Introduction
This guide will assist in-house counsel and private practice lawyers with understanding liability for fake reviews (often online), which are a target for Federal Trade Commission (FTC) challenge and enforcement action. Under the Federal Trade Commission Act (FTC Act) and FTC Endorsements Guides and other public materials, the FTC has authority to prevent the use of unfair or deceptive trade practices.
This guide covers:
- Overview of online fake reviews
- Taking action against fake reviews published online
- What can companies do when they are victims of false reviews?
This guide can be used in conjunction with the following How-to guides: Understanding business defamation and trade libel and Avoiding false or misleading advertising.
Section 1 – Overview of online fake reviews
1.1 Fake reviews posted by the company
In today’s digital age, online reviews and testimonials (commonly used in online shopping) play a crucial role in shaping a business’s reputation and popularity and in pushing business toward online sales sites.
Platforms like Google, Yelp, and Amazon provide high-profile spaces for customers to share their experiences, influencing the purchasing decisions of potential customers. Customers are more likely to trust a company that has several positive reviews left on its site than they would about a company that has no comments or zero feedback. This increasing significance of online reviews has, however, led to the inevitable emergence of fake reviews and testimonials.
Fake reviews and testimonials are reviews or testimonials that are not based on a genuine customer experience. They are created, often by the seller or review brokers they have hired (eg, individuals or small companies), with the intention to deceive and influence customer purchasing decisions. These false testimonials generally are positive and attempt to enhance the customer’s perception of the product or service being reviewed.
Fake testimonials often amount to false or deceptive advertising, since they are not based on the experience of authentic customers, are intended to mislead potential customers, and are intended to convince prospective customers to purchase a product or service that they might not have otherwise done.
Example
In February 2019, the FTC announced its first case challenging a marketer’s use of fake paid reviews on an independent retail website. The defendants in that case advertised and sold ‘Quality Encapsulations Garcinia Cambogia Extract with HCA’ capsules on Amazon.com as an appetite-suppressing, fat-blocking, weight-loss pill.
They allegedly paid a website, amazonverifiedreviews.com, to create and post Amazon reviews of their product. The reviews the defendants bought were posted on Amazon.com and gave the product a five-star rating. The FTC complaint charged the defendants with representing that the purchased Amazon reviews were truthful reviews written by actual purchasers, when they were fabricated. The case was settled with the defendants agreeing, among other things, to notify Amazon that they purchased Amazon reviews and to identify to Amazon the purchased reviews. The settlement order also imposed a judgment of $12.8 million, which was suspended upon payment of $50,000 to the FTC and the payment of unpaid income tax obligations.
More recently, the FTC and several state attorneys general (of New York, California, Colorado, Florida, Illinois, and Massachusetts) brought an enforcement action against Roomster. Roomster operated a website and mobile apps where users paid a fee to access living arrangement listings, including rental properties, room rentals, sublets, and roommate requests.
The suit alleged that Roomster and its founders used fake reviews and other misrepresentations to lure consumers to its platform and pay for access to listings that often turned out to be fake including tens of thousands of fake four- and five-star reviews, most of them purchased from Jonathan Martinez, doing business as AppWinn.
The FTC and its state partners settled the claims, and Roomster and its founders are permanently banned from paying or providing incentives for consumer reviews, and from using or disseminating reviews where they have a relationship with the reviewer that might affect the review’s weight or credibility. In addition, the order settling the case included a monetary judgment of $36.2 million and civil penalties totaling $10.9 million payable to the six impacted states.
1.2 Fake review posted against the company
Fake reviews and testimonials also can be used to harm the brand and reputation of a business. Disgruntled consumers, personal rivals, and business competitors often are tempted to write and post fake customer reviews and testimonials to harm the reputation of a business and demean the quality of its products and services. Negative product reviews (often fake) are sometimes posted and fabricated by activists to harm the reputation of a company because activists disagree with the company’s political or social positions.
