[Federal Register Volume 89, Number 163 (Thursday, August 22, 2024)]
[Rules and Regulations]
[Pages 68034-68079]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18519]



[[Page 68033]]

Vol. 89

Thursday,

No. 163

August 22, 2024

Part II





Federal Trade Commission





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16 CFR Part 465





Trade Regulation Rule on the Use of Consumer Reviews and Testimonials; 
Final Rule

  Federal Register / Vol. 89 , No. 163 / Thursday, August 22, 2024 / 
Rules and Regulations  

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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: Final rule.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is 
issuing this final rule and Statement of Basis and Purpose (``SBP'') 
relating to certain specified unfair or deceptive acts or practices 
involving consumer reviews or testimonials. This final rule, among 
other things, prohibits selling or purchasing fake consumer reviews or 
testimonials, buying positive or negative consumer reviews, certain 
insiders creating consumer reviews or testimonials without clearly 
disclosing their relationships, creating a company-controlled review 
website that falsely purports to provide independent reviews, certain 
review suppression practices, and selling or purchasing fake indicators 
of social media influence.

DATES: This rule is effective October 21, 2024.

FOR FURTHER INFORMATION CONTACT: Michael Ostheimer, (202) 326-2699, 
Attorney, Division of Advertising Practices, Bureau of Consumer 
Protection, Federal Trade Commission, Room CC-6316, 600 Pennsylvania 
Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    A. Advance Notice of Proposed Rulemaking
    B. Notice of Proposed Rulemaking
    C. Notice of Informal Public Hearing
II. The Legal Standard for Promulgating the Rule
    A. Prevalence of Acts or Practices Addressed by the Rule
    B. Manner and Context in Which the Acts or Practices Are 
Deceptive or Unfair
    C. The Economic Effect of the Rule
III. Overview of the Comments
    A. Furthering the Commission's Goal
    B. Adoption of the Proposed Rule as a Final Rule
IV. Section-by-Section Analysis
    A. Sec.  465.1--Definitions
    1. Overview
    2. Definition-by-Definition Analysis
    a. Business
    b. Celebrity Testimonial
    c. Clear and Conspicuous
    d. Consumer Review
    e. Consumer Testimonial
    f. Indicators of Social Media Influence
    g. Officers
    h. Purchase a Consumer Review
    i. Reviewer
    j. Substantially Different Product
    k. Testimonialist
    l. Unjustified Legal Threat
    3. Proposed Additional Definitions
    a. Dissemination
    b. Manager
    c. Relative
    d. Purchase or Procure Fake Indicators
    e. Review Hosting
    B. Sec.  465.2--Fake or False Consumer Reviews, Consumer 
Testimonials, or Celebrity Testimonials
    1. Common Language in Sec.  465.2(a), (b), and (c)
    2. Sec.  465.2(a)
    3. Sec.  465.2(b)
    4. Sec.  465.2(c)
    5. Sec.  465.2(d)
    6. Knowledge Standard
    7. Other Proposals
    C. Sec.  465.3--Consumer Review or Testimonial Reuse or 
Repurposing
    D. Sec.  465.4--Buying Positive or Negative Consumer Reviews
    E. Sec.  465.5--Insider Consumer Reviews and Consumer 
Testimonials
    1. Material Connections
    2. Relatives
    3. Agents
    4. Scope
    5. Knowledge Standard
    6. Other Suggestions
    F. Sec.  465.6--Company-Controlled Review Websites or Entities
    G. Sec.  465.7--Review Suppression
    1. Sec.  465.7(a)
    2. Sec.  465.7(b)
    H. Sec.  465.8--Misuse of Fake Indicators of Social Media 
Influence
    I. Sec.  465.9--Severability
V. Final Rule
VI. Final Regulatory Analysis Under Section 22 of the FTC Act
    A. Need for, and Objectives of the Final Rule
    B. Anticipated Costs and Benefits of the Final Rule
    1. Estimated Benefits of the Final Rule
    a. Consumer Welfare Benefits From Better-Informed Purchase 
Decisions
    b. Consumer Time Savings From Increased Reliability of Summary 
Ratings
    c. Benefits Related to Competition
    2. Estimated Costs of the Final Rule
    a. Compliance Costs
    b. Other Impacts of the Final Rule
    C. Reasonable Alternatives and Explanation of Why Particular 
Alternative Chosen
VII. Paperwork Reduction Act
VIII. Regulatory Flexibility Act--Final Regulatory Flexibility 
Analysis
    A. Reasons for the Rule
    B. Issues Raised by Comments, the Commission's Assessment and 
Response, and Any Changes Made as a Result
    C. Comments by the Chief Counsel for Advocacy of the SBA, the 
Commission's Assessment and Response, and Any Changes Made as a 
Result
    D. Description and Estimate of the Number of Small Entities to 
Which the Rule Will Apply
    E. Description of the Projected Reporting, Recordkeeping, and 
Other Compliance Requirements
    F. Description of Steps Taken To Minimize Impact of the Rule on 
Small Entities
IX. Congressional Review Act

I. Background

A. Advance Notice of Proposed Rulemaking

    On November 8, 2022, the Federal Trade Commission (``Commission'' 
or ``FTC'') published an advance notice of proposed rulemaking 
(``ANPR'') to address certain deceptive or unfair acts or practices 
involving consumer reviews or testimonials.\1\ Specifically, the ANPR 
discussed: (1) 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; (2) review hijacking, where a 
seller steals or repurposes reviews of another product; (3) marketers 
offering compensation or other incentives in exchange for, or 
conditioned on, the writing of positive or negative consumer reviews; 
(4) owners, officers, or managers of a company (a) writing reviews or 
testimonials of their own products or services, or publishing 
testimonials by their employees or family members, which fail to 
provide clear and conspicuous disclosures of those relationships, or 
(b) soliciting reviews from employees or relatives without instructing 
them to disclose their relationships; (5) 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; (6) 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; (7) the suppression 
of customer reviews by physical threat or unjustified legal threat; and 
(8) selling, distributing, or buying followers, subscribers, views, and 
other indicators of social media influence. As part of the ANPR, the 
Commission solicited public comment on, among other things, whether 
such practices are prevalent and, if so, whether and how to proceed 
with a notice of proposed rulemaking

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(``NPRM'').\2\ The ANPR provided for a 60-day comment period, and the 
Commission received 42 responsive comments \3\ from review platforms 
and other businesses, trade associations, consumer advocacy 
organizations, entities dedicated to fighting fake reviews, a public 
interest research center, a think tank, academic researchers, and 
individual consumers.\4\ Most commenters expressed support for the 
Commission proceeding with the rulemaking. Five comments expressed the 
view that a rulemaking was unnecessary, was premature, or should not 
apply to the commenter's constituents, or expressed skepticism about 
the utility of a rulemaking.
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    \1\ Fed. Trade Comm'n, Trade Regulation Rule on the Use of 
Reviews and Endorsements, 87 FR 67424 (Nov. 8, 2022) [hereinafter 
``ANPR''], https://www.federalregister.gov/documents/2022/11/08/2022-24139/trade-regulation-rule-on-the-use-of-reviews-and-endorsements. The ANPR was entitled ``Trade Regulation Rule 
Concerning Reviews and Endorsements.'' In order to better reflect 
its content, the Commission subsequently decided to change the name 
of the proposed rule to ``Trade Regulation Rule on the Use of 
Consumer Reviews and Testimonials.''
    \2\ See ANPR, 87 FR 67427.
    \3\ The Commission also received six unresponsive comments.
    \4\ The comments are publicly available on this rulemaking's 
docket at https://www.regulations.gov/docket/FTC-2022-0070/comments.
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B. Notice of Proposed Rulemaking

