is not necessarily advertising. The term ‘‘consumer testimonial’’ is defined in proposed § 465.1(e) as an advertising or promotional message that consumers are likely to believe reflects the opinions, beliefs, or experiences of a consumer who has purchased, used, or otherwise had experience with a product, service, or business.206 Proposed § 465.1(b) provides a corresponding definition of the term ‘‘celebrity testimonial.’’ It defines the term ‘‘celebrity testimonial’’ as an advertising or promotional message that consumers are likely to believe reflects the opinions, beliefs, or experiences of a well-known person who purchased, used, or otherwise had experience with a product, service, or business. B. Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials Proposed § 465.2 would prohibit certain types of deceptive conduct involving ‘‘consumer reviews,’’ ‘‘consumer testimonials,’’ and ‘‘celebrity testimonials.’’ Proposed § 465.2(a) would prohibit a business from writing, creating, or selling a consumer review, consumer testimonial, or celebrity testimonial that: (a) is by someone who does not exist; (b) is by someone who did not use or otherwise have experience with the product, service, or business that is the subject of the review or testimonial; or (c) materially misrepresents the reviewer’s or testimonialist’s experience with the product, service, or business. Proposed § 465.2(b) would render it a deceptive act or practice for a business to purchase consumer reviews, or disseminate or cause the dissemination of consumer or celebrity testimonials, about the business or one of its products or services, if the business knew or should have known that the review or testimonial: (a) was by someone who does not exist, (b) is by someone who did not use or otherwise have experience with the product, service, or business, or (c) materially misrepresents 206 The definition of a consumer testimonial is based upon the definition of an ‘‘endorsement’’ in the Commission’s Guides Concerning the Use of Endorsements and Testimonials in Advertising. See Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 CFR 255.0(b). PO 00000 Frm 00023 Fmt 4702 Sfmt 4702 the reviewer’s or testimonialist’s experience with the product, service, or business. In accordance with proposed § 465.1(h), ‘‘purchase a consumer review’’ means to provide something of value, such as money, goods, or another review, in exchange for a consumer review. Proposed § 465.2(c) would make it a deceptive act or practice for a business to procure consumer reviews about the business or one of its products or services for posting on a third-party platform or website, if the business knew or should have known that the review: (a) was by someone who does not exist, (b) is by someone who did not use or otherwise have experience with the product, service, or business, or (c) materially misrepresents the reviewer’s experience with the product, service, or business. Google’s comment said a proposed rulemaking should not apply to review platforms.207 Proposed § 465.2 accounts for this concern. The provision does not apply to businesses, like third-party review platforms, that disseminate consumer reviews that are not of their products, services, or businesses. Neither does it apply to any reviews that a platform simply publishes and that it did not purchase. NRF opposed requiring the manual review of every consumer review and poster’s profile.208 Proposed § 465.2 accounts for this concern by not imposing any obligation on those publishing consumer reviews to manually review consumer reviews or poster profiles and by not applying to reviews that a platform simply publishes. Trustpilot asserted any rule should consider a consumer review to be legitimate if the consumer had experience with the business, even if no purchase was made, and NRF’s comment opposed requiring retailers to restrict consumer reviews to verified purchasers.209 In light of these concerns, proposed § 465.2 does not limit legitimate reviews to reviews by purchasers or verified purchasers. It requires only that the reviewer had experience with the product, service, or business. NRF also recommended any rule provision addressing fake reviews be limited to review brokers and not apply to the parties purchasing the reviews.210 It said that buyers of fake reviews should not be covered by a rule because the Commission can already bring a 207 Google Cmt. at 9. Cmt. at 6. 209 Trustpilot Cmt. at 3–4; NRF Cmt. at 6. 210 NRF Cmt. at 1, 7. 208 NRF E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules ‘‘formal enforcement action seeking monetary damages,’’ and it was not opposed to Commission action against such purchasers.211 The Commission believes a rule should indeed apply to those who knowingly purchase fake reviews given that they are no less culpable for deceiving consumers than the brokers. The Commission’s ability to seek monetary relief without a rule applies to both brokers and buyers, and it does not obviate the need for a rule because, as discussed above, seeking such relief is much more difficult without a rule. ddrumheller on DSK120RN23PROD with PROPOSALS1 C. Consumer Review Repurposing Proposed § 465.3 would prohibit a business from using or repurposing, or causing the use or repurposing of, a consumer review written or created for one product so it appears to have been written or created for a substantially different product. This could consist of combining substantially different products so that they share consumer reviews or changing a product page so it features a different product but retains the reviews of the prior product, or copying reviews of other products from other sites. The term ‘‘substantially different product’’ is defined in proposed § 465.1(j), which establishes that the term refers to a product that differs from another product in one or more material attributes other than color, size, count, or flavor. Although differences in flavor are likely to be material to some consumers in some instances, the question can be highly fact specific. For this reason, combining reviews for a product that has multiple flavors would not be a rule violation, though it could still be a deceptive practice under the FTC Act. D. Buying Positive or Negative Consumer Reviews Proposed § 465.4 would prohibit a business from offering compensation or other incentives in exchange for, or conditioned on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative, regarding the product, service, or business that is the subject of the review. ANA’s comment asserted any proposed rulemaking should not address ‘‘review gating’’ or the ‘‘mere solicitation of positive reviews.’’ 212 Review gating occurs when a business asks past purchasers to provide feedback on a product and then invites only those who provide positive feedback to post online reviews on one 211 Id. at 6. Cmt. at 7. 212 ANA VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 or more websites. Review gating and the mere solicitation of positive reviews are not covered by the proposed Rule. Although the Commission believes review gating can be deceptive,213 whether any given instance of reviewgating is deceptive can be highly fact specific. Family First Life commented that the FTC should not promulgate a rule ‘‘that sweeps in and penalizes any review just because the reviewer was offered an incentive to write it . . . without otherwise dictating what the review says.’’ 214 The proposed Rule does not address incentivized reviews except for those required to express a particular sentiment, but the Commission notes that other uses of incentivized reviews can be deceptive and violate the FTC Act.215 The deceptiveness of undisclosed incentivized reviews is highly fact specific. E. Insider Consumer Reviews and Consumer Testimonials Proposed § 465.5 addresses company insider consumer reviews and consumer testimonials in three different ways. Proposed § 465.5(a) applies to insider reviews and testimonials; proposed § 465.5(b) applies to insider testimonials; and proposed § 465.5(c) applies to insider reviews. Proposed § 465.5(a) would prohibit an officer or manager of a business from writing or creating a consumer review or consumer testimonial about the business or its products or services if the consumer review or consumer testimonial does not have a clear and conspicuous disclosure of the officer’s or manager’s relationship to the business. Proposed § 465.1(c) defines ‘‘clear and conspicuous’’ to mean that a required disclosure is easily noticeable (i.e., difficult to miss) and easily understandable by ordinary consumers, including in all of the ways listed in the definition. This is the same definition the Commission proposed in its Negative Option Rule Notice of Proposed Rulemaking.216 In accordance with proposed § 465.1(g), ‘‘officers’’ are 213 See Endorsement Guides, 16 CFR 255.2(e)(11) (review gating ‘‘may be an unfair or deceptive practice if it results in the posted reviews being substantially more positive than if the marketer had not engaged in the practice’’) and 16 CFR 255.2(d). 214 Family First Life Cmt. at 12–13. 215 See, e.g., Endorsement Guides, 16 CFR 255.5(b)(6)(ii) (any resulting review that fails to clearly and conspicuously disclose the incentives provided to that reviewer is likely deceptive). 216 See Fed. Trade Comm’n, NPRM: Negative Option Rule, 88 FR 24716, 24734 (Apr. 24, 2023), https://www.govinfo.gov/content/pkg/FR-2023-0424/pdf/2023-07035.pdf. PO 00000 Frm 00024 Fmt 4702 Sfmt 4702 49379 defined to include a business’s owners, executives, and managing members. Proposed § 465.5(b) applies to consumer testimonials in advertisements disseminated by or on behalf of a business. It would prohibit a business from disseminating or causing the dissemination of certain consumer testimonials about the business or its products or services if the consumer testimonial is written by the business’s officers, managers, employees, or agents, or any of their relatives without clear and conspicuous disclosures of those relationships. This provision would apply only when the business knew or should have known of the testimonialist’s relationship. Proposed § 465.5(c) applies to solicitations of employee and other insider reviews. It would prohibit under some circumstances an officer’s or manager’s solicitation of consumer reviews from employees, agents, or relatives that results in reviews that don’t clearly and conspicuously disclose the reviewer’s relationship. The provision is limited to situations when the person soliciting the review knew or should have known of the prospective reviewer’s relationship and: (a) failed to instruct the prospective reviewer to disclose clearly and conspicuously that relationship, (b) knew or should have known the review appeared without such a disclosure and failed to take remedial steps or, (c) encouraged the prospective reviewer not to make such a disclosure. NADA recommended any proposed rule provision addressing businesses writing, soliciting, or publishing reviews by their employees or family members clarify that a violation ‘‘only arises when the business, and not another entity, affirmatively writes, solicits, and publishes reviews that fail to provide clear and conspicuous disclosures of those relationships.’’ 217 Proposed § 465.5(c) would apply to reviews by employees or family members. Proposed § 465.5(c) is limited to solicitation by an officer or manager, and only when the solicitor failed to advise a disclosure, knew or should have known that a review appeared without such a disclosure and failed to take remedial steps, or encouraged the prospective reviewer not to make such a disclosure. The business would not be liable under the proposed provision for an unsolicited review, for a review about which the solicitor reasonably should not have known, or for a reviewer who refuses to make a disclosure. However, proposed § 465.5(c) reflects the Commission’s 217 NADA E:\FR\FM\31JYP1.SGM Cmt. at 3. 31JYP1 49380 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules belief that businesses should be prohibited not only from publishing insider reviews themselves but also from causing their creation (e.g., when an officer or manager of the business solicits employees to post reviews on third-party review websites and fails to instruct the employees to disclose their relationship to the business). NADA asked the FTC to define the term ‘‘relative.’’ 218 The Commission believes that the limitation to situations in which officers or managers know or should know that they are soliciting a relative for an endorsement or testimonial addresses the comment without the need for a definition. Family First Life commented that when an independent contractor agent writes a review on a workplace-review platform such as Glassdoor, the reviewer’s relationship to the company is obvious and assumed.219 The Commission agrees, in reviews on such platforms, the relationship is readily apparent and, in effect, already disclosed. The Commission does not believe the proposed Rule needs to specifically address this scenario. ddrumheller on DSK120RN23PROD with PROPOSALS1 F. Company-Controlled Review Websites or Entities Proposed § 465.6 prohibits a business from representing that a website, organization, or entity is providing its independent reviews or opinions about a category of businesses, products, or services that includes the business or its products or services, when the business controls, owns, or operates that website, organization, or entity. G. Review Suppression Proposed § 465.7 addresses two types of review suppression. The first type, addressed in proposed § 465.7(a), would prohibit anyone from using an unjustified legal threat or a physical threat, intimidation, or false accusation to prevent the creation of a consumer review or cause the removal of all or part of a review. In accordance with proposed § 465.1(l), an ‘‘unjustified legal threat’’ is defined as a threat to initiate or file a baseless legal action, such as an action for defamation that challenges truthful speech or matters of opinion. NADA recommended that any proposed rule not prohibit what it characterized as good faith online reputation management practices, such as a business: (a) reaching out to consumers who have posted negative reviews and attempting to improve their reviews by addressing their concerns (including sometimes giving customers something of value in satisfaction of their complaints), or (b) responding on a comment thread to each negative review, offering an explanation, making customers whole, and asking any successfully satisfied customers to update their previously negative review.220 Neither proposed § 465.7(a) nor any other proposed Rule provision would prohibit such conduct (assuming that reviewers are not required to remove or change their reviews in order to be made whole). Proposed § 465.7(b) would prohibit a business from misrepresenting that the consumer reviews of one or more of its products or services displayed on its website or platform represent most or all the reviews submitted to the website or platform if reviews are being suppressed based upon their ratings or their negativity. As proposed, the provision makes clear that the non-publication of consumer reviews for certain enumerated reasons is not considered to be review suppression so long as the criteria for withholding reviews are applied to all reviews submitted without regard to the favorability of the review. The listed acceptable reasons for not publishing a review are: (a) that the review contains: (i) trade secrets or privileged or confidential commercial or financial information, (ii) libelous, harassing, abusive, obscene, vulgar, or sexually explicit content, (iii) the personal information or likeness of another person, (iv) content that is discriminatory with respect to race, gender, sexuality, ethnicity, or another protected class, or (v) content that is clearly false or misleading; (b) the seller reasonably believes it is fake; or (c) the review is wholly unrelated to the products or services offered by or available at the website or platform. These criteria are based upon those enumerated in the Consumer Review Fairness Act, 15 U.S.C. 45b(b)(2) and (3). Moreover, consumers would reasonably expect and often prefer that a business exclude reviews meeting these criteria, so the undisclosed exclusion of such reviews solely due to application of those criteria would be unlikely to mislead or be material to consumers. NADA stated that businesses should be able to ‘‘remove reviews or comments that are off topic or include false statements, advertisements, inappropriate language, or confidential or personal identification information.’’ 221 As to reviews that are ‘‘off topic,’’ proposed § 465.7(b) would 218 Id. 219 Family 220 NADA First Life Cmt. at 9–10. VerDate Sep<11>2014 16:48 Jul 28, 2023 221 Id. Jkt 259001 PO 00000 Cmt. at 3–4. at 3. Frm 00025 Fmt 4702 Sfmt 4702 permit not publishing reviews that are ‘‘wholly unrelated to the products or services offered.’’ As to reviews that contain ‘‘false statements,’’ proposed § 465.7(b) would permit not publishing reviews that are ‘‘clearly false or misleading.’’ It is unclear what the comment meant by reviews that include ‘‘advertisements.’’ If NADA means that it is acceptable to delete a review that mentions a competitor, that is not an exception provided in proposed § 465.7(b).222 With regard to reviews that contain ‘‘inappropriate language,’’ proposed § 465.7(b) would permit not publishing reviews containing ‘‘harassing, abusive, obscene, vulgar, or sexually explicit content’’ or ‘‘content that is discriminatory with respect to race, gender, sexuality, ethnicity, or another protected class.’’ As to reviews that contain ‘‘confidential or personal identification information,’’ proposed § 465.7(b) would allow a seller to not publish a review that contains ‘‘trade secrets or privileged or confidential commercial or financial information,’’ or the ‘‘personal information . . . of another person.’’ NADA also said that businesses should be able to ‘‘remove comments or review functions on their own websites or certain social media posts.’’ 223 The proposed Rule does not prohibit or address such conduct. H. Misuse of Fake Indicators of Social Media Influence Proposed § 465.8 prohibits the misuse of indicators of social media influence. As defined by proposed § 465.1(f), the term ‘‘indicators of social media influence’’ refers to any metrics used by the public to make assessments of an individual’s or entity’s social media influence, such as followers, friends, connections, subscribers, views, plays, likes, reposts, and comments. Proposed § 465.8(a) prohibits anyone from selling fake indicators of social media influence that can be used by persons or businesses to misrepresent their influence for a commercial purpose. Proposed § 465.8(b) prohibits 222 Cf. FTC Statement of Policy Regarding Comparative Advertising (1979), https:// www.ftc.gov/legal-library/browse/statement-policyregarding-comparative-advertising (‘‘Commission policy in the area of comparative advertising encourages the naming of, or reference to competitors, but requires clarity, and, if necessary, disclosure to avoid deception of the consumer.’’). 223 NADA Cmt. at 3. The NADA also posited that highlighting five-star reviews from satisfied customers on a dealer’s websites is a legitimate practice that should not be prohibited under a possible rule. Id. at 4. The proposed Rule does not address such a practice. The Commission notes, however, that highlighting five-star reviews from satisfied customers on a dealer’s websites or in its other advertising could be a deceptive practice depending on the facts. E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules anyone from procuring fake indicators of social media influence to misrepresent their influence or importance for a commercial purpose. I. Severability Proposed § 465.9 is a severability provision. It provides that the provisions of the proposed Rule are separate and severable from one another. If any provision is stayed or determined to be invalid, the remaining provisions will continue in effect. VI. The Rulemaking Process The Commission can decide to finalize the proposed Rule if the rulemaking record, including the public comments in response to this NPRM, supports such a conclusion. The Commission may, either on its own initiative or in response to a commenter’s express request, engage in additional processes, including those described in 16 CFR 1.12 and 1.13. If the Commission on its own initiative decides to conduct an informal hearing, or if a commenter files an express request for such a hearing, then a separate notice will issue under 16 CFR 1.12(a). Any person who would like to participate by providing an oral statement at any informal hearing must make an express request to do so in response to this NPRM. Based on the comment record and existing prohibitions against unfair or deceptive consumer reviews and testimonials under Section 5 of the FTC Act, the Commission does not here identify any disputed issues of material fact necessary to be resolved at an informal hearing. The Commission may still do so later, on its own initiative or in response to a commenter. ddrumheller on DSK120RN23PROD with PROPOSALS1 VII. Preliminary Regulatory Analysis Under Section 22 of the FTC Act, the Commission, when it publishes any NPRM for a rule as defined in Section 22(a)(1), must include a ‘‘preliminary regulatory analysis.’’ 15 U.S.C. 57b– 3(b)(1). The required contents of a preliminary regulatory analysis are (a) ‘‘a concise statement of the need for, and the objectives of, the proposed rule,’’ (b) ‘‘a description of any reasonable alternatives to the proposed rule which may accomplish the stated objective,’’ and (c) ‘‘a preliminary analysis of the projected benefits and any adverse economic effects and any other effects’’ for the proposed rule and each alternative, along with an analysis ‘‘of the effectiveness of the proposed rule and each alternative in meeting the stated objectives of the proposed rule.’’ 15 U.S.C. 57b–3(b)(1)(A)–(C). This NPRM already provided the concise statement of the need for, and the objectives of, the proposed Rule in Section IV above. It addresses the other requirements below. A. Anticipated Costs and Benefits and Reasonable Alternatives The Commission is proposing a rule to curb certain unfair or deceptive uses of reviews and testimonials. The proposed Rule contains several provisions to promote accuracy in consumer reviews (henceforth ‘‘reviews’’) and, thus, will help the vast majority of American consumers who rely on such reviews to make betterinformed purchase decisions. The proposed Rule prohibits: the creation, purchasing, procurement, or dissemination of fake or false reviews; repurposing of reviews for substantially different products; and buying of reviews in exchange for, or conditioned on, positive or negative sentiments. It also includes prohibitions on fake or false consumer or celebrity testimonials, insider reviews, misleading companycontrolled review websites or entities, certain review suppression practices, and the misuse of indicators of fake social media influence. The Commission believes that the benefits of proceeding with the rulemaking will significantly outweigh the costs, but it welcomes public comment and data (both qualitative and quantitative) on any benefits and costs to inform a final regulatory analysis. In the preliminary analysis below, the NPRM describes the anticipated impacts of the proposed Rule. Where possible, it quantifies the benefits and costs. If a benefit or cost is quantified, it indicates the sources of the data relied upon. If an assumption is needed, the text makes clear which quantities are being assumed. The NPRM measures the benefits and costs of the proposed Rule against a baseline in which no rule 49381 regarding consumer reviews has been promulgated by the Commission. The Commission solicits comments from the public to improve these estimates before the promulgation of any final rule. The estimates in this preliminary analysis attempt to include a broad set of economic actors, using data on the number of entities registered as businesses in the United States, data on retail sales, and data on U.S. consumers who shop online. The Commission invites submission of information pertaining to additional economic actors who would be affected by the proposed Rule. Conversely, the Commission solicits information on whether a more limited set of economic actors would yield improved estimates. Quantifiable benefits stem from consumer welfare improvements and consumer time savings. With the proposed Rule, online reviews will be more accurate overall, leading consumers to purchase higher-quality products or products that are bettermatched to their preferences. The proposed Rule will also lead to more trustworthy aggregate review ratings (e.g., star ratings), leading some consumers to spend less time scrutinizing reviews to determine their validity. Quantifiable costs primarily reflect the resources spent by businesses to review the proposed Rule and to take any preemptive or remedial steps to comply with its provisions. Because the proposed Rule is an application of preexisting law under Section 5 of the FTC Act, the Commission expects these compliance costs to be minimal. A period of 10 years is used in the baseline scenario because FTC rules are subject to review every 10 years. Quantifiable aggregate benefits and costs are summarized as the net present value over this 10-year period in Table 1.1. The discount rate reflects society’s preference for receiving benefits earlier rather than later; a higher discount rate is associated with a greater preference for benefits in the present. The present value is obtained by multiplying each year’s net benefit by the discount rate raised to the power of the number of years in the future the net benefit accrues. TABLE 1.1—PRESENT VALUE OF NET BENEFITS, 2023–2033 [In billions] Present value: low-end estimate Total Benefits: 3% Discount Rate ................................................................................................................................. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 PO 00000 Frm 00026 Fmt 4702 Sfmt 4702 E:\FR\FM\31JYP1.SGM $59.31 31JYP1 Present value: high-end estimate $234.28 49382 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules TABLE 1.1—PRESENT VALUE OF NET BENEFITS, 2023–2033—Continued [In billions] Present value: low-end estimate 7% Discount Rate ................................................................................................................................. 50.16 200.26 Total One-Time Costs ................................................................................................................... Net Benefits 3% Discount Rate ................................................................................................................................. 7% Discount Rate ................................................................................................................................. 0.83 0.00 58.48 49.33 234.28 200.26 1. Estimated Benefits of the Proposed Rule ddrumheller on DSK120RN23PROD with PROPOSALS1 Present value: high-end estimate This section describes the beneficial impacts of the proposed Rule, provides preliminary quantitative estimates where possible, and describes benefits that are only assessed qualitatively. The quantifiable estimates reflect benefits stemming from the decrease in online review manipulation on third-party platforms or company websites, which covers most of the prohibitions contained in the proposed Rule. This analysis does not calculate benefits from the other aspects of the proposed Rule— prohibitions on fake or false celebrity testimonials; prohibitions on companycontrolled entities that purportedly provide independent opinions; prohibitions on unjustified legal threats or physical threats, intimidation, or false accusations in an attempt to suppress negative consumer reviews; and prohibitions on the misuse of indicators of fake social media influence—because of the limited quantitative research in these areas. The Commission invites comment on research concerning these other aspects of the proposed Rule. The quantified benefits are presented by benefit category, rather than stemming from a specific provision in the proposed Rule, because the relevant provisions have the same end goal—that is, to improve the information available to consumers by reducing the level of review manipulation. Therefore, it is difficult to disentangle the benefits stemming from each provision. Existing academic literature in economics, marketing, computer science, and other fields documents the importance of online reviews: the number of online reviews and aggregate ratings are extremely important for consumer purchase decisions. It is widely documented that the presence of online reviews improves consumer welfare via reductions in both search costs and the level of information VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 asymmetry that exists prior to purchase.224 When making purchase decisions, consumers typically have incomplete information on product quality and attributes. Searching for additional information is costly. Consumers incur costs—including time and effort costs— to seek, evaluate, and integrate incoming information. Online platforms where past users share information about their experiences can significantly lower search costs. Researchers have also demonstrated consumer reviews create value for consumers beyond a reduction in search costs. Consumers are better able to learn of a product’s quality and attributes when there is free-flowing, nonmanipulated commentary from past consumers. Consumer reviews lead to ‘‘better’’ decisions by increasing the level of information available prior to purchase and reducing uncertainty. By the same token, the academic literature also documents that manipulated or fake reviews lead to reductions in consumer welfare by leading consumers to buy low-quality products or otherwise make suboptimal purchase decisions. A secondary benefit is deterrence of the specified review and testimonial practices. The proposed Rule is essentially the only means for imposing civil penalties in most cases involving such practices. Civil penalties are not generally available under the FTC Act for this conduct, unless parties are already subject to a relevant Commission order or have been served with a copy of a relevant Notice of Penalty Offenses. Also, as noted above, in many cases involving this conduct, calculating redress or other Section 19 relief may be difficult. Without civil penalties, bad actors have little fear of being penalized for using fraud and deception in connection with reviews and endorsements. To obtain redress without alleging a rule violation, the Commission must 224 See, e.g., Dina Mayzlin, ‘‘Promotional Chat on the Internet,’’ 25(2) Mktg. Sci., 155–63 (2006). PO 00000 Frm 00027 Fmt 4702 Sfmt 4702 successfully conclude an administrative proceeding including any appeal and file a follow-on Federal case under Section 19 to establish that the conduct is ‘‘one which a reasonable man would have known under the circumstances was dishonest or fraudulent.’’ 225 Although the Commission is likely to meet this standard in cases involving the conduct covered by the proposed Rule, it would take substantially more time and resources, and would significantly delay any redress to victims, compared to a case under the proposed Rule violation, which does not require multiple proceedings or a special knowledge requirement.226 Given the prevalence of unfair or deceptive conduct involving reviews and testimonials, the Commission will have no shortage of bad actors to investigate; it could invest the extra resources freed up by any final rule into more investigations and actions with respect to consumer reviews or testimonials. In sum, the potential consumer-redress benefits of the proposed Rule are significant: the Commission could put a stop to more inarguably unfair or deceptive consumer reviews or testimonials, return money to more victims, and obtain that redress more quickly. a. Consumer Welfare Benefits From Better-Informed Purchase Decisions The study containing the most direct estimate of welfare losses from review manipulation finds that the presence of fake reviews leads consumers to lose 225 15 U.S.C. 57b(a)(2). Depending on the egregiousness of the misconduct and the harm it is causing, the Commission also may seek preliminary injunctive relief in Federal court. 15 U.S.C. 53(b). 226 See, e.g., Press Release, Fed. Trade Comm’n, Marketers of Ab Force Weight Loss Device Agree to Pay $7 Million for Consumer Redress (Jan. 14, 2009), https://www.ftc.gov/news-events/news/pressreleases/2009/01/marketers-ab-force-weight-lossdevice-agree-pay-7-million-consumer-redress (describing a 2009 settlement of a follow-on Section 19 action against Telebrands Corp. that was brought after litigation of a 2003 administrative complaint alleging violations of Section 5 concluded—in this case, the Section 19 action settled instead of being litigated to judgment, which would have taken more time). E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS1 $0.12 for every dollar spent in an experimental setting.227 Due to limited quantitative estimates in the literature, the NPRM assumes this measure of welfare loss encompasses the various types of review manipulation covered by the proposed Rule. It also assumes the proposed Rule causes all fake or manipulated reviews to vanish. Thus, consumers will gain an estimated $0.12 for every dollar spent on goods whose online reviews included fake ones. To estimate consumer welfare benefits from better-informed purchase decisions, the NPRM first estimates the total amount of sales for which consumers consult online reviews. U.S. e-commerce sales totaled $1.034 trillion in 2022.228 The NPRM assumes all products sold online had some form of user-generated commentary (e.g., on third-party review platforms, on discussion boards, on company websites, or on social media), and that this commentary factors into consumers’ purchase decisions for these goods. Online reviews are also important for commerce not conducted online, including for revenues earned by the hospitality industry and by other services. Sales for businesses classified as ‘‘Food Services and Drinking Places’’ by the U.S. Census totaled $843.61 billion in 2021, which includes revenue from restaurants and bars.229 The NPRM assumes consumers rely on reviews for only a portion of these sales. Some consumers—particularly those living in rural parts of the country and in smaller cities—may have a small set of familiar food and drink establishments available to them, making online reviews less influential to their decision to patronize a particular one. Moreover, prior research has found online reviews do not impact revenues of chain restaurants.230 Accordingly, the NPRM assumes consumers rely on reviews for 25 percent of the total revenue generated in the food services and drinking places sector (25 percent of $843.61 billion, or $210.90 billion).231 227 See Akesson et al., ‘‘The Impact of Fake Reviews on Demand and Welfare,’’ supra note 158. 228 See U.S. Census Bureau, ‘‘Quarterly ECommerce Sales Report,’’ Feb. 17, 2023, https:// www.census.gov/retail/ecommerce.html. 229 U.S. Census Bureau, ‘‘Service Annual Survey,’’ Nov. 22, 2022, https://www.census.gov/ programs-surveys/sas.html (listing total revenue of $843,605,000,000 for NAICS Code 722 in 2021, the most recent year with data). 230 See Michael Luca, ‘‘Reviews, Reputation, and Revenue: The Case of Yelp.com.’’ Harvard Bus. Sch. Working Paper 12–016 (2016). 231 25 percent is likely to be a reasonable estimate based on the difference in revenues for new restaurants and established restaurants. A study conducted by Toast, Inc. found that new restaurants earn approximately $112,000 in average revenue per year (https://pos.toasttab.com/blog/on-the-line/ VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 Online reviews are also important for sales in other service sectors. In 2021, total revenue was $247.25 billion for the accommodations sector (which includes hotels and vacation rentals), and total revenue was $56.85 billion for personal services (including beauty salons, barber shops, health clubs, and non-veterinary pet care), totaling $304.10 billion for both sectors.232 About half of hotel revenue is generated by business travelers, who are likely to rely less on online reviews than leisure travelers do.233 In addition, pre-paid hotel bookings and vacation rentals booked online are already accounted for in the e-commerce sales figure described above. Furthermore, some consumers may be loyal customers of local salons and other personal services, regardless of these businesses’ online reputations. Because of these reasons, the NPRM assumes that a subset of accommodation and personal services revenues is affected by consumer reviews. Similar to the calculation for the food and drinking places industry, the NPRM assumes 25 percent of total accommodation and personal care services revenue is impacted by consumer reviews (25 percent of $304.10 billion, or $76.03 billion). The total estimated revenue for services impacted by consumer reviews is $286.93 billion (the sum of $210.90 billion and $76.03 billion). The Commission seeks comments to improve this estimate. Combining the revenue estimates described above yields $1.321 trillion in estimated sales of goods or services for which consumers incorporate reviews into their decision-making. In this analysis, the NPRM does not incorporate revenues stemming from the physical sale of goods in retail stores where consumers read online reviews before purchasing items in person. The Commission invites commenters to submit information to quantify non-ecommerce retail sales that are impacted by reviews. Quantitative estimates of the incidence of fake or false reviews vary average-restaurant-revenue). This is approximately 25 percent of average revenue for restaurants overall ($486,000, according to the website Eat Pallet, https://eatpallet.com/how-much-do-restaurantsmake-in-a-day). 232 See U.S. Census Bureau, ‘‘Service Annual Survey,’’ supra note 229 (listing total 2021 revenue of $247,246,000,000 for NAICS Code 721 and listing total 2021 revenue of $56,845,000,000 for NAICS Codes 812111 through 812199 and NAICS Code 81291). 233 See Linchi Kwok, ‘‘Will business travel spending return to the pre-pandemic level soon?’’ Hospitality Net, Sept. 22, 2022, https:// www.hospitalitynet.org/opinion/4112075.html. PO 00000 Frm 00028 Fmt 4702 Sfmt 4702 49383 by source.234 Nevertheless, at least three prior studies examining the degree of review manipulation as a proportion of businesses or products (rather than as a proportion of reviews) contain similar findings: according to these studies, approximately 10 percent of products or businesses have some manipulated consumer reviews.235 Thus, a basic approximation of total e-commerce sales involving some review manipulation is 10 percent of $1.034 trillion, or $103.4 billion. Similarly, a basic approximation of review-dependent service industry sales involving some review manipulation is 10 percent of $286.93 billion, or $28.69 billion. The Commission seeks submissions of additional research on the prevalence of review manipulation to improve this estimate. Importantly, online businesses that engage in review manipulation are likely to earn less revenue than other ecommerce companies. For example, prior research has found independent firms and sellers offering lower-quality products are more likely to engage in review manipulation.236 Therefore, ecommerce sales affected by review manipulation are likely to be lower than the $103.4 billion in sales described above. A more conservative estimate of e-commerce sales involving review manipulation can be obtained by using 234 These estimates range from the single digits to over 20 percent. See Tripadvisor, ‘‘2023 Review Transparency Report,’’ https:// www.tripadvisor.com/TransparencyReport2023 (finding that 4.4% of review submissions were fraudulent); Trustpilot, ‘‘Transparency Report 2022,’’ https://cdn.trustpilot.net/trustsiteconsumersite/trustpilot-transparency-report2022.pdf (stating that its software removed 5.8 percent of reviews due to being fake); Yelp, ‘‘2022 Yelp Trust & Safety Report,’’ https://trust.yelp.com/ trust-and-safety-report (stating that 19 percent of submitted reviews were marked as ‘‘not recommended’’ by Yelp’s software); Devesh Raval, ‘‘Do Gatekeepers Develop Worse Products? Evidence from Online Review Platforms,’’ Working Paper, Feb. 27, 2023, https://deveshraval.github.io/ reviews.pdf (finding that the share of hidden (likely fake) Yelp reviews is as high as 47 percent). 235 See Nan Hu et al., ‘‘Manipulation of online reviews: An analysis of ratings, readability, and sentiments,’’ 52(3) Decision Support Systems 674– 84 (Feb. 2012) (finding that 10.3 percent of books sold on Amazon had manipulated reviews); Luca and Zervas, ‘‘Fake It Till You Make It: Reputation, Competition, and Yelp Review Fraud,’’ supra note 158 (finding that 10 percent of Boston, MA restaurants had filtered 5-star reviews on Yelp) (Table 3, row 4); Raval, ‘‘Do Gatekeepers Develop Worse Products? Evidence from Online Review Platforms,’’ supra note 234 (finding that 9.7 percent of businesses with reviews or complaints with the Better Business Bureau are of low quality, where fake reviews inflate ratings) (Table III, column 3, row 1). 236 See He et al., ‘‘The Market for Fake Reviews,’’ supra note 158; Dina Mayzlin et al., ‘‘Promotional Reviews: An Empirical Investigation of Online Review Manipulation,’’ 104(8) The Am. Econ. Rev. 2421–55 (2014). E:\FR\FM\31JYP1.SGM 31JYP1 49384 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules price differentials of reviewmanipulated products versus others. Because products with online review manipulation have price points approximately 19 percent of the average price of goods sold online (according to research using data from Amazon),237 a more conservative estimate of reviewmanipulated products’ revenue is 1.9 percent (19 percent × 10 percent) of all $1.034 trillion in e-commerce sales, or $19.65 billion. Because the Commission does not have data on the revenue or quantities sold of review-manipulated products, the NPRM assumes revenue is constant across price points and rely solely on the price differential to approximate revenue. The NPRM does not similarly adjust revenues for non-ecommerce firms (e.g., restaurant and hotels) because there is less variation in prices in those industries. The Commission invites commenters to submit information to improve this estimate. The NPRM estimates annual welfare gains by applying the $0.12 estimate, described above, to the estimated amount of U.S. sales likely to have some manipulated consumer reviews, yielding an annual estimate of welfare gains in the range of $5.80 billion (12 percent of $48.34 billion, the sum of $19.65 billion and $28.69 billion) and $15.85 billion (12 percent of $132.09 billion, the sum of $103.4 billion and $28.69 billion). Assuming e-commerce sales increase linearly over the next ten years at the same rate as they did in the past year,238 the present value of consumer welfare improvements from better-informed purchasing decisions is estimated to be between $50.16 and $199.40 billion as described in Table 2.1. TABLE 2.1—ESTIMATED BENEFITS FROM CONSUMER WELFARE IMPROVEMENTS FROM PURCHASE DECISIONS Percent of e-commerce revenue impacted by review manipulation Total annual welfare improvements from betterinformed purchase decisions (in billions) 10 ............................................................................................................................... 1.9 .............................................................................................................................. $15.85 5.80 $199.40 59.31 Total 10-year (2023–2033) welfare improvement, 7% discount rate (in billions) $170.43 50.16 The proposed Rule’s prohibitions against deceptive and unfair consumer review practices would increase the reliability of consumer reviews. The NPRM assumes this improvement in the dependability of reviews will lead consumers to place more trust in aggregate measures (e.g., aggregate star ratings), which many review settings use to summarize consumer reviews. This in turn will lead some consumers to spend less time scrutinizing individual reviews to detect red flags commonly found in manipulated reviews (e.g., spelling and grammar mistakes, generic highly positive or negative statements, and lack of detail). Therefore, the proposed Rule is likely to result in some amount of time savings for consumers who consult online reviews before making purchases. Approximately 80 percent of Americans are online shoppers.239 Of those who shop online, 14 percent shop online more than once a week, 20 percent shop online once a week, 23 percent shop online once every two weeks, 25 percent shop online once a month, and the remainder do so every few months.240 Different age groups of online shoppers spend various amounts of time reading reviews before making a purchase decision. On average, younger consumers spend more time reading reviews than older consumers.241 This analysis does not incorporate time spent by consumers researching reviews of restaurants, hotels, and other goods and services that are not purchased online because of the limited amount of information available regarding consumers’ total time spent on such activities. The Commission invites commenters to submit information related to the time consumers spend reading reviews for goods and services not purchased online. According to the Bureau of Labor Statistics, the average hourly wage in 2021 was $28.01.242 Recent research suggests individuals living in the United States value their non-work time at 82 percent of average hourly earnings.243 Thus, Americans overall value their non-work time at $22.97 per hour on average. The Commission invites comment on this methodology and seeks submissions of additional data related to quantifying Americans’ value of time. The survey data does not specify whether consumers were surveyed regarding the time spent reading reviews before the purchase of a single product or whether the question concerned the purchase of multiple products. This analysis assumes the time listed in the survey results pertains to the purchase of a single product. It also assumes the implementation of the 237 See Davide Proserpio et al., ‘‘How Fake Customer Reviews Do—and Don’t—Work,’’ Harvard Bus. Rev., Nov. 24, 2020, https://hbr.org/2020/11/ how-fake-customer-reviews-do-and-dont-work. The authors find that products sold on Amazon with manipulated reviews are typically in the $15 to $40 price range. The midpoint of this range ($27.50) represents 19 percent of the average product’s price ($142.74, according to a study conducted by Semrush Inc., https://www.semrush.com/blog/ amazon-pricing-study). 238 E-commerce sales increased by 7.7 percent from 2021 to 2022. See U.S. Census Bureau, ‘‘Quarterly E-Commerce Sales Report,’’ supra note 228. Using growth in the past year to predict future e-commerce sales results in a more conservative estimate than using a longer time frame. Ecommerce sales experienced higher annual growth rates prior to 2021 (14 percent from 2018 to 2019, 43 percent from 2019 to 2020, and 14 percent from 2020 to 2021). The NPRM does not project revenues for non-e-commerce industries because the two most recent years of data are from 2021 and 2020; linear trends during these years are unique to the pandemic and are unlikely to be accurate for future years. 239 See Pew Research Center, ‘‘Online Shopping and E-Commerce,’’ Dec. 19, 2016, https:// www.pewresearch.org/internet/2016/12/19/onlineshopping-and-e-commerce. 240 See Int’l Post Corp., ‘‘Cross-Border ECommerce Shopper Survey 2022,’’ Jan. 2023, https://www.ipc.be/-/media/documents/public/ publications/ipc-shoppers-survey/ onlineshoppersurvey2022.pdf. 241 See BrightLocal, ‘‘Local Consumer Review Survey 2019,’’ Dec. 11, 2019, https:// www.brightlocal.com/research/local-consumerreview-survey-2019. 242 Bureau of Labor Statistics, ‘‘May 2021 National Occupational and Wage Estimates, Unites States,’’ https://www.bls.gov/oes/current/oes_ nat.htm (listing mean hourly wage of $28.01 for all occupations). 243 See Daniel S. Hamermesh, ‘‘What’s to Know About Time Use?,’’ 30 J. of Econ. Survs. 198–203 (2016), https://doi.org/10.1111/joes.12107. b. Consumer Time Savings From Increased Reliability of Summary Ratings ddrumheller on DSK120RN23PROD with PROPOSALS1 Total 10-year (2023–2033) welfare improvement, 3% discount rate (in billions) VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 PO 00000 Frm 00029 Fmt 4702 Sfmt 4702 E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules proposed Rule would reduce the time spent reading reviews by 10 percent. Combining the above figures results in $2.49 billion in consumer time savings per year, or a present value of $18.55 billion to $21.69 billion over a 10-year period, as described in Table 2.2. The Commission invites commenters to submit information to improve this estimate. In addition, there are likely to be other utility-related benefits consumers receive when reading nonmanipulated online reviews or consulting more accurate aggregate summary measures, such as increased satisfaction (apart from purchasing decisions) and decreased frustration. The Commission is not able to quantify these benefits and invites commenters to submit information to assist with calculating these additional benefits. Finally, some consumers may spend more time reading reviews if reviews are less likely to be fake or otherwise manipulated. This increase in time spent reading reviews may offset any time savings from the increased 49385 reliability of summary ratings. Therefore, the NPRM presents another scenario in Table 2.2 where consumers do not gain any benefits from time savings. However, as before, there are likely to be additional benefits difficult to quantify (e.g., decreased frustration) that result from reading more accurate reviews, likely yielding positive net benefits related to reading reviews even when consumers spend more time doing so. The Commission invites comment on methods that would allow us to quantify such benefits. TABLE 2.2—ESTIMATED BENEFITS FROM TIME SAVINGS Scenario 1—Improved Reliability of Aggregate Measures Reduces Overall Time Spent Reading Reviews: Number of online shoppers, age 18–34 a .............................................................................................................................. Average amount of time spent reading online reviews before making a purchase decision (in hours), age 18–34 ............ Number of online shoppers, age 35–54 a .............................................................................................................................. Average amount of time spent reading online reviews before making a purchase decision (in hours), age 35–54 ............ Number of online shoppers, age 55+ a .................................................................................................................................. Average amount of time spent reading online reviews before making a purchase decision (in hours), age 55+ ................ 60,467,204 0.336 67,273,832 0.231 78,920,814 0.167 Total amount of time all online shoppers spend reading online reviews before making a purchase decision (in hours) ........................................................................................................................................................................... Total amount of time U.S. online shoppers spend reading online reviews per year (in hours) b .................................. Value of time for online shoppers (per hour) .................................................................................................................. Percentage of time saved ............................................................................................................................................... 48,991,116 1,728,406,578 $22.97 10% Total annual time savings ........................................................................................................................................ Total 10-year (2023–2033) time savings, 3% discount rate (in billions) ....................................................................................... Total 10-year (2023–2033) time savings, 7% discount rate (in billions) ....................................................................................... $3,970,149,909 $34.88 $29.84 Scenario 2—Increase in Time Spent Reading Reviews Offsets Time Savings from Improved Reliability of Summary Measures: No quantifiable benefit ............................................................................................................................................................ $0 a 80% of age-specific total U.S. population (Source: Pew Research Center, U.S. Census). b Adjusting for online shopping frequency (Source: International Post Corporation). c. Benefits Related to Competition ddrumheller on DSK120RN23PROD with PROPOSALS1 Accurate online reviews have been shown to improve competition. Several studies have found online reviews are particularly important for independent and newer firms.244 Ratings are more influential for these firms because consumers do not have strong prior beliefs as to their quality. New entrants whose sales benefit from online reviews typically offer higher quality goods and services. On the other hand, lowerquality firms often experience revenue 244 See Luca, ‘‘Reviews, Reputation, and Revenue: The Case of Yelp.com,’’ supra note 230 (finding that chain restaurants have declined in market share as Yelp penetration has increased); Gregory Lewis and Georgios Zervas, ‘‘The Welfare Impact of Consumer Reviews: A Case Study of the Hotel Industry,’’ Working Paper, https://economics.sas.upenn.edu/ sites/default/files/filevault/u475/tawelfare.pdf (finding that demand for independent hotels is more sensitive to reviews on Tripadvisor); Brett Hollenbeck, ‘‘Online Reputation Mechanisms and the Decreasing Value of Chain Affiliation,’’ 55(5) J. of Mktg. Resch. 636–54 (2018), https:// www.jstor.org/stable/26966532 (finding that branded, chain-affiliated hotels’ premiums over independent hotels have declined substantially largely due to online reputation mechanisms). VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 losses with more online review activity.245 Relatedly, fake online reviews allow companies to surpass competitors. One study found it only takes 50 fake reviews for a seller to pass any of its competitors in terms of visibility (e.g., via rankings or search results).246 It follows that by curbing the number of fake or manipulated reviews, the proposed Rule would benefit consumers by improving the competitive environment for legitimate firms selling higher-quality products (i.e., those who do not rely on review manipulation to sell their goods). The benefits resulting from improvements in the competitive environment are difficult to quantify. The Commission invites comment on the best approach to quantifying such benefits. 245 See Limin Fang, ‘‘The Effects of Online Review Platforms on Restaurant Revenue, Consumer Learning, and Welfare,’’ 68(11) Mgmt. Sci. 7793–8514 (2022). 246 See Lappas et al., ‘‘The Impact of Fake Reviews on Online Visibility: A Vulnerability Assessment of the Hotel Industry,’’ supra note 158. PO 00000 Frm 00030 Fmt 4702 Sfmt 4702 2. Estimated Costs of the Proposed Rule This section describes the costs associated with the proposed Rule, provides preliminary quantitative estimates where possible, and describes costs that are only assessed qualitatively. a. Compliance Costs The acts and practices prohibited by the proposed Rule are unfair or deceptive under Section 5 of the FTC Act. The proposed Rule targets acts or practices that are clear violations of Section 5, and businesses that are compliant will continue to be compliant. Moreover, the FTC routinely provides guidance to businesses on complying with FTC law, which will make the implications of the proposed Rule easy to understand for a wide range of businesses. Accordingly, the NPRM presents one scenario in Table 3.1 where businesses spend a de minimis amount of time interpreting the proposed Rule and make no changes to their current policies. E:\FR\FM\31JYP1.SGM 31JYP1 49386 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules However, because of the enhanced penalty associated with violating the proposed Rule (relative to de novo violations of Section 5 of the FTC Act), businesses may choose to incur additional administrative burdens to ensure compliance. The NPRM presents another scenario in Table 3.1 where businesses notify their employees of the proposed Rule, conduct a review of their processes, and take any steps they deem important to ensure compliance. For firms that already comply with Section 5, these steps might be out of caution so as not to risk the possibility of violating the proposed Rule. For example, some sellers may currently flag and remove reviews on their websites that they reasonably believe are fake. While this practice would not amount to not a violation of the relevant rule provision (proposed § 465.7(b)), promulgation of the proposed Rule may lead some businesses to choose to take extra steps to verify the inauthenticity of such reviews before suppressing them. A business may also decide to notify its employees of the proposed Rule. For example, if certain employees are responsible for posting new product pages or managing the company’s social media presence, business owners may wish to notify these employees to ensure compliance. Although cautious firms may elect to conduct additional compliance review, the proposed Rule would not require any additional recordkeeping or notices beyond what is required by Section 5 of the FTC Act. For the heightened compliance review scenario in Table 3.1, the NPRM makes assumptions about the number of businesses impacted and the number of person-hours involved in compliance activities. In 2019, there were approximately 33.20 million total firms in the United States. 20,868 of these were entities with 500 or more employees (‘‘large companies’’), and the remaining 33.19 million had fewer than 500 employees (‘‘small companies’’).247 The NPRM assumes all 20,868 large companies had some form of online consumer review presence (e.g., on third-party business platforms such as Yelp or Google Reviews, or on their own websites). It assumes 74 percent of the 33.19 million small companies (24.56 million companies) had an online consumer review presence.248 With heightened compliance review, the NPRM assumes lawyers at large companies, whose time is valued at $61.54 per hour,249 will spend eight hours conducting a one-time review of the proposed Rule and notifying employees whose role involves creating new product pages, managing the company’s social media presence, and any other relevant practices covered by the proposed Rule. It assumes small company owners, whose time is valued at $33.23,250 spend one hour doing the same. In addition, some companies may spend time reviewing their automated processes to ensure they comply with the proposed Rule. For instance, they may check any review filtering processes to ensure reviews that are flagged and removed meet the permissible exceptions listed in proposed § 465.7(b). These costs, which companies might incur just once or on a recurring basis, are likely to be minimal. The NPRM does not quantify these process-related costs because, among other things, the Commission does not know the number of firms that might undertake such a review. The Commission invites commenters to submit information to assist with the calculation of these costs. The total estimated costs are tabulated in Table 3.1. The Commission seeks comments on the assumptions incorporated in these estimates. TABLE 3.1—ESTIMATED COMPLIANCE COSTS ddrumheller on DSK120RN23PROD with PROPOSALS1 2023 Only Scenario 1—No Review: No cost ................................................................................................................................................................................... $0 Total cost ......................................................................................................................................................................... $0 Scenario 2—Heightened Compliance Review: Number of large companies (in thousands) ........................................................................................................................... Cost per hour of rule review and related activities ................................................................................................................ Number of hours of rule review and related activities ........................................................................................................... 20.86 $61.54 8 Subtotal (in millions) ........................................................................................................................................................ Number of small companies with online reviews (in thousands) ........................................................................................... Cost per hour of rule review and related activities ................................................................................................................ Number of hours of rule review and related activities ........................................................................................................... $10.27 24,557.31 $33.23 1 Subtotal (in millions) ........................................................................................................................................................ $816.04 Total cost (in millions) .............................................................................................................................................. $826.31 b. Other Impacts of the Proposed Rule There are several other potential effects from the proposed Rule. While the proposed requirements are far from onerous, there is the possibility some sellers may ‘‘overcorrect’’ in response to the higher penalties imposed by the rule compared to existing law. For example, a firm may encounter an excess of fake, negative reviews from a competitor. While proposed § 465.7(b) permits the suppression of reviews the seller reasonably believes are fake, an overcautious seller seeking to suppress fake reviews from competitors may choose to display no reviews whatsoever so as not to risk violating the proposed Rule. Alternatively, such a 247 See U.S. Census Bureau, ‘‘2019 SUSB Annual Data Tables by Establishment Industry,’’ https:// www.census.gov/data/tables/2019/econ/susb/2019susb-annual.html (listing 6.10 million total firms with at least one paid employee) and ‘‘Nonemployer Statistics,’’ https://www.census.gov/ programs-surveys/nonemployer-statistics.html (listing 27.10 million firms with no paid employees). 248 74 percent of small businesses have at least one Google review. See BrightLocal, ‘‘Google Reviews Study,’’ https://www.brightlocal.com/ research/google-reviews-study/. 249 See Bureau of Labor Statistics, Occupational Outlook Handbook: Lawyers, https://www.bls.gov/ ooh/legal/lawyers.htm. 250 See Payscale, ‘‘Average Small Business Owner Salary,’’ https://www.payscale.com/research/US/ Job=Small_Business_Owner/Salary. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 PO 00000 Frm 00031 Fmt 4702 Sfmt 4702 E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules firm may take no action towards suspected fake reviews to avoid a possible rule violation. Both of these hypothetical scenarios would likely hurt the information environment for consumers. The Commission believes such unintended consequences of the proposed Rule are very unlikely. The Commission seeks comment on the likelihood of such effects and information on how to best quantify them. 3. Potentially Reasonable Alternatives One alternative to the proposed Rule is to terminate the rulemaking and rely instead on the existing tools the Commission currently possesses to combat the specified review and testimonial practices, such as consumer education and enforcement actions brought under Sections 5 and 19 of the FTC Act. Terminating the rulemaking would preserve those Commission resources needed to continue the rulemaking, but such a short-term benefit would come at a significant cost. Failing to strengthen the set of tools available in support of the Commission’s enforcement program against unfair or deceptive consumer reviews or testimonials would deprive it of the benefits outlined above. The Commission seeks comment on this alternative and any potentially reasonable alternative to the proposed Rule. ddrumheller on DSK120RN23PROD with PROPOSALS1 VIII. Paperwork Reduction Act In addition to the requirements of Section 22, the Commission must provide in any NPRM the ‘‘information required by the Regulatory Flexibility Act, 5 U.S.C. 601–612, and the Paperwork Reduction Act, 44 U.S.C. 3501–3520, if applicable.’’ 16 CFR 1.11(c)(4). The Paperwork Reduction Act requires the Commission to engage in additional processes and analysis if it proposes to engage in a ‘‘collection of information’’ as part of the proposed Rule. 44 U.S.C. 3506. The Commission states that the proposed Rule contains no collection of information. IX. Regulatory Flexibility Act—Initial Regulatory Flexibility Analysis The Regulatory Flexibility Act (‘‘RFA’’), 5 U.S.C. 601 et seq., requires an agency to provide an Initial Regulatory Flexibility Analysis (‘‘IRFA’’) with a proposed rule and a Final Regulatory Flexibility Analysis (‘‘FRFA’’) with a final rule, if any, unless the Commission certifies the proposed rule will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 The purpose of a regulatory flexibility analysis is to ensure an agency considers potential impacts on small entities and examines regulatory alternatives that could achieve the regulatory purpose while minimizing burdens on small entities. The Commission believes the proposed Rule would not have a significant economic impact upon small entities, although it may affect a substantial number of small businesses. The proposed Rule primarily prohibits certain unfair or deceptive acts or practices involving consumer reviews or testimonials and does not impose a recordkeeping or disclosure requirement upon businesses. In addition, the Commission does not anticipate these changes will add significant additional costs to small businesses. Specifically, as discussed in further detail below, the Commission anticipates than an average small business will spend, at most, one hour on compliance review, incurring a cost of $33.23. Therefore, the NPRM imposes no new significant burdens on law-abiding businesses. Accordingly, based on available information, the Commission certifies the proposed Rule will not have a significant economic impact on a substantial number of small entities. Although the Commission certifies under the RFA that the proposed rule would not, if promulgated, have a significant impact on a substantial number of small entities, the Commission has determined, nonetheless, it is appropriate to publish an IRFA to inquire into the impact of the proposed Rule on small entities. Therefore, the Commission has prepared the following analysis: A. Description of the Reasons Agency Action Is Being Considered The Commission describes the reasons for the proposed Rule in Section IV above. The FTC’s law enforcement, outreach, and other engagement in this area indicate certain unfair or deceptive acts or practices involving consumer reviews or testimonials are prevalent. The proposed Rule would benefit consumers and legitimate businesses without imposing significant burdens. B. Statement of the Objectives of, and Legal Basis for, the Proposed Rule The Commission describes the objectives for the proposed rule in Section IV above. The legal basis for the proposed rule is Section 18 of the FTC Act, 15 U.S.C. 57a, which authorizes the Commission to promulgate, modify, and repeal trade regulation rules that define with specificity acts or practices in or affecting commerce that are unfair or PO 00000 Frm 00032 Fmt 4702 Sfmt 4702 49387 deceptive within the meaning of Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1). C. Description and Estimate of the Number of Small Entities to Which the Proposed Rule Will Apply The proposed Rule would impact all small entities that currently have, or might potentially accrue, consumer reviews or testimonials. It would also impact small entities that use celebrity testimonials or have a social media presence. It is likely the proposed rule would primarily affect businesses that sell products or services directly to consumers. For example, the proposed Rule is less likely to impact small entities that manufacture niche raw materials for other businesses or small agricultural firms that do not sell directly to consumers. Nevertheless, for a conservative estimate of total costs, the NPRM assumes the proposed Rule would impact all industry classes of small entities. As described in Part V.A.2.a., there are approximately 33.19 million small businesses in the United States. Prior research has found 74 percent of small businesses have at least one Google review. It is possible that, across all platforms (beyond Google reviews), a higher percentage of small businesses have consumer reviews or testimonials, celebrity testimonials, or a social media presence. The Commission does not have the appropriate data to refine this estimate. Therefore, the best estimate is 24.56 million (74 percent × 33.19 million) small businesses would be impacted by the proposed Rule. The Commission seeks comment on the estimated number of small business entities for which the proposed Rule would have a significant economic impact. D. Description of the Projected Reporting, Recordkeeping, and Other Compliance Requirements The proposed contains no reporting or recordkeeping requirements. Therefore, many legitimate businesses are likely to incur no additional compliance costs with the proposed Rule. As described in Section V.A.2.a, a cautious firm may elect to undertake additional compliance review due to the enhanced penalties associated with potential rule violations (relative to de novo violations of Section 5 of the FTC Act). If every small business impacted by the proposed Rule conducted one hour of compliance review, each firm would incur $33.23 of compliance costs, which reflects the estimated hourly E:\FR\FM\31JYP1.SGM 31JYP1 49388 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules earnings of a small business owner.251 Therefore, under the conservative assumption of heightened compliance review for all small businesses, costs to small businesses would total $816.13 million (24.56 million × $33.23). Because it is likely only a minority of small businesses would elect to conduct optional compliance review, total compliance costs for these entities are likely to be significantly lower than this estimate. E. Identification of Duplicative, Overlapping, or Conflicting Federal Rules The Commission has not identified any duplication, overlap, or conflict with the proposed Rule. The Commission invites comment and information on this issue. ddrumheller on DSK120RN23PROD with PROPOSALS1 F. Description of Any Significant Alternatives to the Proposed Rule The Commission describes alternatives in Section V.A.3. One alternative to the proposed Rule is to rely on the existing tools the Commission currently possesses to combat the specified review and testimonial practices, such as consumer education and enforcement actions brought under Sections 5 and 19 of the FTC Act. The Commission believes promulgation of the proposed Rule would result in greater net benefits to the marketplace while imposing no additional burdens beyond what is required by the FTC Act. As described in further detail in Section V.A., the proposed Rule would not only result in significant benefits to consumers but also improve the competitive environment, particularly for small, independent, or new firms. Therefore, the proposed Rule appears to be superior to this alternative for small entities. The Commission seeks comment on alternative compliance methods that would reduce the economic impact of the proposed Rule on small entities. X. 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 Rule. The Commission requests that factual data on 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. Responses to these questions should be itemized 251 See Payscale, ‘‘Average Small Business Owner Salary,’’ supra note 250. VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 according to the numbered questions in this document. 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. General Questions for Comment When responding to any of the following general questions, please specify the portion(s) of the proposal to which your comment relates. 1. Does the proposed Rule further the Commission’s goal of protecting consumers from clearly unfair or deceptive acts or practices involving consumer reviews and testimonials? Why or why not? 2. Should the Commission finalize the proposed Rule as a final rule? Why or why not? How, if at all, should the Commission change the proposed Rule in promulgating a final rule? 3. Please provide comment, including relevant data, statistics, consumer complaint information, or any other evidence, on each different provision of the proposed Rule. Regarding each provision, please include answers to the following questions: a. What would the provision’s impact (including any benefits and costs), if any, be on consumers, governments, and businesses, including existing businesses and those yet to be started? Are there changes that could be made to lessen any such burdens without significantly reducing the benefits? b. Is the proposed prohibition in the provision clear, meaningful, and appropriate? c. Should the scope of the proposed prohibition be expanded or narrowed, and, if so, how, and why? How, if at all, should it be improved? d. Should any final rule keep the proposed prohibition and, if so, why? If not, what alternative proposals should the Commission consider? 4. Does the proposed Rule contain a collection of information? 5. Would the proposed Rule, if promulgated, have a significant economic impact on a substantial number of small entities? If so, how could it be modified to avoid a significant economic impact on a substantial number of small entities? Specific Questions for Comment § 465.1 Definitions 6. Are the proposed definitions clear? Should changes be made to any definitions? Should the scope of any of the proposed definitions be expanded or narrowed, and if so, why? 7. What additional definitions, if any, are needed? PO 00000 Frm 00033 Fmt 4702 Sfmt 4702 § 465.2 Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials Proposed § 465.2(b) would prohibit businesses from purchasing a consumer review, or from disseminating or causing the dissemination of a consumer testimonial or celebrity testimonial when the business knew or should have known it was false or fake. Proposed § 465.2(c) would prohibit businesses from procuring a consumer review for posting on a third-party platform or website that the business knew or should have known was false or fake. 8. Is the ‘‘knew or should have known’’ standard appropriate for purposes of proposed § 465.2(b) and (c)? Why or why not? One alternative would define a violation as occurring whenever a business engages in a deceptive practice with respect to a review or testimonial if the business ‘‘knew or could have known’’ that the review or testimonial was deceptive. Should the Commission adopt this alternative? Why or why not? Should the Commission adopt a different knowledge requirement, and if so, what should it be and why? Should there be no knowledge requirement at all for proposed § 465.2(b) and (c)? Why or why not? 9. Under what circumstances should a business purchasing or procuring a consumer review know that it is fake or false? 10. Under what circumstances should a business disseminating or causing the dissemination of a consumer testimonial or celebrity testimonial know that it is fake or false? § 465.3 Consumer Review Repurposing Proposed § 465.3 would prohibit businesses from repurposing or causing the repurposing of a consumer review created for one product so that it appears to have been created for a substantially different product. 11. Is the description of ‘‘substantially different product’’ appropriate for purposes of this provision? Why or why not? If not, how should it be modified? 12. Under what circumstances do consumers consider products to be significantly different enough that they should not share the same consumer reviews? § 465.4 Buying Positive or Negative Consumer Reviews Proposed § 465.4 would prohibit providing compensation or other incentives in exchange for, or conditioned on, the writing or creation of consumer reviews expressing a particular sentiment. E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS1 12. Should the proposed prohibition distinguish in any way between an explicit and implied condition that a consumer review express a particular sentiment? Why or why not? If so, how should it be addressed? § 465.5 Insider Consumer Reviews and Consumer Testimonials Proposed § 465.5(a) would prohibit an officer or manager of a business from writing or creating a consumer review or consumer testimonial about the business or one of its products or services that fails to have a clear and conspicuous disclosure of the officer’s or manager’s relationship to the business. Proposed § 465.5(b) would prohibit a business from disseminating a testimonial by an officer, manager, employee, or agent, or any of their relatives, without a clear and conspicuous disclosure of the relationship, when the business knew or should have known the testimonialist’s relationship. Proposed § 465.5(c) would prohibit an officer or manager of a business from asking for a consumer review about the business or one of its products or services from a person related to the business, when the solicitor knew or should have known the prospective reviewer’s relationship, the request results in a review without a clear and conspicuous disclosure of the relationship, and the requestor failed to advise a disclosure, knew or should have known that a review appeared without such a disclosure and failed to take remedial steps, or encouraged the prospective reviewer not to make such a disclosure. 13. Is it appropriate that proposed § 465.5(a) and (c) apply to ‘‘officers’’ and ‘‘managers’’? Why or why not? If not, how should either or both prohibitions be modified? 14. Should the term ‘‘managers’’ be defined or described? Why or why not? If so, how should it be defined or described? 15. Is it appropriate that proposed § 465.5(a), (b), and (c) are limited to circumstances in which the requisite disclosure is absent? Why or why not? If not, how should any of the prohibitions be modified? 16. Is it appropriate that proposed § 465.5(b) and (c)(1) are limited to circumstances in which the business, officer, or manager knew or should have known of the relationship? Why or why not? One alternative would be to limit the circumstances of a violation to when the business, officer, or manager ‘‘knew or could have known’’ of the relationship. Should the Commission adopt this alternative? Why or why not? Should the Commission adopt a VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 different knowledge requirement, and if so, what should it be and why? Should there be no knowledge requirement at all for proposed § 465.5(b) and (c)(1)? Why or why not? 17. Is it appropriate that § 465.5(b) and (c) are limited to testimonials and reviews from officers, managers, employees, agents, or relatives? Why or why not? If not, how should either or both prohibitions be modified? 18. Should the Commission define or otherwise describe the term ‘‘relative’’? Why or why not? If so, how should it be defined or described? 19. Is it appropriate that § 465.5(c)(2)(ii) is limited to circumstances in which the requestor knew or should have known that the review appeared without such a disclosure? Why or why not? One alternative would be to limit the circumstances of a violation to when the requestor ‘‘knew or could have known’’ that the review appeared without such a disclosure. Should the Commission adopt this alternative? Why or why not? Should the Commission adopt a different knowledge requirement, and if so, what should it be and why? Should there be no knowledge requirement at all for proposed § 465.5(c)(2)(ii)? Why or why not? § 465.7 Review Suppression Proposed § 465.7(a) would prohibit anyone from using an unjustified legal threat or a physical threat, intimidation, or false accusation in an attempt to remove or prevent a negative consumer review. Proposed § 465.7(b) would prohibit a merchant from misrepresenting that the consumer reviews displayed on its website or platform represent most or all the reviews submitted when it is suppressing reviews based upon their ratings or their negativity. 20. Is it appropriate that proposed § 465.7(a) focuses on the specific types of listed threats or activities? Why or why not? If not, how should it be modified? 21. Is the definition of ‘‘unjustified legal threat’’ sufficiently clear? Why or why not? If not, how should it be modified? 22. Is it appropriate that proposed § 465.7(b) is limited to circumstances in which reviews are being suppressed based on rating or negativity? Why or why not? If not, how should it be modified? 23. Is it appropriate that proposed § 465.7(b) is limited to the misrepresentations described therein? Why or why not? If not, how should it be modified? PO 00000 Frm 00034 Fmt 4702 Sfmt 4702 49389 XI. 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 September 29, 2023. Write ‘‘Consumer Reviews and Testimonials NPRM, R311003’’ 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 website https:// www.regulations.gov. 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 that the Commission considers your online comment, please follow the instructions on the webbased form. If you file your comment on paper, write ‘‘Consumer Reviews and Testimonials NPRM, R311003’’ on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex F), Washington, DC 20580. If possible, please submit your paper comment to the Commission by overnight service. Because your comment will be placed on the public record, you are solely responsible for making sure that 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,’’ E:\FR\FM\31JYP1.SGM 31JYP1 49390 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS1 and must comply with FTC Rule 4.9(c), 16 CFR 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 https://www.regulations.gov—as legally required by FTC Rule 4.9(b), 16 CFR 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 receives on or before September 29, 2023. For information on the Commission’s privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/ siteinformation/privacypolicy. XII. Communications by Outside Parties to the Commissioners or Their Advisors Pursuant to FTC Rule 1.18(c)(1)(i)–(ii), the Commission has determined that communications with respect to the merits of this proceeding from any outside party to any Commissioner or Commissioner advisor shall be subject to the following treatment. Written communications and summaries or transcripts of oral communications shall be placed on the rulemaking record if the communication is received before the end of the public comment period in response to this NPRM. They shall be placed on the public record if the communication is received later. Unless the outside party making an oral communication is a member of Congress, such communications are permitted only if advance notice is published in the Weekly Calendar and Notice of Sunshine Meetings.252 List of Subjects in 16 CFR Part 465 Advertising. ■ For the reasons set forth above, the Federal Trade Commission proposes to amend title 16, chapter I, subchapter D 252 See 15 U.S.C. 57a(i)(2)(A); 16 CFR 1.18(c). VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 of the Code of Federal Regulations by adding part 465 to read as follows: PART 465—RULE ON THE USE OF CONSUMER REVIEWS AND TESTIMONIALS Sec. 465.1 Definitions. 465.2 Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials. 465.3 Consumer Review Repurposing. 465.4 Buying Positive or Negative Consumer Reviews. 465.5 Insider Consumer Reviews and Consumer Testimonials. 465.6 Company-Controlled Review websites or Entities. 465.7 Review Suppression. 465.8 Misuse of Fake Indicators of Social Media Influence. 465.9 Severability. Authority: 15 U.S.C. 57a. § 465.1 Definitions. (a) Business means an individual, partnership, corporation, or any other commercial entity that sells products or services. (b) Celebrity testimonial means an advertising or promotional message (including verbal statements, demonstrations, or depictions of the name, signature, likeness, or other identifying personal characteristics of an individual) that consumers are likely to believe reflects the opinions, beliefs, or experiences of a well-known person who purchased, used, or otherwise had experience with a product, service, or business. (c) Clear and conspicuous means that a required disclosure is easily noticeable (i.e., difficult to miss) and easily understandable by ordinary consumers, including in all of the following ways: (1) In any communication that is solely visual or solely audible, the disclosure must be made through the same means through which the communication is presented. In any communication made through both visual and audible means, such as a television advertisement, the disclosure must be presented simultaneously in both the visual and audible portions of the communication even if the representation requiring the disclosure is made in only one means. (2) A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics, must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood. (3) An audible disclosure, including by telephone or streaming video, must be delivered in a volume, speed, and cadence sufficient for ordinary PO 00000 Frm 00035 Fmt 4702 Sfmt 4702 consumers to easily hear and understand it. (4) In any communication using an interactive electronic medium, such as social media or the internet, the disclosure must be unavoidable. A disclosure is not clear and conspicuous if a consumer must take any action, such as clicking on a hyperlink or hovering over an icon, to see it. (5) The disclosure must use diction and syntax understandable to ordinary consumers and must appear in each language in which the representation that requires the disclosure appears. (6) The disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and face-to-face communications. (7) The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication. (8) When the representation or sales practice targets a specific audience, such as children, the elderly, or the terminally ill, ‘‘ordinary consumers’’ includes members of that group. (d) Consumer review means a consumer’s evaluation, or a purported consumer’s evaluation, of a product, service, or business that is submitted by the consumer or purported consumer and that is published to a website or platform dedicated in whole or in part to receiving and displaying such evaluations. For the purposes of this Rule, consumer reviews include consumer ratings regardless of whether they include any text or narrative. (e) Consumer testimonial means an advertising or promotional message (including verbal statements, demonstrations, or depictions of the name, signature, likeness, or other identifying personal characteristics of an individual) that consumers are likely to believe reflects the opinions, beliefs, or experiences of a consumer who has purchased, used, or otherwise had experience with a product, service, or business. (f) Indicators of social media influence means any metrics used by the public to make assessments of an individual’s or entity’s social media influence, such as followers, friends, connections, subscribers, views, plays, likes, reposts, and comments. (g) Officers include owners, executives, and managing members of a business. (h) Purchase a consumer review means to provide something of value, such as money, goods, or another review, in exchange for a consumer review. E:\FR\FM\31JYP1.SGM 31JYP1 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules (i) Reviewer means the author or purported author of a consumer review. (j) Substantially different product means a product that differs from another product in one or more material attributes other than color, size, count, or flavor. (k) Testimonialist means the person giving or purportedly giving a consumer testimonial or celebrity testimonial. (l) An unjustified legal threat is a threat to initiate or file a baseless legal action, such as an action for defamation that challenges truthful speech or matters of opinion. ddrumheller on DSK120RN23PROD with PROPOSALS1 § 465.2 Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials. (a) It is an unfair or deceptive act or practice and a violation of this Rule for a business to write, create, or sell a consumer review, consumer testimonial, or celebrity testimonial: (1) by a reviewer or testimonialist who does not exist; (2) by a reviewer or testimonialist who did not use or otherwise have experience with the product, service, or business that is the subject of the review or testimonial; or (3) that materially misrepresents, expressly or by implication, the reviewer’s or testimonialist’s experience with the product, service, or business that is the subject of the review or testimonial. (b) It is an unfair or deceptive act or practice and a violation of this Rule for a business to purchase a consumer review, or to disseminate or cause the dissemination of a consumer testimonial or celebrity testimonial, about the business or one of its products or services, which the business knew or should have known: (1) was by a reviewer or testimonialist who does not exist; (2) was by a reviewer or testimonialist who did not use or otherwise have experience with the product, service, or business that is the subject of the review or testimonial; or (3) materially misrepresents, expressly or by implication, the reviewer’s or testimonialist’s experience with the product, service, or business that is the subject of the review or testimonial. (c) It is an unfair or deceptive act or practice and a violation of this Rule for a business to procure a consumer review for posting on a third-party platform or website, about the business or one of its products or services, which the business knew or should have known: (1) was by a reviewer who does not exist; (2) was by a reviewer who did not use or otherwise have experience with the VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 product, service, or business that is the subject of the review or testimonial; or (3) materially misrepresents, expressly or by implication, the reviewer’s experience with the product, service, or business that is the subject of the review. § 465.3 Consumer Review Repurposing. It is an unfair or deceptive act or practice and a violation of this Rule for a business to use or repurpose a consumer review written or created for one product so that it appears to have been written or created for a substantially different product, or to cause such use or repurposing. § 465.4 Buying Positive or Negative Consumer Reviews. It is an unfair or deceptive act or practice and a violation of this Rule for a business to provide compensation or other incentives in exchange for, or conditioned on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative, regarding the product, service, or business that is the subject of the review. § 465.5 Insider Consumer Reviews and Consumer Testimonials. It is an unfair or deceptive act or practice and a violation of this Rule for: (a) an officer or manager of a business to write or create a consumer review or consumer testimonial about the business or one of its products or services that fails to have a clear and conspicuous disclosure of the officer’s relationship to the business; (b) a business to disseminate or cause the dissemination of a consumer testimonial about the business or one of its products or services by one of its officers, managers, employees, or agents, or any of their relatives which fails to have a clear and conspicuous disclosure of the testimonialist’s relationship to the business or to the officer, manager, employee, or agent, when the business knew or should have known the testimonialist’s relationship to the business or to one of its officers, employees, or agents; or (c) an officer or manager of a business to solicit or demand a consumer review about the business or one of its products or services from an employee, from an agent, or from a relative of any such officer, manager, employee, or agent, when: (1) the officer or manager knew or should have known the prospective reviewer’s relationship to the business or to one of its officers, managers, employees, or agents, (2) the officer or manager: PO 00000 Frm 00036 Fmt 4702 Sfmt 4702 49391 (i) did not instruct the prospective reviewer to disclose clearly and conspicuously that relationship, (ii) knew or should have known that such a review appeared without such a disclosure and failed to take remedial steps, or (iii) encouraged the prospective reviewer not to make such a disclosure, and (3) the solicitation or demand results in the prospective reviewer writing or creating such a review without such a disclosure. § 465.6 Company-Controlled Review websites or Entities. It is an unfair or deceptive act or practice and a violation of this Rule for a business to represent, expressly or by implication, that a website, organization, or entity that it controls, owns, or operates provides independent reviews or opinions about a category of businesses, products, or services including the business or one or more of its products or services. § 465.7 Review Suppression. It is an unfair or deceptive act or practice and a violation of this Rule: (a) for anyone to use an unjustified legal threat or a physical threat, intimidation, or false accusation in an attempt to prevent a consumer review or any portion thereof from being written or created or cause a consumer review or any portion thereof to be removed; or (b) for a business to misrepresent, expressly or by implication, that the consumer reviews of one or more of its products or services displayed on its website or platform represent most or all the reviews submitted to the website or platform when reviews are being suppressed (i.e., not displayed) based upon their ratings or their negativity. For purposes of this paragraph, a review is not considered suppressed based upon rating or negativity if the suppression occurs because of any of the following reasons, so long as the criteria for withholding reviews are applied to all reviews submitted without regard to the favorability of the review: (1) the review contains: (i) trade secrets or privileged or confidential commercial or financial information, (ii) libelous, harassing, abusive, obscene, vulgar, or sexually explicit content, (iii) the personal information or likeness of another person, (iv) content that is discriminatory with respect to race, gender, sexuality, ethnicity, or another protected class, or (v) content that is clearly false or misleading; E:\FR\FM\31JYP1.SGM 31JYP1 49392 Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Proposed Rules (2) the seller reasonably believes the review is fake; or (3) the review is wholly unrelated to the products or services offered by or available at the website or platform. § 465.8 Misuse of Fake Indicators of Social Media Influence. It is an unfair or deceptive act or practice and a violation of this Rule for anyone to: (a) sell or distribute fake indicators of social media influence that can be used by persons or businesses to misrepresent their influence or importance for a commercial purpose; or (b) purchase or procure fake indicators of social media influence to misrepresent their influence or importance for a commercial purpose. § 465.9 Severability. The provisions of this part are separate and severable from one another. If any provision is stayed or determined to be invalid, the remaining provisions shall continue in effect. By direction of the Commission. April J. Tabor, Secretary. [FR Doc. 2023–15581 Filed 7–28–23; 8:45 am] BILLING CODE 6750–01–P DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 203 [Docket No. FR–6353–P–01] RIN 2502–AJ66 Modernization of Engagement With Mortgagors in Default Office of the Assistant Secretary for Housing—Federal Housing Commissioner, Department of Housing and Urban Development, HUD. ACTION: Proposed rule. AGENCY: HUD’s regulations require that mortgagees of Federal Housing Administration (FHA) insured single family mortgages (mortgagees) meet in person, or make a reasonable effort to meet in person, with mortgagors who are in default on their mortgage payments. This rule proposes to modernize this requirement by updating HUD’s regulation to better align with advances in electronic communication technology and mortgagor engagement preferences, while preserving consumer protections. Specifically, this rule proposes to update HUD’s current inperson, face-to-face meeting requirements by permitting mortgagees ddrumheller on DSK120RN23PROD with PROPOSALS1 SUMMARY: VerDate Sep<11>2014 16:48 Jul 28, 2023 Jkt 259001 to utilize methods of communication most likely to receive a response from the mortgagor as determined by the Secretary, including electronic and other remote communication methods, such as telephone calls or video calls, to meet with mortgagors who are in default on their mortgage payments. This proposed rule would also expand the meeting requirement to all mortgagors in default, including mortgagors who do not reside in the mortgaged property and those with a mortgaged property not within 200 miles of their mortgagee, its servicer, or a branch office of either. DATES: Comment Due Date: September 29, 2023. ADDRESSES: There are two methods for submitting public comments. All submissions must refer to the above docket number and title. 1. Electronic Submission of Comments. Comments may be submitted electronically through the Federal eRulemaking Portal at www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make comments immediately available to the public. Comments submitted electronically through www.regulations.gov can be viewed by other commenters and interested members of the public. Commenters should follow the instructions provided on that website to submit comments electronically. 2. Submission of Comments by Mail. Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW, Room 10276, Washington, DC 20410–0500. Note: To receive consideration as a public comment, comments must be submitted through one of the two methods specified above. Public Inspection of Public Comments. HUD will make all properly submitted comments and communications available for public inspection and copying during regular business hours at the above address. Due to security measures at the HUD Headquarters building, you must schedule an appointment in advance to review the public comments by calling the Regulations Division at 202–708– 3055 (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or PO 00000 Frm 00037 Fmt 4702 Sfmt 4702 communication disabilities. To learn more about how to make an accessible telephone call, please visit https:// www.fcc.gov/consumers/guides/ telecommunications-relay-service-trs. Copies of all comments submitted are available for inspection and downloading at www.regulations.gov. FOR FURTHER INFORMATION CONTACT: Graham Mayfield, Acting Director, Office of Single Family Asset Management, Department of Housing and Urban Development, 451 7th Street SW, Room 9278, Washington, DC 20410, telephone 202–768–2838 (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/ telecommunications-relay-service-trs. SUPPLEMENTARY INFORMATION: First codified in 1976, HUD’s regulations at 24 CFR 203.604 require mortgagees to meet in person, or make a reasonable effort to meet in person, with mortgagors who are in default on their mortgage payment. This requirement for an in-person meeting with the mortgagor, commonly referred to as the ‘‘face-to-face meeting’’ requirement, originated during a time when mortgage lending and servicing activities were conducted in person at locations in the local communities a mortgagee served. At that time, a ‘‘face-to-face’’ meeting was the most effective way to discuss and facilitate loss mitigation options because knowledgeable mortgagee staff were available at locations near the mortgaged property. Beginning in the mid-1990s, many mortgagees began consolidating origination and servicing activities in centralized locations. Today, many mortgagees have a national presence and often employ a single national servicing center or a limited number of regional servicing centers, operate without retail places of business altogether, and tend to conduct origination and servicing activities with employees and clients not being in close physical proximity. In addition, mortgagors prefer to conduct business online or through other remote methods. This proposed rule would permit the use of electronic and other remote communication methods to make it more convenient for mortgagors in default to participate in meetings with their mortgagee. The current face-to-face meeting requirement also reflects a time when electronic methods for conducting virtual meetings were not widely E:\FR\FM\31JYP1.SGM 31JYP1