Example
A bedding manufacturer, MyPillow, was the subject of numerous negative reviews traceable to the company CEO’s vocal support of President Trump. Negative reviews were posted on Amazon and Yelp, and on the websites of retailers who carried the company’s products.
Online review platforms such as Yelp, Google, and Amazon have their own posting policies. It is best practice for companies (particularly e-commerce retailers) who rely on online consumer reviews to generate sales and goodwill to familiarize themselves with the policies and rules of the most popular review sites, to monitor sites to ensure that reviews are genuine, to ascertain when and how fraudulent reviews can be addressed or removed, and to provide reporting mechanisms for customers to report suspected fake reviews.
Example
Amazon is acting proactively to protect its brand by addressing negative reviews. For example, on May 1, 2024, Amazon reported, on its website that it sued Auction Sentinel (‘Sentinel’) for selling fake five-star ‘verified” seller feedback to illicit companies that were operating Amazon selling accounts. By doing so, Sentinel artificially inflated the company’s ratings in Amazon’s store. In addition, Sentinel offered a ‘Stealth Account Setup Service’ that assisted in the creation of fraudulent selling accounts for illicit companies that were ineligible to create a new selling accounts in the Amazon store. The court ultimately granted disgorgement damages that required Sentinel to give up any profits made as a result of these illegal activities. The legal actions the company is taking against those responsible for fake reviews is being publicized widely by the company.
1.3 The legal regime
False online reviews are covered by the Federal Trade Commission Act (FTC Act), 15 USC Chapter 2. Section 5 of the FTC Act, codified at 15 USC 45, declares unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce to be unlawful. The Act authorizes the Federal Trade Commission (FTC) to prevent persons, partnerships, or corporations from using such unfair methods of competition and deceptive practices.
To provide guidance to businesses and marketers, the FTC has established various guidelines for advertisers, including the recently updated Guides Concerning the Use of Endorsements and Testimonials in Advertising (as codified at 16 CFR Part 255) (the Guides). These provide examples of the FTC application of section 5 of the FTC Act and the types of advertising practices that would be considered as violations.
The purpose of the Guides is to help businesses understand how to use endorsements and testimonials ethically in advertising to ensure they are truthful and in compliance with the law. Endorsements are defined as ‘any advertising, marketing, or promotional message for a product that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.’ The Guides apply to both traditional forms of advertising and newer forms such as social media platforms.
The Guides highlight the importance of disclosing any material connections between advertisers and endorsers that may affect the credibility or weight of the endorsement. The Guides also set out specific guidance on when and how to disclose material connections on different platforms. In this context, ‘endorsers’ include virtual influencers, writers of fake reviews, and non-existent entities that purport to give endorsements, and ‘material connections’ can include financial compensation, free products or services, or any other type of benefit that could influence the endorsement. The FTC requires clear and conspicuous disclosure of these connections to ensure that consumers understand the content and can make informed decisions. For example, if an ad features an ‘endorser’ who is a relative or where a reviewer is paid, the ad is misleading unless the connection with the advertiser is made clear.
Example
A winemaker has a television commercial featuring an endorsement from a family member. The endorser starts her pitch by saying “My husband and his uncle have created this delightful wine for your table . . .” Since the endorser’s connection to the advertiser is clear, the advertisement is not misleading.
Furthermore, the Guides emphasize that endorsements and testimonials must be the genuine opinions, beliefs, and experiences of the endorsers. Claims made in the endorsements must be truthful and must be capable of being substantiated. False testimonials can mislead consumers and violate the FTC Act.
The FTC also finalized the Trade Regulation Rule on the Use of Consumer Reviews and Testimonials. This rule took effect on October 21, 2024. Violations of this rule may lead to civil penalties of up to $51,744 per violation. This new rule prohibits several deceptive practices, including:
- Fake reviews and testimonials. Businesses may not purchase, create, or disseminate fake reviews or testimonials, whether those reviews or testimonials are generated by humans or artificial intelligence (AI). This prohibition includes reviews signed by nonexistent individuals, or those that misrepresent a consumer’s experience.