    Based on an extensive review of the comments received in response 
to the ANPR, the Commission's own history of enforcement, and other 
sources of information, the Commission published the NPRM on July 31, 
2023.\5\ In the NPRM, the Commission stated that it has reason to 
believe that certain unfair or deceptive acts or practices involving 
consumer reviews or testimonials are prevalent, including: (1) fake 
consumer reviews and testimonials, as well as reviews and testimonials 
that otherwise misrepresent the experiences of the reviewers and 
testimonialists; (2) the unfair or deceptive reuse or repurposing of 
consumer reviews; (3) the giving of incentives for reviews conditioned 
on the sentiment of the reviews; (4) the use of consumer reviews and 
testimonials written by company insiders without disclosure of their 
relationships to the company; (5) marketers setting up purportedly 
independent websites, organizations, or entities to review or endorse 
their own products; (6) seller websites 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; (7) 
review suppression by unjustified legal threat or physical threat; and 
(8) the sale and misuse of fake indicators of social media influence 
for commercial purposes.\6\ The Commission identified no disputed 
issues of material fact; explained its considerations in developing the 
proposed rule; solicited additional public comment thereon, including 
specific questions designed to assist the public in submitting 
comments; and provided interested parties the opportunity to request to 
present their position orally at an informal hearing.\7\ Finally, the 
NPRM set out the Commission's proposed regulatory text.\8\
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    \5\ See Fed. Trade Comm'n, Trade Regulation Rule on the Use of 
Consumer Reviews and Testimonials, 88 FR 49364 (July 31, 2023) 
[hereinafter ``NPRM''], https://www.federalregister.gov/documents/2023/07/31/2023-15581/trade-regulation-rule-on-the-use-of-consumer-reviews-and-testimonials.
    \6\ See id. at 49370-77.
    \7\ Id. at 49377-81, 49389-90.
    \8\ Id. at 49390-92.
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    In response to the NPRM, the Commission received 100 responsive and 
non-duplicative comments \9\ from entities and individuals interested 
in the proposed rule,\10\ which are discussed in sections III and IV. 
Although some commenters raised concerns and recommended specific 
modifications or additions to the Commission's proposal, the majority 
of commenters generally supported the Commission's proposal. Three 
commenters submitted timely requests to make oral statements at an 
informal hearing (``the hearing requesters'').\11\
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    \9\ The Commission also received sixteen comments that were non-
responsive and two that were duplicates.
    \10\ The comments are publicly available on this rulemaking's 
docket at https://www.regulations.gov/document/FTC-2023-0047-0001/comment.
    \11\ Fake Review Watch, Cmt. on NPRM at 4-5 (Aug. 8, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0015 (``Fake 
Review Watch Cmt.''); Interactive Advertising Bureau, Cmt. on NPRM 
at 14-15 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0101 (``IAB Cmt.''); Researchers at Brigham Young 
University, Pennsylvania State University, and Emory University, 
Cmt. on NPRM at 4 (Sept. 22, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0060 (``The Researcher Cmt.'').
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C. Notice of Informal Public Hearing

    On January 16, 2024, the Commission published an Initial Notice of 
Informal Hearing, which also served as the Final Notice of Informal 
Hearing.\12\ The Notice designated the Honorable Carol Fox Foelak, an 
Administrative Law Judge for the Securities and Exchange Commission, to 
serve as the presiding officer for the informal hearing and stated that 
the hearing requesters could speak at the informal hearing, make 
documentary submissions to be placed on the public rulemaking record, 
or both. Written submissions were due on or before January 30, 2024. In 
response to the Notice of Informal Hearing, the Commission received 
seven comments.\13\ The Notice also stated that the Commission had 
decided not to proceed with proposed Sec.  465.3,\14\ which pertained 
to the unfair or deceptive reuse or repurposing of a consumer review 
written or created for one product so that it appears to have been 
written or created for a substantially different product.
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    \12\ Fed. Trade Comm'n, Trade Regulation Rule on the Use of 
Consumer Reviews and Testimonials, 89 FR 2526 (Jan. 16, 2024) 
[hereinafter ``Hearing Notice''], https://www.federalregister.gov/documents/2024/01/16/2024-00678/rule-on-the-use-of-consumer-reviews-and-testimonials.
    \13\ The comments are publicly available on this rulemaking's 
docket at https://www.regulations.gov/docket/FTC-2024-0004/comments.
    \14\ Hearing Notice, 89 FR 2528.
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    As announced in the Notice of Informal Hearing, the informal 
hearing began as scheduled on February 13, 2024.\15\ Because the 
Commission had not designated disputed issues of material fact, the 
February 13 hearing session included no cross-examination or rebuttal 
submissions but did include oral statements from the three hearing 
requesters.\16\ One of the hearing requesters, the Interactive 
Advertising Bureau (``IAB''), a trade association, argued that there 
were two disputed issues of material fact.\17\ The other two hearing 
requesters discussed their comments submitted pursuant to the NPRM. At 
the conclusion of this hearing session, the presiding officer issued an 
order inviting further submissions, including specific evidence, 
concerning whether there were disputed issues of material fact.\18\ IAB 
submitted a letter that described the results from a survey directed to 
its members--to which eighteen unidentified members responded \19\--
regarding the impact of the proposed rule, including their estimated 
compliance costs.\20\
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    \15\ Members of the public were able to watch the informal 
hearing live on the Commission's website, https://www.ftc.gov.
    \16\ A transcript of the February 13 hearing session is 
available at https://www.ftc.gov/system/files/ftc_gov/pdf/transcript-consumer-reviews-and-testimonials-rule-informal-hearing-feb-13-2024.pdf [hereinafter ``February 13 Hearing Transcript''].
    \17\ IAB's proposed disputed issues of material fact were 
``whether the compliance costs for businesses will be minimal, 
particularly if the `knew or should have known' standard is 
finalized'' and ``whether the Commission finding that unattended 
consequences from the NPRM are unlikely is accurate.'' February 13 
Hearing Transcript at 9.
    \18\ Order by Presiding Officer Foelak at 2 (Feb. 13, 2024), 
https://www.ftc.gov/system/files/ftc_gov/pdf/r311003aljorder20240213.pdf.
    \19\ IAB ``represents over 700 leading media companies, brand 
marketers, agencies and technology companies.'' February 13 Hearing 
Transcript at 6.
    \20\ Letter Brief from Interactive Advertising Bureau to 
Presiding Officer Foelak (Feb. 20, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/r311003iabsubmission20240220.pdf.
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    On February 23, 2024, the presiding officer issued an order finding 
one disputed issue of material fact, namely, ``[w]hether the compliance 
costs for businesses will be minimal.'' \21\ However, the February 23 
order stated that ``[i]t can be argued that . . . even

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if the actual costs are more than double what the FTC assumed, it would 
not change the outcome of the rule, and therefore, it is not a 
`disputed issue[ ] of material fact necessary to be resolved.' '' \22\ 
The order provided that the presiding officer was nevertheless 
scheduling an additional hearing session for March 5, 2024, because 
``an expert witness or proposed testimony from affected firms' 
compliance officers or legal counsel'' might ``shed light on what would 
be involved with compliance review and implementation'' and ``could 
give the FTC a way of better quantifying cost.'' \23\ The March 5 
hearing session was subsequently moved to March 6, 2024 at the trade 
association's request.\24\
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    \21\ Order by Presiding Officer Foelak (Feb. 23, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/p311003aljorder20240226.pdf.
    \22\ Id.
    \23\ Id.
    \24\ Order by Presiding Officer Foelak (Feb. 28, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/r311003_alj_order_3_2024.02.28.pdf.
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    At the March 6 hearing session, the trade association put on one 
witness: its Executive Vice President for Public Policy, an attorney, 
who testified about the results of two limited surveys of its 
members.\25\ FTC staff conducted cross examination. The attorney's 
testimony about the surveys \26\ did not call the Commission's cost 
estimates into legitimate question. Only a small number of unidentified 
trade association members completed the surveys, and no evidence was 
submitted to indicate that they were representative of any group, much 
less all affected businesses.\27\ Further, only a few of the survey 
respondents gave compliance cost estimates, none of which were 
accompanied by explanation or evidence of their factual bases, and all 
of which could have been influenced by the trade association's 
misconceptions about the law and the proposed rule.\28\
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    \25\ A transcript of the March 6 hearing session is available at 
https://www.ftc.gov/system/files/ftc_gov/pdf/r311003informalhearing03062024.pdf. See also, Interactive 
Advertising Bureau's Submission of Exhibits (Mar. 5, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/r311003iabsubmissionexhibits20240305.pdf.
    \26\ The presiding officer stated that testimony by the trade 
association's ``attorney about survey responses is hearsay and will 
be weighed accordingly.'' Order by Presiding Officer Foelak (Mar. 4. 
2024), https://www.ftc.gov/system/files/ftc_gov/pdf/r311003aljorder20240304-1.pdf.
    \27\ IAB received eighteen responses to the first survey and 
nineteen to the second. See Post-Hearing Letter Brief from 
Interactive Advertising Bureau to Presiding Officer Foelak (Mar. 13, 
2024), https://www.ftc.gov/system/files/ftc_gov/pdf/r311003iabposthearingbrief20240313.pdf.
    \28\ See Transcript of Informal Hearing on Proposed Trade 
Regulation Rule on the Use of Consumer Reviews and Testimonials 
(Mar. 6, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/r311003informalhearing03062024.pdf.
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    The presiding officer issued a recommended decision on May 8, 2024, 
stating that based on the evidence, ``it cannot be found whether or not 
the proposed rule will have compliance costs that will be minimal.'' 
\29\ Later in the decision, the presiding officer explained that the 
evidence ``falls short as the basis for a finding that compliance costs 
would not be minimal'' because ``a minute sample of businesses that 
would be affected by the proposed rule responded to the surveys, and 
there is insufficient information about the nature of those businesses, 
how they calculated potential compliance costs, and the methodology of 
the surveys.'' \30\
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    \29\ Order by Presiding Officer Foelak at 5 (May 8, 2024), 
https://www.ftc.gov/system/files/ftc_gov/pdf/r311003aljdecision20240508.pdf. The presiding officer added that, 
``[u]nquestionably, there is insufficient evidence in the record to 
make a specific finding as to the size of the compliance costs 
associated with the proposed rule.'' Id. at 5 n.9.
    \30\ Id. at 6.
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    In crafting the final rule, the Commission has carefully considered 
the comments received and the rulemaking record as a whole, which 
includes the oral statements made at and documents submitted for the 
informal hearing. As a result, the final rule contains some changes 
from the proposed rule. These modifications, mostly clarifications and 
limitations, discussed in detail in section IV of this document, are 
based upon input from commenters and careful consideration of relevant 
law. Section IV also discusses commenters' recommendations that the 
Commission declined to adopt, along with the Commission's reasons for 
rejecting them. Accordingly, the Commission adopts the proposed rule 
with limited modifications as discussed below. The rule will take 
effect October 21, 2024.