Agencies

FEDERAL TRADE COMMISSION

[Federal Register Volume 88, Number 145 (Monday, July 31, 2023)]
[Proposed Rules]
[Pages 49364-49392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-15581]


=======================================================================
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FEDERAL TRADE COMMISSION

16 CFR Part 465

RIN 3084-AB76


Trade Regulation Rule on the Use of Consumer Reviews and 
Testimonials

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking; request for public comment.

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SUMMARY: The Federal Trade Commission (``FTC or ``Commission'') 
commences a rulemaking to promulgate a trade regulation rule entitled 
``Rule on the Use of Consumer Reviews and Testimonials,'' which would 
prohibit certain specified unfair or deceptive acts or practices 
involving consumer reviews or testimonials. The Commission finds such 
practices to be prevalent based on the comments it received in response 
to an advance notice of proposed rulemaking and other information 
discussed in this publication. The Commission now solicits written 
comment, data, and arguments concerning the utility and scope of the 
proposed trade regulation rule to prohibit the specified unfair or 
deceptive acts or practices.

DATES: Comments must be received on or before September 29, 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 
Testimonials NPRM, R311003'' 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 F), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Michael Ostheimer, Attorney, Federal 
Trade Commission, Bureau of Consumer Protection, Advertising Practices 
Division, (202) 326-2699, [email protected].

SUPPLEMENTARY INFORMATION: The Commission invites interested parties to 
submit data, views, and arguments on the proposed Rule on the Use of 
Consumer Reviews and Testimonials (``proposed Rule'') and, 
specifically, on the questions set forth in Section X of this notice of 
proposed rulemaking (``NPRM''). The comment period will remain open 
until September 29, 2023.\1\ To the extent practicable, all comments 
will be available on the public record and posted at the docket for 
this rulemaking on https://www.regulations.gov. If interested parties 
request to present their position orally, the Commission will hold an 
informal hearing, as specified in Section 18(c) of the FTC Act, 15 
U.S.C. 57a(c). Persons interested in making a presentation at an 
informal hearing must file a comment expressly requesting a hearing in 
response to this publication, containing a statement identifying their 
interests in the proceeding and any proposals to add disputed issues of 
material fact necessary to be resolved during an informal hearing. The 
comment should describe why the person thinks the informal hearing is 
warranted and how they would participate, and include a summary of 
their expected testimony. Interested persons' comments may also, 
without requesting an informal hearing, expressly request to speak at 
any informal hearing that is held, which may happen if another 
commenter requests an informal hearing or if the Commission on its own 
elects to hold one. If an informal hearing is held, the Commission will 
publish a separate notice in accordance with 16 CFR 1.12(a) (``initial 
notice of informal hearing'').
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    \1\ The Commission elects not to provide a separate, second 
comment period for rebuttal comments. See 16 CFR 1.11(e) (``The 
Commission may in its discretion provide for a separate rebuttal 
period following the comment period.'').
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I. Background

    The Commission published, on November 8, 2022, an advance notice of 
proposed rulemaking (``ANPR'') under the authority of Section 
18(a)(1)(B) of the FTC Act, 15 U.S.C. 57a(a)(1)(B); \2\ which 
authorizes the Commission to promulgate, modify, or 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).
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    \2\ Fed. Trade Comm'n, ANPR: Trade Regulation Rule on the Use of 
Reviews and Endorsements (``ANPR''), 87 FR 67424 (Nov. 8, 2022), 
https://www.federalregister.gov/documents/2022/11/08/2022-24139/trade-regulation-rule-on-the-use-of-reviews-and-endorsements.
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    The ANPR described the Commission's history of educating industry 
and consumers about the use of deceptive reviews and testimonials and 
of taking law enforcement action against certain unfair or deceptive 
acts or practices involving consumer reviews or testimonials.\3\ 
Specifically, the ANPR discussed: (a) the use of reviews or 
endorsements by people who do not exist, who did not actually use or 
test the product or service, or who were misrepresenting their 
experience with it; (b) review 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; (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

[[Page 49365]]

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; (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; (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; (g) the suppression of customer reviews by physical threat 
or unjustified legal threat; and (h) selling, distributing, or buying 
followers, subscribers, views, and other indicators of social media 
influence. The ANPR also asked a series of questions to inform the 
Commission's determination about whether it has reason to believe that 
such practices are prevalent and, if so, whether and how to proceed 
with an NPRM.\4\ During the 60-day comment period, the Commission 
received 42 responsive comments.
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    \3\ The ANPR was entitled ``Trade Regulation Rule Concerning 
Reviews and Endorsements.'' The Commission has decided to change the 
name of the proposed rule to ``Trade Regulation Rule on the Use of 
Consumer Reviews and Testimonials,'' to better reflect its content.
    \4\ ANPR, 87 FR at 67427.
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    Based on the substance of these comments, as well as the 
Commission's history of enforcement and other information discussed 
below, the Commission is now exercising its authority under Section 
18(a)(1)(B) of the FTC Act to propose a trade regulation rule that 
defines conduct that, in the context of consumer reviews or 
testimonials, constitutes unfair or deceptive acts or practices. The 
Commission has reason to believe that certain unfair or deceptive 
practices involving consumer reviews or testimonials are prevalent \5\ 
and that proceeding with this rulemaking is in the public interest.
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    \5\ See 15 U.S.C. 57a(b)(3) (``The Commission shall issue a 
notice of proposed rulemaking pursuant to paragraph (1)(A) only 
where it has reason to believe that the unfair or deceptive acts or 
practices which are the subject of the proposed rulemaking are 
prevalent.'').
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    After reviewing the comments and because the Commission believes it 
would be in the public interest to move forward expeditiously with this 
rulemaking proceeding, the Commission has decided to issue this NPRM 
without holding the public workshops originally contemplated in the 
ANPR. Upon reviewing the ANPR comments, the Commission determined that 
conducting public workshops at that stage of the proceeding would not 
provide additional unique viewpoints or issues. Instead, by issuing 
this NPRM and analyzing the comments submitted in response, the 
Commission will be able to further develop the record, receive comments 
on potential alternatives, and decide whether additional events or 
methods are needed to facilitate public participation in the rulemaking 
process.
    Below, after discussing the comments, setting out the evidence of 
prevalence, and explaining its considerations in developing the 
proposed Rule, the Commission poses specific questions for comment and 
provides the text of the proposed Rule.

II. Summary of Comments to ANPR

    The Commission received 42 responsive comments in response to the 
ANPR.\6\ Twenty-nine comments supported the Commission proceeding with 
a rulemaking. Four comments expressed the view that a rulemaking was 
unnecessary, premature, or should not apply to the commenter's 
constituents. One commenter expressed skepticism about the utility of a 
rulemaking. The remaining commenters did not express a clear view on 
the merits of proceeding or did not address the question. Fifteen 
comments came from individual consumers. Seven comments were submitted 
by trade associations, five by review platform operators and one by an 
employee of one such operator, three by small businesses and one by a 
small business employee, three by consumer advocacy organizations, 
three by entities dedicated to fighting fake reviews, one by a public 
interest research center, one by a think tank, one by academic 
researchers, and one by an insurance marketing organization.
---------------------------------------------------------------------------

    \6\ The comments are publicly available on this rulemaking's 
docket at https://www.regulations.gov/docket/FTC-2022-0070/comments.
---------------------------------------------------------------------------

    The 15 individual consumers expressed significant concerns about 
fake consumer reviews and testimonials.\7\ One consumer comment 
declared: ``this rule to extend the FTC power over fraudulent and paid 
for testimonies and reviews is a necessity. I think . . . protection 
against these types of scams is an integral need to the people of the 
United States.'' \8\ Consumer commenters wrote about the difficulty 
that many consumers have in identifying fake reviews.\9\ One consumer 
who selected an auto repair shop based upon misleading reviews written 
by the shop's employees or their spouses spoke of having been 
personally harmed by deceptive reviews.\10\ Two consumer comments said 
that truthful negative reviews are valuable and should not be 
suppressed.\11\ Two additional consumer commenters spoke of the need to 
punish and deter bad actors.\12\
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    \7\ Anonymous Cmt. on Trade Regulation Rule on the Use of 
Reviews and Endorsements (``Cmt. on ANPR'') (Nov. 15, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0006 (``Anonymous 
Consumer A Cmt.''); Mahzer Zaim, Cmt. on ANPR (Nov. 21, 2022), 
https://www.regulations.gov/comment/FTC-2022-0070-0008 (``Zaim 
Cmt.''); Jill Monday, Cmt. on ANPR (Dec. 3, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0010 (``Monday Cmt.''); 
Donald Kelly, Cmt. on ANPR, (Dec. 7, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0012 (``Kelly Cmt.''); 
Heather Earl, Cmt. on ANPR (Dec. 11, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0013; Andrea Sliger, Cmt. 
on ANPR (Dec. 11, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0014; Merrill Ahrens, Cmt. on ANPR (Dec. 11, 2022), 
https://www.regulations.gov/comment/FTC-2022-0070-0015; Diane 
Dauite, Cmt. on ANPR (Dec. 11, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0016 (``Dauite Cmt.''); Stephanie Smith, Cmt. 
on ANPR (Dec. 12, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0017 (``Smith Cmt.''); Anonymous, Cmt. on ANPR (Dec. 13, 
2022), https://www.regulations.gov/comment/FTC-2022-0070-0018 
(``Anonymous Consumer B Cmt.''); Jim Zevely, Cmt. on ANPR (Dec. 17, 
2022), https://www.regulations.gov/comment/FTC-2022-0070-0019 
(``Zevely Cmt.''); Frank Evelhoch II, Cmt. on ANPR (Dec. 17, 2022), 
https://www.regulations.gov/comment/FTC-2022-0070-0021 (``Evelhoch 
Cmt.''); Anonymous, Cmt. on ANPR (Dec. 26, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0022 (``Anonymous Consumer 
C Cmt.''); Judy Draper, Cmt. on ANPR (Dec. 28, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0023; Anonymous, Cmt. on 
ANPR (Dec. 31, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0025 (``Anonymous Consumer D Cmt.'').
    \8\ Anonymous Consumer A Cmt. at 1.
    \9\ Kelly Cmt. at 1; Smith Cmt. at 1; Zevely Cmt. at 1; Evelhoch 
Cmt. at 1; Anonymous Consumer D Cmt. at 1.
    \10\ Monday Cmt. at 1.
    \11\ Dauite Cmt. at 1; Anonymous Consumer B Cmt. at 1.
    \12\ Zaim Cmt. at 2; Anonymous Consumer C Cmt. at 1.
---------------------------------------------------------------------------

    The four comments from small businesses or a small business 
employee were from Ubiquitous Advising, LLC, (``Ubiquitous Advising''), 
Patrick's Pet Care, an anonymous small business that sells products 
through a particular online marketplace, and Tammy Provencal, who is a 
small business employee.\13\ Ubiquitous Advising supports the 
rulemaking, and commented that fake reviews cause more damage than 
anyone can imagine.\14\ It also said that review

[[Page 49366]]

suppression is just as bad, with businesses threatening, bullying, or 
suing consumers who are trying to warn other consumers, even when there 
is zero chance of those businesses winning such a lawsuit.\15\ 
Ubiquitous Advising described a company in its local area that is 
constantly threatening and bullying reviewers.\16\ Patrick's Pet Care 
did not indicate clearly whether it supports the rulemaking but 
complained about being attacked with negative reviews.\17\ It suggested 
that people should not be able to post anonymous, non-traceable reviews 
and that platforms should disclose the names of reviewers.\18\ The 
anonymous small business that submitted a comment did not address the 
proposed rulemaking and asserted that a particular online marketplace 
was manipulating the placement of negative reviews.\19\ The small 
business employee supports the rulemaking and stated that a competitor 
is giving incentives for 5-star reviews.\20\
---------------------------------------------------------------------------

    \13\ Ubiquitous Advising, LLC, Cmt. on ANPR (Dec. 29, 2022), 
https://www.regulations.gov/comment/FTC-2022-0070-0024 (``Ubiquitous 
Advising Cmt.''); Patrick's Pet Care, Cmt. on ANPR (Jan. 9, 2023), 
https://www.regulations.gov/comment/FTC-2022-0070-0032 (``Patrick's 
Pet Care Cmt.''); Anonymous, Cmt. on ANPR (Nov. 28, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0009 (``Anonymous Business 
Cmt.''); Tammy Provencal, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0042 (``Provencal Cmt.'').
    \14\ Ubiquitous Advising Cmt. at 1-2.
    \15\ Id. at 1.
    \16\ Id.
    \17\ Patrick's Pet Care Cmt. at 1-2.
    \18\ Id. at 2.
    \19\ Anonymous Business Cmt. at 1-2.
    \20\ Provencal Cmt. at 1.
---------------------------------------------------------------------------

    The five review platforms that submitted comments, Yelp, Inc. 
(``Yelp''), Trustpilot A/S (``Trustpilot''), Google LLC (``Google''), 
Tripadvisor LLC (``Tripadvisor''), and Amazon.com, Inc. (``Amazon''), 
wrote of the importance of reviews to consumers and the lengths to 
which they go to stop and combat fake reviews.\21\ These comments 
conveyed information both about the prevalence and harm caused by fake 
review practices.
---------------------------------------------------------------------------

    \21\ Yelp, Inc., Cmt. on ANPR (Jan. 6, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0028 (``Yelp Cmt.''); 
Trustpilot A/S, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0031 (``Trustpilot 
Cmt.''); Google LLC, Cmt. on ANPR, (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0034 (``Google Cmt.''); 
Tripadvisor LLC, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0036 (``Tripadvisor 
Cmt.''); Amazon.com, Inc., Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0041 (``Amazon Cmt.'').
---------------------------------------------------------------------------

    Yelp, which supports civil penalties for ``businesses and 
individuals who author, arrange for or pay for deceptive reviews,'' 
\22\ said that an overwhelming majority of consumers who read reviews 
(83 percent) say they trust online reviews about local businesses.\23\ 
In one Yelp survey, 71 percent of respondents said they would no longer 
visit a business if they learned the business has fake or compensated 
online reviews.\24\ As a first line of defense, Yelp uses automated 
software systems in order to detect biased reviews and ``flags a 
significant percentage of reviews--about 19% based on Yelp's most 
recent . . . figures--as `not recommended.' '' \25\ Yelp said that 
groups to facilitate the buying, selling, or exchange of fake reviews 
exist on various online platforms (e.g., Facebook, Instagram, 
Twitter).\26\ In 2021, Yelp made more than 1,000 reports to online 
platforms warning them of nearly 950 suspicious groups, posts, or 
individuals found on their sites.\27\ Yelp also wrote that ``abusive 
and questionable or unjustified legal threats are another form of 
review suppression that Yelp constantly confronts'' and that its 2021 
data shows a majority of such threat alerts ``stemmed from beauty and 
health categories--businesses consumers often turn to when making 
critical life decisions or that can otherwise be sensitive in nature.'' 
\28\
---------------------------------------------------------------------------

    \22\ Yelp Cmt. at 12. At the same time, Yelp said that because 
``such deceptive review practices are already illegal under Section 
5 of the FTC Act,'' it ``recommends against additional rulemaking 
that is specifically directed toward liability for deceptive 
reviews.'' The Commission has difficulty reconciling these two 
comments as the Commission could not adopt new civil penalties 
without rulemaking.
    \23\ Id. at 4.
    \24\ Id.
    \25\ Id. at 6.
    \26\ Id. at 8.
    \27\ Id.
    \28\ Id. at 11-12.
---------------------------------------------------------------------------

    Trustpilot, a Danish company operating a website that hosts reviews 
of businesses worldwide, did not appear to support or oppose the 
rulemaking. It said that of the 46.7 million Trustpilot reviews written 
globally in 2021, it removed 2.7 million fake reviews.\29\ In 2021, 
Trustpilot identified and took action against more than 60,000 reviews 
about United States businesses that were submitted by accounts it 
deemed to be companies or individuals who offered fake reviews for sale 
online.\30\ It noted that it is appropriate for consumers to review a 
service provider with which they have had an experience even if they 
did not make a purchase.\31\ In 2021, Trustpilot detected and removed 
as biased just over 8,000 reviews for United States businesses written 
by owners, officers, or employees of the company reviewed, or their 
family members.\32\ Trustpilot stated that such behavior does not 
necessarily reflect intentional fraud.\33\ It commented that it is 
aware of cases outside of Trustpilot in which the suppression of 
negative reviews has occurred on retailer or business websites.\34\ It 
has seen some cases, mostly outside of the US, in which businesses have 
threatened reviewers if they do not delete a negative review.\35\ In 
response to the ANPR, Trustpilot said it is possible that, before 
moving to regulation, there may be benefits in seeking to maximize the 
effects of other steps, such as educating businesses and consumers or 
developing codes of conduct.\36\ It noted that while regulation could 
send a strong signal, it may face the challenge of being quite static 
in a dynamic and fast-paced environment.\37\
---------------------------------------------------------------------------

    \29\ Trustpilot Cmt. at 2. Trustpilot noted that it defines 
``fake reviews'' more broadly than was used in the FTC's ANPR.
    \30\ Id. at 3.
    \31\ Id. at 3-4.
    \32\ Id. at 7.
    \33\ Id.
    \34\ Id. at 8.
    \35\ Id. at 9.
    \36\ Id. at 16.
    \37\ Id. at 17.
---------------------------------------------------------------------------

    Google supports the rulemaking.\38\ It said that fake reviews 
undermine users' confidence in the information available on its 
platform.\39\ Google uses both automated systems and human operators to 
monitor compliance with its policies and identify and remove fake 
reviews.\40\ Spammers constantly evolve their tactics, so 
distinguishing between fake and authentic reviews is an ongoing 
battle.\41\ For example, in response to advances in Google's detection 
and mitigation capabilities, bad actors have adapted, such as by using 
Virtual Private Networks (``VPNs'') to evade routine detection.\42\ 
Google said that businesses may also have strong incentives to buy 
positive reviews, which exacerbates the problem.\43\ In addition, many 
reviews displayed on its platform are sourced or surfaced from third 
parties (e.g., from the merchant website where consumers purchased the 
product or service), and it can be more difficult to detect when such 
reviews are fake because Google lacks access to some signals of 
inauthentic activity, such as the account that created the review being 
used to post duplicate content.\44\ In 2022, Google removed millions of 
reviews from Google Play that it determined to be fake, inorganic, or 
otherwise malicious.\45\ In 2021, users submitted around one billion 
Google Maps reviews and Google blocked or removed more than 95 million 
of them for violating its policies.\46\ Google also removed another one 
million reviews that were reported

[[Page 49367]]

directly to it, and it disabled more than one million user accounts due 
to policy-violating activity.\47\ Google urged the Commission to focus 
on those posting fake reviews rather than on the platforms.\48\
---------------------------------------------------------------------------

    \38\ Google Cmt. at 9.
    \39\ Id. at 1, 2, 9.
    \40\ Id. at 1.
    \41\ Id. at 3.
    \42\ Id.
    \43\ Id.
    \44\ Id. at 3, 6.
    \45\ Id. at 8.
    \46\ Id.
    \47\ Id.
    \48\ Id. at 9.
---------------------------------------------------------------------------

    Tripadvisor agrees that deceptive actions by bad actors harm 
consumers and honest businesses.\49\ In 2021, of the 26 million reviews 
submitted to Tripadvisor, it identified 3.6 percent as violating its 
fraud guidelines.\50\ It said that in certain scenarios it can be 
difficult to distinguish authentic reviews from fake.\51\ Tripadvisor 
also said that efforts to suppress negative reviews, including by 
threatening reviewers, is one of the problems that plague the online 
consumer review ecosystem.\52\ Finally, it believes that targeted 
authority for the FTC to impose financial penalties on bad actors can 
be an element of a comprehensive effort to improve the consumer 
information ecosystem, but that any provision that authorizes the 
assessment of a financial penalty must be appropriately targeted in 
both design and enforcement at those who knowingly engage in clearly 
deceptive and fraudulent practices.\53\
---------------------------------------------------------------------------

    \49\ Tripadvisor Cmt. at 7.
    \50\ Id.
    \51\ Id. at 5-6.
    \52\ Id. at 11.
    \53\ Id. at 10.
---------------------------------------------------------------------------