- Insider reviews. Reviews written by company insiders, such as employees or their immediate family members, must include clear disclosures of the relationship between the reviewer and the business. The rule prohibits businesses from disseminating insider reviews that they knew or should have known were undisclosed.
- Incentivized reviews. While businesses can offer incentives for reviews, they cannot condition these incentives on the sentiment of the review. For example, offering a discount only for positive reviews would violate this rule.
- Review suppression. The rule explicitly prohibits the suppression of negative reviews, whether through legal threats, intimidation, or by selectively publishing only positive reviews while misrepresenting them as representative of all consumer feedback.
- Company-controlled review websites. Businesses are prohibited from misrepresenting that a website or entity they control provides independent reviews or opinions. This provision prevents misleading consumers by presenting controlled sites as independent.
- Fake social media indicators. The rule bans the purchase, sale, or use of fake social media indicators, such as followers or likes, that misrepresent a business’s influence.
Application to AI-generated content
The FTC has clarified that the new rule applies to AI-generated reviews. The FTC has expressed concern about the use of AI to create fake reviews that can be indistinguishable from genuine ones, and has taken pains to emphasize that these practices are prohibited. This clarification must be kept in mind as businesses make increasing use of AI tools in their marketing. Despite the absence of direct references to AI in the rule’s text, the FTC’s guidance makes it clear that the principles of authenticity and transparency apply equally to content generated either by AI or humans. Businesses that use AI must ensure that any content produced meets the same standards as human-generated content, particularly regarding accuracy and disclosure.
Steps for ensuring compliance
To comply with the FTC’s new rule, businesses should undertake the following actions. Even those with existing policies aligned with the FTC’s Endorsement Guides should reassess and update them, particularly to address AI’s role in reviews, ensure accurate social media indicators, and comply with new requirements.
- Conduct a comprehensive audit of the practices for using reviews. Start with a comprehensive audit ot how consumer reviews are solicited, collected, and published. The audit should include review of both human and AI-driven processes. Implement a governance protocol for AI-generated reviews to be sure that outputs accurately reflect consumer feedback and are not the result of the manipulation of data. Clearly identify any AI influence on reviews or summaries.
- Implement clear disclosure policies. Policies must be established to require the disclosure of material connections in reviews, especially reviews made by employees or affiliates. These disclosures must be clear and conspicuous. Develop policies to require disclosure when GenAI influences reviews, so that consumers are made aware of AI's role.
- Reevaluate incentive programs. Incentive programs for reviews must ensure neutrality. This would include taking measures such as offering discounts for any review, not just positive ones. Incentivized reviews must clearly disclose the incentive. Additional disclosures should be made if GenAI processes these reviews, and should indicate AI’s role in the analysis.
- Strengthen the policies for review moderation and suppression. Establish transparent guidelines for moderating reviews, to ensure that legitimate negative reviews aren't suppressed unless they contain prohibited content. Implement oversight to allow the audit of AI moderation systems, so that there is human review involvement to prevent bias. GenAI summaries must fairly represent both positive and negative feedback.
- Monitor third-party review platforms. Third-party review platforms must comply with the new rule, especially in regard to AI-generated reviews. Review agreements with platforms to ensure that they disclose AI’s role in processing. Regular audits to verify compliance with FTC guidelines and internal protocols should be conducted.
- Educate and train employees. Comprehensive training should be provided toemployees, especially those employees in marketing, customer service, and IT, to ensure their understanding of the new rule. Offer specialized training on AI tools in review processes, with an emphasis on transparency and compliance.
- Develop a crisis management plan. Prepare a response plan for regulatory inquiries or issues that do not necessarily involve non-compliance. The plan should focus on taking prompt corrective actions, especially involving GenAI content. Protocols for AI-related compliance issues should be established, and those protocols should ensure immediate review and correction of AI outputs. Transparent communication must be maintained with regulators and consumers.
- Adopt additional governance measures that apply specifically to AI components. Develop a governance framework or team to oversee AI use in reviews, ensuring compliance with the applicable standards. Conduct regular audits of AI systems to check for biases in the system and to verify accurate representation of consumer feedback. AI accountability measures should be incorporated in vendor agreements. AI outputs must be monitored in real time to quickly address any issues.