II. The Legal Standard for Promulgating the Rule

    The Commission is promulgating 16 CFR part 465 pursuant to 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).\31\
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    \31\ See 15 U.S.C. 57a(a)(1)(B).
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    Whenever the Commission promulgates a rule under section 
18(a)(1)(B), the rule must also include a Statement of Basis and 
Purpose (``SBP'') that addresses: (1) the prevalence of the acts or 
practices addressed by the rule; (2) the manner and context in which 
the acts or practices are unfair or deceptive; and (3) the economic 
effect of the rule, taking into account the effect on small businesses 
and consumers.\32\ In this section of the preamble, the Commission 
summarizes its findings regarding each of these requirements.
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    \32\ 15 U.S.C. 57a(d)(1). In addition, section 22(b)(2) of the 
FTC Act requires the Commission to prepare a final regulatory 
analysis. 15 U.S.C. 57b-3(b)(2). The final regulatory analysis is in 
section VI of this document.
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A. Prevalence of Acts or Practices Addressed by the Rule

    In its ANPR, the Commission described its enforcement record, 
demonstrating the pervasiveness of the deceptive or unfair commercial 
acts or practices involving reviews or other endorsements it was 
examining.\33\ In the NPRM, the Commission cited additional enforcement 
evidence, including actions brought by State Attorneys General 
(``AGs'') and private lawsuits, as well as international evidence, and 
also took notice of additional indications of prevalence that came from 
commenters.\34\
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    \33\ ANPR, 87 FR 67425-26.
    \34\ NPRM, 88 FR 49370-77.
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    In support of the finding that fake reviews are prevalent, the NPRM 
cited to (1) FTC, State, and private cases; (2) statistics from review 
platforms, a platform insider, academic and other researchers, consumer 
surveys, investigative journalists, and others about the incidence of 
fake reviews; (3) information about the pervasiveness of consumer 
review rings that facilitate the buying, selling, or exchange of fake 
reviews; (4) the experiences of regulators in other countries and of 
international bodies; and (5) reporting regarding the use of generative 
artificial intelligence (``AI'') tools that make it easier for bad 
actors to write fake reviews.\35\ In support of the finding that fake 
testimonials are prevalent, the NPRM discussed relevant FTC cases, an 
in-depth Better Business Bureau investigative study that examined fake 
celebrity endorsements, a celebrity lawsuit involving the fraudulent 
use of the celebrities' names, and an FTC consumer alert about fake 
Shark Tank celebrity testimonials.\36\ In support of the finding that 
misrepresentations of endorsers' experiences are prevalent, the NPRM 
cited to FTC cases and a

[[Page 68037]]

comment by the North American Insulation Manufacturers Association 
(``NAIMA'') asserting that testimonials by those misrepresenting their 
experiences with insulation products are plentiful.\37\ The Commission 
concluded that the unfair or deceptive reuse or repurposing of consumer 
reviews is prevalent, relying upon a prior Commission case and numerous 
news articles.\38\ To show how commonly incentives are given in 
exchange for reviews with the incentives conditioned on the sentiment 
of the reviews, the NPRM pointed to FTC and private cases, analyses by 
researchers of markets for procuring reviews, and the experience of a 
small business employee commenter who said a competitor was providing 
incentives for 5-star reviews.\39\ The Commission found prevalence of 
unfair or deceptive insider reviews and testimonials based on its prior 
cases; a State AG action; statistics from a review platform commenter 
about how many reviews of businesses were written by their owners, 
officers, or employees, or their family members; and an individual 
commenter who relied upon insider reviews in selecting an auto repair 
shop.\40\ The NPRM cited prior cases regarding the prevalent practice 
of marketers setting up purportedly independent websites, 
organizations, or entities to review or endorse their own products.\41\ 
The Commission found prevalence of suppression of negative reviews on 
retailer or business websites based on a platform's comment, a recent 
FTC case, and what it learned in another investigation about more than 
4,500 merchants that were automatically publishing only 4- or 5-star 
consumer reviews.\42\ The NPRM relied upon reports by platform and 
other commenters, as well as FTC and State AG cases, regarding review 
suppression by unjustified legal threat or physical threat.\43\ 
Finally, with respect to the prevalence of sales and misuse of fake 
indicators of social media influence for commercial purposes, the NPRM 
discussed cases brought by the FTC, a State AG, and private parties, 
and published reports on social media bots and fake social media 
accounts.\44\
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    \35\ Id. at 49370-72. AI tools make it easier for bad actors to 
pollute the review ecosystem by generating, quickly and cheaply, 
large numbers of realistic but fake reviews that can then be 
distributed widely across multiple platforms. AI-generated reviews 
are covered by the final rule, which the Commission hopes will deter 
the use of AI for that illicit purpose.
    \36\ NPRM, 88 FR 493720-73.
    \37\ Id. at 49373.
    \38\ Id. at 49373-74.
    \39\ Id. at 49374.
    \40\ Id. at 49374-75.
    \41\ Id. at 49375
    \42\ Id. at 49376.
    \43\ Id.
    \44\ Id. at 49376-77.
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B. Manner and Context in Which the Acts or Practices Are Deceptive or 
Unfair

    The rule is intended to curb certain unfair or deceptive uses of 
consumer reviews and testimonials. It contains several provisions to 
promote accuracy and truthfulness in reviews and testimonials and, 
thus, will allow American consumers to make better-informed purchase 
decisions. The key provisions of the rule prohibit conduct that is 
inherently deceptive or unfair, including creating, selling, and buying 
fake or false reviews or testimonials; buying reviews in exchange for, 
or conditioned on, their sentiment; and using reviews and testimonials 
from company insiders that hide their relationships to the company. The 
rule also includes prohibitions against misleading, company-controlled 
review websites or entities; unfair or deceptive review suppression 
practices; and the misuse of fake indicators of social media influence.

