FTC puts companies on notice about fake reviews, misleading endorsements

By Stephen Daniells contact

- Last updated on GMT

© Blue Planet Studio / Getty Images
© Blue Planet Studio / Getty Images

Related tags: FTC, Online reviews

The US Federal Trade Commission (FTC) has sent Notices of Penalty Offenses to hundreds of businesses, alerting them of steep penalties if they use fake reviews or other misleading endorsements to deceive consumers.

The Agency sent the Notice of Penalty Offenses to more than 700 companies, including many cosmetics, beauty, and personal care companies and retailers. The full list can be found HERE​.

“The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace,” ​explained the Agency in a release. “Consequently, the FTC is now using its Penalty Offense Authority to remind advertisers of the law and deter them from breaking it. By sending a Notice of Penalty Offenses to more than 700 companies, the agency is placing them on notice they could incur significant civil penalties—up to $43,792 per violation—if they use endorsements in ways that run counter to prior FTC administrative cases.”

The companies receiving the notice represent an array of large companies, top advertisers, leading retailers, top consumer product companies, and major advertising agencies. It should be stressed that just because a company received a letter from the FTC does not in any way suggest that it has engaged in deceptive or unfair conduct, said the Agency. The letters are just putting businesses on notice about the penalties associated with any potential offenses.

“Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses,”​ said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Advertisers will pay a price if they engage in these deceptive practices.”

Specifics

The FTC has identified the following specific practices in the use of endorsements and testimonials that it says are deceptive or unfair and are unlawful under Section 5 of the Federal Trade Commission Act:

• It is an unfair or deceptive trade practice to make claims which represent, expressly or by implication, that a third party has endorsed a product or its performance when such third party has not in fact endorsed such product or its performance.

• It is an unfair or deceptive trade practice for an advertiser to misrepresent that an endorsement represents the experience, views, or opinions of users or purported users of the product.

• It is an unfair or deceptive trade practice to misrepresent an endorser as an actual user, a current user, or a recent user of a product or service.

• It is an unfair or deceptive trade practice for an advertiser to continue to advertise an endorsement unless the advertiser has good reason to believe that the endorser continues to subscribe to the views presented in the endorsement.

• It is an unfair or deceptive trade practice for an advertiser to use testimonials to make unsubstantiated or otherwise deceptive performance claims even if such testimonials are genuine.

• It is an unfair or deceptive trade practice to fail to disclose a connection between an endorser and the seller of an advertised product or service, if such a connection might materially affect the weight or credibility of the endorsement and if the connection would not be reasonably expected

The Commission vote to authorize the Notice and its distribution was 5-0.

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