If the Federal Trade Commission has its way, businesses could soon be fined a hefty sum for hosting or promoting fake product reviews online.
Faux five-star and rave reviews of less-than-stellar consumer goods can boost businesses' profits while deceiving consumers, according to the agency, which has proposed a rule to crack down on companies that buy, sell or promote phony user ratings of their products. If the rule is finalized, violators would be subject to penalties of up to $50,000 per infraction, depending on the case.
"The FTC has seen a massive increase in online reviews in the past few years," Serena Viswanathan, associate director of the FTC's division of ad practices, told CBS News. "We're all using them now to make decisions on whether to buy a product, where to stay on vacation. But unfortunately, with the rise in online reviews we have seen that bad actors can manipulate or fake reviews to deceive consumers for their own benefit."
New types of, which can write human-sounding, but bogus, product reviews, also threaten to compound the problem by enabling bad actors to crank out far more fake reviews, according to the consumer watchdog.
Deceptive reviews hurt consumers by making it hard to obtain factual information about products, regulators say.
"The FTC's proposed rule would make it crystal clear that it's illegal to do things like write or sell fake reviews from people who don't exist or never used the product, or to buy positive reviews or even buy negative reviews about your competitors," Viswanathan said.
Boosting "honest companies"
A steady stream of phony product reviews can boost an item's visibility among consumers while obscuring products from more trustworthy companies, according to experts.
"Our proposed rule on fake reviews shows that we're using all available means to attack deceptive advertising in the digital age," said Samuel Levine, Director of the FTC's Bureau of Consumer Protection said in a statement. "The rule would trigger civil penalties for violators and should help level the playing field for honest companies."
According to a U.S. PIRG estimate, between 30% and 40% of online reviews are "concocted or are in some way not genuine." Bogus reviews surged during the pandemic when U.S. shoppers made the bulk of their purchases over the internet versus in stores, the consumer advocacy group noted.
Nearly 90% of online shoppers rely on reviews to guide their purchase decisions, according to PIRG.
"Not only does this harm consumers who are trying to make informed buying decisions, fake reviews also hurt honest businesses who make sure their online reviews are genuine. When people lose confidence in reviews, legitimate positive reviews don't mean as much. So consumers lose. Honest businesses lose. Dishonest businesses win," PIRG said in a report.
The FTC's proposed rule would make selling and buying fake reviews illegal, while also cracking down on a practice known as "review hijacking." This consists of repurposing a genuine consumer review written for one product so that it appears to pertain to a substantially different product.
Also under the proposed enforcement, company insiders cannot review their own products, and businesses cannot bribe people to leave positive reviews or threaten them if they leave negative reviews. Companies would be permitted to offer customers gift cards for leaving a review, so long as the business doesn't dictate what people say about a product.
"We really think that the possibility of significant financial penalties under a rule should make some of these bad actors think twice about writing fake reviews and selling fake reviews," Viswanathan said.