C. The Economic Effect of the Rule

    As part of the rulemaking proceeding, the Commission solicited 
public comment and data (both qualitative and quantitative) on the 
economic impact of the proposed rule and its costs and benefits.\45\ In 
issuing the final rule, the Commission has carefully considered the 
comments received and the costs and benefits of each provision, taking 
into account the effect on small businesses and consumers, as discussed 
in more detail in sections VI and VIII of this document. The record 
demonstrates that the most significant anticipated benefit of the final 
rule is increased deterrence of clearly unfair or deceptive acts or 
practices involving consumer reviews or testimonials. Another 
significant benefit is the expansion of the remedies available to the 
Commission, including the ability to more effectively obtain monetary 
relief. This is particularly critical given the U.S. Supreme Court's 
decision in AMG Capital Management, LLC v. FTC, which held that 
equitable monetary relief, including consumer redress, is not available 
under section 13(b) of the FTC Act.\46\ Post-AMG, the Commission's 
primary means for obtaining redress is section 19 of the FTC Act. By 
issuing the final rule, the Commission can obtain such redress based on 
violations of the rule in one proceeding under section 19(a)(1), which 
will be significantly faster than the two-step process for obtaining 
redress under section 19(a)(2).\47\ By allowing the Commission to 
secure redress more quickly and efficiently, this rule will also allow 
the Commission to preserve enforcement resources for other mission 
priorities.\48\ As an additional benefit, the rule will enable the 
Commission to seek civil penalties against violators.\49\ Without an 
efficient way to seek civil penalties, bad actors have little fear of 
being penalized for using fraud and deception in connection with 
reviews and endorsements. Increased deterrence will have consumer 
welfare benefits and will benefit honest competition.\50\ Moreover, the 
final rule is likely to impose relatively small compliance costs on 
honest businesses.\51\
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    \45\ ANPR, 87 FR 67426-27; NPRM, 88 FR 49387-88.
    \46\ See AMG Cap. Mgmt., LLC v. FTC, 593 U.S. 67, 82 (2021).
    \47\ See 15 U.S.C. 57b(a)(1), (2); see also NPRM, 88 FR 49377-78 
(discussing impact of AMG Cap. Mgmt.).
    \48\ When the rule has been violated, the Commission can 
commence a Federal court action and seek to recover money for 
consumers or obtain an order imposing civil penalties. See 15 U.S.C. 
57b(a)(1), 15 U.S.C. 45(m)(1)(A). Without the rule, the path to 
monetary relief is longer and requires the Commission to first 
conduct an administrative proceeding to determine whether the 
respondent violated the FTC Act; if the Commission finds that the 
respondent did so, the Commission issues a cease-and-desist order, 
which might not become final until after the resolution of any 
resulting appeal. Then, to recover money for consumers, the 
Commission must prove in a separate Federal court action that the 
violator engaged in fraudulent or dishonest conduct. See 15 U.S.C. 
57b(a)(2).
    \49\ See section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 
45(m)(1)(A) (providing that violators of a trade regulation rule 
``with actual knowledge or knowledge fairly implied on the basis of 
objective circumstances that such act is unfair or deceptive and is 
prohibited by such rule'' are liable for civil penalties for each 
violation). In addition, any entity or person who violates such a 
rule (irrespective of the state of knowledge) is liable for any 
injury caused to consumers by the rule violation. The Commission may 
pursue such recovery in a suit under section 19(a)(1) of the FTC 
Act, 15 U.S.C. 57b(a)(1).
    \50\ NPRM, 88 FR 49382-85.
    \51\ Id. at 49385-87; see infra sections VI and VIII of this 
document.
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III. Overview of the Comments \52\
---------------------------------------------------------------------------

    \52\ Minor changes to formatting, grammar, and punctuation have 
been made to some of the comments quoted in this document. These 
changes do not entail any substantive changes.
---------------------------------------------------------------------------

    The Commission received 100 responsive and non-duplicative comments 
in response to the NPRM from a diverse group of individuals (including 
consumers and law students), industry groups and trade associations, 
review platforms, retailers, and other businesses, consumer advocacy 
organizations, and government entities.
    In the NPRM, the Commission invited the public to comment on any 
issues or concerns the public believed were relevant or appropriate to 
the Commission's consideration of the

[[Page 68038]]

proposed rule.\53\ The NPRM also posed twenty-three specific questions 
for the public.\54\ The first two are broad questions addressed in this 
section III, which also discusses several issues or concerns that 
commenters raised generally without reference to particular sections of 
the rule. Responses to the more specific questions in the NPRM are 
discussed in section IV of this document, a section-by-section analysis 
of the final rule. Questions relating to the Paperwork Reduction Act 
(``PRA'') and Regulatory Flexibility Act (``RFA'') and are addressed in 
sections VII and VIII of this document, respectively.\55\
---------------------------------------------------------------------------

    \53\ NPRM, 88 FR 49388.
    \54\ Id. at 49388-89.
    \55\ Id. at 49388. In addition to soliciting public comment on 
the NPRM's PRA and RFA analyses in the PRA and RFA sections, the 
NPRM also posed two specific questions related to the PRA and RFA 
analyses. Question 4 inquired whether ``the proposed rule contains a 
collection of information,'' and Question 5 asked, ``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?'' Id. at 49381-86, 49388.
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A. Furthering the Commission's Goal

    In Question 1 of the NPRM, the Commission asked whether its 
proposal would further the Commission's goal of protecting consumers 
from clearly unfair or deceptive acts or practices involving consumer 
reviews and testimonials.\56\
---------------------------------------------------------------------------

    \56\ NPRM, 88 FR 49388.
---------------------------------------------------------------------------

    Several commenters expressly addressed this question. A review 
platform and a business that specializes in identifying fake online 
reviews submitted comments stating that the proposed rule would further 
the Commission's goal of protecting consumers from clearly unfair or 
deceptive acts or practices involving consumer reviews.\57\ Another 
review platform commenter answered that there are ``numerous advantages 
of the FTC's proposed new Rule,'' that it is ``generally supportive of 
this intervention overall,'' and that the proposed rule ``will be 
helpful to set out clear rules that expressly prohibit practices like 
writing or purchasing fake reviews, providing compensation or 
incentives in exchange for reviews, and certain acts of unfair review 
suppression.'' \58\ A business commenter similarly answered that the 
``Proposed Rule addresses many concerns about unfair or deceptive acts 
or practices involving consumer reviews and testimonials, such as false 
and biased reviews.'' \59\ Both of these commenters also noted areas in 
which they thought certain provisions of the proposed rule should be 
adjusted or clarified; those issues are addressed below.\60\ A consumer 
organization said that ``[i]n general, . . . the proposed Rule will 
reduce the incentives for businesses to purchase, disseminate, or sell 
fake consumer reviews or testimonials,'' but thought that the proposed 
rule should have placed explicit restrictions on third-party review 
platforms.\61\ The Commission notes that this topic is beyond the scope 
of the rulemaking, which focuses instead on those responsible for 
inarguably unfair or deceptive acts or practices regarding reviews and 
testimonials.
---------------------------------------------------------------------------

    \57\ Yelp Inc., Cmt. on NPRM at 3 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0088 (``Yelp Cmt.''); The 
Transparency Company, Cmt. on NPRM at 1, 5 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0107 (``Transparency 
Company Cmt.'').
    \58\ Trustpilot, Cmt. on NPRM at 2 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0084 (``Trustpilot 
Cmt.'').
    \59\ Family First Life, LLC, Cmt. on NPRM at 2 (Sept. 29, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0104 (``Family 
First Life Cmt.'').
    \60\ Trustpilot Cmt. at 2-3; Family First Life Cmt. at 2-3.
    \61\ Consumer Reports, Cmt. on NPRM at 2-3 (Sept. 29, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0099 (``Consumer 
Reports Cmt.'').
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B. Adoption of the Proposed Rule as a Final Rule

    In Question 2 of the NPRM, the Commission inquired whether it 
should finalize the proposed rule, the reasons for why commenters were 
in favor of or against the finalization of the proposed rule, and 
whether the Commission should make any changes to its original 
proposal.\62\
---------------------------------------------------------------------------

    \62\ NPRM, 88 FR 49388.
---------------------------------------------------------------------------

    Only two commenters directly addressed this question. A business 
commenter agreed that the Commission should finalize the proposed 
rule.\63\ A review platform commenter said it ``supports this Rule and 
would support the Commission finalizing the Rule.\64\ It also suggested 
adjustments to the Commission's proposal, which are addressed below in 
this document.
---------------------------------------------------------------------------

    \63\ Transparency Company Cmt. at 6.
    \64\ Trustpilot Cmt. at 3.
---------------------------------------------------------------------------

    Numerous individual commenters,\65\ trade associations,\66\ and 
consumer organizations \67\ expressed general support for the proposed 
rule. For example, an individual commenter wrote, ``I completely agree 
with the proposal. . . . Because review sections have become so 
untrustworthy (being impossible to tell whether a company has paid for 
positive reviews of its own product, or for negative reviews on a 
rival's product), review sections have become functionally useless for 
me. This makes it difficult to purchase any products online, since real 
consumer feedback is one of the few ways to determine whether I should 
buy the product or service without first examining it in person.'' \68\ 
Another individual stated, ``I support the rules as specified, and 
applaud the FTC's action in this regard. It is extremely difficult for 
the consumer to determine the validity of online reviews--even within 
specific retailers such as amazon. There is little benefit for large 
online retailers to ensure that reviews are accurate, and this fact is 
evident in the large number of bogus reviews found on amazon, newegg, 
youtube and other sites.'' \69\ A third individual wrote, ``I strongly 
support the rules against fake review