Significance of the FTC’s approach: new rule vs. endorsement guides
The new FTC rule marks a shift from the non-binding Endorsement Guides to legally enforceable regulations that grant the FTC direct enforcement authority. This change is especially significant following the US Supreme Court’s AMG Capital Management, LLC v FTC, 593 US 67 (2021) decision, which limited the FTC’s ability to seek monetary relief under Section 13(b) of the FTC Act. This new rule, unlike the Enforcement Guides, allows the FTC to impose immediate civil penalties, enhancing enforcement capabilities and deterring deceptive practices in consumer reviews and testimonials.
The FTC’s Trade Regulation Rule on the Use of Consumer Reviews and Testimonials introduces significant changes, especially with regards to the increasing use of AI. The Rule establishes a clear, enforceable standard for compliance and transparency. Advertisers must exceed previous guidelines and implement robust governance programs. These governance programs should include regular audits of AI-driven review practices, adoption and enforcement of transparent disclosure policies, and must ensure fairness in AI-generated summaries. Compliance with these standards has become a legal obligation that carries with it substantial financial and reputational risks for non-compliance. By proactively managing AI use and training employees, businesses can avoid penalties and maintain consumer trust.
1.3.1 Application of other legal regimes
In addition to enforcement actions taken by the FTC, fake negative reviews could constitute defamation, and could provide the basis for a common law tort suit. A false review, particularly a false positive review, could also constitute false advertising, possibly allowing the imposition of liability on the endorser based on either state or federal law. For further information, see How-to guides: Understanding business defamation and trade libel and Avoiding false or misleading advertising.
Section 2 – Taking action against false reviews published online
2.1 FTC actions and policy regarding fake online reviews and deceptive practices
Recently, the FTC increased its efforts to thwart deceptive trade practices online. As part of these efforts, the FTC has issued Endorsement Guides and public materials, policy guides, and letters pertaining to deceptive online practices, including fake online reviews.
Whereas federal statutes and regulations are legally binding, FTC letters and guides generally are not. Keep in mind, however, that a letter or a guide gives a strong indication of the general principles in evaluating endorsements and testimonials and how the FTC might attempt to enforce statutes and regulations in the future, including how they might be argued in future litigation. Moreover, practices inconsistent with the FTC letters and guides may result in enforcement action by the Commission under section 5 of the FTC Act. Such publications should be taken very seriously.
2.1.1 FTC actions for fake online reviews and deceptive practices
FTC actions for false online reviews are a relatively new development. However, the following case details the FTC’s complaint against a company, Sunday Riley Modern Skincare, LLC in connection with fake online reviews. See In the Matter of Sunday Riley Modern Skincare, LLC, and Sunday Riley.
Background
Sunday Riley Modern Skincare, a Texas-based company, sells cosmetic products at Sephora, a large, multinational chain of beauty supplies, and on Sephora.com. Sephora enables its customers to leave reviews of the products that the company sells on its website to provide consumers with meaningful feedback about cosmetic products.
Complaint
In its complaint against Sunday Riley Modern Skincare and its founder, Sunday Riley, the FTC alleged the company, by and through Ms Riley, instructed its employees to post fake reviews of Sunday Riley products on the Sephora website in order to increase sales. According to the complaint, after Sephora discovered and removed fake reviews written by the company’s employees, Sunday Riley Modern Skincare obtained a virtual private network to hide the IP addresses of its employees. The company then directed the employees to create accounts on Sephora’s site under false identities, leave 5-star reviews of the company’s products, and to dislike any negative reviews about its products and to have those negative reviews removed.
FTC charges
The FTC charged the company and its founder with two violations of section 5 of the FTC Act (15 USC 45), including making false or misleading claims that the employee-generated reviews represented reviews of real product users and using deceptive practices by failing to disclose the fact that Sunday Riley Modern Skincare employees wrote the positive reviews.