    Amazon did not state support for or opposition to the rulemaking. 
Amazon said that in 2021 alone, it invested more than $900 million and 
employed more than 12,000 people who were dedicated to protecting 
customers and its store from fraud and other forms of abuse.\54\ Amazon 
stated that it proactively stopped more than 200 million suspected fake 
reviews in 2020 alone.\55\ Amazon also noted that fraudsters approach 
its customers through their own websites and on social media and 
solicit them to write misleading reviews in exchange for money, free 
products, or other incentives.\56\ In 2021, Amazon reported more than 
16,000 social media groups that were buying or exchanging misleading 
reviews to the social media sites that hosted them, including Facebook, 
Twitter, and Instagram, resulting in the removal of groups with more 
than 11 million members.\57\ In July 2022, Amazon sued more than 10,000 
such Facebook groups.\58\ Amazon encouraged the FTC to increase the use 
of its existing authority to pursue fake review brokers, collaborate 
with other regulators to combat bad actors who facilitate review abuse, 
continue to provide guidance to legitimate businesses, and educate 
consumers about how to identify and report fake reviews.\59\
---------------------------------------------------------------------------

    \54\ Amazon Cmt. at 2.
    \55\ Id.
    \56\ Id. at 2.
    \57\ Id.
    \58\ Id. at 3.
    \59\ Id.
---------------------------------------------------------------------------

    An individual Amazon employee working in the Amazon Risk department 
for the past 10 years submitted a comment.\60\ The commenter personally 
reviewed thousands of seller and buyer accounts for review abuse and 
said there is no dispute that deceptive reviews are widespread and 
harmful to customers.\61\ The commenter is ``skeptical about whether 
the regulation will be effective'' because most online platforms and 
shopping websites do not require customers to register using real 
identities in order to leave reviews and because Section 230 of the 
Communications Decency Act (47 U.S.C. 230) immunizes internet service 
providers, like Google and Facebook, from lawsuits ``based on claims 
related to content published by third-parties using their service[s].'' 
\62\
---------------------------------------------------------------------------

    \60\ Miao Zhao, Cmt. on ANPR (Dec. 19, 2022), https://www.regulations.gov/comment/FTC-2022-0070-0020 (``Zhao Cmt.'') at 1.
    \61\ Id.
    \62\ Id. at 1-2.
---------------------------------------------------------------------------

    The academic researchers who submitted a comment were Rajvardhan 
Oak and Zubair Shafiq from the University of California Davis, who had 
examined reviews on online marketplaces.\63\ They infiltrated an 
``incentivized review service geared towards Amazon.com'' and 
discovered solicitations for incentivized five-star reviews for 242,000 
products.\64\ They found more than 250 groups on Facebook in which 
reviews were brokered, the largest of which had around 550,000 
members.\65\ Over the six weeks that they tracked products for which 
incentivized reviews were sought, no reviews were removed from nearly 
50 percent of those products.\66\ Although Amazon delists products 
suspected of seeking incentivized reviews, only 25 of the 1,600 
products they were tracking were removed by Amazon during the six-week 
period.\67\ They also said that, in response to Amazon's lawsuits 
against Facebook groups, group administrators and agents simply created 
alternate communication channels, such as Signal/Telegram groups, and 
circulated the details of the alternatives.\68\
---------------------------------------------------------------------------

    \63\ Rajvardhan Oak and Zubair Shafiq, Cmt. on ANPR (Jan. 9, 
2023), https://www.regulations.gov/comment/FTC-2022-0070-0030 (``Oak 
& Shafiq Cmt.'') at 1.
    \64\ Id. at 3-4.
    \65\ Id. at 4.
    \66\ Id. at 7-8.
    \67\ Id. at 8.
    \68\ Id.
---------------------------------------------------------------------------

    The Commission received comments from three entities dedicated to 
fighting fake reviews: the Transparency Company, Fake Review Watch, and 
Fakespot, Inc.\69\ All three commenters asserted that the strategies 
that are currently being used by review platforms are insufficient.\70\
---------------------------------------------------------------------------

    \69\ The Transparency Company, Cmt. on ANPR (Jan. 9, 2023), 
https://www.regulations.gov/comment/FTC-2022-0070-0044 
(``Transparency Company Cmt.''); Fake Review Watch, Cmt. on ANPR 
(Jan. 5, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0026 (``Fake Review Watch Cmt.''); Fakespot, Inc., Cmt. on ANPR 
(Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0035 (``Fakespot Cmt.'').
    \70\ Transparency Company Cmt. at 9, 18; Fake Review Watch Cmt. 
at 2; Fakespot Cmt. at 1-2.
---------------------------------------------------------------------------

    The Transparency Company, which supports a rulemaking, said that 
its research suggests that the major review websites are unable to 
detect a majority of fake reviews online.\71\ It estimated that 8.5 
percent of published reviews--for all industries--are fake, and 
provided a link to its fake review research, which asserted that 10.7 
percent of Google reviews, 7.1 percent of Yelp reviews, and 5.2 percent 
of Tripadvisor reviews were fake.\72\ The comment noted that 54 percent 
of consumers say that they would not buy a product if they suspected it 
to have fake reviews and estimated that consumer injury from fake 
reviews is approximately $5 billion per year.\73\ It documented over 
1,000 examples of fake negative reviews causing injury to competition 
and it estimates that thousands of lawyers are hired each year to send 
demand letters to and intimidate the authors of negative consumer 
reviews.\74\ The comment identified platform actions that have been 
effective in reducing consumer harm associated with fake reviews but 
said that ending online review fraud would require, among other things, 
the authentication of consumer reviewers.\75\
---------------------------------------------------------------------------

    \71\ Transparency Company Cmt. at 9.
    \72\ Id.; Uberall, The State of Online Review Fraud: An Analysis 
of 4 Million Reviews on Google, Facebook, Yelp and Tripadvisor at 
15, https://join.momentfeed.com/hubfs/2021%20Fake%20Reviews/FakeReviews_Report.pdf.
    \73\ Transparency Company Cmt. at 16, 18.
    \74\ Transparency Company Cmt. at 16.
    \75\ Id. at 18-20.
---------------------------------------------------------------------------

    Fake Review Watch, which supports a rulemaking, said that there is 
a robust black market for paid for (or traded for) reviews on Google, 
Yelp, Facebook, Trustpilot, and numerous other review sites and that 
many of the transactions are conducted on social media.\76\ It

[[Page 49368]]

stated that fake reviews are commonplace and often difficult to detect 
without examining review profile histories across multiple 
businesses.\77\ Fake Review Watch has observed over 100 Facebook groups 
operating as review exchanges, with hundreds or thousands of members 
each.\78\ The comment also asserted that Google: (a) often allows 
profiles that posted fake reviews to remain active even after it 
removes those reviews, (b) provides no alerts to consumers about 
businesses with fake reviews, and (c) makes fake review detection more 
difficult by allowing profiles to choose not to display all of their 
reviews and by not displaying the dates of reviews.\79\ The comment 
also complained about reviews by Yelp Elite members,\80\ which Fake 
Review Watch asserted are automatically recommended and not subject to 
evaluation by Yelp's recommendation software, and about the inadequacy 
of Yelp's consumer alerts.\81\ Fake Review Watch said that regulators 
should require review sites to tell consumers everything they know 
about a business's reviews and to post notices reminding consumers that 
the site cannot guarantee the truthfulness and accuracy of any 
review.\82\
---------------------------------------------------------------------------

    \76\ Fake Review Watch Cmt. at 1, 9.
    \77\ Id. at 1.
    \78\ Id.
    \79\ Id. at 3.
    \80\ According to Yelp, Yelp Elite members are chosen ``based on 
a number of things, including well-written reviews, high quality 
photos, a detailed personal profile, and a history of playing well 
with others.'' https://www.yelp-support.com/article/What-is-Yelps-Elite-Squad?l=en_US.
    \81\ Id. at 4-5.
    \82\ Id. at 9.
---------------------------------------------------------------------------

    Fakespot did not state support for or opposition to a rulemaking. 
In its comment, Fakespot opined that sellers posting fake reviews and 
fake review farms are among the malicious actors generating fake online 
content that, in the last five years, has led to a ``dramatic 
deterioration'' of trust between sellers, platforms, and consumers.\83\
---------------------------------------------------------------------------

    \83\ Fakespot Cmt. at 1.
---------------------------------------------------------------------------

    The three consumer advocacy organizations that submitted comments, 
Truth in Advertising, Inc. (``TINA''), the U.S. Public Interest 
Research Group (``US PIRG''), and the National Consumers League 
(``NCL''), all advocated for a rulemaking.\84\
---------------------------------------------------------------------------

    \84\ Truth in Advertising, Inc., Cmt. on ANPR (Jan. 9, 2023), 
https://www.regulations.gov/comment/FTC-2022-0070-0029 (``TINA 
Cmt.'') at 1; U.S. Public Interest Research Group, Cmt. on ANPR 
(Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0045 (``US PIRG Cmt.'') at 2; National Consumers League, Cmt. on 
ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0039 (``NCL Cmt.'') at 1. Electronic Privacy Information Center 
(``EPIC''), which is a public interest research center, submitted a 
comment supporting a rulemaking. Its comment focused mainly on 
endorsements by police organizations of one product. Electronic 
Privacy Information Center, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0043.
---------------------------------------------------------------------------

    TINA said that fake reviews are an insidious problem, primarily 
because consumers have come to rely heavily on reviews in making their 
online purchasing decisions, and it provided numerous citations to 
publications regarding the importance of reviews to consumer decision 
making.\85\ It stated that incentives to generate early, positive 
reviews have led to a proliferation of false and fake reviews--a 
deceptive marketing tactic that will only continue to flourish if not 
effectively reined in by regulators.\86\ TINA said that, given the 
Supreme Court's AMG Capital Management decision, a rule would 
substantially improve the agency's ability to combat and deter 
deception and unfairness in this area.\87\
---------------------------------------------------------------------------

    \85\ TINA Cmt. at 2-3.
    \86\ Id. at 3.
    \87\ Id. at 3.
---------------------------------------------------------------------------

    US PIRG cited findings by industry observers that 30 to 40 percent 
of online reviews are not genuine, and stated that consumers have no 
way of knowing which reviews are legitimate.\88\ It asserted that fake 
reviews harm both consumers who are trying to make informed buying 
decisions and honest businesses, and that, when consumers lose 
confidence in reviews, legitimate positive reviews do not mean as 
much.\89\ It said that the marketplace is poisoned by outright fake 
reviews, reviews written in exchange for free items, fake negative 
reviews written about competitors, review suppression, reviews or 
endorsements written for consideration, and misrepresentations that a 
website or a certification or a seal is independent.\90\
---------------------------------------------------------------------------

    \88\ US PIRG Cmt. at 1.
    \89\ Id.
    \90\ Id. at 1-2.
---------------------------------------------------------------------------

    NCL said that millions of consumers use reviews every day to inform 
billions of dollars in purchasing decisions involving both online and 
offline businesses.\91\ It cited an estimate that in 2021, fraudulent 
reviews cost U.S. consumers $28 billion.\92\ NCL also cited a different 
study which said that, by deceiving buyers into purchasing lower 
quality and potentially unsafe products, fake reviews lead to $0.12 of 
consumer welfare lost for every $1 spent online.\93\ It said that the 
practices outlined in the ANPR were all unfair and deceptive, that the 
sellers and service providers that do not use fake reviews are at a 
competitive disadvantage, that the effects of a fake review may last up 
to a month after its deletion or detection, and that the threat of fake 
negative reviews is being used to extort honest businesses.\94\ NCL 
also asked the Commission to require platforms to implement measures to 
combat the unfair and deceptive uses of reviews, endorsements, and 
indicators of social media influence, possibly requiring purchase 
verification before allowing a user to leave a review and the active 
policing of reviews.\95\ Finally, NCL suggested that the FTC explore 
options for holding platforms accountable for allowing organized review 
fraud to flourish.\96\
---------------------------------------------------------------------------

    \91\ NCL Cmt. at 1.
    \92\ Id. at 2.
    \93\ Id.
    \94\ Id. at 3-4.
    \95\ Id. at 4.
    \96\ Id.
---------------------------------------------------------------------------

    The seven trade associations that submitted comments, the North 
American Insulation Manufacturers Association (``NAIMA''), the American 
Dental Association (``ADA''), the Computer & Communications Industry 
Association (``CCIA''), the Travel Technology Association (``Travel 
Tech''), the National Automobile Dealers Association (``NADA''), the 
National Retail Federation (``NRF''), and the Association of National 
Advertisers (``ANA''),\97\ took widely divergent positions on a 
rulemaking.
---------------------------------------------------------------------------

    \97\ North American Insulation Manufacturers Association, Cmt. 
on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0037 (``NAIMA Cmt.''); American Dental Association, Cmt. 
on ANPR (Jan. 5, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0027 (``ADA Cmt.''); Computer & Communications Industry 
Association, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0047 (``CCIA Cmt.''); 
Travel Technology Association, Cmt. on ANPR (Jan. 9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0046 (``Travel Tech 
Cmt.''); National Automobile Dealers Association, Cmt. on ANPR (Jan. 
9, 2023), https://www.regulations.gov/comment/FTC-2022-0070-0038 
(``NADA Cmt.''); National Retail Federation, Cmt. on ANPR (Jan. 9, 
2023), https://www.regulations.gov/comment/FTC-2022-0070-0039 (``NRF 
Cmt.''); Association of National Advertisers, Cmt. on ANPR (Jan. 9, 
2023), https://www.regulations.gov/comment/FTC-2022-0070-0040 (``ANA 
Cmt.'').
---------------------------------------------------------------------------

    NAIMA and ADA both support a rulemaking.\98\ With respect to 
reviews or other endorsements by nonexistent individuals, NAIMA said 
that it has challenged misleading claims that were ``supported by 
avatars or entities that there was no chance of making real contact 
with.'' \99\ It also asserted that testimonials by those 
misrepresenting their experiences with products are plentiful.\100\ 
Finally, NAIMA stated that it regularly challenges statements about

[[Page 49369]]

its members' products ``that appear on standalone websites which 
falsely claim to be independent reviewers.'' \101\ ADA wants the FTC to 
allow dentists to disclose patient information in responding to reviews 
and to require that reviewers identify themselves.\102\
---------------------------------------------------------------------------

    \98\ NAIMA Cmt. at 1; ADA Cmt. at 1.
    \99\ NAIMA Cmt. at 2.
    \100\ Id.
    \101\ Id.
    \102\ ADA Cmt. at 1.
---------------------------------------------------------------------------

    It is unclear whether Travel Tech or CCIA support a rulemaking. 
Travel Tech commented that the integrity of reviews is essential to 
maintain the trust and confidence of the customers of Travel Tech 
members.\103\ It stated that the overwhelming majority of reviews are 
legitimate and that Travel Tech members have systems in place to 
address the minority of reviews that can be harmful to consumers or 
travel-related operators and providers.\104\ Travel Tech recommended 
that the Commission utilize its existing authority to combat nefarious 
paid review-generation sites, referred to as ``click farms.'' \105\ 
CCIA said that any proposed rulemaking should focus on bad actors 
engaging in fraudulent behavior, not legitimate endorsements that 
happen to occur through social media.\106\
---------------------------------------------------------------------------

    \103\ Travel Tech Cmt. at 1.
    \104\ Id. at 3.
    \105\ Id. at 4.
    \106\ CCIA Cmt. at 4.
---------------------------------------------------------------------------

    NADA commented that rulemaking is unnecessary because the 
Commission did not identify any harmful market conduct for which 
remedies to protect consumers do not exist under current Federal and 
state law and because monetary penalty authority alone is not reason 
enough to issue a rule.\107\ Its comment continued that, if the 
rulemaking proceeds, the Commission should stick to its stated goal of 
addressing ``certain types of clear Section 5 violations involving 
reviews and endorsements'' to ``benefit consumers, help level the 
playing field, and not burden legitimate marketers.'' \108\ With 
respect to any potential rule provision addressing businesses writing, 
soliciting, or publishing reviews by their employees or family members, 
NADA asked that the FTC make clear that a violation ``only arises when 
the business, and not another entity, affirmatively writes, solicits, 
and publishes reviews that fail to provide clear and conspicuous 
disclosures of those relationships'' and that the FTC define the term 
``relative.'' \109\ The comment asserted that businesses may 
legitimately ``seek to remove reviews or comments that are off topic or 
include false statements, advertisements, inappropriate language, or 
confidential or personal identification information'' or to ``remove 
comments or review functions on their own websites or certain social 
media posts.'' \110\ NADA also posited other practices that they 
considered legitimate and did not want prohibited under a possible 
rule: (a) responding on a comment thread to each negative review, 
offering an explanation, making customers whole, and asking any 
successfully satisfied customers to respond on the thread with their 
satisfaction or update their previously negative review; (b) surveying 
customer satisfaction and prompting only satisfied customers to leave 
reviews; (c) reaching out to consumers in an effort to change reviews 
by addressing their issues, sometimes giving customers something of 
value in satisfaction of their problems; or (d) highlighting five-star 
reviews from satisfied customers on a dealer's websites.\111\ NADA said 
it understood that some third-party review websites promoted their 
services to businesses and if a business did not purchase those 
services, it would have a negative effect on the consumer reviews shown 
for the business.\112\ Finally, NADA said that the FTC should directly 
engage with review websites, e-commerce sites, and consumer brands 
through public workshop conferences.\113\
---------------------------------------------------------------------------

    \107\ NADA Cmt. at 1-2.
    \108\ Id. at 3.
    \109\ Id.
    \110\ Id.
    \111\ Id. at 3-4.
    \112\ Id. at 4 n.12.
    \113\ Id. at 5.
---------------------------------------------------------------------------

    NRF opposed additional regulation of retailers but not of fake 
review brokers.\114\ It believes that the issue of fake and misleading 
reviews is important but that fake review brokers are much more likely 
to mislead consumers and create issues for retailers given the 
potential for brokers to submit fake reviews in volume.\115\ NRF said 
that the fraudulent tactics employed by review brokers can include: (a) 
using ``bots'' and artificial intelligence tools to generate reviews on 
behalf of nonexistent consumers; (b) posting identical, or 
substantially identical, reviews for multiple different products and/or 
under multiple consumer accounts; (c) flooding social media platforms 
such as Twitter, Instagram, and Facebook with false review content, 
whether as standalone posts or as comments or replies to genuine 
reviews or consumer questions; (d) creating and operating social media 
groups or standalone websites that purport to offer benefits like 
refunds or coupons in exchange for specified types of reviews or 
ratings; and (e) reimbursing consumers for what would otherwise appear 
to be bona-fide purchases in exchange for positive 5-star reviews and 
ratings.\116\ NRF opposed requiring retailers to restrict consumer 
reviews to verified purchasers.\117\ It also opposed blanket approaches 
such as ``requiring manual review of every consumer review and the 
poster's profile'' or approaches that ``risk inadvertent discriminatory 
or disparate deletion of reviews based on implicit biases towards 
certain consumer classes.'' \118\ NRF said that if a retailer is 
actually acting in bad faith (whether by itself or by intentionally 
engaging a fake review broker to act on its behalf), the FTC can take 
the step of ``filing a complaint and bringing formal enforcement action 
seeking monetary damages as it has done several times this year 
alone.'' \119\ It accordingly believes that no new enforcement 
mechanism is necessary for the Commission to ensure retailers comply 
with existing law, or to hold them accountable for violations.\120\
---------------------------------------------------------------------------

    \114\ NRF Cmt. at 1.
    \115\ Id. at 2.
    \116\ Id. at 2-3.
    \117\ Id. at 6.
    \118\ Id.
    \119\ Id.
    \120\ Id. at 7.
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    ANA asserted that a rulemaking is premature, while making clear 
that ``ANA does not take the position that fake reviews may not produce 
economic injury.'' \121\ It asserted that the ``FTC has not 
demonstrated evidence of prevalence and has not identified a particular 
industry that would justify embarking upon rulemaking that would be 
sufficient, clear, narrowly tailored, easy to enforce, and not 
burdensome to legitimate marketers.'' \122\ ANA appeared to agree that 
some of the practices challenged in past FTC cases involving the 
offering of compensation or other incentives in exchange for, or 
conditioned on, the writing of positive consumer reviews are 
problematic and deceptive.\123\ It sought to distinguish such practices 
from other practices that, according to ANA, do not obviously cause 
consumer harm, such as review gating or the ``mere solicitation of 
positive reviews.'' \124\
---------------------------------------------------------------------------

    \121\ ANA Cmt. at 2, 4.
    \122\ Id. at 1-2.
    \123\ Id. at 6.
    \124\ Id. at 7.
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    The Commission also received a comment from an insurance marketing 
organization, Family First Life LLC (``Family First Life''), which 
supported ``a narrowly tailored rule [that] would benefit consumers, 
help level the playing field, and not burden legitimate

[[Page 49370]]

marketers.'' \125\ It recommended that any regulation ``be tailored to 
exclude situations where an employee or independent contractor is 
leaving a review of their experience working with their employer or 
principal.'' \126\ Family First Life pointed out that when someone 
``writes a review of her own personal experience working with a company 
on workplace-review platforms, such as Glassdoor or Indeed,'' concerns 
about the reviewer's undisclosed relationship to the company are absent 
because, on such platforms, ``there is an obvious and assumed 
relationship between the reviewer and the company.'' \127\ Family First 
Life commented that the ``FTC should not write a rule that sweeps in 
and penalizes any review just because the reviewer was offered an 
incentive to write it--without otherwise dictating what the review 
says.'' \128\ Family First Life also stated that the ``FTC should 
include in any proposed regulation it promulgates a safe harbor for 
truthful reviews that are incentivized but not influenced, controlled, 
or conditioned by the entity offering the incentive.'' \129\ Finally, 
it asserted that the FTC should not treat platforms' determinations of 
policy violations as evidence of rule breaking.\130\
---------------------------------------------------------------------------

    \125\ Family First Life LLC, Cmt. on ANPR (Jan. 9, 2023), 
https://www.regulations.gov/comment/FTC-2022-0070-0049 (``Family 
First Life Cmt.'') at 1-2.
    \126\ Id. at 9.
    \127\ Id. at 9-10.
    \128\ Id. at 12-13.
    \129\ Id. at 14.
    \130\ Id. at 18.
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    The Commission also received a comment from a non-partisan think 
tank, the Center for Data Innovation (``CDI'').\131\ As part of its 
comment, CDI asserted that regulation is premature because there are no 
widely accepted best practices for platforms and platforms are still 
experimenting with solutions.\132\ CDI acknowledged that researchers 
studying deceptive reviews found that fake reviews do have a large 
presence online and a significant impact on commerce, citing research 
and reports that included the following findings, among others: (a) 
``around five percent of reviews left for a private-label apparel 
company were posted by individuals who did not purchase products''; (b) 
``around 4 percent of online reviews [we]re fake in 2021''; (c) fake 
reviews impact nearly $152 billion in global e-commerce revenue; (d) 
Yelp flagged and filtered out around 16 percent of reviews in 2016; and 
(e) 20 percent of 41,572 reviews on Tripadvisor were suspicious.\133\ 
It noted that an artificial intelligence (``AI'') system is able to 
write reviews that are nearly indistinguishable from reviews written by 
people.\134\ CDI commented that fake review brokers help facilitate the 
creation of fake reviews by connecting bad actors with reviewers, often 
using ``large groups on websites such as Facebook to find reviewers 
willing to write reviews in exchange for free products or 
compensation.'' \135\ The comment asserted that the review broker 
dictates the rating and what the review should say and then pays the 
reviewer only once the review is accepted and posted.\136\ CDI proposed 
that, instead of engaging in a rulemaking, the FTC should establish 
partnerships with review companies, e-commerce platforms, and social 
media companies to establish voluntary best practices to detect and 
prevent fake reviews.\137\
---------------------------------------------------------------------------

    \131\ Center for Data Innovation, Cmt. on ANPR (Jan. 9, 2023), 
https://www.regulations.gov/comment/FTC-2022-0070-0048 (``CDI 
Cmt.'').
    \132\ Id. at 5.
    \133\ Id. at 3.
    \134\ Id. at 3-4.
    \135\ Id. at 5.
    \136\ Id.
    \137\ Id. at 5-6.
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III. Prevalence of the Consumer Review and Testimonial Practices at 
Issue

A. Fake or False Consumer Reviews or Testimonials

    Comments from the platforms support a finding that fake consumer 
reviews are prevalent. In 2020, Amazon asserted it proactively stopped 
more than 200 million suspected fake reviews.\138\ In 2021, according 
to the company, Google blocked or removed more than 95 million Google 
Maps reviews for policy violations; in 2022, it removed millions of 
fake, inorganic, or otherwise malicious Google Play reviews.\139\ Yelp 
commented that, in 2021, its recommendation software identified about 
19 percent of reviews as ``not recommended.'' \140\ In 2021, 
Tripadvisor reportedly flagged 3.6 percent of reviews submitted (or 
about one million reviews) as fraudulent.\141\ Trustpilot stated that 
in 2021, accounts deemed to be review sellers submitted more than 
60,000 reviews of U.S. businesses; it identified and filtered the 
reviews and blocked the accounts associated with them.\142\
---------------------------------------------------------------------------

    \138\ Amazon Cmt. at 2.
    \139\ Google Cmt. at 8.
    \140\ Yelp Cmt. at 6.
    \141\ Tripadvisor Cmt. at 7.
    \142\ Trustpilot Cmt. at 3.
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    Several comments spoke about the prevalence of consumer review 
rings on various online platforms (e.g., Facebook, Instagram, Twitter) 
that facilitate the buying, selling, or exchange of fake reviews. In 
2021, Amazon reported more than 16,000 abusive review-related groups to 
social media sites, leading to the removal of groups with more than 11 
million members.\143\ In July 2022, Amazon sued administrators of more 
than 10,000 Facebook groups that attempted to orchestrate fake reviews 
on Amazon.com in exchange for money or free products.\144\ In 2021, 
Yelp reported almost 950 suspicious groups, posts, or individuals to 
online platforms.\145\ Fake Review Watch has accessed more than 100 
Facebook review exchange groups, each with hundreds or thousands of 
participants.\146\
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    \143\ Amazon Cmt. at 2.
    \144\ Id. at 3.
    \145\ Yelp Cmt. at 8.
    \146\ Fake Review Watch Cmt. at 1.
---------------------------------------------------------------------------

    The comment from the Amazon employee who reviewed thousands of 
accounts for review abuse said that deceptive reviews are 
widespread.\147\
---------------------------------------------------------------------------

    \147\ Zhao Cmt. at 1.
---------------------------------------------------------------------------

    Other comments suggest the platforms may be underestimating the 
extent of the fake review problem. The Transparency Company estimated 
8.5 percent of published consumer reviews are fake.\148\ The Fake 
Review Watch comment explained reviews written by Yelp Elite members 
are not subject to evaluation by Yelp's automatic software and there is 
a robust market for Yelp Elite Reviews.\149\ US PIRG asserted 30 to 40 
percent of online reviews are fabricated or otherwise not genuine.\150\ 
The UC Davis researchers found that nearly 50 percent of the products 
sold on Amazon.com by those seeking incentivized reviews did not have 
any of their reviews removed during the six-week period the researchers 
tracked them.\151\ CDI cited research regarding the prevalence of fake 
reviews, including findings that ``around five percent of reviews left 
for a private-label apparel company were posted by individuals who did 
not purchase products,'' ``around 4 percent of online reviews [we]re 
fake in 2021,'' and, based on a third-party analysis of 41,572 reviews, 
around 20 percent of Tripadvisor reviews were suspicious.\152\
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    \148\ Transparency Company Cmt. at 9.
    \149\ Fake Review Watch Cmt. at 4.
    \150\ US PIRG Cmt. at 1.
    \151\ Oak & Shafiq Cmt. at 7-8.
    \152\ CDI Cmt. at 3.
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    Numerous research reports, several of which are cited in the 
comments, further establish the prevalence of fake reviews. For 
example, in 2020, the Department of Homeland Security issued a report 
that focused on counterfeit and pirated goods but also found that ``the 
ratings systems across platforms have been gamed, and the

[[Page 49371]]

proliferation of fake reviews and counterfeit goods on third-party 
marketplaces now threatens the trust mechanism itself.'' \153\ An 
Uberall report from 2021 estimated 10.7 percent of Google reviews, 7.1 
percent of Yelp reviews, and 5.2 percent of Tripadvisor reviews were 
fake.\154\ A 2021 joint report by the University of Baltimore and CHEQ 
AI Technologies Ltd., a company that provides online security services, 
described the ``booming market'' for fake reviews and estimated, based 
on self-reporting from several major platforms, four percent of global 
reviews are fake.\155\ Also in 2021, Fakespot released a report finding 
that, in 2020, nearly 37.6 percent of reviews on Walmart.com were 
unreliable, with the figure at 27.6 percent for Amazon.com.\156\ 
Further, in its most recent annual local consumer review survey, 
BrightLocal reported 54 percent of consumers were confident they saw 
fake reviews on Amazon.com in 2022, with the figures being 50 percent 
for Google and 42 percent for Facebook.\157\
---------------------------------------------------------------------------

    \153\ See, e.g., Department of Homeland Security, Combating 
Trafficking in Counterfeit and Pirated Goods (2020), https://www.dhs.gov/sites/default/files/publications/20_0124_plcy_counterfeit-pirated-goods-report_01.pdf.
    \154\ See ``Fake Reviews: How Big a Problem Exactly?,'' Oct. 28, 
2021, https://uberall.com/en-us/resources/blog/how-big-a-problem-are-fake-reviews. Notably, these percentages refer to reviews that 
were not blocked by these platforms before publication.
    \155\ See University of Baltimore and CHEQ, ``The Economic Cost 
of Bad Actors on the Internet: Fake Online Reviews 2021,'' https://f.hubspotusercontent00.net/hubfs/5228455/Research/Fake%20Online%20Reviews%202021.pdf.
    \156\ See Fakespot, ``2021 Fakespot US Online Shopping, Ratings 
& Reviews Analysis Report,'' https://www.fakespot.com/2021holidayreport.
    \157\ See Sammy Paget, ``Local Consumer Review Survey 2023,'' 
Feb. 7, 2023, https://www.brightlocal.com/research/local-consumer-review-survey/.
---------------------------------------------------------------------------

    Academic research--some of which, again, is cited in the comments--
has also repeatedly confirmed the prevalence of fake reviews.\158\ 
Numerous journalists, including from The Washington Post, The Wall 
Street Journal, CBC News, and CNBC, have also reported on such 
prevalence, sometimes having undertaken their own investigations.\159\ 
Further, Which?, a consumer advocacy group based in the United Kingdom, 
has issued several reports documenting fake and manipulated reviews 
across multiple platforms.\160\
---------------------------------------------------------------------------

    \158\ See, e.g., Jesper Akesson et al., ``The Impact of Fake 
Reviews on Demand and Welfare,'' National Bureau of Economic 
Research Conference, July 20, 2022, https://conference.nber.org/conf_papers/f166391.pdf; Sherry He et al., ``The Market for Fake 
Reviews,'' 2021, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3664992; Devesh Raval, ``Do Bad Businesses 
Get Good Reviews? Evidence from Online Review Platforms,'' 2020, 
https://deveshraval.github.io/reviews.pdf; Renee DiResta, 
``Manipulating Consumption,'' 2018, https://medium.com/@noupside/manipulating-consumption-42f2e9013d0b; Ted Lappas et al., ``The 
Impact of Fake Reviews on Online Visibility: A Vulnerability 
Assessment of the Hotel Industry,'' 2016, https://pubsonline.informs.org/doi/abs/10.1287/isre.2016.0674; Michael Luca 
and Georgios Zervas, ``Fake It Till You Make It: Reputation, 
Competition, and Yelp Review Fraud,'' 62(12) Mgmt. Sci. Dec. 3412-27 
(2016), https://dash.harvard.edu/handle/1/22836596.
    \159\ See, e.g., Bob Segall, ``Millions of those 5-star online 
reviews are fake; Here's how to spot them,'' WTHR, Feb. 15, 2022, 
https://www.wthr.com/article/news/investigations/13-investigates/many-of-those-5-star-reviews-you-see-online-are-totally-fake-yelp-google-facebook-false-accounts/531-f175843b-1316-494a-a746-5bdfcada43fa; Nicole Nguyen, ``Fake Reviews and Inflated Ratings Are 
Still a Problem for Amazon,'' Wall St. J., June 13, 2021, https://www.wsj.com/articles/fake-reviews-and-inflated-ratings-are-still-a-problem-for-amazon-11623587313; Laura Sydell, ``Fake patient reviews 
are making it increasingly hard to seek medical help on Google, Yelp 
and other directory sites,'' Wash. Post, June 5, 2021, https://www.washingtonpost.com/business/2021/06/04/fake-medical-reviews-google-zocdoc-trustpilot/; Matthew Pierce et al., ``Black market in 
Google reviews means you can't believe everything you read,'' CBC 
News, May 4, 2021 (finding that sale of reviews is a growing and 
widespread problem), https://www.cbc.ca/news/investigates/fake-reviews-on-google-1.6033859; Natasha Lomas, ``Apple urged to root 
out rating scams as developer highlights ugly cost of enforcement 
failure,'' Tech Crunch, Feb. 3, 2021 (finding that selling fake App 
Store reviews ``is a booming business''), https://techcrunch.com/2021/02/03/apple-urged-to-root-out-rating-scams-as-developer-highlights-ugly-cost-of-enforcement-failure/; Katie Tarasov, 
``Amazon is filled with fake reviews and it's getting harder to spot 
them,'' CNBC, Sep. 6, 2020, https://www.cnbc.com/2020/09/06/amazon-reviews-thousands-are-fake-heres-how-to-spot-them.html; Greg 
Sterling, ``Fake reviews problem is much worse than people know,'' 
Search Engine Land, Apr. 22, 2020, https://searchengineland.com/fake-reviews-problem-is-much-worse-than-people-know-333331; Nick 
Fernandez, ``It's 2020 and the Google Play Store still has a major 
fake review problem,'' Android Authority, Feb. 23, 2020, https://www.androidauthority.com/play-store-fake-review-problem-1082191/; 
Eric Griffith, ``39 Percent of Online Reviews Are Totally 
Unreliable,'' PCMag, Nov. 7, 2019, https://www.pcmag.com/news/39-percent-of-online-reviews-are-totally-unreliable; Elizabeth Dwoskin 
and Craig Timberg, ``How merchants use Facebook to flood Amazon with 
fake reviews,'' Wash. Post, Apr. 23, 2018, https://www.washingtonpost.com/business/economy/how-merchants-secretly-use-facebook-to-flood-amazon-with-fake-reviews/2018/04/23/5dad1e30-4392-11e8-8569-26fda6b404c7_story.html.
    \160\ See, e.g., Hannah Walsh, ``Apple App store and Google Play 
flooded with fake reviews,'' WHICH?, Mar. 9, 2023, https://www.which.co.uk/news/article/apple-app-store-and-google-play-flooded-with-fake-reviews-aEA138U8bUw6; Sara Spary, ``How Facebook 
fuels Amazon's fake reviews,'' WHICH?, Jan. 13, 2022 (finding 
Facebook groups with more than 200,000 members facilitating the sale 
of fake Amazon reviews), https://www.which.co.uk/news/2022/01/how-facebook-fuels-amazons-fake-reviews/; Hannah Walsh, ``How a thriving 
fake review industry is gaming Amazon marketplace,'' WHICH?, Feb. 
16, 2021 (finding a ``thriving industry of review manipulation 
businesses'' targeting the Amazon marketplace and trading on a 
``massive scale''), https://www.which.co.uk/news/2021/02/how-a-thriving-fake-review-industry-is-gaming-amazon-marketplace/.
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    More recently, concerns have been raised that generative artificial 
intelligence (``AI'') tools can be used to write product reviews.\161\ 
It has been reported that an AI chatbot is being used to create fake 
reviews.\162\ As the reporting notes, the widespread emergence of AI 
chatbots is likely to make it easier for bad actors to write fake 
reviews.
---------------------------------------------------------------------------