[[Page 68039]]

and testimonials and fines for businesses and people who write them. As 
a consumer, I often use reviews to help determine whether a product or 
service is reliable; the prevalence of fake reviews makes this 
impossible.'' \70\ A trade association commented, ``The NPRM proposes 
rules that are appropriately scoped to target the bad actors [who are] 
intent on committing fraud through fake or deceptive reviews. . . . The 
NPRM strikes the appropriate balance between enhancing the Commission's 
tools to target bad actors and preserving industry flexibility to 
develop innovative and effective solutions to maintain consumer 
confidence in reviews.'' \71\ A consumer organization stated, ``The 
Commission absolutely should finalize the proposed rule to better 
protect shoppers and hold businesses accountable.'' \72\
---------------------------------------------------------------------------

    \65\ Amelia Markey, Cmt. on NPRM (July 31, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0003 (``Markey Cmt.''); 
Chris Hippensteel, Cmt. on NPRM (Aug. 1, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0006 (``Hippensteel 
Cmt.''); Jeremy Anderson, Cmt. on NPRM (Aug. 1, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0007 (``Anderson Cmt.''); 
Caroline Fribance, Cmt. on NPRM (Aug. 11, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0017 (``Fribance Cmt.''); 
Pia Edborg, Cmt. on NPRM (Aug. 17, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0027 (``Edborg Cmt.''); 
Anonymous 1, Cmt. on NPRM (Aug. 20, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0031 (``Anonymous 1 
Cmt.''); Jessica Ludlam, Cmt. on NPRM (Aug. 24, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0036 (``Ludlam Cmt.''); 
SUPERGUEST, Cmt. on NPRM (Sept. 8, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0046 (``Superguest 
Cmt.''); Sean Poole, Cmt. on NPRM at 1-2 (Sept. 22, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0063 (``Poole Cmt.''); 
Artemio Magana, Cmt. on NPRM (Sept. 28, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0079 (``Magana Cmt.'').
    \66\ American Dental Association, Cmt. on NPRM at 1 (Sept. 28, 
2023), https://www.regulations.gov/comment/FTC-2023-0047-0078 (``ADA 
Cmt.''); Travel Technology Association, Cmt. on NPRM at 1, 4-5 
(Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0097 (``Travel Tech. Cmt.'').
    \67\ Coalition of Civil Society Organizations, Cmt. on NPRM at 
1-3 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0108; U.S. Public Interest Research Group Education Fund, Cmt. 
on NPRM at 2 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0109 (``US PIRG Cmt.'').
    \68\ Markey Cmt.
    \69\ Anderson Cmt.
    \70\ Anonymous 1 Cmt.
    \71\ Travel Tech. Cmt. at 1, 4.
    \72\ US PIRG Cmt. at 2.
---------------------------------------------------------------------------

    A number of individual consumers,\73\ a review platform,\74\ other 
industry members,\75\ and consumer organizations \76\ supported the 
Commission's proposal, but urged the Commission to go further and 
impose additional requirements, such as by adding provisions that would 
apply to third-party review platforms. As noted above, such provisions 
would be beyond the scope of the rulemaking. Similarly beyond the scope 
of the rulemaking is an individual's suggestion that the Commission 
should restrict the highlighting of testimonials on websites and 
prohibit payments for reviews.'' \77\ A review platform's comment 
``applaud[ed] . . . the Commission . . . for its extensive efforts to 
address the problem of deceptive review practices, as reflected in the 
Commission's notice of proposed rulemaking, and . . . fully support[ed] 
and endorse[d] the Commission's proposed Rule.'' \78\ Its suggestions 
for several provisions are discussed below. A consumer group stated 
that the proposed rule ``is needed'' and ``addresses an urgent problem: 
fabricated and otherwise deceptive reviews and ratings of products and 
services,'' but asked for numerous modifications to strengthen it.\79\ 
These proposals are discussed below.
---------------------------------------------------------------------------

    \73\ Michael Ravnitzky, Cmt. on NPRM at 1-2 (Aug. 6, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0013 (``Ravnitzky 
Cmt.''); Adam Foster, Cmt. on NPRM at 1-2 (Sept. 21, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0052 (``Foster Cmt.''); 
Anonymous 2, Cmt. on NPRM at 1, 4 (Sept. 22, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0065 (``Anonymous 2 
Cmt.''); Anonymous 3, Cmt. on NPRM (Sept. 27, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0069 (``Anonymous 3 
Cmt.'').
    \74\ Yelp Cmt. at 1, 5-8.
    \75\ Strategic Marketing, Cmt. on NPRM (Aug. 7, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0014; PerfectRec Inc., 
Cmt. on NPRM at 1-3 (Aug. 23, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0035; Mozilla, Cmt. on NPRM at 5-7 (Sept. 28, 
2023), https://www.regulations.gov/comment/FTC-2023-0047-0076 
(``Mozilla Cmt.''); The Responsible Online Commerce Coalition, Cmt. 
on NPRM at 2, 4-6 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0086.
    \76\ Fake Review Watch Cmt. at 1-4; Truth in Advertising, Inc., 
Cmt. on NPRM at 2, 4-11 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0083 (``TINA Cmt.''); 
National Consumers League, Cmt. on NPRM at 2-9 (Sept. 29, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0096 (``NCL 
Cmt.''); Consumer Reports Cmt. at 2-11.
    \77\ Anonymous 3 Cmt.
    \78\ Yelp Cmt. at 1, 4-8.
    \79\ TINA Cmt. at 4, 6.
---------------------------------------------------------------------------

    A few individual commenters \80\ and industry commenters \81\ were 
supportive of a rule but expressed the need for clarifications or 
modifications. An individual commenter wrote that ``[a]ll of the rules 
proposed . . . make (common) sense'' but identified ``a few scenarios 
that highlight that the language in the proposed rules is a bit 
ambiguous'' and that with ``steep penalties like this, guidelines need 
to be clear, concrete, AND simple so businesses can understand.'' \82\ 
Another individual commenter said that the proposed rule ``takes great 
strides,'' but that two proposed sections, 465.4 and 465.6, are too 
restrictive.\83\ A retailer wrote, ``On the whole, . . . the Proposed 
Rule contains provisions that are reasonable and would provide 
additional protection to consumers'' but ``there are a few provisions . 
. . that are not well drafted or that need additional language.'' \84\ 
Another retailer said that it ``supports a tailored rule that focuses 
on the bad actors that harm consumers,'' but that the proposed rule 
``sweeps more broadly, extending to the activities of legitimate 
businesses that do not uncover abuses that they `should have' 
identified, regardless of their good faith efforts'' and that ``[s]uch 
an overbroad rule would have significant unintended negative 
consequences on legitimate conduct.'' \85\ An industry organization 
commented that the proposed rule ``is an important step, and we share 
the Commission's goal of improving consumer confidence in reviews and 
testimonials'' but ``strongly urge[d] the Commission to reexamine . . . 
[four] provisions'' to address what it viewed as First Amendment 
concerns and for other reasons.\86\ The specific suggestions or 
concerns raised by these and other commenters are addressed below. In 
particular, whether in the text of the final rule or in the discussion 
below, the Commission is clarifying the scope or meaning of various 
rule provisions to cover the specific activities or conduct that harm 
consumers and avoid ambiguity or overbreadth.
---------------------------------------------------------------------------

    \80\ Anonymous 4, Cmt. on NPRM (Sept. 1, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0040 (``Anonymous 4 
Cmt.''); Riley Albert, Cmt. on NPRM at 3 (Sept. 21, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0053 (``Albert Cmt.''); 
Alyssa Frieling, Cmt. on NPRM at 1-4 (Sept. 22, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0059 (``Frieling Cmt.'').
    \81\ Hammacher, Schlemmer and Co., Inc., Cmt. on NPRM at 1-7 
(Aug. 21, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0032 (``Hammacher Schlemmer Cmt.''); Amazon.com, Inc., Cmt. on NPRM 
at 5-13 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0085 (``Amazon Cmt.''); TechNet Cmt. on NPRM at 2-4 (Sept. 
29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0089 
(TechNet Cmt.''); Family First Life Cmt. at 2-16.
    \82\ Anonymous 4 Cmt.
    \83\ Frieling Cmt. at 1-4.
    \84\ Hammacher Schlemmer Cmt. at 1.
    \85\ Amazon Cmt. at 5.
    \86\ TechNet Cmt. at 2-4.
---------------------------------------------------------------------------