The FTC approved a settlement order, whereby the company and its founder are prohibited from engaging in the same or similar conduct. Additionally, the settlement agreement requires that the company and Ms Riley educate the Sunday Riley Modern Skincare employees about their obligation to disclose, in clear and conspicuous language, their affiliation with the company when posting any reviews about the company’s products.
Outcome
Although the above case did not result in monetary penalties for the company or its founder, this case illustrates the FTC’s position regarding companies and their employees posting fake online reviews. Further, while companies may avoid monetary fines in connection with fake online reviews, the reputational damage that may result from the discovery of false online reviews should serve as a warning to avoid such deceptive practices.
2.1.2 Other examples of enforcement actions
On February 16, 2023, the FTC announced an enforcement action against The Bountiful Company (Bountiful) for a practice the FTC dubbed ‘review hijacking.’ Bountiful, a vitamin and supplement company, falsely represented that certain products received ratings and reviews that, in reality, belonged to other products sold by Bountiful. Bountiful is set to pay $600,000 under the agency’s final consent order approved by the FTC.
On October 30, 2023, the New York Attorney General announced a settlement with a Manhattan orthopedic surgeon who manipulated online reviews of his practice to entice prospective patients. An investigation by the Office of the Attorney General found that the surgeon and his wife worked together to suppress negative reviews and artificially inflate positive reviews of his practice on numerous websites, including ZocDoc, Google, Yelp, Healthgrades, Vitals, Md.com, RateMds.com, and the Better Business Bureau. As a result of the agreement, the surgeon and his wife are required to take down all the fake positive reviews online and pay $100,000 in penalties.
2.1.3 FTC policy regarding fake online reviews and deceptive practices
FTC Policy Statement Regarding Advertising Substantiation (1984)
In 1984, the FTC issued a policy statement that requires advertisers to have a reasonable basis for their claims before making them. Advertisers must possess reliable scientific evidence or other forms of empirical evidence that support the claims made in their advertisements. The policy aims to ensure that claims are truthful and backed by sufficient evidence. Advertisers must be able to substantiate their claims and must be able to provide evidence if challenged by the FTC.
The Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct around Endorsements and Testimonials (2021)
In October 2021, the FTC issued a letter to more than 700 companies, putting them on record regarding how the Commission is likely to enforce future regulations. The Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct around Endorsements and Testimonials listed seven acts or practices that are unlawful under section 5 of the FTC Act. Among those are falsely indicating a party has endorsed a product, unfair or deceptive ads that indicate an endorsement represents that actual experience of a user, and unfair or deceptive trade practices to misrepresent that an endorser is an actual user or customer.
The FTC also has issued several letters addressing fake and manipulative reviews that are directed at influencing children. (See FTC Proposes to Strengthen Advertising Guidelines Against Fake and Manipulated Reviews.) These proposals have been incorporated into the Guides referenced above.
2.2 How online review platforms are responding
Online review sites such as Yelp, Google, and Amazon are working to combat fake reviews and to maintain the integrity of their platforms. The sites employ various measures to identify and remove fraudulent or misleading reviews, including reviews posted by online ‘review brokers’ that specialize in helping other companies gain marketing traction by posting online product reviews favorable to the client company.
These measures include using proprietary computer algorithms, artificial intelligence, and manual review processes to analyze each review before it is displayed. Companies such as Amazon have conducted investigations, identified brokers who post fake reviews, and have filed lawsuits to force the brokers to cease posting on Amazon and to provide the names of their clients. (See Amazon continues legal actions to protect customers from fake reviews). Amazon and other online platforms – including Expedia and Booking.com – have also recently joined together to launch the Coalition for Trusted Reviews, ‘a cross-industry collaboration committed to protecting access to trustworthy consumer reviews worldwide. Together, members will define best practices for hosting online reviews and sharing methods of fake review detection, aiming to stop fake reviews at the source.’