    \161\ See, e.g., Chat GPT, ``Reader Beware: This Gear Review Was 
Written by an AI Bot,'' GearJunkie, Dec. 7, 2022, https://gearjunkie.com/news/chat-gpt-ai-gear-review-msr-pocket-rocket.
    \162\ See Annie Palmer, ``People are using A.I. chatbots to 
write Amazon reviews,'' CNBC, Apr. 25, 2023, https://www.cnbc.com/2023/04/25/amazon-reviews-are-being-written-by-ai-chatbots.html.
---------------------------------------------------------------------------

    The Commission has brought numerous cases involving allegedly 
fabricated consumer reviews. See, e.g., Complaint at 9-17, FTC v. 
Roomster Corp., No. 1:22-CV-07389 (S.D.N.Y. Aug. 30, 2022) (alleged 
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 
allegedly created fake accounts to write fake reviews of company's 
products on third-party retailer's website); Shop Tutors, Inc., 169 
F.T.C. 476, 487-89 (2020) (reviews of LendEDU were allegedly 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.com reviews of 
defendants' product were allegedly fabricated by one or more third 
parties whom defendants had paid to generate reviews); Complaint at 19, 
FTC v. Genesis Today, Inc., 1:15-cv-00062 (W.D. Tex. Jan. 26, 2015) 
(Amazon.com product reviews allegedly purchased by defendants); 
Complaint at 5, 8, FTC v. Dunlevy, No. 1:11-cv-01226-TWT (N.D. Ga. Apr. 
4, 2011) (alleged fake consumer comments).
    State Attorneys General have also brought cases challenging 
allegedly fabricated consumer reviews. See, e.g., Complaint at 4, 
Washington v. Alderwood Surgical Ctr., LLC, No. 2:22-cv-01835 (W.D. 
Wash. Dec. 29, 2022) (creating allegedly fake positive reviews on 
Google, Yelp, and other review sites); Complaint at 17-22, State v. 
Amazon Home Warranty LLC, No. CV2021-007632 (Ariz. Sup. Ct. Maricopa 
Cnty. May 10, 2021) (disseminated or caused the dissemination of 
allegedly fake favorable consumer reviews on third-party review 
websites, including on the

[[Page 49372]]

BBB's website); Assurance of Voluntary Compliance at 3-5, State v. 
Unified Holding Grp., LLC, No. 2020-06785 (C.P. Cumberland Cnty., Pa. 
Dec. 16, 2020) (alleged fabricated reviews on the BBB website); 
Complaint at 15, State v. US Air Ducts & Sky Builders, Inc., No. 19-2-
24757-6-SEA (Wash. Sup. Ct. Kings Cnty., Sept. 20, 2019) (allegedly 
created fake Google reviews); Complaint at 8-9, State v. Mechs. Heating 
& Air Conditioning, LLC, No. 13108809 (Ga. Sup. Ct. Cobb Cnty., Oct. 
11, 2013) (alleged fake favorable customer reviews, including on 
Yelp.com, Kudzu.com, and Google+Local.com). In September 2013, the New 
York Attorney General's office announced settlements with 19 companies 
that allegedly either purchased fake reviews or arranged to have fake 
reviews posted for their clients.\163\
---------------------------------------------------------------------------

    \163\ Press Release, A.G. Schneiderman Announces Agreement With 
19 Companies To Stop Writing Fake Online Reviews And Pay More Than 
$350,000 In Fines, Sept. 23, 2013, https://ag.ny.gov/press-release/2013/ag-schneiderman-announces-agreement-19-companies-stop-writing-fake-online-reviews.
---------------------------------------------------------------------------

    Numerous private lawsuits have involved purportedly fake consumer 
reviews. See, e.g., BHRS Grp., LLC v. Brio Water Tech., Inc., 553 F. 
Supp. 3d 793, 797 (C.D. Cal. 2021) (defendant allegedly enlisted 
individuals to purchase products for the purpose of leaving positive 
Amazon.com reviews of its products and negative Amazon.com reviews of 
plaintiff's competing products); Marksman Sec. Corp. v. P.G. Sec., No. 
19-62467-CIV-CAN, 2021 U.S. Dist. LEXIS 196580, at *43 (S.D. Fla. Oct. 
12, 2021) (denying plaintiff's motion for default and granting in part 
its motion for summary judgment in a case in which defendants paid for 
positive Google reviews from at least three individuals who never lived 
in a building that a defendant serviced); Rubinstein v. Ourian, No. 20-
21948-CIV-MORE, 2021 U.S. Dist. LEXIS 171799, at *3-4 (S.D. Fla. Sep. 
10, 2021) (order granting motions for summary judgment on claims and 
counterclaims in a case in which defendant allegedly purchased negative 
reviews of plaintiff plastic surgeon); RingCentral, Inc. v. Nextiva, 
Inc., No. 19-cv-02626-NC, 2021 U.S. Dist. LEXIS 114042, at *7-8 (N.D. 
Cal. June 17, 2021) (order denying plaintiff's motion for summary 
judgment, and granting in part defendant's motion for summary judgment 
in a case in which plaintiff alleged defendant posted fake positive 
reviews for itself and fake negative reviews of the plaintiff, and 
defendant made similar allegations about plaintiff); AlphaCard Sys. LLC 
v. Fery LLC, Civil Action No. 19-20110 (MAS) (TJB), 2020 U.S. Dist. 
LEXIS 147059, at *2 (D.N.J. Aug. 14, 2020) (denying defendant's motion 
to dismiss in a case in which defendant allegedly ``placed'' hundreds 
of phony Amazon.com customer reviews on defendant's products); 
Stonecoat of Tex., LLC v. Procal Stone Design, LLC, Civil Action No. 
4:17CV303, 2019 U.S. Dist. LEXIS 153115, at *7-8 (E.D. Tex. July 25, 
2019) (denying motions for summary judgment on claims and 
counterclaims, and denying motion to strike attachments in a case in 
which plaintiffs allegedly directed employees and/or representatives to 
submit fake complaints/negative reviews about defendant and post fake 
positive reviews about plaintiff); Super Mario Plumbing v. Belodedov, 
No. 2:17-cv-02545-TLN-AC, 2018 U.S. Dist. LEXIS 24514, at *1-3 (E.D. 
Cal. Feb. 14, 2018) (denying motion for preliminary injunction in a 
case in which defendant allegedly posted fake negative reviews about 
competitor plaintiff); SA Luxury Expeditions LLC v. Latin Am. for Less, 
LLC, No. C 14-04085 WHA, 2014 U.S. Dist. LEXIS 159520, at *1-2 (N.D. 
Cal. Nov. 12, 2014) (motion to dismiss held in abeyance in a case in 
which defendant allegedly posted fake negative consumer reviews about 
competitor plaintiff).
    The problem of fake reviews is not limited to the United States. 
Regulators in other countries, including Canada, the United Kingdom, 
and Germany, as well as international bodies like the Organisation for 
Economic Co-operation and Development (OECD), have all stated fake 
reviews are a growing, thriving, or substantial marketplace 
problem.\164\ The extent of fake reviews outside of the United States 
lends additional support to the conclusion that fake reviews are 
prevalent, but the Commission is not determining prevalence based upon 
such facts.
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    \164\ See, e.g., Competition Bureau Canada, ``Honest Advertising 
in the Digital Age,'' Jan. 22, 2020, https://www.canada.ca/en/competition-bureau/news/2020/01/honest-advertising-in-the-digital-age.html; UK Competition and Markets Authority, ``CMA expects 
Facebook and eBay to tackle sale of fake reviews,'' June 21, 2019, 
https://www.gov.uk/government/news/cma-expects-facebook-and-ebay-to-tackle-sale-of-fake-reviews; Germany Federal Cartel Office, 
``Bundeskartellamt launches sector inquiry into user reviews,'' May 
23, 2019, https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/23_05_2019_SU_Nutzerbwertungen.html; OECD, 
``Understanding Online Ratings and Reviews'' at 14-15 (2019), 
https://www.oecd-ilibrary.org/science-and-technology/understanding-online-consumer-ratings-and-reviews_eb018587-en; OECD, ``Good 
Practice Guide on Online Consumer Ratings and Reviews'' at 6 (2019) 
(noting evidence that some businesses post fake reviews ``on a large 
scale''), https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DSTI/CP(2019)5/FINAL&docLanguage=En.
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    The Commission has also challenged allegedly fictitious consumer 
testimonials that appear in advertising. See, e.g., Complaint at 15, 
17-18, FTC v. Wellco, Inc., No. 1:21-cv-02081 (S.D.N.Y. Mar. 10, 2021) 
(testimonials allegedly copied from competitors' websites); Shop 
Tutors, Inc., 169 F.T.C. 476, 488-89 (2020) (allegedly fabricated 
testimonials); Complaint at 14, 19, FTC v. A.S. Resch., LLC (Synovia), 
No. 1:19-cv-3423 (D. Colo. Dec. 5, 2019) (allegedly fake testimonials); 
Complaint at 20-22, 31, FTC v. Global Cmty. Innovations LLC, No. 5:19-
CV-00788 (N.D. Ohio Apr. 10, 2019) (allegedly fake testimonials); 
Complaint at 12, 18, FTC v. Fat Giraffe Mktg. Grp. LLC, No. 2:19-cv-
00063-CW (D. Utah Jan. 29, 2019) (the people featured in testimonials 
allegedly were not real customers); FTC v. Cardiff, No. ED 18-cv-02104-
DMG (PLAx), 2020 U.S. Dist. LEXIS 210930, at *15-16 (C.D. Cal. Oct. 9, 
2020) (granting in part FTC motion for summary judgment and finding 
testimonialists in infomercial had not used the product); Complaint at 
12-13, 20, FTC v. Mktg. Architects, Inc., No. 2:18-cv-00050-NT (D. Me. 
Feb. 5, 2018) (allegedly fake testimonials); Complaint at 14, 21, FTC 
v. Health Res. Labs., LLC, No. 2:17-cv-00467-JDL (D. Me. Nov. 30, 2017) 
(allegedly fake testimonials); Complaint at 13, 18, 28, FTC v. XXL 
Impressions LLC, No. 1:17-cv-00067-NT (D. Me. Feb. 22, 2017) 
(defendants allegedly did 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) (allegedly fake testimonials); First Amended Complaint at 75, FTC 
v. Jeremy Johnson, No. 10-cv-2203-RLH (GWF) (D. Nev. Feb. 25, 2013) 
(defendants allegedly hired third parties to post fake positive online 
articles and web pages purportedly by consumers who had successfully 
used defendants' product to find government grants); FTC v. Grant 
Connect, LLC, 827 F. Supp. 2d 1199, 1228 (D. Nev. 2011) (granting 
summary judgment on FTC's deception count where defendants presented no 
evidence showing certain testimonials were genuine), aff'd in part and 
vacated in part on other grounds, 763 F.3d 1094 (9th Cir. 2014); 
Buckingham Prods., Inc., 106 F.T.C. 116 (1985) (testimonials allegedly 
do not represent actual and genuine testimonials from customers); 
Technobrands, Inc., 133 F.T.C. 647, 650, 654-55 (2002) (purported 
consumer endorsers allegedly did not exist); Plaza

[[Page 49373]]

Club, Inc., 80 F.T.C. 62 (1972) (testimonialist allegedly was not a 
member of respondents' physical fitness facilities and unknown to 
respondents); New Standard Publ'g. Co., Inc., 47 F.T.C. 1350, 1366 
(1951) (some of the testimonials and letters recommending encyclopedia 
allegedly were not genuine).
    The use of fake celebrity endorsements is widespread. A 2018 Better 
Business Bureau in-depth investigative study found many celebrity 
endorsements are fake.\165\ According to one news report, Ellen 
DeGeneres and Sandra Bullock both sued 100 anonymous defendants who 
fraudulently used their names in promoting an anti-aging serum and 
weight-loss products, and dozens of other celebrities' names have been 
misappropriated in similar fashion.\166\
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    \165\ See Better Business Bureau, Subscription Traps and 
Deceptive Free Trials Scam Millions with Misleading Ads and Fake 
Celebrity Endorsements (Dec. 12, 2018), https://www.bbb.org/article/investigations/18929-subscription-traps-and-deceptive-free-trials-scam-millions-with-misleading-ads-and-fake-celebrity-endorsements.
    \166\ See Randy Hutchinson, Opinion, Endorsements by stars such 
as Ellen DeGeneres and Sandra Bullock might be fake, The Tennessean, 
Jan. 8, 2020, https://www.tennessean.com/story/opinion/2020/01/08/celebrity-endorsement-of-products-could-be/2834860001/.
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    The FTC has challenged numerous allegedly false claims that 
specific celebrities endorsed certain products, services, or 
businesses. See, e.g., Complaint at 22-23, 27-28, 38-39, FTC v. Effen 
Ads, LLC, No. 2:19-cv-00945-RJS (D. Utah Nov. 26, 2019); 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 
12-13, FTC v. Tachht, Inc., No. 8:16-cv-01397-JDW-AEP (M.D. Fla. June 
1, 2016); Complaint at 13-15, 18, FTC v. 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); Complaint at 15-17, FTC 
v. Central Coast Nutraceuticals, Inc., No. 10 C 4931 (N.D. Ill. Aug. 5, 
2010); The Raymond Lee Org., Inc., 92 F.T.C. 489 (1978) (use of the 
names, photographs, and words of public officials, including members of 
Congress, allegedly misled consumers that the officials recommended or 
endorsed the business). Most recently, FTC staff published a blog post 
to warn consumers about scammers using fake Shark Tank celebrity 
testimonials and endorsements.\167\
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    \167\ See Karen Hobbs, Did your favorite Shark Tank celebrity 
really endorse THAT? Probably not, Fed. Trade Comm'n Consumer Blog 
(Feb. 17, 2023), https://consumer.ftc.gov/consumer-alerts/2023/02/did-your-favorite-shark-tank-celebrity-really-endorse-probably-not.
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    Consumer reviews and testimonials that are not entirely fabricated 
can still misrepresent the experiences of the purported reviewers and 
testimonialists, and such misrepresentations are prevalent. This 
conclusion is reflected in NAIMA's comment, which asserted testimonials 
by those misrepresenting their experiences with products are plentiful.
    The Commission has challenged many advertisements that allegedly 
misrepresented endorsers' experiences. See, e.g., FTC v. Cardiff, 2020 
U.S. Dist. LEXIS 210930, at *15-16, 48 (testimonialists had already 
lost weight without using the product); Complaint at 14, 18, FTC v. 
A.S. Resch., LLC (Synovia), No. 1:19-cv-3423 (testimonialists had 
allegedly 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 
allegedly did not represent the actual experiences of customers); 
Complaint at 22-24, 27, FTC v. Russell T. Dalbey, No. 1:11-cv-01396-
CMA-KLM (D. Colo. May 26, 2011) (testimonials allegedly misrepresented 
earnings from brokering promissory notes using defendants' system); FTC 
v. Data Med. Capital, Inc., No. SA CV 99-1266 AHS (EEx), 2010 U.S. 
Dist. LEXIS 3344, *27 (C.D. Cal. Jan. 15, 2010) (testimonial for one 
defendant recycled as a fictitious testimonial for a different 
defendant); Complaint at 17, FTC v. Advanced Patch Techs., Inc., No. 
104-CV-0670 (N.D. Ga. Mar. 10, 2004) (allegedly testimonialists 
attributed their weight loss to simply wearing the Pound A Patch but 
were also provided supervised exercise sessions three times per week); 
Esrim Ve Sheva Holding Corp., 132 F.T.C. 736, 740 (2001) (testimonial 
from respondent allegedly did not represent his actual findings and 
experience with the product); Computer Bus. Servs., Inc., 123 F.T.C. 
75, 78-79 (1997) (testimonials by purchasers of home-based business 
ventures allegedly did not reflect their actual experiences); Twin Star 
Prods., Inc., 113 F.T.C. 847, 853-54 (1990) (endorsement allegedly did 
not reflect the honest opinions, findings, beliefs, or experience of 
the endorser); National Sys. Corp., 93 F.T.C. 58, 63-65 (1979) (some 
testimonials were allegedly untrue); Federated Sanitary Corp., 85 
F.T.C. 130, 133 (1975) (alleging testimonials represented to be from 
salesmen, franchisees, or other distributors of respondents' products 
were not made by such individuals, and a substantial number of 
purported testimonialists had never dealt with the respondents); 
Natpac, Inc., 79 F.T.C. 454, 459 (1971) (testimonial letters were 
allegedly prepared by respondents and signed before the purported 
authors had received the products and had time to evaluate them); P. 
Lorillard Co., 46 F.T.C. 735, 740 (1950) (alleging testimonials did not 
present or reflect the actual personal experiences, knowledge, or 
beliefs of the signers; some testimonialists did not smoke Old Gold 
cigarettes or any cigarettes; many testimonials were prewritten by 
respondent's representatives; and many were known by the respondent to 
be false); R.J. Reynolds Tobacco Co., 46 F.T.C. 706, 731-32 (1950) 
(endorsements communicated that endorsers exclusively smoked Camel 
cigarettes when they did not smoke cigarettes, did not smoke Camels 
exclusively, or could not tell the difference between Camels and other 
cigarettes).
    Accordingly, based on the foregoing evidence, the Commission 
concludes fake consumer reviews and testimonials, as well as reviews 
and testimonials that otherwise misrepresent the experiences of the 
reviewers and testimonialists, are prevalent.

B. Consumer Review or Testimonial Reuse or Repurposing

    One type of review deception known as ``review hijacking'' or 
``review reuse fraud'' appears to primarily or solely affect online 
marketplaces with third-party sellers, such as Amazon.com. Vendors and 
third-party sellers on Amazon's platform can make their own 
modifications to product pages, or request Amazon's assistance to do 
so, using features referred to as ``product merging'' and ``product 
variation.'' Products that are substantially similar and that differ 
only in narrow, specific ways--such as color, size, or quantity--but 
that do not alter the core essence of the item, such as a shirt that 
comes in multiple colors and different sizes, may share a variation 
relationship. Products in a variation relationship share the same 
product detail page. Each product will appear as an alternative on the 
product detail page, and, when a shopper selects a different product in 
the variation relationship, the content of the product detail page, 
such as the pictured product, may change. The variation relationship 
enables buyers to compare and choose among product attributes from a 
single product detail

[[Page 49374]]

page, thereby facilitating customer choice and ease of shopping.
    Some vendors and sellers abuse these features by repurposing a 
listing page for a product that has positive reviews (e.g., a shower 
caddy or a jar of honey) and using it to sell a completely unrelated 
product (e.g., a phone charger or a neck brace), thus inflating the 
star rating for the latter--and going unnoticed unless consumers read 
the individual reviews closely. By repurposing the page, the review 
hijacker is implicitly misrepresenting the repurposed reviews are for 
the second product and the product has more ratings and reviews than it 
does. The review hijacker may also be misrepresenting that the second 
product has a higher average star rating or that it has earned ``Best 
Seller'' or ``Amazon's Choice'' badges. These claims are unquestionably 
deceptive and of no redeeming value to legitimate marketers.
    This problem has persisted since at least 2018 and is prevalent as 
reflected in reporting by Consumer Reports, The Verge, Buzzfeed News, 
and others.\168\ The reporting provides many examples of review 
hijacking found on Amazon.com across multiple product categories. The 
author of the Consumer Reports article stated that experts believe it 
is an ``acute problem'' and some legitimate Amazon.com sellers are 
overwhelmed with fighting it. The Verge article calls it a ``common 
tactic'' and quotes a former Amazon employee as saying ``the problem is 
way bigger than people realize.'' \169\
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    \168\ See, e.g., Sara Spary, ``Top-rated Amazon headphones 
boosted by `fake reviews' for toys, mugs and umbrellas,'' WHICH?, 
Apr. 7, 2022, https://www.which.co.uk/news/2022/04/top-rated-amazon-headphones-boosted-by-fake-reviews-for-toys-mugs-and-umbrellas/; 
Timothy B. Lee, ``Amazon still hasn't fixed its problem with bait-
and-switch reviews,'' ARS Technica, Dec. 20, 2020, https://arstechnica.com/tech-policy/2020/12/amazon-still-hasnt-fixed-its-problem-with-bait-and-switch-reviews/; Jon Keegan, ``Is This Amazon 
Review Bullshit?,'' The Markup, July 21, 2020, https://themarkup.org/ask-the-markup/2020/07/21/how-to-spot-fake-amazon-product-reviews; Josh Dzieza, ``Even Amazon's own products are 
getting hijacked by imposter sellers,'' The Verge, Aug. 29, 2019, 
https://www.theverge.com/2019/8/29/20837359/amazon-basics-fake-sellers-imposters-third-party-marketplace; Jake Swearingen, 
``Hijacked Reviews on Amazon Can Trick Shoppers,'' Consumer Rep., 
Aug. 26, 2019, https://www.consumerreports.org/customer-reviews-ratings/hijacked-reviews-on-amazon-can-trick-shoppers/; Nicole 
Nguyen, ``Here's Another Kind Of Review Fraud Happening On Amazon,'' 
Buzzfeed News, May 29, 2018, https://www.buzzfeednews.com/article/nicolenguyen/amazon-review-reuse-fraud.
    \169\ See Dzieza, ``Even Amazon's own products are getting 
hijacked by imposter sellers,'' supra note 168.
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    The Commission recently brought its first case involving this type 
of review deception, suing a large vendor that boosted its newly 
launched products on Amazon.com. The vendor allegedly had Amazon 
establish variation relationships between the newer products and 
successful, established products that had more ratings and reviews, 
high average ratings, or ``Amazon's Choice'' or ``#1 Best Seller'' 
badges. See Complaint at 1-6, The Bountiful Co., No. C-4791 (Apr. 10, 
2023).
    Accordingly, based on the foregoing evidence, the Commission 
concludes that the unfair or deceptive reuse or repurposing of consumer 
reviews is prevalent.

C. Buying Positive or Negative Consumer Reviews

    It is common for sellers or their agents to give incentives in 
exchange for reviews with the incentives conditioned on the sentiment 
of the reviews. In the review markets discussed in the comments and 
described above, prospective reviewers are offered free merchandise or 
money in exchange for 5-star reviews. Social media groups for procuring 
misleading reviews are prevalent. The UC Davis researchers found 
242,000 products for which Amazon sellers solicited incentivized five-
star Amazon.com reviews.\170\ In addition, the comment from the small 
business employee said that a competitor of the company for which she 
worked is providing incentives for 5-star reviews.\171\ In another 
academic study, UCLA researchers analyzed these review markets and 
resulting reviews on Amazon.com and found the market for fake reviews 
is large and the practice of buying and selling reviews is 
widespread.\172\
---------------------------------------------------------------------------

    \170\ Oak & Shafiq Cmt. at 3-4.
    \171\ Provencal Cmt. at 1.
    \172\ He et al., ``The Market for Fake Reviews,'' supra note 
158.
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    The Commission has brought cases in which a marketer allegedly 
provided an incentive for a review or endorsement that was required to 
be positive. See, e.g., Complaint at 14, 19-20, FTC v. A.S. Resch., LLC 
(Synovia), No. 1:19-cv-3423 (allegedly offered consumer endorsers free 
product in exchange for ``especially positive and inspiring'' reviews); 
Complaint at 5-6, 8, Urthbox, Inc., No. C-4676 (Apr. 3, 2019) 
(allegedly 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) (allegedly past 
customers were regularly 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 told that they should ``be creative and try to 
make your review stand out for viewers to read!'').
    Such conduct has also been challenged in private actions. See, 
e.g., Marksman Sec. Corp. v. P.G. Sec., 2021 U.S. Dist. LEXIS 196580, 
at *4 (denying plaintiff's motion for default and granting in part its 
motion for summary judgment in which it was undisputed that defendants 
paid for positive Google reviews).
    Regulators in Australia, Denmark, and the United Kingdom, as well 
as the OECD, have issued guidelines or business guidance indicating 
companies should not provide incentives for giving positive 
reviews.\173\ While it may lend some additional support to the 
conclusion that the acts or practices are prevalent, the Commission is 
not concluding that the conduct is prevalent on the basis that other 
countries have taken actions.
---------------------------------------------------------------------------

    \173\ Australian Competition & Consumer Commission, Online 
product and service reviews, https://www.accc.gov.au/business/advertising-and-promotions/online-product-and-service-reviews; 
Danish Consumer Ombudsman, Guidelines on publication of user reviews 
(2015), https://www.forbrugerombudsmanden.dk/media/49717/guidelines.pdf; United Kingdom Competition and Markets Authority, 
Online reviews and endorsements (2015), https://www.gov.uk/government/consultations/online-reviews-and-endorsements; OECD, Good 
Practice Guide on Online Consumer Ratings and Reviews (2019), 
https://www.oecd-ilibrary.org/science-and-technology/good-practice-guide-on-online-consumer-ratings-and-reviews_0f9362cf-en.
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    Accordingly, based on the foregoing evidence, the Commission 
concludes the giving of incentives for reviews conditioned on the 
sentiment of the reviews is prevalent.

D. Insider Consumer Reviews and Testimonials

    It is quite common for a company's owners, officers, managers, 
executives, employees, agents, or their relatives, to write consumer 
reviews or testimonials of its products or services.
    According to Trustpilot, in 2021, more than 8,000 reviews for U.S. 
businesses were written by their owners, officers, or employees, or 
their family members.\174\ In addition, an individual commenter 
complained of having relied upon misleading reviews written by a 
business's employees or their spouses before selecting an auto repair 
shop.\175\
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    \174\ Trustpilot Cmt. at 7.
    \175\ Monday Cmt. at 1.
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    The Commission has challenged numerous instances of deceptive

[[Page 49375]]

reviews allegedly written by company insiders. See, e.g., Complaint at 
21, 26-27, United States v. Vision Path, Inc., No. 1:22-cv-00176 
(D.D.C. Jan. 25, 2022) (allegedly an executive of the company wrote a 
review on a third-party site and the co-CEO posted a public response 
thanking the reviewer); Complaint at 2-4, Sunday Riley Modern Skincare, 
LLC, No. C-4729 (Nov. 6, 2020) (company owner and managers allegedly 
asked company employees to write product reviews on third-party 
retailer's website); Creaxion Corp., 167 F.T.C. 71, 78-79 (2019) 
(company allegedly conducted program that reimbursed individuals, 
including the CEO and other company employees, for purchasing its 
product and posting online reviews); Complaint at 5-6, 8-9, Mikey & 
Momo, Inc., No. C-4655 (May 3, 2018) (Amazon.com reviews allegedly 
written by company officer and her relatives); 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 allegedly written 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 allegedly written by 
managers); Complaint at 10, United States v. Spokeo, Inc., No. 2:12-cv-
05001-MMM-SH (C.D. Cal. June 7, 2012) (allegedly defendant directed its 
employees to draft and post comments endorsing its products on news and 
technology websites; and comments were reviewed and edited by managers 
and then posted using account names provided by defendant); Reverb 
Commc'ns, Inc., 150 F.T.C. 782, 783-84 (2010) (owner of public 
relations agency, her managers, and employees allegedly wrote iTunes 
store reviews for clients' games).
    At least one State Attorney General has challenged alleged insider 
reviews. See Complaint at 15, State v. US Air Ducts & Sky Builders, 
Inc., No. 19-2-24757-6-SEA (Wash. Sup. Ct. Kings Cnty., Sept. 20, 2019) 
(Google reviews allegedly written by employees, relatives of employees, 
and the business owner).
    The Commission has also challenged testimonials allegedly written 
by insiders in numerous instances. See, e.g., Complaint at 15, 19-20, 
FTC v. Health Ctr., Inc., No. 2:20-cv-00547 (D. Nev. Mar. 19, 2020) 
(defendants allegedly 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 (D. Colo. 2019) (ads 
allegedly included a testimonial by a 50 percent owner and officer); 
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 allegedly from 
licensees or franchisees, their relatives, or their employees); Deutsch 
LA, Inc., 159 F.T.C. 1163, 1168-69 (2015) (public relations firm 
allegedly asked employees to tweet about client's product); Complaint 
at 19, 21, FTC v. Genesis Today, Inc., No. 1:15-cv-00062 (W.D. Tex. 
Jan. 26, 2015) (allegedly defendants' promotional materials linked to 
video testimonials by purported users of their weight-loss products 
that were provided by their employees); Complaint at 17, FTC v. 
Advanced Patch Techs., Inc., No. 104-CV-0670 (N.D. Ga. Mar. 10, 2004) 
(shopping mall segment of infomercial with testimonials from ``real 
people'' allegedly included at least one employee of the defendants or 
their agents); Brake Guard Prods., Inc., 125 F.T.C. 138, 191 (1998) 
(published testimonial was allegedly from a dealer/distributor of the 
product); Gisela Flick, 116 F.T.C. 1108, 113-14 (1993) (alleged 
infomercial endorsement by company's Athletic Director); Cliffdale 
Assocs., Inc., 103 F.T.C. 110, 144-45, 172 (1984) (testimonials were 
allegedly by business associates or relatives).
    Accordingly, based on the foregoing evidence, the Commission 
concludes the use of consumer reviews and testimonials written by 
company insiders--that is, consumer reviews and testimonials written by 
a company's owners, officers, managers, executives, employees, agents, 
or their relatives--is prevalent.

E. Company-Controlled Review Websites or Entities

    Numerous businesses have set up purportedly independent websites, 
organizations, or entities that review or endorse their own products.
    In numerous cases, the Commission has challenged sellers who 
allegedly misrepresented that the websites they controlled provided 
independent opinions of products. See, e.g., Complaint at 2, 8-9, Son 
Le, No. C-4619 (May 31, 2020) (respondents allegedly operated 
purportedly independent websites that reviewed their own trampolines); 
FTC v. Roca Labs, Inc., 345 F. Supp. 3d 1375, 1389-90 (M.D. Fla. 2018) 
(defendants operated a purportedly independent, objective website that 
endorsed defendants' products); Complaint at 21-25, 28, FTC v. 
NourishLife, LLC, No. 1:15-cv-00093 (N.D. Ill. Jan. 7, 2015) 
(defendants allegedly operated a purportedly independent, scientific 
research website that endorsed a supplement sold only by defendants).
    The Commission has also challenged sellers who allegedly created 
purportedly independent organizations or entities that supposedly 
reviewed or approved their products or services. See, e.g., Complaint 
at 3-5, Bollman Hat Co., No. C-4643 (Jan. 23, 2018) (respondents 
allegedly created a U.S.-origin seal misrepresenting that an 
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) (alleged 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 represented its 
baby mattresses had been certified by Green Safety Shield and failed to 
disclose the shield was its own designation); Complaint at 4-6, 
Benjamin Moore & Co., Inc., No. C-4646 (July 11, 2017) (respondent 
allegedly used a ``Green Promise'' 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 allegedly misrepresented that seal-
providing association was an independent, third-party certifier when it 
created and controlled that association); Nonprofit Mgmt. LLC, 151 
F.T.C. 144, 148-49 (2011) (respondents allegedly misrepresented their 
seal program was endorsed by two independent associations when 
respondents 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 allegedly established the Council on Natural Nutrition and 
then misrepresented it was an independent organization of experts who 
had endorsed defendants' products); Nat'l Media Corp., 116 F.T.C. 549, 
559-60 (1993) (respondents allegedly claimed the National Association 
of Advertising Producers was an existing, independent organization that 
evaluates commercials for their integrity and excellence); Revco, D.S., 
Inc., 67 F.T.C. 1158, 1163, 1208-18, 1250-51 (1965) (respondents 
allegedly created and controlled Consumer Protective Institute and gave 
their products its seal of approval).
    Accordingly, based on the foregoing evidence, the Commission 
concludes the practice of marketers setting up

[[Page 49376]]

purportedly independent websites, organizations, or entities to review 
or endorse their own products is prevalent.