    Only four commenters, two individual commenters \87\ and two trade 
associations,\88\ said that the proposed rule was unnecessary or 
unwarranted. One of the individuals, wrote that ``the rule seems to be 
unnecessary as it is unlikely to actually provide the benefit to 
consumers of removing falsified reviews'' because it is difficult to 
identify and trace fake reviews and ``punish[ ] an offender'' and that 
the proposed rule ``also has potential to penalize non-offenders'' when 
competitors purchase ``review bombs.'' \89\ The commenter asserted that 
the FTC's estimated benefits are based on faulty assumptions such as 
that ``the entirety of the loss'' from false reviews ``would be 
eliminated simply because the rule is enacted.\90\ The commenter said 
that the FTC should either maintain the status quo or require websites 
with consumer reviews to include a disclosure that ``some reviews may 
have not been made by genuine customers, may potentially have been paid

[[Page 68040]]

testimonials, etc.'' \91\ The other individual commenter said that the 
``proposed rule is unnecessary because all of the practices considered 
by the rule `are already unlawful under Section 5 of the FTC Act,' it 
has potentially massive compliance costs for American businesses'' 
(citing the FTC's estimated cost), ``and the better salutation [sic] is 
to work with States and review platforms to resolve the issue.'' \92\ 
One of the trade associations stated that the ``Proposed Rule is 
[u]nnecessary,'' that ``current FTC enforcement authority has been 
effective in addressing such clearly deceptive practices, and there is 
no indication how or why a trade regulation rule is needed, or how such 
a rule would more effectively address concerns about such deceptive 
practices,'' and that ``a need to alleviate the `difficulty' of 
obtaining monetary relief under the FTC Act where such authority has 
never existed, does not provide an adequate basis for the issuance of a 
Magnuson-Moss rulemaking.'' \93\ The other trade association asserted 
that (1) it ``does not believe that rulemaking is warranted, wise, or a 
balanced approach, in part because it raises serious First Amendment 
concerns;'' (2) ``a well-designed rule would focus on a defined trade'' 
but the ``record to date does not establish that customer reviews, the 
use of those reviews, or the dissemination of those reviews by 
commercial platforms is itself a defined trade;'' (3) the ``FTC should 
not promulgate a rule solely because the augmented penalties attendant 
to a rule violation could ostensibly advance a Commission goal 
generally;'' and (4) ``the FTC fail[ed] to show how enforcement 
actions, many of which were settled by consent order, translate into 
`prevalence.' '' \94\
---------------------------------------------------------------------------

    \87\ Marc Slezak, Cmt. on NPRM at 1-5 (Sept. 22, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0054 (``Slezak Cmt.''); 
Sumner Camp-Martin, Cmt. on NPRM at 1-5 (Sept. 22, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0056 (``Camp-Martin 
Cmt.'').
    \88\ National Automobile Dealers Association, Cmt. on NPRM at 1-
2 (Sept. 28, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0077 (NADA Cmt.''); Association of National Advertisers, Cmt. 
on NPRM at 3-7 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0105 (``ANA Cmt.'').
    \89\ Slezak Cmt. at 1-4.
    \90\ Id. 3.
    \91\ Id. 4.
    \92\ Camp-Martin Cmt. at 1-2. The commenter said, ``In the 
alternative to the complete abandonment of the proposed rule, 
Section 465.4 should be amended'' and broadened. Id. at 1.
    \93\ NADA Cmt. at 1-2.
    \94\ ANA Cmt. at 3-7.
---------------------------------------------------------------------------

    The Commission disagrees with the four commenters who said that the 
proposed rule was unnecessary or unwarranted. The Commission believes 
that the status quo is inadequate to address consumer harm and that the 
rule will add deterrence and aid enforcement even though the practices 
covered by the rule are already unlawful under section 5 of the FTC 
Act. Greater deterrence and more effective enforcement are legitimate 
reasons to engage in a rulemaking, whereas difficulties in enforcing a 
rule against some violators are no reason to eschew it.\95\ Further, 
the compliance costs estimated by the Commission are greatly outweighed 
by the estimated benefits to consumers and honest competition. The 
Commission notes that the harm caused by the acts and practices 
addressed cut across multiple trades. The Commission addresses 
potential First Amendment concerns and arguments regarding prevalence 
below.
---------------------------------------------------------------------------

    \95\ The Commission is aware that a business could attempt to 
damage a competitor's reputation by purchasing fake positive reviews 
for that competitor and then reporting those reviews to the platform 
on which they appear. In investigating a fake review matter, FTC 
staff would take such a possibility into account.
---------------------------------------------------------------------------

IV. Section-by-Section Analysis

    The following discussion provides a section-by-section analysis of 
the provisions proposed in the NPRM, and discusses the comments 
received, the Commission's responses to the comments, and the 
provisions adopted in the final rule.\96\
---------------------------------------------------------------------------

    \96\ The Commission notes that many commenters raised similar 
concerns or addressed overlapping issues. To avoid repetition, the 
Commission has endeavored to respond to issues raised in similar 
comments together. Responses provided in any given section apply 
equally to comments addressing the same subject in the context of 
other sections. Moreover, throughout the SBP, the Commission 
discusses justifications for the final rule that are informed by its 
careful consideration of all comments received, even where that 
discussion is not linked to a particular comment.
---------------------------------------------------------------------------

A. Sec.  465.1--Definitions

1. Overview
    The proposed rule included definitions for the following terms: 
``business''; ``celebrity testimonial''; ``clear and conspicuous''; 
``consumer review''; ``consumer testimonial''; ``indicators of social 
media influence''; ``officers''; ``purchase a consumer review''; 
``reviewer''; ``substantially different product''; ``testimonialist''; 
and ``unjustified legal threat.'' In Question 6 of the NPRM, the 
Commission asked whether the proposed definitions are clear and what 
changes should be made to any definitions. In Questions 11 and 21 of 
the NPRM, the Commission asked specifically about the definitions of 
``substantially different product'' and ``unjustified legal threat,'' 
respectively. In the following definition-by-definition analysis, the 
Commission discusses each definition proposed in the NPRM, relevant 
comments not otherwise addressed in the discussion of the corresponding 
substantive provisions of the final rule, and the definitions that the 
Commission is finalizing.\97\
---------------------------------------------------------------------------

    \97\ Because the Commission is adding additional definitions and 
not including one proposed definition, the definitions are 
renumbered in the final rule.
---------------------------------------------------------------------------

2. Definition-by-Definition Analysis
a. Business
    The proposed rule defined ``business'' as ``an individual, 
partnership, corporation, or any other commercial entity that sells 
products or services.'' This term appeared in the proposed definitions 
of ``celebrity testimonial,'' ``consumer review,'' ``consumer 
testimonial,'' and ``officers,'' and in every substantive section of 
the proposed rule. For the following reasons, the Commission adopts the 
definition of ``business'' largely as proposed, with a minor, non-
substantive clarification as described below.
    A trade association commenter noted correctly that the Commission's 
rulemaking authority is limited to acts or practices ``in or affecting 
commerce.'' \98\ It recommended that the Commission insert ``in or 
affecting commerce as defined in section 4 of the Federal Trade 
Commission Act (15 U.S.C. 44)'' in the definition of a ``business.'' 
\99\ The Commission declines to make this modification. An entity that 
is selling products or services is engaging in commerce and, even 
without the commenter's proposed addition, the acts and practices 
covered by the final rule are limited to commercial practices.
---------------------------------------------------------------------------

    \98\ National Federation of Independent Businesses, Cmt. on NPRM 
at 2 (Sept. 12, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0047 (``NFIB Cmt.'').
    \99\ Id.
---------------------------------------------------------------------------

    A consumer advocacy organization commenter argued that the 
definition of a business potentially liable under the proposed rule was 
unduly narrow and should be expanded to include ``advertisers,'' 
``endorsers,'' and ``[a]dvertising agencies, public relations firms, 
review brokers, reputation management companies, and other similar 
intermediaries.'' \100\ However, advertisers, advertising agencies, 
public relations firms, review brokers, reputation management 
companies, and other similar intermediaries all sell products or 
services and are covered by the Commission's definition of 
``business.'' To the extent that an endorser is in the business of 
selling reviews or testimonials, the endorser is covered by the 
definition. The Commission is therefore not making the proposed change.
---------------------------------------------------------------------------

    \100\ TINA Cmt. at 6-7.
---------------------------------------------------------------------------