Review sites have also started implementation of strict guidelines and policies to prohibit fake reviews and incentivized testimonials. These sites encourage users to report suspicious reviews, and ask them to provide feedback to help identify and remove fraudulent content. Proactive steps to shut down fraudulent activity are a way for these platforms to ensure that customers can rely on genuine and trustworthy reviews when making purchasing decisions.
Section 3 – What can companies do when they are victims of false reviews?
3.1 Take action against the person or entity posting the review
It is important to note that, following adoption of the Communications Decency Act (CDA) (Title V of the Telecommunications Act of 1996), as a rule, online platforms are immune from liability for fake or harmful reviews posted on their site under Section 230 of the Act (47 USC section 230). That section provides that ‘[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.’ However, online platforms rely on the credibility of the reviews posted there to generate income and often are keen to weed out fake reviews and testimonials. It is best practice for a company to familiarize themselves with the rules of the hosting platform to determine whether the fake online review was posted in violation of the hosting platform’s rules of use. This avenue might include providing the hosting platform with proof that the review in question is not a bona fide review.
3.1.1 Business defamation
If the hosting platform is unable or unwilling to help resolve an issue with a fake review, and the victim company is unable to resolve the issue informally, it is best practice to determine whether the fake review constitutes business defamation or trade libel or whether another tort (such as tortious interference with a business relationship, for example, where a third party interferes with a contract or business relationship rather than making defamatory statements) may have been committed and whether the victim company wants to take legal action.
The type of action will depend on the nature of the post or review, and one avenue may be to file a defamation lawsuit against the reviewer.
Each state in the United States has its own civil laws. Although the elements of defamation are broadly similar in each state it is important to check for variations on a state-by-state basis. To establish a cause of action for defamation, a false statement must be published about the plaintiff to at least one person other than the plaintiff that:
- causes injury to the plaintiff;
- is a statement of provable fact (rather than opinion); and
- the statement must have been made with at least negligence; and
- is not be protected by any exemption or privilege.
The plaintiff must establish damages ie, that financial loss or harm was caused because of the false statement.
Keep in mind that the world of business is a global marketplace. A fake review or other such defamatory statement may have been made from overseas and distant from the place where the statement did its damage. Also note too that many online posts are made anonymously or under a pseudonym. Filing a lawsuit to resolve a problem with a fake review might require the filing of a ‘John Doe’ suit, and it may necessitate pursuing a claim against an individual or entity in another country. Such endeavors can be complicated and costly, so organizations should perform a cost-benefit analysis prior to making a claim.
See How-to guide: Understanding business defamation and trade libel.
3.2 Other courses of action
3.2.1 Cease and desist orders
Naturally, the first and most obvious option to deal with a fake review is to request that it be removed, either by contacting the platform that hosts it or the person making the post. Knowing the rules of the hosting platform is crucial. The next step, as it would be prior to any litigation, is to send a demand letter setting out the company’s intention to exercise its full legal rights.
3.2.2 Injunction
If, after requesting removal of the fake review, the reviewer refuses to remove the review and the online platform fails or is unable to remove it, another option is for a company to seek an injunction against the reviewer. Courts have increasingly used injunctive relief to prevent the proliferation of fake online reviews and to prevent significant damage to businesses. Companies should consider seeking injunctive relief as a tool to restrain potential future disruption to the profitability and reputation of the business.
3.2.3 Compliance policy and best practice
It is important for marketing, business, and legal teams to work together to develop processes to ensure compliant marketing practices for online reviews and endorsements. Business could introduce policies and procedures to identify fake reviews and outline potential responses to mitigate their overall impact. In addition, it may be worth considering whether a senior individual within the company should be designated to have oversight and monitoring of this role.
Additional resources
Federal Trade Commission (FTC)
FTC Bureau of Consumer Protection
FTC’s Endorsement Guides: What People Are Asking
Disclosures 101 for Social Media Influencers
Soliciting and Paying for Online Reviews: A Guide for Marketers
Guides concerning use of endorsements and testimonials in advertising.
Better Business Bureau
Related Lexology Pro content
How-to guides:
Understanding business defamation and trade libel
Avoiding false or misleading advertising
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