F. Review Suppression

    The ANPR addressed two types of review suppression. One type 
involves a seller's website representing that the consumer reviews 
displayed represent most or all of the reviews submitted when, in fact, 
reviews are being suppressed based upon their negativity. Trustpilot 
commented that it was aware of the suppression of negative reviews on 
retailer or business websites.\176\
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    \176\ Trustpilot Cmt. at 8.
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    In a recent case, the Commission alleged a retailer suppressed 
hundreds of thousands of 1-, 2-, and 3-star reviews submitted to its 
website. See Complaint at 1-2, Fashion Nova, LLC, No. C-4759 (Mar. 18, 
2022). Staff also publicly addressed this issue in a 2020 closing 
letter to Yotpo, the company that provided review management services 
to Fashion Nova and numerous other merchants.\177\ FTC staff's 
investigation of Yotpo revealed more than 4,500 Yotpo merchant clients 
were only automatically publishing 4- or 5-star reviews. Of the 1-star 
reviews submitted to merchants not automatically publishing 1-star 
reviews, just 21 percent were published; and of the 2-star reviews 
submitted to merchants not automatically publishing 2-star reviews, 
just 31 percent were published. After FTC staff began investigating 
Yotpo, it implemented clear and prominent guidance to its clients on 
their need to promptly post reviews, including negative reviews, and 
began to automatically post negative reviews that have not been 
promptly reviewed and acted upon by its clients.\178\
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    \177\ See https://www.ftc.gov/system/files/documents/closing_letters/nid/202_3039_yotpo_closing_letter.pdf.
    \178\ See id.
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    Foreign consumer protection entities have brought several actions 
involving companies that prevented the publication of negative reviews. 
An online health-care booking service in Australia, which published 
patient reviews, admitted it did not publish approximately 17,000 
reviews and edited another 3,000 reviews either to remove negative 
aspects or to embellish positive aspects.\179\ An Australian court 
found a home building company held back bad reviews from its review 
websites to give a more favorable impression of its services.\180\ A 
New Zealand holiday home rental website pleaded guilty and was fined 
for removing negative comments about rental properties and its 
maintenance and management of them, and not publishing any reviews that 
gave a rating below 3.5 stars.\181\ The United Kingdom's Competition 
and Markets Authority secured an undertaking from an online knitwear 
retailer that did not publish all genuine, relevant, and lawful reviews 
submitted by its customers.\182\ The problem is sufficiently prevalent 
that an EU Directive prohibits ``publishing only positive reviews and 
deleting the negative ones.'' \183\ These foreign actions lend 
additional support to the conclusion that the conduct is prevalent, but 
the Commission is not determining prevalence based upon such actions.
---------------------------------------------------------------------------

    \179\ See ``HealthEngine to pay $2.9 million for misleading 
reviews and patient referrals,'' Australian Competition & Consumer 
Commission, Aug. 20, 2020, https://www.accc.gov.au/media-release/healthengine-to-pay-29-million-for-misleading-reviews-and-patient-referrals.
    \180\ See ``Aveling Homes ordered to pay penalties of $380,000 
for misleading review websites,'' Australian Competition & Consumer 
Commission, Nov. 30, 2017, https://www.accc.gov.au/media-release/aveling-homes-ordered-to-pay-penalties-of-380000-for-misleading-review-websites.
    \181\ See ``Bachcare fined for removing negative comments in 
online reviews,'' RNZ, Dec. 20, 2019, https://www.rnz.co.nz/news/national/405929/bachcare-fined-for-removing-negative-comments-in-online-reviews.
    \182\ See ``Retailer hosting reviews on its website: improvement 
of practices,'' Competition and Markets Authority, Aug. 11, 2016, 
https://www.gov.uk/cma-cases/retailer-hosting-reviews-on-its-website-improvement-of-practices.
    \183\ See Directive (EU) 2019/2161 of the European Parliament 
and of the Council, Nov. 27, 2019, https://eur-lex.europa.eu/eli/dir/2019/2161/oj.
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    The other type of review suppression addressed in the ANPR is 
suppression by unjustified legal threat or physical threat. The 
comments in response to the ANPR support a determination that such 
review suppression is prevalent. Yelp said it ``constantly confronts'' 
the use of ``abusive and questionable or unjustified legal threats'' to 
suppress reviews.\184\ Trustpilot has seen cases, mostly outside of the 
United States, where businesses have threatened consumers if they do 
not delete negative reviews.\185\ A comment from Ubiquitous Advising 
described a company in its local area that is constantly threatening 
and bullying reviewers in order to suppress bad reviews.\186\ The 
Transparency Company said every year thousands of lawyers are hired to 
intimidate the authors of negative reviews.\187\
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    \184\ Yelp Cmt. at 11.
    \185\ Trustpilot Cmt. at 9.
    \186\ Ubiquitous Advising Cmt. at 1.
    \187\ Transparency Company Cmt. at 16.
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    In a case against Roca Labs, Inc., the Commission successfully 
challenged as unfair the defendants' threats to enforce--and their 
actual enforcement of--non-disparagement clauses in form contracts that 
were intended to suppress customers' negative reviews.\188\ A 
subsequent FTC case against World Patent Marketing challenged alleged 
review suppression through physical intimidation as unfair.\189\ 
According to the Commission's complaint, the defendants in that matter 
``cultivate[d] a threatening atmosphere through emails to would-be 
complainants.'' \190\ For example, they distributed, through an email 
to all of their then-existing customers, a blog post discussing an 
incident that purportedly occurred in their offices: A consumer that 
allegedly wanted to speak with them about an invention idea was 
stopped, detained, and expelled by their ``intimidating security team, 
all ex-Israeli Special Ops and trained in Krav Maga, one of the most 
deadly of the martial arts.'' \191\ The post continued: ``The World 
Patent Marketing Security Team are the kind of guys who are trained to 
knockout first and ask questions later.''
---------------------------------------------------------------------------

    \188\ See FTC v. Roca Labs, Inc., 345 F. Supp. 3d at 1393-96.
    \189\ See Complaint at 8-10, 12, FTC v. World Patent Mktg., 
Inc., No. 1:17-cv-20848-DPG (S.D. Fla. Mar. 6, 2017).
    \190\ Id. at 9.
    \191\ Id.
---------------------------------------------------------------------------

    State Attorneys General have also challenged the alleged use of 
unjustified legal threats in attempts to have consumers remove negative 
reviews. See, e.g., Complaint at 12-14, Maine v. Liberty Bell Moving & 
Storage, Inc., 2:2022cv00204 (D. Me. July 8, 2022); Complaint at 4, 
Washington v. Alderwood Surgical Ctr., LLC.
    A State Attorney General challenged the alleged suppression of 
negative reviews through intimidation, albeit not physical 
intimidation, and false accusations. Complaint at 5-7 and Appendices A-
C, State v. Mechs. Heating & Air Conditioning, LLC (alleged publishing 
or threatening to publish the names, home addresses, telephone numbers, 
email addresses, and photographs of consumers who wrote negative 
reviews, together with accusations that the consumers engaged in 
illegal or unethical activities or otherwise maligning their 
character).
    Accordingly, based on the foregoing evidence, the Commission 
concludes the types of review suppression discussed above are 
prevalent.

G. Indicators of Social Media Influence

    In order to sell or market themselves or their products or 
services, some individuals and businesses misrepresent their social 
media influence by buying fake followers, fake subscribers, fake

[[Page 49377]]

views, and other similar inauthentic indicators of such influence.
    The Commission addressed the alleged sale and use of such fake and 
inauthentic indicators in complaint against Devumi, LLC.\192\ In that 
matter, the Commission alleged that, by selling and distributing these 
indicators to users of various social media platforms, the defendants 
enabled the purchasers to ``exaggerate and misrepresent their social 
media influence,'' thereby providing the means and instrumentalities 
for the purchasers to engage in deception.\193\ For example, the 
defendants allegedly sold fake Twitter followers to actors, athletes, 
musicians, writers, and other individuals who wanted to increase their 
appeal as influencers and to motivational speakers, law firm partners, 
investment professionals, experts, and other individuals who wanted to 
boost their credibility to potential clients for their services.\194\
---------------------------------------------------------------------------

    \192\ See Complaint at 5, FTC v. Devumi, LLC, No. 9:19-cv-81419-
RKA (S.D. Fla. Oct. 18, 2019).
    \193\ Id. at 5.
    \194\ Id. at 3-4.
---------------------------------------------------------------------------

    At least one State Attorney General has brought a case challenging 
the alleged misuse of fake indicators of social media influence for 
commercial purposes. In December 2022, the Washington State Attorney 
General filed suit against a plastic surgery provider accused of buying 
tens of thousands of fake ``followers'' on Instagram and thousands of 
fake ``likes'' on Instagram and other social media to create a false 
appearance of popularity in its advertising to consumers.\195\
---------------------------------------------------------------------------

    \195\ Complaint at 4, Washington v. Alderwood Surgical Ctr., 
LLC.
---------------------------------------------------------------------------

    Platforms have also sued the sellers of fake indicators of social 
media influence. In April 2019, Facebook, Inc., and Instagram LLC sued 
the operators of websites offering fake engagement services.\196\ The 
operators allegedly used a network of computers or ``bots'' and 
Instagram accounts to provide fake ``likes,'' ``views,'' and 
``followers'' to their customers' Instagram accounts.\197\
---------------------------------------------------------------------------

    \196\ Complaint at 1, 5-9, Facebook, Inc. v. Arend Nollen, No. 
3:19-cv-02262 (N.D. Cal. Apr. 25, 2019).
    \197\ Id. at 8-9.
---------------------------------------------------------------------------

    Both the FTC and an independent organization have analyzed bots, 
inauthentic social media accounts, and fake followers. In July 2020, 
the Commission issued a report to Congress, titled ``Social Media Bots 
and Deceptive Advertising.'' \198\ The report stated social media 
companies have reported removing or disabling billions of inauthentic 
accounts, the online advertising industry has taken steps to curb bot 
and influencer fraud, and the computing community is designing 
sophisticated social bot detection methods, but nonetheless, use of 
social media bots remains a serious issue.\199\ A 2023 report by the 
NATO Strategic Communications Centre of Excellence, which analyzed the 
market for inauthentic social media accounts and fake followers for 
several years, found it is as fast and cheap to buy them now as several 
years ago, and the platforms' ability to detect and remove them is 
declining overall.\200\ Citing TikTok's own reports that it had removed 
1.4 billion fake followers in the second quarter of 2022, the 
researchers stated the total number of fake followers on that platform 
during that period was likely much higher, given their experiments 
found only five percent of all purchased fake engagement was identified 
and removed in a four-week period. Further, in a 2022 study, 
researchers found that fake views of YouTube videos are widespread, and 
that the platform does not correct them quickly.\201\
---------------------------------------------------------------------------

    \198\ See Social Media Bots and Deceptive Advertising: Federal 
Trade Commission Report to Congress, https://www.ftc.gov/system/files/documents/reports/social-media-bots-advertising-ftc-report-congress/socialmediabotsreport.pdf.
    \199\ Id. at 5.
    \200\ See NATO Strategic Communications Centre of Excellence, 
``Social Media Manipulation 2022/2023: Assessing the Ability of 
Social Media Companies to Combat Platform Manipulation,'' January 
2023, https://stratcomcoe.org/publications/social-media-manipulation-20222023-assessing-the-ability-of-social-media-companies-to-combat-platform-manipulation/272. See also Johan 
Lindquist and Esther Weltevrede, ``Negotiating Authenticity in the 
Market for Fake Followers on Social Media,'' Social Science Research 
Council, Oct. 5, 2021 (describing ability of manipulation services 
to evade platform detection), https://items.ssrc.org/beyond-disinformation/negotiating-authenticity-in-the-market-for-fake-followers-on-social-media/; Joseph Cox, ``All of My TikTok Followers 
Are Fake,'' Vice Motherboard, Aug. 13, 2020 (describing the speed 
and ease of buying fake followers in bulk), https://www.vice.com/en/article/z3e8na/get-buy-tiktok-followers-likes-views-cheap-easy.
    \201\ See Maria Castaldo et al., ``Doing data science with 
platforms crumbs: an investigation into fakes views on YouTube,'' 
Sep. 28, 2022, https://doi.org/10.48550/arXiv.2210.01096.
---------------------------------------------------------------------------

    Accordingly, based on the foregoing evidence, the Commission 
concludes the sale and misuse of fake indicators of social media 
influence for commercial purposes is prevalent.

IV. Reasons for the Proposed Rule on the Use of Consumer Reviews and 
Testimonials

    The Commission believes the proposed Rule will substantially 
improve its ability to combat certain specified, clearly unfair or 
deceptive acts or practices involving consumer reviews or testimonials. 
Although such practices are already unlawful under Section 5 of the FTC 
Act, which prohibits unfair or deceptive acts or practices, the 
proposed Rule may increase deterrence against these practices in the 
first instance and will allow the Commission to seek civil penalties 
against the violators and more readily obtain monetary redress for 
their victims. As discussed below, the proposed Rule would accomplish 
these goals without significantly burdening honest businesses and 
provide benefits to consumers and honest competitors.
    The Commission's objective in commencing this rulemaking is to 
deter certain clearly unfair or deceptive acts or practices involving 
consumer reviews or testimonials, and expand the remedies available to 
it in instances where such practices are uncovered. A recent U.S. 
Supreme Court decision,\202\ which overturned 40 years of precedent 
from the U.S. Circuit Courts of Appeal uniformly holding that the 
Commission could take action under Section 13(b) of the FTC Act, 15 
U.S.C. 53(b), to return money unlawfully taken from consumers through 
unfair or deceptive acts or practices, has made it significantly more 
difficult for the Commission to return money to injured consumers.\203\ 
Without Section 13(b) as it had historically been understood, the only 
method the Commission has to return money unlawfully taken from 
consumers is Section 19 of the FTC Act, 15 U.S.C. 57b, which provides 
two paths for consumer redress. The longer path, under Section 
19(a)(2), requires the Commission to first issue a final cease-and-
desist order--including any resulting appeal. Then, to recover money 
for consumers, the Commission must prove separately in Federal court 
that the violator engaged in fraudulent or dishonest conduct.\204\ The 
shorter path to monetary relief is under Section 19(a)(1), which allows 
the Commission to recover redress directly through a Federal court 
action and is available only when the Commission alleges violation of a 
rule.\205\ None of the Commission's cases challenging deceptive 
consumer reviews or testimonials has involved other misconduct for 
which the Commission

[[Page 49378]]

sought civil penalties under any of the rules it enforces.
---------------------------------------------------------------------------

    \202\ See AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1352 
(2021).
    \203\ See ANPR, 87 FR at 67425 & n.1 (discussing AMG Cap. 
Mgmt.).
    \204\ See 15 U.S.C. 57b(a)(2) (``If the Commission satisfies the 
court that the act or practice to which the cease-and-desist order 
relates is one which a reasonable man would have known under the 
circumstances was dishonest or fraudulent, the court may grant 
relief.'').
    \205\ Compare 15 U.S.C. 57b(a)(1) (rule violations), with id. 
57b(a)(2) (Section 5 violations).
---------------------------------------------------------------------------

    In addition, the longer path to redress under Section 19(a)(2) 
provides relief only to redress consumer injury, which may be difficult 
to quantify in certain circumstances. By contrast, with a rule 
violation, the shorter path to redress under Section 19(a)(1) also 
gives the Commission the ability to obtain civil penalties, which 
punish the wrongdoer, provide general and specific deterrence, and do 
not require quantifiable proof of consumer injury.
    Outlawing egregious review and testimonial practices by rule 
expands the Commission's enforcement toolkit and allows it to deliver 
on its mission by stopping and deterring harmful conduct and, in some 
cases, making American consumers whole when they have been wronged. 
Because fake reviews and the other unfair or deceptive review and 
testimonial practices described here are so prevalent and so harmful, 
the unlocking of additional remedies through this rulemaking, 
particularly the ability to seek civil penalties against violators and 
obtain redress for consumers or others injured by the conduct, will 
allow the Commission to more effectively police harmful review and 
testimonial practices that plague consumers and honest businesses.

V. Overview and Scope of Proposed Rule on the Use of Consumer Reviews 
and Testimonials

A. Key Definitions

    Proposed Sec.  465.1 would provide definitions for 12 terms as they 
appear in proposed 16 CFR part 465, including, among others, 
definitions for the terms ``consumer reviews,'' ``consumer 
testimonials,'' and ``celebrity testimonials.''
    The term ``consumer review'' is defined in proposed Sec.  465.1(d) 
as a consumer's evaluation, or a purported consumer's evaluation, of a 
product, service, or business that is submitted by the consumer, or 
purported consumer, and that is published to a website or platform 
dedicated in whole or in part to receiving and displaying such reviews. 
The definition states that consumer reviews include consumer ratings, 
regardless of whether they include any text or narrative.
    The definition includes ``purported consumers'' so that it covers 
reviews by authors who do not exist. It does not include all consumer 
evaluations of products or services, such as a blog post or other 
social media post evaluating a product; it is limited to those 
submitted to a website or platform or portion thereof dedicated to such 
reviews. Such websites and platforms would include, among other things, 
third-party review platforms and advertiser and retailer websites that 
collect and display consumer reviews. A consumer review submitted and 
published to one website that is republished on a second website is 
still a consumer review as republished. A consumer review is not 
necessarily advertising.
    The term ``consumer testimonial'' is defined in proposed Sec.  
465.1(e) as an advertising or promotional message that consumers are 
likely to believe reflects the opinions, beliefs, or experiences of a 
consumer who has purchased, used, or otherwise had experience with a 
product, service, or business.\206\ Proposed Sec.  465.1(b) provides a 
corresponding definition of the term ``celebrity testimonial.'' It 
defines the term ``celebrity testimonial'' as an advertising or 
promotional message that consumers are likely to believe reflects the 
opinions, beliefs, or experiences of a well-known person who purchased, 
used, or otherwise had experience with a product, service, or business.
---------------------------------------------------------------------------

    \206\ The definition of a consumer testimonial is based upon the 
definition of an ``endorsement'' in the Commission's Guides 
Concerning the Use of Endorsements and Testimonials in Advertising. 
See Guides Concerning the Use of Endorsements and Testimonials in 
Advertising, 16 CFR 255.0(b).
---------------------------------------------------------------------------

B. Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity 
Testimonials

    Proposed Sec.  465.2 would prohibit certain types of deceptive 
conduct involving ``consumer reviews,'' ``consumer testimonials,'' and 
``celebrity testimonials.''
    Proposed Sec.  465.2(a) would prohibit a business from writing, 
creating, or selling a consumer review, consumer testimonial, or 
celebrity testimonial that: (a) is by someone who does not exist; (b) 
is by someone who did not use or otherwise have experience with the 
product, service, or business that is the subject of the review or 
testimonial; or (c) materially misrepresents the reviewer's or 
testimonialist's experience with the product, service, or business.
    Proposed Sec.  465.2(b) would render it a deceptive act or practice 
for a business to purchase consumer reviews, or disseminate or cause 
the dissemination of consumer or celebrity testimonials, about the 
business or one of its products or services, if the business knew or 
should have known that the review or testimonial: (a) was by someone 
who does not exist, (b) is by someone who did not use or otherwise have 
experience with the product, service, or business, or (c) materially 
misrepresents the reviewer's or testimonialist's experience with the 
product, service, or business. In accordance with proposed Sec.  
465.1(h), ``purchase a consumer review'' means to provide something of 
value, such as money, goods, or another review, in exchange for a 
consumer review.
    Proposed Sec.  465.2(c) would make it a deceptive act or practice 
for a business to procure consumer reviews about the business or one of 
its products or services for posting on a third-party platform or 
website, if the business knew or should have known that the review: (a) 
was by someone who does not exist, (b) is by someone who did not use or 
otherwise have experience with the product, service, or business, or 
(c) materially misrepresents the reviewer's experience with the 
product, service, or business.
    Google's comment said a proposed rulemaking should not apply to 
review platforms.\207\ Proposed Sec.  465.2 accounts for this concern. 
The provision does not apply to businesses, like third-party review 
platforms, that disseminate consumer reviews that are not of their 
products, services, or businesses. Neither does it apply to any reviews 
that a platform simply publishes and that it did not purchase.
---------------------------------------------------------------------------

    \207\ Google Cmt. at 9.
---------------------------------------------------------------------------

    NRF opposed requiring the manual review of every consumer review 
and poster's profile.\208\ Proposed Sec.  465.2 accounts for this 
concern by not imposing any obligation on those publishing consumer 
reviews to manually review consumer reviews or poster profiles and by 
not applying to reviews that a platform simply publishes.
---------------------------------------------------------------------------

    \208\ NRF Cmt. at 6.
---------------------------------------------------------------------------

    Trustpilot asserted any rule should consider a consumer review to 
be legitimate if the consumer had experience with the business, even if 
no purchase was made, and NRF's comment opposed requiring retailers to 
restrict consumer reviews to verified purchasers.\209\ In light of 
these concerns, proposed Sec.  465.2 does not limit legitimate reviews 
to reviews by purchasers or verified purchasers. It requires only that 
the reviewer had experience with the product, service, or business.
---------------------------------------------------------------------------

    \209\ Trustpilot Cmt. at 3-4; NRF Cmt. at 6.
---------------------------------------------------------------------------

    NRF also recommended any rule provision addressing fake reviews be 
limited to review brokers and not apply to the parties purchasing the 
reviews.\210\ It said that buyers of fake reviews should not be covered 
by a rule because the Commission can already bring a

[[Page 49379]]

``formal enforcement action seeking monetary damages,'' and it was not 
opposed to Commission action against such purchasers.\211\ The 
Commission believes a rule should indeed apply to those who knowingly 
purchase fake reviews given that they are no less culpable for 
deceiving consumers than the brokers. The Commission's ability to seek 
monetary relief without a rule applies to both brokers and buyers, and 
it does not obviate the need for a rule because, as discussed above, 
seeking such relief is much more difficult without a rule.
---------------------------------------------------------------------------

    \210\ NRF Cmt. at 1, 7.
    \211\ Id. at 6.
---------------------------------------------------------------------------

C. Consumer Review Repurposing

    Proposed Sec.  465.3 would prohibit a business from using or 
repurposing, or causing the use or repurposing of, a consumer review 
written or created for one product so it appears to have been written 
or created for a substantially different product. This could consist of 
combining substantially different products so that they share consumer 
reviews or changing a product page so it features a different product 
but retains the reviews of the prior product, or copying reviews of 
other products from other sites. The term ``substantially different 
product'' is defined in proposed Sec.  465.1(j), which establishes that 
the term refers to a product that differs from another product in one 
or more material attributes other than color, size, count, or flavor. 
Although differences in flavor are likely to be material to some 
consumers in some instances, the question can be highly fact specific. 
For this reason, combining reviews for a product that has multiple 
flavors would not be a rule violation, though it could still be a 
deceptive practice under the FTC Act.

D. Buying Positive or Negative Consumer Reviews

    Proposed Sec.  465.4 would prohibit a business from offering 
compensation or other incentives in exchange for, or conditioned on, 
the writing or creation of consumer reviews expressing a particular 
sentiment, whether positive or negative, regarding the product, 
service, or business that is the subject of the review.
    ANA's comment asserted any proposed rulemaking should not address 
``review gating'' or the ``mere solicitation of positive reviews.'' 
\212\ Review gating occurs when a business asks past purchasers to 
provide feedback on a product and then invites only those who provide 
positive feedback to post online reviews on one or more websites. 
Review gating and the mere solicitation of positive reviews are not 
covered by the proposed Rule. Although the Commission believes review 
gating can be deceptive,\213\ whether any given instance of review-
gating is deceptive can be highly fact specific.
---------------------------------------------------------------------------

    \212\ ANA Cmt. at 7.
    \213\ See Endorsement Guides, 16 CFR 255.2(e)(11) (review gating 
``may be an unfair or deceptive practice if it results in the posted 
reviews being substantially more positive than if the marketer had 
not engaged in the practice'') and 16 CFR 255.2(d).
---------------------------------------------------------------------------

    Family First Life commented that the FTC should not promulgate a 
rule ``that sweeps in and penalizes any review just because the 
reviewer was offered an incentive to write it . . . without otherwise 
dictating what the review says.'' \214\ The proposed Rule does not 
address incentivized reviews except for those required to express a 
particular sentiment, but the Commission notes that other uses of 
incentivized reviews can be deceptive and violate the FTC Act.\215\ The 
deceptiveness of undisclosed incentivized reviews is highly fact 
specific.
---------------------------------------------------------------------------

    \214\ Family First Life Cmt. at 12-13.
    \215\ See, e.g., Endorsement Guides, 16 CFR 255.5(b)(6)(ii) (any 
resulting review that fails to clearly and conspicuously disclose 
the incentives provided to that reviewer is likely deceptive).
---------------------------------------------------------------------------

E. Insider Consumer Reviews and Consumer Testimonials

    Proposed Sec.  465.5 addresses company insider consumer reviews and 
consumer testimonials in three different ways. Proposed Sec.  465.5(a) 
applies to insider reviews and testimonials; proposed Sec.  465.5(b) 
applies to insider testimonials; and proposed Sec.  465.5(c) applies to 
insider reviews.
    Proposed Sec.  465.5(a) would prohibit an officer or manager of a 
business from writing or creating a consumer review or consumer 
testimonial about the business or its products or services if the 
consumer review or consumer testimonial does not have a clear and 
conspicuous disclosure of the officer's or manager's relationship to 
the business. Proposed Sec.  465.1(c) defines ``clear and conspicuous'' 
to mean that a required disclosure is easily noticeable (i.e., 
difficult to miss) and easily understandable by ordinary consumers, 
including in all of the ways listed in the definition. This is the same 
definition the Commission proposed in its Negative Option Rule Notice 
of Proposed Rulemaking.\216\ In accordance with proposed Sec.  
465.1(g), ``officers'' are defined to include a business's owners, 
executives, and managing members.
---------------------------------------------------------------------------

    \216\ See Fed. Trade Comm'n, NPRM: Negative Option Rule, 88 FR 
24716, 24734 (Apr. 24, 2023), https://www.govinfo.gov/content/pkg/FR-2023-04-24/pdf/2023-07035.pdf.
---------------------------------------------------------------------------

    Proposed Sec.  465.5(b) applies to consumer testimonials in 
advertisements disseminated by or on behalf of a business. It would 
prohibit a business from disseminating or causing the dissemination of 
certain consumer testimonials about the business or its products or 
services if the consumer testimonial is written by the business's 
officers, managers, employees, or agents, or any of their relatives 
without clear and conspicuous disclosures of those relationships. This 
provision would apply only when the business knew or should have known 
of the testimonialist's relationship.
    Proposed Sec.  465.5(c) applies to solicitations of employee and 
other insider reviews. It would prohibit under some circumstances an 
officer's or manager's solicitation of consumer reviews from employees, 
agents, or relatives that results in reviews that don't clearly and 
conspicuously disclose the reviewer's relationship. The provision is 
limited to situations when the person soliciting the review knew or 
should have known of the prospective reviewer's relationship and: (a) 
failed to instruct the prospective reviewer to disclose clearly and 
conspicuously that relationship, (b) knew or should have known the 
review appeared without such a disclosure and failed to take remedial 
steps or, (c) encouraged the prospective reviewer not to make such a 
disclosure.
    NADA recommended any proposed rule provision addressing businesses 
writing, soliciting, or publishing reviews by their employees or family 
members clarify that a violation ``only arises when the business, and 
not another entity, affirmatively writes, solicits, and publishes 
reviews that fail to provide clear and conspicuous disclosures of those 
relationships.'' \217\ Proposed Sec.  465.5(c) would apply to reviews 
by employees or family members. Proposed Sec.  465.5(c) is limited to 
solicitation by an officer or manager, and only when the solicitor 
failed to advise a disclosure, knew or should have known that a review 
appeared without such a disclosure and failed to take remedial steps, 
or encouraged the prospective reviewer not to make such a disclosure. 
The business would not be liable under the proposed provision for an 
unsolicited review, for a review about which the solicitor reasonably 
should not have known, or for a reviewer who refuses to make a 
disclosure. However, proposed Sec.  465.5(c) reflects the Commission's

[[Page 49380]]

belief that businesses should be prohibited not only from publishing 
insider reviews themselves but also from causing their creation (e.g., 
when an officer or manager of the business solicits employees to post 
reviews on third-party review websites and fails to instruct the 
employees to disclose their relationship to the business).
---------------------------------------------------------------------------

    \217\ NADA Cmt. at 3.
---------------------------------------------------------------------------

    NADA asked the FTC to define the term ``relative.'' \218\ The 
Commission believes that the limitation to situations in which officers 
or managers know or should know that they are soliciting a relative for 
an endorsement or testimonial addresses the comment without the need 
for a definition.
---------------------------------------------------------------------------

    \218\ Id.
---------------------------------------------------------------------------

    Family First Life commented that when an independent contractor 
agent writes a review on a workplace-review platform such as Glassdoor, 
the reviewer's relationship to the company is obvious and assumed.\219\ 
The Commission agrees, in reviews on such platforms, the relationship 
is readily apparent and, in effect, already disclosed. The Commission 
does not believe the proposed Rule needs to specifically address this 
scenario.
---------------------------------------------------------------------------

    \219\ Family First Life Cmt. at 9-10.
---------------------------------------------------------------------------

F. Company-Controlled Review Websites or Entities

    Proposed Sec.  465.6 prohibits a business from representing that a 
website, organization, or entity is providing its independent reviews 
or opinions about a category of businesses, products, or services that 
includes the business or its products or services, when the business 
controls, owns, or operates that website, organization, or entity.

G. Review Suppression

    Proposed Sec.  465.7 addresses two types of review suppression. The 
first type, addressed in proposed Sec.  465.7(a), would prohibit anyone 
from using an unjustified legal threat or a physical threat, 
intimidation, or false accusation to prevent the creation of a consumer 
review or cause the removal of all or part of a review. In accordance 
with proposed Sec.  465.1(l), an ``unjustified legal threat'' is 
defined as a threat to initiate or file a baseless legal action, such 
as an action for defamation that challenges truthful speech or matters 
of opinion.
    NADA recommended that any proposed rule not prohibit what it 
characterized as good faith online reputation management practices, 
such as a business: (a) reaching out to consumers who have posted 
negative reviews and attempting to improve their reviews by addressing 
their concerns (including sometimes giving customers something of value 
in satisfaction of their complaints), or (b) responding on a comment 
thread to each negative review, offering an explanation, making 
customers whole, and asking any successfully satisfied customers to 
update their previously negative review.\220\ Neither proposed Sec.  
465.7(a) nor any other proposed Rule provision would prohibit such 
conduct (assuming that reviewers are not required to remove or change 
their reviews in order to be made whole).
---------------------------------------------------------------------------

    \220\ NADA Cmt. at 3-4.
---------------------------------------------------------------------------

    Proposed Sec.  465.7(b) would prohibit a business from 
misrepresenting that the consumer reviews of one or more of its 
products or services displayed on its website or platform represent 
most or all the reviews submitted to the website or platform if reviews 
are being suppressed based upon their ratings or their negativity. As 
proposed, the provision makes clear that the non-publication of 
consumer reviews for certain enumerated reasons is not considered to be 
review suppression so long as the criteria for withholding reviews are 
applied to all reviews submitted without regard to the favorability of 
the review. The listed acceptable reasons for not publishing a review 
are: (a) that the review contains: (i) trade secrets or privileged or 
confidential commercial or financial information, (ii) libelous, 
harassing, abusive, obscene, vulgar, or sexually explicit content, 
(iii) the personal information or likeness of another person, (iv) 
content that is discriminatory with respect to race, gender, sexuality, 
ethnicity, or another protected class, or (v) content that is clearly 
false or misleading; (b) the seller reasonably believes it is fake; or 
(c) the review is wholly unrelated to the products or services offered 
by or available at the website or platform. These criteria are based 
upon those enumerated in the Consumer Review Fairness Act, 15 U.S.C. 
45b(b)(2) and (3). Moreover, consumers would reasonably expect and 
often prefer that a business exclude reviews meeting these criteria, so 
the undisclosed exclusion of such reviews solely due to application of 
those criteria would be unlikely to mislead or be material to 
consumers.
    NADA stated that businesses should be able to ``remove reviews or 
comments that are off topic or include false statements, 
advertisements, inappropriate language, or confidential or personal 
identification information.'' \221\ As to reviews that are ``off 
topic,'' proposed Sec.  465.7(b) would permit not publishing reviews 
that are ``wholly unrelated to the products or services offered.'' As 
to reviews that contain ``false statements,'' proposed Sec.  465.7(b) 
would permit not publishing reviews that are ``clearly false or 
misleading.'' It is unclear what the comment meant by reviews that 
include ``advertisements.'' If NADA means that it is acceptable to 
delete a review that mentions a competitor, that is not an exception 
provided in proposed Sec.  465.7(b).\222\ With regard to reviews that 
contain ``inappropriate language,'' proposed Sec.  465.7(b) would 
permit not publishing reviews containing ``harassing, abusive, obscene, 
vulgar, or sexually explicit content'' or ``content that is 
discriminatory with respect to race, gender, sexuality, ethnicity, or 
another protected class.'' As to reviews that contain ``confidential or 
personal identification information,'' proposed Sec.  465.7(b) would 
allow a seller to not publish a review that contains ``trade secrets or 
privileged or confidential commercial or financial information,'' or 
the ``personal information . . . of another person.'' NADA also said 
that businesses should be able to ``remove comments or review functions 
on their own websites or certain social media posts.'' \223\ The 
proposed Rule does not prohibit or address such conduct.
---------------------------------------------------------------------------

    \221\ Id. at 3.
    \222\ Cf. FTC Statement of Policy Regarding Comparative 
Advertising (1979), https://www.ftc.gov/legal-library/browse/statement-policy-regarding-comparative-advertising (``Commission 
policy in the area of comparative advertising encourages the naming 
of, or reference to competitors, but requires clarity, and, if 
necessary, disclosure to avoid deception of the consumer.'').
    \223\ NADA Cmt. at 3. The NADA also posited that highlighting 
five-star reviews from satisfied customers on a dealer's websites is 
a legitimate practice that should not be prohibited under a possible 
rule. Id. at 4. The proposed Rule does not address such a practice. 
The Commission notes, however, that highlighting five-star reviews 
from satisfied customers on a dealer's websites or in its other 
advertising could be a deceptive practice depending on the facts.
---------------------------------------------------------------------------

H. Misuse of Fake Indicators of Social Media Influence

    Proposed Sec.  465.8 prohibits the misuse of indicators of social 
media influence. As defined by proposed Sec.  465.1(f), the term 
``indicators of social media influence'' refers to any metrics used by 
the public to make assessments of an individual's or entity's social 
media influence, such as followers, friends, connections, subscribers, 
views, plays, likes, reposts, and comments.
    Proposed Sec.  465.8(a) prohibits anyone from selling fake 
indicators of social media influence that can be used by persons or 
businesses to misrepresent their influence for a commercial purpose. 
Proposed Sec.  465.8(b) prohibits

[[Page 49381]]

anyone from procuring fake indicators of social media influence to 
misrepresent their influence or importance for a commercial purpose.