    A review platform commenter suggested that, to avoid ambiguity, the 
Commission clarify that ``sells products or services'' in the 
definition of ``business'' applies to each of the types of entities 
listed in the definition, not just to ``any other commercial

[[Page 68041]]

entity.'' \101\ The Commission is adopting this recommendation to 
clarify the intended scope of the definition.
---------------------------------------------------------------------------

    \101\ Yelp Cmt. at 3.
---------------------------------------------------------------------------

    For the reasons explained in this section, the Commission is 
finalizing the definition of ``business'' to mean an individual who 
sells products or services, a partnership that sells products or 
services, a corporation that sells products or services, or any other 
commercial entity that sells products or services.
b. Celebrity Testimonial
    The proposed rule defined ``celebrity testimonial'' as ``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.'' The Commission 
is finalizing the definition of this term--which is used in Sec.  
465.2, Fake or False Consumer Reviews, Consumer Testimonials, or 
Celebrity Testimonials--with one modification.
    A trade association commenter said that the definition of a 
celebrity endorsement should be clarified to exclude ``a situation 
where a celebrity or celebrity likeness appears or is used by a 
business as a promotion, without any specific advertising or opinions 
presented.'' \102\ The commenter gave the example of an athlete who 
appears at a business to sign autographs or simply appears, without 
making any statements or representations about the business.\103\ Such 
situations should not be excluded from the scope of the definition 
because a business's use in advertising or promotion of a celebrity or 
a celebrity's image can, even without any additional statements, imply 
that the celebrity has a positive opinion of the business or its 
products or services and therefore constitute a celebrity testimonial. 
However, if consumers would not interpret the celebrity's appearance to 
reflect the celebrity's opinions of, beliefs about, or experiences 
with, a business or its products or services, then the appearance is 
not a testimonial. That issue is thus highly dependent on specific 
facts. Further, to take the commenter's example, it is highly unlikely 
that a celebrity who does nothing more than sign autographs or appear 
at a business could violate Sec.  465.2, because such signings or 
appearances alone would likely not communicate anything to consumers 
about the celebrity's use or experience with a product, service, or 
business.
---------------------------------------------------------------------------

    \102\ NADA Cmt. at 5.
    \103\ Id.
---------------------------------------------------------------------------

    A second trade association asserted that the definition of a 
``celebrity testimonial'' does not give advertisers adequate notice as 
to when a testimonial is a ``celebrity'' testimonial or a ``consumer'' 
testimonial.\104\ The commenter requested that the Commission provide 
further guidance on what constitutes a ``well-known'' individual.\105\ 
Based upon common usage, well-known individuals include those famous in 
the areas of entertainment, such as film, music, writing, or sport, and 
those known to the public for their positions or successes in business, 
government, politics, or religion. Individuals who earn money through 
their work as ``influencers'' are also well known, as are those who 
have been featured in the news or media. More important, whether 
someone is well known does not matter for purposes of rule 
interpretation and enforcement because any provisions that apply to 
celebrity testimonials also apply to consumer testimonials.
---------------------------------------------------------------------------

    \104\ IAB Cmt. at 14.
    \105\ Id.
---------------------------------------------------------------------------

    A business commenter suggested replacing ``a well-known person'' in 
the definition with a ``widely known all-purpose public figure'' or 
``widely known public figure'' for the purpose of ``clarity.'' \106\ It 
said that Black's Law Dictionary defines the term ``all-purpose public 
figure'' to mean ``[s]omeone who achieves such pervasive fame or 
notoriety that he or she becomes a public figure for all purposes and 
in all contexts.'' \107\ To be ``well known,'' one need not have such 
pervasive fame as to be a public figure for all purposes and in all 
contexts. For example, an influencer may be well known to a subset of 
individuals interested in a particular subject. The commenter gave no 
justification for narrowing the definition of a ``celebrity 
testimonial,'' and the Commission declines to do so.
---------------------------------------------------------------------------

    \106\ Family First Life Cmt. at 4-5.
    \107\ Id. at 5. See Black's Law Dictionary (11th ed. 2019).
---------------------------------------------------------------------------

    A public interest research center commenter said that the 
definitions of ``celebrity testimonials'' and ``consumer testimonials'' 
should ``be broadened to explicitly include non-natural persons, such 
as businesses and public sector entities.'' \108\ Although endorsements 
by such organizations are addressed in the Commission's Endorsement 
Guides,\109\ the Commission did not intend for any provision using the 
term ``testimonials'' to apply to endorsements by entities. To clarify 
that the Commission does not intend for any provision using the term 
``testimonials'' to apply to endorsements by entities, the Commission 
is substituting the word ``individual'' for the word ``person'' 
wherever the word appeared in the Commission's original proposal.\110\ 
The only section of the rule that applies to endorsements by entities 
or purported entities is Sec.  465.6, which addresses company-
controlled review websites or entities. However, Sec.  465.6 does not 
apply to consumer or celebrity testimonials.
---------------------------------------------------------------------------

    \108\ Electronic Privacy Information Center, Cmt. on NPRM at 3 
(Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0111 (``EPIC Cmt.'').
    \109\ See Fed. Trade Comm'n, Guides Concerning Use of 
Endorsements and Testimonials in Advertising (``Endorsement 
Guides''), 16 CFR 255.4.
    \110\ The Commission is using the term ``individual'' in the 
context of this rule to mean a single human being. See Individual 
(def. 1), Dictionary.com, LLC, https://www.dictionary.com/browse/individual (last visited July 5, 2024) (defining ``individual'' as 
``a single human being, as distinguished from a group''). The 
Commission notes that, in the context of a different rulemaking, it 
has proposed defining ``individual'' to mean ``a person, entity, or 
party, whether real or fictitious, other than those that constitute 
a business or government'' under 16 CFR 461. See Fed. Trade Comm'n, 
Trade Regulation Rule on Impersonation of Government and Businesses, 
89 FR 15072, 15083 (Mar. 1, 2024).
---------------------------------------------------------------------------

c. Clear and Conspicuous
    The proposed rule defined ``clear and conspicuous'' to mean ``that 
a required disclosure is easily noticeable (i.e., difficult to miss) 
and easily understandable,'' including in eight enumerated ways, 
listing proposed requirements for ``any communication that is solely 
visual or solely audible,'' ``[a] visual disclosure,'' ``[a]n audible 
disclosure,'' and ``any communication using an interactive electronic 
medium,'' and providing, inter alia, that such disclosures ``must use 
diction and syntax understandable to ordinary consumers,'' ``must 
appear in each language in which the representation that requires the 
disclosure appears,'' and ``must not be contradicted or mitigated by, 
or inconsistent with, anything else in the communication.'' Based on 
the following, the Commission is finalizing the definition of this 
term--which is used in Sec.  465.5, Insider Consumer Reviews and 
Consumer Testimonials--with one modification.
    A trade association commenter suggested not using the terms 
``diction'' and ``syntax'' in the definition because many of those 
subject to the rule ``may not know the meaning of th[os]e words.'' 
\111\ The commenter suggested replacing them with ``words'' and

[[Page 68042]]

``grammar.'' \112\ ``Diction'' means the choice and use of words.\113\ 
``Syntax'' involves the arrangement of words and phrases and is a 
subset of grammar.\114\ The Commission believes that the meaning of 
``diction'' and ``syntax'' are sufficiently clear.
---------------------------------------------------------------------------

    \111\ NFIB Cmt. at 2.
    \112\ Id.
    \113\ See Diction (def. 2), Merriam-Webster.com Dictionary, 
https://www.merriam-webster.com/dictionary/diction (last visited 
July 5, 2024) (defining ``diction'' as the ``choice of words 
especially with regard to correctness, clearness, or 
effectiveness'').
    \114\ See Syntax (defs. 1a, 1b), Merriam-Webster.com Dictionary, 
https://www.merriam-webster.com/dictionary/syntax (last visited July 
5, 2024) (defining ``syntax'' as the ``the way in which linguistic 
elements (such as words) are put together to form constituents (such 
as phrases or clauses)'' and as ``the part of grammar dealing with 
this'').
---------------------------------------------------------------------------

    One trade association commenter asserted that it is unnecessary to 
have a definition of ``clear and conspicuous'' because the ``phrase . . 
. has a meaning under FTC jurisprudence.'' \115\ The definition is 
based on that jurisprudence and decades of Commission experience 
policing deceptive and unfair conduct. The Commission believes it is 
both helpful and necessary that the rule provides more explicit 
guidance on what does and does not constitute a clear and conspicuous 
disclosure.
---------------------------------------------------------------------------