I. Severability

    Proposed Sec.  465.9 is a severability provision. It provides that 
the provisions of the proposed Rule are separate and severable from one 
another. If any provision is stayed or determined to be invalid, the 
remaining provisions will continue in effect.

VI. The Rulemaking Process

    The Commission can decide to finalize the proposed Rule if the 
rulemaking record, including the public comments in response to this 
NPRM, supports such a conclusion. The Commission may, either on its own 
initiative or in response to a commenter's express request, engage in 
additional processes, including those described in 16 CFR 1.12 and 
1.13. If the Commission on its own initiative decides to conduct an 
informal hearing, or if a commenter files an express request for such a 
hearing, then a separate notice will issue under 16 CFR 1.12(a). Any 
person who would like to participate by providing an oral statement at 
any informal hearing must make an express request to do so in response 
to this NPRM. Based on the comment record and existing prohibitions 
against unfair or deceptive consumer reviews and testimonials under 
Section 5 of the FTC Act, the Commission does not here identify any 
disputed issues of material fact necessary to be resolved at an 
informal hearing. The Commission may still do so later, on its own 
initiative or in response to a commenter.

VII. Preliminary Regulatory Analysis

    Under Section 22 of the FTC Act, the Commission, when it publishes 
any NPRM for a rule as defined in Section 22(a)(1), must include a 
``preliminary regulatory analysis.'' 15 U.S.C. 57b-3(b)(1). The 
required contents of a preliminary regulatory analysis are (a) ``a 
concise statement of the need for, and the objectives of, the proposed 
rule,'' (b) ``a description of any reasonable alternatives to the 
proposed rule which may accomplish the stated objective,'' and (c) ``a 
preliminary analysis of the projected benefits and any adverse economic 
effects and any other effects'' for the proposed rule and each 
alternative, along with an analysis ``of the effectiveness of the 
proposed rule and each alternative in meeting the stated objectives of 
the proposed rule.'' 15 U.S.C. 57b-3(b)(1)(A)-(C). This NPRM already 
provided the concise statement of the need for, and the objectives of, 
the proposed Rule in Section IV above. It addresses the other 
requirements below.

A. Anticipated Costs and Benefits and Reasonable Alternatives

    The Commission is proposing a rule to curb certain unfair or 
deceptive uses of reviews and testimonials. The proposed Rule contains 
several provisions to promote accuracy in consumer reviews (henceforth 
``reviews'') and, thus, will help the vast majority of American 
consumers who rely on such reviews to make better-informed purchase 
decisions. The proposed Rule prohibits: the creation, purchasing, 
procurement, or dissemination of fake or false reviews; repurposing of 
reviews for substantially different products; and buying of reviews in 
exchange for, or conditioned on, positive or negative sentiments. It 
also includes prohibitions on fake or false consumer or celebrity 
testimonials, insider reviews, misleading company-controlled review 
websites or entities, certain review suppression practices, and the 
misuse of indicators of fake social media influence.
    The Commission believes that the benefits of proceeding with the 
rulemaking will significantly outweigh the costs, but it welcomes 
public comment and data (both qualitative and quantitative) on any 
benefits and costs to inform a final regulatory analysis.
    In the preliminary analysis below, the NPRM describes the 
anticipated impacts of the proposed Rule. Where possible, it quantifies 
the benefits and costs. If a benefit or cost is quantified, it 
indicates the sources of the data relied upon. If an assumption is 
needed, the text makes clear which quantities are being assumed. The 
NPRM measures the benefits and costs of the proposed Rule against a 
baseline in which no rule regarding consumer reviews has been 
promulgated by the Commission. The Commission solicits comments from 
the public to improve these estimates before the promulgation of any 
final rule.
    The estimates in this preliminary analysis attempt to include a 
broad set of economic actors, using data on the number of entities 
registered as businesses in the United States, data on retail sales, 
and data on U.S. consumers who shop online. The Commission invites 
submission of information pertaining to additional economic actors who 
would be affected by the proposed Rule. Conversely, the Commission 
solicits information on whether a more limited set of economic actors 
would yield improved estimates.
    Quantifiable benefits stem from consumer welfare improvements and 
consumer time savings. With the proposed Rule, online reviews will be 
more accurate overall, leading consumers to purchase higher-quality 
products or products that are better-matched to their preferences. The 
proposed Rule will also lead to more trustworthy aggregate review 
ratings (e.g., star ratings), leading some consumers to spend less time 
scrutinizing reviews to determine their validity. Quantifiable costs 
primarily reflect the resources spent by businesses to review the 
proposed Rule and to take any preemptive or remedial steps to comply 
with its provisions. Because the proposed Rule is an application of 
preexisting law under Section 5 of the FTC Act, the Commission expects 
these compliance costs to be minimal.
    A period of 10 years is used in the baseline scenario because FTC 
rules are subject to review every 10 years. Quantifiable aggregate 
benefits and costs are summarized as the net present value over this 
10-year period in Table 1.1. The discount rate reflects society's 
preference for receiving benefits earlier rather than later; a higher 
discount rate is associated with a greater preference for benefits in 
the present. The present value is obtained by multiplying each year's 
net benefit by the discount rate raised to the power of the number of 
years in the future the net benefit accrues.

           Table 1.1--Present Value of Net Benefits, 2023-2033
                              [In billions]
------------------------------------------------------------------------
                                      Present value:     Present value:
                                     low-end estimate  high-end estimate
------------------------------------------------------------------------
Total Benefits:
    3% Discount Rate..............             $59.31            $234.28

[[Page 49382]]

 
    7% Discount Rate..............              50.16             200.26
                                   -------------------------------------
        Total One-Time Costs......               0.83               0.00
Net Benefits
    3% Discount Rate..............              58.48             234.28
    7% Discount Rate..............              49.33             200.26
------------------------------------------------------------------------

1. Estimated Benefits of the Proposed Rule
    This section describes the beneficial impacts of the proposed Rule, 
provides preliminary quantitative estimates where possible, and 
describes benefits that are only assessed qualitatively. The 
quantifiable estimates reflect benefits stemming from the decrease in 
online review manipulation on third-party platforms or company 
websites, which covers most of the prohibitions contained in the 
proposed Rule. This analysis does not calculate benefits from the other 
aspects of the proposed Rule--prohibitions on fake or false celebrity 
testimonials; prohibitions on company-controlled entities that 
purportedly provide independent opinions; prohibitions on unjustified 
legal threats or physical threats, intimidation, or false accusations 
in an attempt to suppress negative consumer reviews; and prohibitions 
on the misuse of indicators of fake social media influence--because of 
the limited quantitative research in these areas. The Commission 
invites comment on research concerning these other aspects of the 
proposed Rule. The quantified benefits are presented by benefit 
category, rather than stemming from a specific provision in the 
proposed Rule, because the relevant provisions have the same end goal--
that is, to improve the information available to consumers by reducing 
the level of review manipulation. Therefore, it is difficult to 
disentangle the benefits stemming from each provision.
    Existing academic literature in economics, marketing, computer 
science, and other fields documents the importance of online reviews: 
the number of online reviews and aggregate ratings are extremely 
important for consumer purchase decisions. It is widely documented that 
the presence of online reviews improves consumer welfare via reductions 
in both search costs and the level of information asymmetry that exists 
prior to purchase.\224\
---------------------------------------------------------------------------

    \224\ See, e.g., Dina Mayzlin, ``Promotional Chat on the 
Internet,'' 25(2) Mktg. Sci., 155-63 (2006).
---------------------------------------------------------------------------

    When making purchase decisions, consumers typically have incomplete 
information on product quality and attributes. Searching for additional 
information is costly. Consumers incur costs--including time and effort 
costs--to seek, evaluate, and integrate incoming information. Online 
platforms where past users share information about their experiences 
can significantly lower search costs.
    Researchers have also demonstrated consumer reviews create value 
for consumers beyond a reduction in search costs. Consumers are better 
able to learn of a product's quality and attributes when there is free-
flowing, non-manipulated commentary from past consumers. Consumer 
reviews lead to ``better'' decisions by increasing the level of 
information available prior to purchase and reducing uncertainty. By 
the same token, the academic literature also documents that manipulated 
or fake reviews lead to reductions in consumer welfare by leading 
consumers to buy low-quality products or otherwise make suboptimal 
purchase decisions.
    A secondary benefit is deterrence of the specified review and 
testimonial practices. The proposed Rule is essentially the only means 
for imposing civil penalties in most cases involving such practices. 
Civil penalties are not generally available under the FTC Act for this 
conduct, unless parties are already subject to a relevant Commission 
order or have been served with a copy of a relevant Notice of Penalty 
Offenses. Also, as noted above, in many cases involving this conduct, 
calculating redress or other Section 19 relief may be difficult. 
Without civil penalties, bad actors have little fear of being penalized 
for using fraud and deception in connection with reviews and 
endorsements.
    To obtain redress without alleging a rule violation, the Commission 
must successfully conclude an administrative proceeding including any 
appeal and file a follow-on Federal case under Section 19 to establish 
that the conduct is ``one which a reasonable man would have known under 
the circumstances was dishonest or fraudulent.'' \225\ Although the 
Commission is likely to meet this standard in cases involving the 
conduct covered by the proposed Rule, it would take substantially more 
time and resources, and would significantly delay any redress to 
victims, compared to a case under the proposed Rule violation, which 
does not require multiple proceedings or a special knowledge 
requirement.\226\
---------------------------------------------------------------------------

    \225\ 15 U.S.C. 57b(a)(2). Depending on the egregiousness of the 
misconduct and the harm it is causing, the Commission also may seek 
preliminary injunctive relief in Federal court. 15 U.S.C. 53(b).
    \226\ See, e.g., Press Release, Fed. Trade Comm'n, Marketers of 
Ab Force Weight Loss Device Agree to Pay $7 Million for Consumer 
Redress (Jan. 14, 2009), https://www.ftc.gov/news-events/news/press-releases/2009/01/marketers-ab-force-weight-loss-device-agree-pay-7-million-consumer-redress (describing a 2009 settlement of a follow-
on Section 19 action against Telebrands Corp. that was brought after 
litigation of a 2003 administrative complaint alleging violations of 
Section 5 concluded--in this case, the Section 19 action settled 
instead of being litigated to judgment, which would have taken more 
time).
---------------------------------------------------------------------------

    Given the prevalence of unfair or deceptive conduct involving 
reviews and testimonials, the Commission will have no shortage of bad 
actors to investigate; it could invest the extra resources freed up by 
any final rule into more investigations and actions with respect to 
consumer reviews or testimonials. In sum, the potential consumer-
redress benefits of the proposed Rule are significant: the Commission 
could put a stop to more inarguably unfair or deceptive consumer 
reviews or testimonials, return money to more victims, and obtain that 
redress more quickly.
a. Consumer Welfare Benefits From Better-Informed Purchase Decisions
    The study containing the most direct estimate of welfare losses 
from review manipulation finds that the presence of fake reviews leads 
consumers to lose

[[Page 49383]]

$0.12 for every dollar spent in an experimental setting.\227\ Due to 
limited quantitative estimates in the literature, the NPRM assumes this 
measure of welfare loss encompasses the various types of review 
manipulation covered by the proposed Rule. It also assumes the proposed 
Rule causes all fake or manipulated reviews to vanish. Thus, consumers 
will gain an estimated $0.12 for every dollar spent on goods whose 
online reviews included fake ones.
---------------------------------------------------------------------------

    \227\ See Akesson et al., ``The Impact of Fake Reviews on Demand 
and Welfare,'' supra note 158.
---------------------------------------------------------------------------

    To estimate consumer welfare benefits from better-informed purchase 
decisions, the NPRM first estimates the total amount of sales for which 
consumers consult online reviews. U.S. e-commerce sales totaled $1.034 
trillion in 2022.\228\ The NPRM assumes all products sold online had 
some form of user-generated commentary (e.g., on third-party review 
platforms, on discussion boards, on company websites, or on social 
media), and that this commentary factors into consumers' purchase 
decisions for these goods.
---------------------------------------------------------------------------

    \228\ See U.S. Census Bureau, ``Quarterly E-Commerce Sales 
Report,'' Feb. 17, 2023, https://www.census.gov/retail/ecommerce.html.
---------------------------------------------------------------------------

    Online reviews are also important for commerce not conducted 
online, including for revenues earned by the hospitality industry and 
by other services. Sales for businesses classified as ``Food Services 
and Drinking Places'' by the U.S. Census totaled $843.61 billion in 
2021, which includes revenue from restaurants and bars.\229\ The NPRM 
assumes consumers rely on reviews for only a portion of these sales. 
Some consumers--particularly those living in rural parts of the country 
and in smaller cities--may have a small set of familiar food and drink 
establishments available to them, making online reviews less 
influential to their decision to patronize a particular one. Moreover, 
prior research has found online reviews do not impact revenues of chain 
restaurants.\230\ Accordingly, the NPRM assumes consumers rely on 
reviews for 25 percent of the total revenue generated in the food 
services and drinking places sector (25 percent of $843.61 billion, or 
$210.90 billion).\231\
---------------------------------------------------------------------------

    \229\ U.S. Census Bureau, ``Service Annual Survey,'' Nov. 22, 
2022, https://www.census.gov/programs-surveys/sas.html (listing 
total revenue of $843,605,000,000 for NAICS Code 722 in 2021, the 
most recent year with data).
    \230\ See Michael Luca, ``Reviews, Reputation, and Revenue: The 
Case of Yelp.com.'' Harvard Bus. Sch. Working Paper 12-016 (2016).
    \231\ 25 percent is likely to be a reasonable estimate based on 
the difference in revenues for new restaurants and established 
restaurants. A study conducted by Toast, Inc. found that new 
restaurants earn approximately $112,000 in average revenue per year 
(https://pos.toasttab.com/blog/on-the-line/average-restaurant-revenue). This is approximately 25 percent of average revenue for 
restaurants overall ($486,000, according to the website Eat Pallet, 
https://eatpallet.com/how-much-do-restaurants-make-in-a-day).
---------------------------------------------------------------------------

    Online reviews are also important for sales in other service 
sectors. In 2021, total revenue was $247.25 billion for the 
accommodations sector (which includes hotels and vacation rentals), and 
total revenue was $56.85 billion for personal services (including 
beauty salons, barber shops, health clubs, and non-veterinary pet 
care), totaling $304.10 billion for both sectors.\232\ About half of 
hotel revenue is generated by business travelers, who are likely to 
rely less on online reviews than leisure travelers do.\233\ In 
addition, pre-paid hotel bookings and vacation rentals booked online 
are already accounted for in the e-commerce sales figure described 
above. Furthermore, some consumers may be loyal customers of local 
salons and other personal services, regardless of these businesses' 
online reputations. Because of these reasons, the NPRM assumes that a 
subset of accommodation and personal services revenues is affected by 
consumer reviews. Similar to the calculation for the food and drinking 
places industry, the NPRM assumes 25 percent of total accommodation and 
personal care services revenue is impacted by consumer reviews (25 
percent of $304.10 billion, or $76.03 billion). The total estimated 
revenue for services impacted by consumer reviews is $286.93 billion 
(the sum of $210.90 billion and $76.03 billion). The Commission seeks 
comments to improve this estimate.
---------------------------------------------------------------------------

    \232\ See U.S. Census Bureau, ``Service Annual Survey,'' supra 
note 229 (listing total 2021 revenue of $247,246,000,000 for NAICS 
Code 721 and listing total 2021 revenue of $56,845,000,000 for NAICS 
Codes 812111 through 812199 and NAICS Code 81291).
    \233\ See Linchi Kwok, ``Will business travel spending return to 
the pre-pandemic level soon?'' Hospitality Net, Sept. 22, 2022, 
https://www.hospitalitynet.org/opinion/4112075.html.
---------------------------------------------------------------------------

    Combining the revenue estimates described above yields $1.321 
trillion in estimated sales of goods or services for which consumers 
incorporate reviews into their decision-making. In this analysis, the 
NPRM does not incorporate revenues stemming from the physical sale of 
goods in retail stores where consumers read online reviews before 
purchasing items in person. The Commission invites commenters to submit 
information to quantify non-e-commerce retail sales that are impacted 
by reviews.
    Quantitative estimates of the incidence of fake or false reviews 
vary by source.\234\ Nevertheless, at least three prior studies 
examining the degree of review manipulation as a proportion of 
businesses or products (rather than as a proportion of reviews) contain 
similar findings: according to these studies, approximately 10 percent 
of products or businesses have some manipulated consumer reviews.\235\ 
Thus, a basic approximation of total e-commerce sales involving some 
review manipulation is 10 percent of $1.034 trillion, or $103.4 
billion. Similarly, a basic approximation of review-dependent service 
industry sales involving some review manipulation is 10 percent of 
$286.93 billion, or $28.69 billion. The Commission seeks submissions of 
additional research on the prevalence of review manipulation to improve 
this estimate.
---------------------------------------------------------------------------

    \234\ These estimates range from the single digits to over 20 
percent. See Tripadvisor, ``2023 Review Transparency Report,'' 
https://www.tripadvisor.com/TransparencyReport2023 (finding that 
4.4% of review submissions were fraudulent); Trustpilot, 
``Transparency Report 2022,'' https://cdn.trustpilot.net/trustsite-consumersite/trustpilot-transparency-report-2022.pdf (stating that 
its software removed 5.8 percent of reviews due to being fake); 
Yelp, ``2022 Yelp Trust & Safety Report,'' https://trust.yelp.com/trust-and-safety-report (stating that 19 percent of submitted 
reviews were marked as ``not recommended'' by Yelp's software); 
Devesh Raval, ``Do Gatekeepers Develop Worse Products? Evidence from 
Online Review Platforms,'' Working Paper, Feb. 27, 2023, https://deveshraval.github.io/reviews.pdf (finding that the share of hidden 
(likely fake) Yelp reviews is as high as 47 percent).
    \235\ See Nan Hu et al., ``Manipulation of online reviews: An 
analysis of ratings, readability, and sentiments,'' 52(3) Decision 
Support Systems 674-84 (Feb. 2012) (finding that 10.3 percent of 
books sold on Amazon had manipulated reviews); Luca and Zervas, 
``Fake It Till You Make It: Reputation, Competition, and Yelp Review 
Fraud,'' supra note 158 (finding that 10 percent of Boston, MA 
restaurants had filtered 5-star reviews on Yelp) (Table 3, row 4); 
Raval, ``Do Gatekeepers Develop Worse Products? Evidence from Online 
Review Platforms,'' supra note 234 (finding that 9.7 percent of 
businesses with reviews or complaints with the Better Business 
Bureau are of low quality, where fake reviews inflate ratings) 
(Table III, column 3, row 1).
---------------------------------------------------------------------------

    Importantly, online businesses that engage in review manipulation 
are likely to earn less revenue than other e-commerce companies. For 
example, prior research has found independent firms and sellers 
offering lower-quality products are more likely to engage in review 
manipulation.\236\ Therefore, e-commerce sales affected by review 
manipulation are likely to be lower than the $103.4 billion in sales 
described above. A more conservative estimate of e-commerce sales 
involving review manipulation can be obtained by using

[[Page 49384]]

price differentials of review-manipulated products versus others. 
Because products with online review manipulation have price points 
approximately 19 percent of the average price of goods sold online 
(according to research using data from Amazon),\237\ a more 
conservative estimate of review-manipulated products' revenue is 1.9 
percent (19 percent x 10 percent) of all $1.034 trillion in e-commerce 
sales, or $19.65 billion. Because the Commission does not have data on 
the revenue or quantities sold of review-manipulated products, the NPRM 
assumes revenue is constant across price points and rely solely on the 
price differential to approximate revenue. The NPRM does not similarly 
adjust revenues for non-e-commerce firms (e.g., restaurant and hotels) 
because there is less variation in prices in those industries. The 
Commission invites commenters to submit information to improve this 
estimate.
---------------------------------------------------------------------------

    \236\ See He et al., ``The Market for Fake Reviews,'' supra note 
158; Dina Mayzlin et al., ``Promotional Reviews: An Empirical 
Investigation of Online Review Manipulation,'' 104(8) The Am. Econ. 
Rev. 2421-55 (2014).
    \237\ See Davide Proserpio et al., ``How Fake Customer Reviews 
Do--and Don't--Work,'' Harvard Bus. Rev., Nov. 24, 2020, https://hbr.org/2020/11/how-fake-customer-reviews-do-and-dont-work. The 
authors find that products sold on Amazon with manipulated reviews 
are typically in the $15 to $40 price range. The midpoint of this 
range ($27.50) represents 19 percent of the average product's price 
($142.74, according to a study conducted by Semrush Inc., https://www.semrush.com/blog/amazon-pricing-study).
---------------------------------------------------------------------------

    The NPRM estimates annual welfare gains by applying the $0.12 
estimate, described above, to the estimated amount of U.S. sales likely 
to have some manipulated consumer reviews, yielding an annual estimate 
of welfare gains in the range of $5.80 billion (12 percent of $48.34 
billion, the sum of $19.65 billion and $28.69 billion) and $15.85 
billion (12 percent of $132.09 billion, the sum of $103.4 billion and 
$28.69 billion). Assuming e-commerce sales increase linearly over the 
next ten years at the same rate as they did in the past year,\238\ the 
present value of consumer welfare improvements from better-informed 
purchasing decisions is estimated to be between $50.16 and $199.40 
billion as described in Table 2.1.
---------------------------------------------------------------------------

    \238\ E-commerce sales increased by 7.7 percent from 2021 to 
2022. See U.S. Census Bureau, ``Quarterly E-Commerce Sales Report,'' 
supra note 228. Using growth in the past year to predict future e-
commerce sales results in a more conservative estimate than using a 
longer time frame. E-commerce sales experienced higher annual growth 
rates prior to 2021 (14 percent from 2018 to 2019, 43 percent from 
2019 to 2020, and 14 percent from 2020 to 2021). The NPRM does not 
project revenues for non-e-commerce industries because the two most 
recent years of data are from 2021 and 2020; linear trends during 
these years are unique to the pandemic and are unlikely to be 
accurate for future years.

            Table 2.1--Estimated Benefits From Consumer Welfare Improvements From Purchase Decisions
----------------------------------------------------------------------------------------------------------------
                                                            Total annual
                                                              welfare         Total 10-year      Total 10-year
                                                         improvements from     (2023-2033)        (2023-2033)
    Percent of e-commerce revenue impacted by review      better- informed       welfare            welfare
                      manipulation                            purchase       improvement, 3%    improvement, 7%
                                                           decisions (in    discount rate (in  discount rate (in
                                                             billions)          billions)          billions)
----------------------------------------------------------------------------------------------------------------
10.....................................................             $15.85            $199.40            $170.43
1.9....................................................               5.80              59.31              50.16
----------------------------------------------------------------------------------------------------------------

b. Consumer Time Savings From Increased Reliability of Summary Ratings
    The proposed Rule's prohibitions against deceptive and unfair 
consumer review practices would increase the reliability of consumer 
reviews. The NPRM assumes this improvement in the dependability of 
reviews will lead consumers to place more trust in aggregate measures 
(e.g., aggregate star ratings), which many review settings use to 
summarize consumer reviews. This in turn will lead some consumers to 
spend less time scrutinizing individual reviews to detect red flags 
commonly found in manipulated reviews (e.g., spelling and grammar 
mistakes, generic highly positive or negative statements, and lack of 
detail). Therefore, the proposed Rule is likely to result in some 
amount of time savings for consumers who consult online reviews before 
making purchases.
    Approximately 80 percent of Americans are online shoppers.\239\ Of 
those who shop online, 14 percent shop online more than once a week, 20 
percent shop online once a week, 23 percent shop online once every two 
weeks, 25 percent shop online once a month, and the remainder do so 
every few months.\240\ Different age groups of online shoppers spend 
various amounts of time reading reviews before making a purchase 
decision. On average, younger consumers spend more time reading reviews 
than older consumers.\241\ This analysis does not incorporate time 
spent by consumers researching reviews of restaurants, hotels, and 
other goods and services that are not purchased online because of the 
limited amount of information available regarding consumers' total time 
spent on such activities. The Commission invites commenters to submit 
information related to the time consumers spend reading reviews for 
goods and services not purchased online.
---------------------------------------------------------------------------

    \239\ See Pew Research Center, ``Online Shopping and E-
Commerce,'' Dec. 19, 2016, https://www.pewresearch.org/internet/2016/12/19/online-shopping-and-e-commerce.
    \240\ See Int'l Post Corp., ``Cross-Border E-Commerce Shopper 
Survey 2022,'' Jan. 2023, https://www.ipc.be/-/media/documents/public/publications/ipc-shoppers-survey/onlineshoppersurvey2022.pdf.
    \241\ See BrightLocal, ``Local Consumer Review Survey 2019,'' 
Dec. 11, 2019, https://www.brightlocal.com/research/local-consumer-review-survey-2019.
---------------------------------------------------------------------------

    According to the Bureau of Labor Statistics, the average hourly 
wage in 2021 was $28.01.\242\ Recent research suggests individuals 
living in the United States value their non-work time at 82 percent of 
average hourly earnings.\243\ Thus, Americans overall value their non-
work time at $22.97 per hour on average. The Commission invites comment 
on this methodology and seeks submissions of additional data related to 
quantifying Americans' value of time.
---------------------------------------------------------------------------

    \242\ Bureau of Labor Statistics, ``May 2021 National 
Occupational and Wage Estimates, Unites States,'' https://www.bls.gov/oes/current/oes_nat.htm (listing mean hourly wage of 
$28.01 for all occupations).
    \243\ See Daniel S. Hamermesh, ``What's to Know About Time 
Use?,'' 30 J. of Econ. Survs. 198-203 (2016), https://doi.org/10.1111/joes.12107.
---------------------------------------------------------------------------

    The survey data does not specify whether consumers were surveyed 
regarding the time spent reading reviews before the purchase of a 
single product or whether the question concerned the purchase of 
multiple products. This analysis assumes the time listed in the survey 
results pertains to the purchase of a single product. It also assumes 
the implementation of the

[[Page 49385]]

proposed Rule would reduce the time spent reading reviews by 10 
percent. Combining the above figures results in $2.49 billion in 
consumer time savings per year, or a present value of $18.55 billion to 
$21.69 billion over a 10-year period, as described in Table 2.2. The 
Commission invites commenters to submit information to improve this 
estimate.
    In addition, there are likely to be other utility-related benefits 
consumers receive when reading nonmanipulated online reviews or 
consulting more accurate aggregate summary measures, such as increased 
satisfaction (apart from purchasing decisions) and decreased 
frustration. The Commission is not able to quantify these benefits and 
invites commenters to submit information to assist with calculating 
these additional benefits.
    Finally, some consumers may spend more time reading reviews if 
reviews are less likely to be fake or otherwise manipulated. This 
increase in time spent reading reviews may offset any time savings from 
the increased reliability of summary ratings. Therefore, the NPRM 
presents another scenario in Table 2.2 where consumers do not gain any 
benefits from time savings. However, as before, there are likely to be 
additional benefits difficult to quantify (e.g., decreased frustration) 
that result from reading more accurate reviews, likely yielding 
positive net benefits related to reading reviews even when consumers 
spend more time doing so. The Commission invites comment on methods 
that would allow us to quantify such benefits.

             Table 2.2--Estimated Benefits From Time Savings
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Scenario 1--Improved Reliability of Aggregate
 Measures Reduces Overall Time Spent Reading Reviews:
    Number of online shoppers, age 18-34 \a\.........         60,467,204
    Average amount of time spent reading online                    0.336
     reviews before making a purchase decision (in
     hours), age 18-34...............................
    Number of online shoppers, age 35-54 \a\.........         67,273,832
    Average amount of time spent reading online                    0.231
     reviews before making a purchase decision (in
     hours), age 35-54...............................
    Number of online shoppers, age 55+ \a\...........         78,920,814
    Average amount of time spent reading online                    0.167
     reviews before making a purchase decision (in
     hours), age 55+.................................
                                                      ------------------
        Total amount of time all online shoppers              48,991,116
         spend reading online reviews before making a
         purchase decision (in hours)................
        Total amount of time U.S. online shoppers          1,728,406,578
         spend reading online reviews per year (in
         hours) \b\..................................
        Value of time for online shoppers (per hour).             $22.97
        Percentage of time saved.....................                10%
                                                      ------------------
            Total annual time savings................     $3,970,149,909
Total 10-year (2023-2033) time savings, 3% discount               $34.88
 rate (in billions)..................................
Total 10-year (2023-2033) time savings, 7% discount               $29.84
 rate (in billions)..................................
------------------------------------------------------------------------
Scenario 2--Increase in Time Spent Reading Reviews
 Offsets Time Savings from Improved Reliability of
 Summary Measures:
    No quantifiable benefit..........................                 $0
------------------------------------------------------------------------
\a\ 80% of age-specific total U.S. population (Source: Pew Research
  Center, U.S. Census).
\b\ Adjusting for online shopping frequency (Source: International Post
  Corporation).

c. Benefits Related to Competition
    Accurate online reviews have been shown to improve competition. 
Several studies have found online reviews are particularly important 
for independent and newer firms.\244\ Ratings are more influential for 
these firms because consumers do not have strong prior beliefs as to 
their quality. New entrants whose sales benefit from online reviews 
typically offer higher quality goods and services. On the other hand, 
lower-quality firms often experience revenue losses with more online 
review activity.\245\
---------------------------------------------------------------------------

    \244\ See Luca, ``Reviews, Reputation, and Revenue: The Case of 
Yelp.com,'' supra note 230 (finding that chain restaurants have 
declined in market share as Yelp penetration has increased); Gregory 
Lewis and Georgios Zervas, ``The Welfare Impact of Consumer Reviews: 
A Case Study of the Hotel Industry,'' Working Paper, https://economics.sas.upenn.edu/sites/default/files/filevault/u475/tawelfare.pdf (finding that demand for independent hotels is more 
sensitive to reviews on Tripadvisor); Brett Hollenbeck, ``Online 
Reputation Mechanisms and the Decreasing Value of Chain 
Affiliation,'' 55(5) J. of Mktg. Resch. 636-54 (2018), https://www.jstor.org/stable/26966532 (finding that branded, chain-
affiliated hotels' premiums over independent hotels have declined 
substantially largely due to online reputation mechanisms).
    \245\ See Limin Fang, ``The Effects of Online Review Platforms 
on Restaurant Revenue, Consumer Learning, and Welfare,'' 68(11) 
Mgmt. Sci. 7793-8514 (2022).
---------------------------------------------------------------------------

    Relatedly, fake online reviews allow companies to surpass 
competitors. One study found it only takes 50 fake reviews for a seller 
to pass any of its competitors in terms of visibility (e.g., via 
rankings or search results).\246\ It follows that by curbing the number 
of fake or manipulated reviews, the proposed Rule would benefit 
consumers by improving the competitive environment for legitimate firms 
selling higher-quality products (i.e., those who do not rely on review 
manipulation to sell their goods). The benefits resulting from 
improvements in the competitive environment are difficult to quantify. 
The Commission invites comment on the best approach to quantifying such 
benefits.
---------------------------------------------------------------------------

    \246\ See Lappas et al., ``The Impact of Fake Reviews on Online 
Visibility: A Vulnerability Assessment of the Hotel Industry,'' 
supra note 158.
---------------------------------------------------------------------------

2. Estimated Costs of the Proposed Rule
    This section describes the costs associated with the proposed Rule, 
provides preliminary quantitative estimates where possible, and 
describes costs that are only assessed qualitatively.
a. Compliance Costs
    The acts and practices prohibited by the proposed Rule are unfair 
or deceptive under Section 5 of the FTC Act. The proposed Rule targets 
acts or practices that are clear violations of Section 5, and 
businesses that are compliant will continue to be compliant. Moreover, 
the FTC routinely provides guidance to businesses on complying with FTC 
law, which will make the implications of the proposed Rule easy to 
understand for a wide range of businesses. Accordingly, the NPRM 
presents one scenario in Table 3.1 where businesses spend a de minimis 
amount of time interpreting the proposed Rule and make no changes to 
their current policies.

[[Page 49386]]

    However, because of the enhanced penalty associated with violating 
the proposed Rule (relative to de novo violations of Section 5 of the 
FTC Act), businesses may choose to incur additional administrative 
burdens to ensure compliance. The NPRM presents another scenario in 
Table 3.1 where businesses notify their employees of the proposed Rule, 
conduct a review of their processes, and take any steps they deem 
important to ensure compliance. For firms that already comply with 
Section 5, these steps might be out of caution so as not to risk the 
possibility of violating the proposed Rule. For example, some sellers 
may currently flag and remove reviews on their websites that they 
reasonably believe are fake. While this practice would not amount to 
not a violation of the relevant rule provision (proposed Sec.  
465.7(b)), promulgation of the proposed Rule may lead some businesses 
to choose to take extra steps to verify the inauthenticity of such 
reviews before suppressing them. A business may also decide to notify 
its employees of the proposed Rule. For example, if certain employees 
are responsible for posting new product pages or managing the company's 
social media presence, business owners may wish to notify these 
employees to ensure compliance. Although cautious firms may elect to 
conduct additional compliance review, the proposed Rule would not 
require any additional recordkeeping or notices beyond what is required 
by Section 5 of the FTC Act.
    For the heightened compliance review scenario in Table 3.1, the 
NPRM makes assumptions about the number of businesses impacted and the 
number of person-hours involved in compliance activities. In 2019, 
there were approximately 33.20 million total firms in the United 
States. 20,868 of these were entities with 500 or more employees 
(``large companies''), and the remaining 33.19 million had fewer than 
500 employees (``small companies'').\247\ The NPRM assumes all 20,868 
large companies had some form of online consumer review presence (e.g., 
on third-party business platforms such as Yelp or Google Reviews, or on 
their own websites). It assumes 74 percent of the 33.19 million small 
companies (24.56 million companies) had an online consumer review 
presence.\248\
---------------------------------------------------------------------------

    \247\ See U.S. Census Bureau, ``2019 SUSB Annual Data Tables by 
Establishment Industry,'' https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html (listing 6.10 million total firms 
with at least one paid employee) and ``Nonemployer Statistics,'' 
https://www.census.gov/programs-surveys/nonemployer-statistics.html 
(listing 27.10 million firms with no paid employees).
    \248\ 74 percent of small businesses have at least one Google 
review. See BrightLocal, ``Google Reviews Study,'' https://www.brightlocal.com/research/google-reviews-study/.
---------------------------------------------------------------------------

    With heightened compliance review, the NPRM assumes lawyers at 
large companies, whose time is valued at $61.54 per hour,\249\ will 
spend eight hours conducting a one-time review of the proposed Rule and 
notifying employees whose role involves creating new product pages, 
managing the company's social media presence, and any other relevant 
practices covered by the proposed Rule. It assumes small company 
owners, whose time is valued at $33.23,\250\ spend one hour doing the 
same.
---------------------------------------------------------------------------

    \249\ See Bureau of Labor Statistics, Occupational Outlook 
Handbook: Lawyers, https://www.bls.gov/ooh/legal/lawyers.htm.
    \250\ See Payscale, ``Average Small Business Owner Salary,'' 
https://www.payscale.com/research/US/Job=Small_Business_Owner/Salary.
---------------------------------------------------------------------------

    In addition, some companies may spend time reviewing their 
automated processes to ensure they comply with the proposed Rule. For 
instance, they may check any review filtering processes to ensure 
reviews that are flagged and removed meet the permissible exceptions 
listed in proposed Sec.  465.7(b). These costs, which companies might 
incur just once or on a recurring basis, are likely to be minimal. The 
NPRM does not quantify these process-related costs because, among other 
things, the Commission does not know the number of firms that might 
undertake such a review. The Commission invites commenters to submit 
information to assist with the calculation of these costs.
    The total estimated costs are tabulated in Table 3.1. The 
Commission seeks comments on the assumptions incorporated in these 
estimates.

                  Table 3.1--Estimated Compliance Costs
------------------------------------------------------------------------
                                                           2023 Only
------------------------------------------------------------------------
Scenario 1--No Review:
    No cost..........................................                 $0
                                                      ------------------
        Total cost...................................                 $0
------------------------------------------------------------------------
Scenario 2--Heightened Compliance Review:
    Number of large companies (in thousands).........              20.86
    Cost per hour of rule review and related                      $61.54
     activities......................................
    Number of hours of rule review and related                         8
     activities......................................
                                                      ------------------
        Subtotal (in millions).......................             $10.27
    Number of small companies with online reviews (in          24,557.31
     thousands)......................................
    Cost per hour of rule review and related                      $33.23
     activities......................................
    Number of hours of rule review and related                         1
     activities......................................
                                                      ------------------
        Subtotal (in millions).......................            $816.04
                                                      ------------------
            Total cost (in millions).................            $826.31
------------------------------------------------------------------------

b. Other Impacts of the Proposed Rule
    There are several other potential effects from the proposed Rule. 
While the proposed requirements are far from onerous, there is the 
possibility some sellers may ``overcorrect'' in response to the higher 
penalties imposed by the rule compared to existing law. For example, a 
firm may encounter an excess of fake, negative reviews from a 
competitor. While proposed Sec.  465.7(b) permits the suppression of 
reviews the seller reasonably believes are fake, an overcautious seller 
seeking to suppress fake reviews from competitors may choose to display 
no reviews whatsoever so as not to risk violating the proposed Rule. 
Alternatively, such a

[[Page 49387]]

firm may take no action towards suspected fake reviews to avoid a 
possible rule violation. Both of these hypothetical scenarios would 
likely hurt the information environment for consumers. The Commission 
believes such unintended consequences of the proposed Rule are very 
unlikely. The Commission seeks comment on the likelihood of such 
effects and information on how to best quantify them.
3. Potentially Reasonable Alternatives
    One alternative to the proposed Rule is to terminate the rulemaking 
and rely instead on the existing tools the Commission currently 
possesses to combat the specified review and testimonial practices, 
such as consumer education and enforcement actions brought under 
Sections 5 and 19 of the FTC Act. Terminating the rulemaking would 
preserve those Commission resources needed to continue the rulemaking, 
but such a short-term benefit would come at a significant cost. Failing 
to strengthen the set of tools available in support of the Commission's 
enforcement program against unfair or deceptive consumer reviews or 
testimonials would deprive it of the benefits outlined above. The 
Commission seeks comment on this alternative and any potentially 
reasonable alternative to the proposed Rule.

VIII. Paperwork Reduction Act

    In addition to the requirements of Section 22, the Commission must 
provide in any NPRM the ``information required by the Regulatory 
Flexibility Act, 5 U.S.C. 601-612, and the Paperwork Reduction Act, 44 
U.S.C. 3501-3520, if applicable.'' 16 CFR 1.11(c)(4).
    The Paperwork Reduction Act requires the Commission to engage in 
additional processes and analysis if it proposes to engage in a 
``collection of information'' as part of the proposed Rule. 44 U.S.C. 
3506. The Commission states that the proposed Rule contains no 
collection of information.

IX. Regulatory Flexibility Act--Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires an agency to provide an Initial Regulatory Flexibility 
Analysis (``IRFA'') with a proposed rule and a Final Regulatory 
Flexibility Analysis (``FRFA'') with a final rule, if any, unless the 
Commission certifies the proposed rule will not have a significant 
economic impact on a substantial number of small entities. 5 U.S.C. 
605. The purpose of a regulatory flexibility analysis is to ensure an 
agency considers potential impacts on small entities and examines 
regulatory alternatives that could achieve the regulatory purpose while 
minimizing burdens on small entities.
    The Commission believes the proposed Rule would not have a 
significant economic impact upon small entities, although it may affect 
a substantial number of small businesses. The proposed Rule primarily 
prohibits certain unfair or deceptive acts or practices involving 
consumer reviews or testimonials and does not impose a recordkeeping or 
disclosure requirement upon businesses. In addition, the Commission 
does not anticipate these changes will add significant additional costs 
to small businesses. Specifically, as discussed in further detail 
below, the Commission anticipates than an average small business will 
spend, at most, one hour on compliance review, incurring a cost of 
$33.23. Therefore, the NPRM imposes no new significant burdens on law-
abiding businesses.
    Accordingly, based on available information, the Commission 
certifies the proposed Rule will not have a significant economic impact 
on a substantial number of small entities. Although the Commission 
certifies under the RFA that the proposed rule would not, if 
promulgated, have a significant impact on a substantial number of small 
entities, the Commission has determined, nonetheless, it is appropriate 
to publish an IRFA to inquire into the impact of the proposed Rule on 
small entities. Therefore, the Commission has prepared the following 
analysis:

A. Description of the Reasons Agency Action Is Being Considered

    The Commission describes the reasons for the proposed Rule in 
Section IV above. The FTC's law enforcement, outreach, and other 
engagement in this area indicate certain unfair or deceptive acts or 
practices involving consumer reviews or testimonials are prevalent. The 
proposed Rule would benefit consumers and legitimate businesses without 
imposing significant burdens.

B. Statement of the Objectives of, and Legal Basis for, the Proposed 
Rule

    The Commission describes the objectives for the proposed rule in 
Section IV above. The legal basis for the proposed rule is Section 18 
of the FTC Act, 15 U.S.C. 57a, which authorizes the Commission to 
promulgate, modify, and repeal trade regulation rules that define with 
specificity acts or practices in or affecting commerce that are unfair 
or deceptive within the meaning of Section 5(a)(1) of the FTC Act, 15 
U.S.C. 45(a)(1).

C. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rule Will Apply

    The proposed Rule would impact all small entities that currently 
have, or might potentially accrue, consumer reviews or testimonials. It 
would also impact small entities that use celebrity testimonials or 
have a social media presence. It is likely the proposed rule would 
primarily affect businesses that sell products or services directly to 
consumers. For example, the proposed Rule is less likely to impact 
small entities that manufacture niche raw materials for other 
businesses or small agricultural firms that do not sell directly to 
consumers. Nevertheless, for a conservative estimate of total costs, 
the NPRM assumes the proposed Rule would impact all industry classes of 
small entities.
    As described in Part V.A.2.a., there are approximately 33.19 
million small businesses in the United States. Prior research has found 
74 percent of small businesses have at least one Google review. It is 
possible that, across all platforms (beyond Google reviews), a higher 
percentage of small businesses have consumer reviews or testimonials, 
celebrity testimonials, or a social media presence. The Commission does 
not have the appropriate data to refine this estimate. Therefore, the 
best estimate is 24.56 million (74 percent x 33.19 million) small 
businesses would be impacted by the proposed Rule. The Commission seeks 
comment on the estimated number of small business entities for which 
the proposed Rule would have a significant economic impact.

D. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    The proposed contains no reporting or recordkeeping requirements. 
Therefore, many legitimate businesses are likely to incur no additional 
compliance costs with the proposed Rule.
    As described in Section V.A.2.a, a cautious firm may elect to 
undertake additional compliance review due to the enhanced penalties 
associated with potential rule violations (relative to de novo 
violations of Section 5 of the FTC Act). If every small business 
impacted by the proposed Rule conducted one hour of compliance review, 
each firm would incur $33.23 of compliance costs, which reflects the 
estimated hourly

[[Page 49388]]

earnings of a small business owner.\251\ Therefore, under the 
conservative assumption of heightened compliance review for all small 
businesses, costs to small businesses would total $816.13 million 
(24.56 million x $33.23). Because it is likely only a minority of small 
businesses would elect to conduct optional compliance review, total 
compliance costs for these entities are likely to be significantly 
lower than this estimate.
---------------------------------------------------------------------------

    \251\ See Payscale, ``Average Small Business Owner Salary,'' 
supra note 250.
---------------------------------------------------------------------------

E. Identification of Duplicative, Overlapping, or Conflicting Federal 
Rules

    The Commission has not identified any duplication, overlap, or 
conflict with the proposed Rule. The Commission invites comment and 
information on this issue.

F. Description of Any Significant Alternatives to the Proposed Rule

    The Commission describes alternatives in Section V.A.3. One 
alternative to the proposed Rule is to rely on the existing tools the 
Commission currently possesses to combat the specified review and 
testimonial practices, such as consumer education and enforcement 
actions brought under Sections 5 and 19 of the FTC Act. The Commission 
believes promulgation of the proposed Rule would result in greater net 
benefits to the marketplace while imposing no additional burdens beyond 
what is required by the FTC Act. As described in further detail in 
Section V.A., the proposed Rule would not only result in significant 
benefits to consumers but also improve the competitive environment, 
particularly for small, independent, or new firms. Therefore, the 
proposed Rule appears to be superior to this alternative for small 
entities.
    The Commission seeks comment on alternative compliance methods that 
would reduce the economic impact of the proposed Rule on small 
entities.

X. 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 Rule. The Commission requests that 
factual data on 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. 
Responses to these questions should be itemized according to the 
numbered questions in this document. 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.

General Questions for Comment

    When responding to any of the following general questions, please 
specify the portion(s) of the proposal to which your comment relates.
    1. Does the proposed Rule further the Commission's goal of 
protecting consumers from clearly unfair or deceptive acts or practices 
involving consumer reviews and testimonials? Why or why not?
    2. Should the Commission finalize the proposed Rule as a final 
rule? Why or why not? How, if at all, should the Commission change the 
proposed Rule in promulgating a final rule?
    3. Please provide comment, including relevant data, statistics, 
consumer complaint information, or any other evidence, on each 
different provision of the proposed Rule. Regarding each provision, 
please include answers to the following questions:
    a. What would the provision's impact (including any benefits and 
costs), if any, be on consumers, governments, and businesses, including 
existing businesses and those yet to be started? Are there changes that 
could be made to lessen any such burdens without significantly reducing 
the benefits?
    b. Is the proposed prohibition in the provision clear, meaningful, 
and appropriate?
    c. Should the scope of the proposed prohibition be expanded or 
narrowed, and, if so, how, and why? How, if at all, should it be 
improved?
    d. Should any final rule keep the proposed prohibition and, if so, 
why? If not, what alternative proposals should the Commission consider?
    4. Does the proposed Rule contain a collection of information?
    5. Would the proposed Rule, if promulgated, have a significant 
economic impact on a substantial number of small entities? If so, how 
could it be modified to avoid a significant economic impact on a 
substantial number of small entities?

Specific Questions for Comment

Sec.  465.1 Definitions
    6. Are the proposed definitions clear? Should changes be made to 
any definitions? Should the scope of any of the proposed definitions be 
expanded or narrowed, and if so, why?
    7. What additional definitions, if any, are needed?
Sec.  465.2 Fake or False Consumer Reviews, Consumer Testimonials, or 
Celebrity Testimonials
    Proposed Sec.  465.2(b) would prohibit businesses from purchasing a 
consumer review, or from disseminating or causing the dissemination of 
a consumer testimonial or celebrity testimonial when the business knew 
or should have known it was false or fake. Proposed Sec.  465.2(c) 
would prohibit businesses from procuring a consumer review for posting 
on a third-party platform or website that the business knew or should 
have known was false or fake.
    8. Is the ``knew or should have known'' standard appropriate for 
purposes of proposed Sec.  465.2(b) and (c)? Why or why not? One 
alternative would define a violation as occurring whenever a business 
engages in a deceptive practice with respect to a review or testimonial 
if the business ``knew or could have known'' that the review or 
testimonial was deceptive. Should the Commission adopt this 
alternative? Why or why not? Should the Commission adopt a different 
knowledge requirement, and if so, what should it be and why? Should 
there be no knowledge requirement at all for proposed Sec.  465.2(b) 
and (c)? Why or why not?
    9. Under what circumstances should a business purchasing or 
procuring a consumer review know that it is fake or false?
    10. Under what circumstances should a business disseminating or 
causing the dissemination of a consumer testimonial or celebrity 
testimonial know that it is fake or false?
Sec.  465.3 Consumer Review Repurposing
    Proposed Sec.  465.3 would prohibit businesses from repurposing or 
causing the repurposing of a consumer review created for one product so 
that it appears to have been created for a substantially different 
product.
    11. Is the description of ``substantially different product'' 
appropriate for purposes of this provision? Why or why not? If not, how 
should it be modified?
    12. Under what circumstances do consumers consider products to be 
significantly different enough that they should not share the same 
consumer reviews?
Sec.  465.4 Buying Positive or Negative Consumer Reviews
    Proposed Sec.  465.4 would prohibit providing compensation or other 
incentives in exchange for, or conditioned on, the writing or creation 
of consumer reviews expressing a particular sentiment.

[[Page 49389]]

    12. Should the proposed prohibition distinguish in any way between 
an explicit and implied condition that a consumer review express a 
particular sentiment? Why or why not? If so, how should it be 
addressed?
Sec.  465.5 Insider Consumer Reviews and Consumer Testimonials
    Proposed Sec.  465.5(a) would prohibit an officer or manager of a 
business from writing or creating a consumer review or consumer 
testimonial about the business or one of its products or services that 
fails to have a clear and conspicuous disclosure of the officer's or 
manager's relationship to the business. Proposed Sec.  465.5(b) would 
prohibit a business from disseminating a testimonial by an officer, 
manager, employee, or agent, or any of their relatives, without a clear 
and conspicuous disclosure of the relationship, when the business knew 
or should have known the testimonialist's relationship. Proposed Sec.  
465.5(c) would prohibit an officer or manager of a business from asking 
for a consumer review about the business or one of its products or 
services from a person related to the business, when the solicitor knew 
or should have known the prospective reviewer's relationship, the 
request results in a review without a clear and conspicuous disclosure 
of the relationship, and the requestor failed to advise a disclosure, 
knew or should have known that a review appeared without such a 
disclosure and failed to take remedial steps, or encouraged the 
prospective reviewer not to make such a disclosure.
    13. Is it appropriate that proposed Sec.  465.5(a) and (c) apply to 
``officers'' and ``managers''? Why or why not? If not, how should 
either or both prohibitions be modified?
    14. Should the term ``managers'' be defined or described? Why or 
why not? If so, how should it be defined or described?
    15. Is it appropriate that proposed Sec.  465.5(a), (b), and (c) 
are limited to circumstances in which the requisite disclosure is 
absent? Why or why not? If not, how should any of the prohibitions be 
modified?
    16. Is it appropriate that proposed Sec.  465.5(b) and (c)(1) are 
limited to circumstances in which the business, officer, or manager 
knew or should have known of the relationship? Why or why not? One 
alternative would be to limit the circumstances of a violation to when 
the business, officer, or manager ``knew or could have known'' of the 
relationship. Should the Commission adopt this alternative? Why or why 
not? Should the Commission adopt a different knowledge requirement, and 
if so, what should it be and why? Should there be no knowledge 
requirement at all for proposed Sec.  465.5(b) and (c)(1)? Why or why 
not?
    17. Is it appropriate that Sec.  465.5(b) and (c) are limited to 
testimonials and reviews from officers, managers, employees, agents, or 
relatives? Why or why not? If not, how should either or both 
prohibitions be modified?
    18. Should the Commission define or otherwise describe the term 
``relative''? Why or why not? If so, how should it be defined or 
described?
    19. Is it appropriate that Sec.  465.5(c)(2)(ii) is limited to 
circumstances in which the requestor knew or should have known that the 
review appeared without such a disclosure? Why or why not? One 
alternative would be to limit the circumstances of a violation to when 
the requestor ``knew or could have known'' that the review appeared 
without such a disclosure. Should the Commission adopt this 
alternative? Why or why not? Should the Commission adopt a different 
knowledge requirement, and if so, what should it be and why? Should 
there be no knowledge requirement at all for proposed Sec.  
465.5(c)(2)(ii)? Why or why not?
Sec.  465.7 Review Suppression
    Proposed Sec.  465.7(a) would prohibit anyone from using an 
unjustified legal threat or a physical threat, intimidation, or false 
accusation in an attempt to remove or prevent a negative consumer 
review. Proposed Sec.  465.7(b) would prohibit a merchant from 
misrepresenting that the consumer reviews displayed on its website or 
platform represent most or all the reviews submitted when it is 
suppressing reviews based upon their ratings or their negativity.
    20. Is it appropriate that proposed Sec.  465.7(a) focuses on the 
specific types of listed threats or activities? Why or why not? If not, 
how should it be modified?
    21. Is the definition of ``unjustified legal threat'' sufficiently 
clear? Why or why not? If not, how should it be modified?
    22. Is it appropriate that proposed Sec.  465.7(b) is limited to 
circumstances in which reviews are being suppressed based on rating or 
negativity? Why or why not? If not, how should it be modified?
    23. Is it appropriate that proposed Sec.  465.7(b) is limited to 
the misrepresentations described therein? Why or why not? If not, how 
should it be modified?

XI. 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 September 29, 
2023. Write ``Consumer Reviews and Testimonials NPRM, R311003'' 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 website https://www.regulations.gov.
    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 that the Commission considers 
your online comment, please follow the instructions on the web-based 
form.
    If you file your comment on paper, write ``Consumer Reviews and 
Testimonials NPRM, R311003'' on your comment and on the envelope, and 
mail your comment to the following address: Federal Trade Commission, 
Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 
(Annex F), Washington, DC 20580. If possible, please submit your paper 
comment to the Commission by overnight service.
    Because your comment will be placed on the public record, you are 
solely responsible for making sure that 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,''

[[Page 49390]]

and must comply with FTC Rule 4.9(c), 16 CFR 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 https://www.regulations.gov--as legally 
required by FTC Rule 4.9(b), 16 CFR 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 receives on or before September 29, 2023. 
For information on the Commission's privacy policy, including routine 
uses permitted by the Privacy Act, see https://www.ftc.gov/siteinformation/privacypolicy.

XII. Communications by Outside Parties to the Commissioners or Their 
Advisors

    Pursuant to FTC Rule 1.18(c)(1)(i)-(ii), the Commission has 
determined that communications with respect to the merits of this 
proceeding from any outside party to any Commissioner or Commissioner 
advisor shall be subject to the following treatment. Written 
communications and summaries or transcripts of oral communications 
shall be placed on the rulemaking record if the communication is 
received before the end of the public comment period in response to 
this NPRM. They shall be placed on the public record if the 
communication is received later. Unless the outside party making an 
oral communication is a member of Congress, such communications are 
permitted only if advance notice is published in the Weekly Calendar 
and Notice of Sunshine Meetings.\252\
---------------------------------------------------------------------------

    \252\ See 15 U.S.C. 57a(i)(2)(A); 16 CFR 1.18(c).
---------------------------------------------------------------------------

List of Subjects in 16 CFR Part 465

    Advertising.

0
For the reasons set forth above, the Federal Trade Commission proposes 
to amend title 16, chapter I, subchapter D of the Code of Federal 
Regulations by adding part 465 to read as follows:

PART 465--RULE ON THE USE OF CONSUMER REVIEWS AND TESTIMONIALS

Sec.
465.1 Definitions.
465.2 Fake or False Consumer Reviews, Consumer Testimonials, or 
Celebrity Testimonials.
465.3 Consumer Review Repurposing.
465.4 Buying Positive or Negative Consumer Reviews.
465.5 Insider Consumer Reviews and Consumer Testimonials.
465.6 Company-Controlled Review websites or Entities.
465.7 Review Suppression.
465.8 Misuse of Fake Indicators of Social Media Influence.
465.9 Severability.

    Authority: 15 U.S.C. 57a.


Sec.  465.1  Definitions.

    (a) Business means an individual, partnership, corporation, or any 
other commercial entity that sells products or services.
    (b) Celebrity testimonial means an advertising or promotional 
message (including verbal statements, demonstrations, or depictions of 
the name, signature, likeness, or other identifying personal 
characteristics of an individual) that consumers are likely to believe 
reflects the opinions, beliefs, or experiences of a well-known person 
who purchased, used, or otherwise had experience with a product, 
service, or business.
    (c) Clear and conspicuous means that a required disclosure is 
easily noticeable (i.e., difficult to miss) and easily understandable 
by ordinary consumers, including in all of the following ways:
    (1) In any communication that is solely visual or solely audible, 
the disclosure must be made through the same means through which the 
communication is presented. In any communication made through both 
visual and audible means, such as a television advertisement, the 
disclosure must be presented simultaneously in both the visual and 
audible portions of the communication even if the representation 
requiring the disclosure is made in only one means.
    (2) A visual disclosure, by its size, contrast, location, the 
length of time it appears, and other characteristics, must stand out 
from any accompanying text or other visual elements so that it is 
easily noticed, read, and understood.
    (3) An audible disclosure, including by telephone or streaming 
video, must be delivered in a volume, speed, and cadence sufficient for 
ordinary consumers to easily hear and understand it.
    (4) In any communication using an interactive electronic medium, 
such as social media or the internet, the disclosure must be 
unavoidable. A disclosure is not clear and conspicuous if a consumer 
must take any action, such as clicking on a hyperlink or hovering over 
an icon, to see it.
    (5) The disclosure must use diction and syntax understandable to 
ordinary consumers and must appear in each language in which the 
representation that requires the disclosure appears.
    (6) The disclosure must comply with these requirements in each 
medium through which it is received, including all electronic devices 
and face-to-face communications.
    (7) The disclosure must not be contradicted or mitigated by, or 
inconsistent with, anything else in the communication.
    (8) When the representation or sales practice targets a specific 
audience, such as children, the elderly, or the terminally ill, 
``ordinary consumers'' includes members of that group.
    (d) Consumer review means a consumer's evaluation, or a purported 
consumer's evaluation, of a product, service, or business that is 
submitted by the consumer or purported consumer and that is published 
to a website or platform dedicated in whole or in part to receiving and 
displaying such evaluations. For the purposes of this Rule, consumer 
reviews include consumer ratings regardless of whether they include any 
text or narrative.
    (e) Consumer testimonial means an advertising or promotional 
message (including verbal statements, demonstrations, or depictions of 
the name, signature, likeness, or other identifying personal 
characteristics of an individual) that consumers are likely to believe 
reflects the opinions, beliefs, or experiences of a consumer who has 
purchased, used, or otherwise had experience with a product, service, 
or business.
    (f) Indicators of social media influence means any metrics used by 
the public to make assessments of an individual's or entity's social 
media influence, such as followers, friends, connections, subscribers, 
views, plays, likes, reposts, and comments.
    (g) Officers include owners, executives, and managing members of a 
business.
    (h) Purchase a consumer review means to provide something of value, 
such as money, goods, or another review, in exchange for a consumer 
review.

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    (i) Reviewer means the author or purported author of a consumer 
review.
    (j) Substantially different product means a product that differs 
from another product in one or more material attributes other than 
color, size, count, or flavor.
    (k) Testimonialist means the person giving or purportedly giving a 
consumer testimonial or celebrity testimonial.
    (l) An unjustified legal threat is a threat to initiate or file a 
baseless legal action, such as an action for defamation that challenges 
truthful speech or matters of opinion.


Sec.  465.2  Fake or False Consumer Reviews, Consumer Testimonials, or 
Celebrity Testimonials.

    (a) It is an unfair or deceptive act or practice and a violation of 
this Rule for a business to write, create, or sell a consumer review, 
consumer testimonial, or celebrity testimonial:
    (1) by a reviewer or testimonialist who does not exist;
    (2) by a reviewer or testimonialist who did not use or otherwise 
have experience with the product, service, or business that is the 
subject of the review or testimonial; or
    (3) that materially misrepresents, expressly or by implication, the 
reviewer's or testimonialist's experience with the product, service, or 
business that is the subject of the review or testimonial.
    (b) It is an unfair or deceptive act or practice and a violation of 
this Rule for a business to purchase a consumer review, or to 
disseminate or cause the dissemination of a consumer testimonial or 
celebrity testimonial, about the business or one of its products or 
services, which the business knew or should have known:
    (1) was by a reviewer or testimonialist who does not exist;
    (2) was by a reviewer or testimonialist who did not use or 
otherwise have experience with the product, service, or business that 
is the subject of the review or testimonial; or
    (3) materially misrepresents, expressly or by implication, the 
reviewer's or testimonialist's experience with the product, service, or 
business that is the subject of the review or testimonial.
    (c) It is an unfair or deceptive act or practice and a violation of 
this Rule for a business to procure a consumer review for posting on a 
third-party platform or website, about the business or one of its 
products or services, which the business knew or should have known:
    (1) was by a reviewer who does not exist;
    (2) was by a reviewer who did not use or otherwise have experience 
with the product, service, or business that is the subject of the 
review or testimonial; or
    (3) materially misrepresents, expressly or by implication, the 
reviewer's experience with the product, service, or business that is 
the subject of the review.


Sec.  465.3  Consumer Review Repurposing.

    It is an unfair or deceptive act or practice and a violation of 
this Rule for a business to use or repurpose a consumer review written 
or created for one product so that it appears to have been written or 
created for a substantially different product, or to cause such use or 
repurposing.


Sec.  465.4  Buying Positive or Negative Consumer Reviews.

    It is an unfair or deceptive act or practice and a violation of 
this Rule for a business to provide compensation or other incentives in 
exchange for, or conditioned on, the writing or creation of consumer 
reviews expressing a particular sentiment, whether positive or 
negative, regarding the product, service, or business that is the 
subject of the review.


Sec.  465.5  Insider Consumer Reviews and Consumer Testimonials.

    It is an unfair or deceptive act or practice and a violation of 
this Rule for:
    (a) an officer or manager of a business to write or create a 
consumer review or consumer testimonial about the business or one of 
its products or services that fails to have a clear and conspicuous 
disclosure of the officer's relationship to the business;
    (b) a business to disseminate or cause the dissemination of a 
consumer testimonial about the business or one of its products or 
services by one of its officers, managers, employees, or agents, or any 
of their relatives which fails to have a clear and conspicuous 
disclosure of the testimonialist's relationship to the business or to 
the officer, manager, employee, or agent, when the business knew or 
should have known the testimonialist's relationship to the business or 
to one of its officers, employees, or agents; or
    (c) an officer or manager of a business to solicit or demand a 
consumer review about the business or one of its products or services 
from an employee, from an agent, or from a relative of any such 
officer, manager, employee, or agent, when:
    (1) the officer or manager knew or should have known the 
prospective reviewer's relationship to the business or to one of its 
officers, managers, employees, or agents,
    (2) the officer or manager:
    (i) did not instruct the prospective reviewer to disclose clearly 
and conspicuously that relationship,
    (ii) knew or should have known that such a review appeared without 
such a disclosure and failed to take remedial steps, or
    (iii) encouraged the prospective reviewer not to make such a 
disclosure, and
    (3) the solicitation or demand results in the prospective reviewer 
writing or creating such a review without such a disclosure.


Sec.  465.6  Company-Controlled Review websites or Entities.

    It is an unfair or deceptive act or practice and a violation of 
this Rule for a business to represent, expressly or by implication, 
that a website, organization, or entity that it controls, owns, or 
operates provides independent reviews or opinions about a category of 
businesses, products, or services including the business or one or more 
of its products or services.


Sec.  465.7  Review Suppression.

    It is an unfair or deceptive act or practice and a violation of 
this Rule:
    (a) for anyone to use an unjustified legal threat or a physical 
threat, intimidation, or false accusation in an attempt to prevent a 
consumer review or any portion thereof from being written or created or 
cause a consumer review or any portion thereof to be removed; or
    (b) for a business to misrepresent, expressly or by implication, 
that the consumer reviews of one or more of its products or services 
displayed on its website or platform represent most or all the reviews 
submitted to the website or platform when reviews are being suppressed 
(i.e., not displayed) based upon their ratings or their negativity. For 
purposes of this paragraph, a review is not considered suppressed based 
upon rating or negativity if the suppression occurs because of any of 
the following reasons, so long as the criteria for withholding reviews 
are applied to all reviews submitted without regard to the favorability 
of the review:
    (1) the review contains:
    (i) trade secrets or privileged or confidential commercial or 
financial information,
    (ii) libelous, harassing, abusive, obscene, vulgar, or sexually 
explicit content,
    (iii) the personal information or likeness of another person,
    (iv) content that is discriminatory with respect to race, gender, 
sexuality, ethnicity, or another protected class, or
    (v) content that is clearly false or misleading;

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    (2) the seller reasonably believes the review is fake; or
    (3) the review is wholly unrelated to the products or services 
offered by or available at the website or platform.


Sec.  465.8  Misuse of Fake Indicators of Social Media Influence.

    It is an unfair or deceptive act or practice and a violation of 
this Rule for anyone to:
    (a) sell or distribute fake indicators of social media influence 
that can be used by persons or businesses to misrepresent their 
influence or importance for a commercial purpose; or
    (b) purchase or procure fake indicators of social media influence 
to misrepresent their influence or importance for a commercial purpose.


Sec.  465.9  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, the 
remaining provisions shall continue in effect.

    By direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2023-15581 Filed 7-28-23; 8:45 am]
BILLING CODE 6750-01-P

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