    \115\ ANA Cmt. at 11.
---------------------------------------------------------------------------

    Several commenters asserted that the proposed definition was overly 
prescriptive and not sufficiently flexible.\116\ The Commission 
disagrees and reiterates that the definition contains basic, common-
sense principles, such as requiring visual disclosures in a size 
consumers can see and audible disclosures at a volume they can hear. 
The definition merely provides a baseline and provides a great deal of 
flexibility in what a disclosure should say and how it appears. The 
basic, enumerated requirements are necessary for a disclosure to be 
effective.
---------------------------------------------------------------------------

    \116\ IAB Cmt. at 14; U.S. Chamber of Commerce, Cmt. on NPRM at 
7-8 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0087 (``Chamber of Commerce Cmt.''); National Retail 
Federation, Cmt. on NPRM at 10 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0090 (``NRF Cmt.'').
---------------------------------------------------------------------------

    Two commenters objected to the requirement that internet 
disclosures be ``unavoidable,'' an objective standard that depends on 
whether consumers could have avoided the disclosure, which, per the 
definition is the case when ``a consumer must take any action, such as 
clicking on a hyperlink or hovering over an icon, to see'' the 
disclosure.\117\ The commenters do not believe that a disclosure has to 
be unavoidable for it to be effective; they noted that a staff business 
guidance document, issued in 2000 and updated in 2013, allowed for the 
possibility that avoidable disclosures, e.g., those available through a 
hyperlink, could be clear and conspicuous.\118\ The Commission believes 
that a disclosure is not effective when it is not seen or heard, 
including when the reason for it not being seen or heard is its 
avoidability. The staff guidance said that ``[d]isclosures that are an 
integral part of a claim or inseparable from it should not be 
communicated through a hyperlink,'' and the purported independence and 
objectivity of a reviewer or testimonialist is often integral.\119\ 
Further, some readers misunderstood the staff guidance about the 
necessity of properly labeling hyperlinks to convey the ``importance, 
nature, and relevance of the information'' to which the hyperlinks 
lead. The staff guidance said that, to be effective, the label of the 
hyperlink might need to give the essence of the disclosure, with the 
hyperlink leading to the details.\120\ Even had these qualifications 
been absent, the Commission is not bound by the 2013 staff business 
guidance, which is currently under review in light of an evolution of 
views over time regarding online disclosures and avoidability.\121\
---------------------------------------------------------------------------

    \117\ IAB Cmt. at 14; Chamber of Commerce Cmt. at 8.
    \118\ Id.
    \119\ Fed. Trade Comm'n, .com Disclosures: How to Make Effective 
Disclosures in Digital Advertising at 10 (Mar. 2013), https://www.ftc.gov/system/files/documents/plain-language/bus41-dot-com-disclosures-information-about-online-advertising.pdf.
    \120\ Id. at 11. (``Although the label itself does not need to 
contain the complete disclosure, it may be necessary to incorporate 
part of the disclosure to indicate the type and importance of the 
information to which the link leads.'')
    \121\ See Press Release, Fed. Trade Comm'n, FTC Looks to 
Modernize Its Guidance on Preventing Digital Deception (June 3, 
2022), https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-looks-modernize-its-guidance-preventing-digital-deception.
---------------------------------------------------------------------------

    One commenter asked whether a disclosure in the first line of a 
product review would be considered unavoidable.\122\ For the purposes 
of this rule, the Commission would consider such a disclosure to be 
unavoidable. A different commenter expressed concern that the 
requirement that a disclosure ``stand out'' would require new 
formatting techniques for companies hosting reviews and preclude a 
disclosure from being in the review itself.\123\ For the purposes of 
this rule, the Commission would consider a disclosure at the beginning 
of a text-only consumer review to ``stand out.''
---------------------------------------------------------------------------

    \122\ Trustpilot Cmt. at 14. The same commenter also raised 
concerns about the applicability of the definition to ratings and 
aggregate ratings. Id. That is issue is discussed below in the 
discussion of the corresponding substantive rule provision. See 
infra section IV.E.6 of this document.
    \123\ NRF Cmt. at 10.
---------------------------------------------------------------------------

    A trade association said that ``the average social media user is 
familiar with where text is found in any given social media post, and 
social media platforms already make text visible against a variety of 
backgrounds'' so ``[r]equiring the endorsement-disclosure text to 
differ from other text is not only impractical, but it could actually 
create confusion for social media users who have grown accustomed to 
viewing all text related to a post in a certain manner.'' \124\ The 
Commission recognizes that, on a social media platform that allows only 
uniform text, it is not possible to have the text of a disclosure 
appear in different text. As with a text-only consumer review, the 
Commission would consider a disclosure at the beginning of such a text-
only testimonial to ``stand out.'' On visual platforms with 
superimposed text, it is quite possible and reasonable to require that 
the text of a disclosure ``stand out.''
---------------------------------------------------------------------------

    \124\ Id. at 11.
---------------------------------------------------------------------------

    One commenter asserted that being ``unavoidable'' and being 
``easily noticed'' are ambiguous concepts.\125\ The Commission 
disagrees. ``Unavoidable'' means that a consumer cannot avoid a 
disclosure such as by failing to click on a link or by failing to 
scroll. ``Easily noticeable'' is a simple and objective standard 
evaluated from the perspective of a reasonable consumer.
---------------------------------------------------------------------------

    \125\ ANA Cmt. at 11.
---------------------------------------------------------------------------

    Two commenters asserted that it would be difficult to make clear 
and conspicuous disclosures required by the proposed rule on a small 
screen.\126\ They did not explain why that would be the case, and the 
Commission does not believe that compliance with the rule's disclosure 
requirement should be difficult on handheld devices.
---------------------------------------------------------------------------

    \126\ IAB Cmt. at 14; NRF Cmt. at 11.
---------------------------------------------------------------------------

    One commenter asserted that, because of the proposed definition of 
clear and conspicuous, ``[t]here is no need for the FTC to determine 
whether the resulting speech is rendered deceptive, untrue, or 
inaccurate.'' \127\ The Commission disagrees. The only substantive 
provision for which the definition is relevant is Sec.  465.5. A 
business would not violate that provision merely by having a disclosure 
that is not clear and conspicuous. Rather, the business would have to 
engage in conduct that would be unfair or deceptive in the absence of a 
clear and conspicuous disclosure (e.g., a corporate officer

[[Page 68043]]

giving a consumer endorsement without disclosing that they are an 
insider). As discussed below, the Commission is finalizing proposed 
Sec.  465.5 with a modification to clarify to clarify that the 
provision is limited to conduct that would violate section 5 of the FTC 
Act.\128\ The same commenter also surmised, based on the similarity of 
the definition of ``clear and conspicuous'' to the definition of the 
same phrase in the Endorsement Guides, that the Commission intends that 
the examples used in the Endorsement Guides would also be examples of 
violative behavior under the rule.\129\ That is not the case. The 
Endorsement Guides address a broader range of conduct than the rule. Of 
the three examples in the Endorsement Guides that illustrate whether 
disclosures are clear and conspicuous, two of them address issues--the 
payment of influencers and implied typicality--not covered by the 
rule.\130\ The third example involves a disclosure that individuals 
appearing in a television ad and giving testimonials are paid 
actors.\131\ Such conduct would not be covered by the rule unless the 
underlying testimonials were fake or false.
---------------------------------------------------------------------------

    \127\ ANA Cmt. at 11.
    \128\ See infra section IV.E.1 of this document.
    \129\ Id.
    \130\ 16 CFR 255.0(g)(9) and (11).
    \131\ 16 CFR 255.0(g)(10).
---------------------------------------------------------------------------

    One commenter, a trade association, stated that it was ``unclear if 
the Commission has considered any social media platform constraints 
with respect to the length of posts (e.g., character and time 
limits),'' and asked (1) whether and how hashtags can meet the ``clear 
and conspicuous'' requirement, (2) whether ```#Ad' is a sufficient 
visual disclosure of a material relationship,'' and (3) that the 
Commission ``provide more examples, including appropriate use of 
hashtags in disclosures, in its final rule.'' \132\ Another trade 
association requested in its comment that the Commission provide 
``visual examples of `insider' endorsement disclosures that the 
Commission finds acceptable.'' \133\ The Commission believes it is not 
difficult to comply with the rule's disclosure requirements in the 
social media context. Depending upon their wording and appearance, 
hashtags can be clear and conspicuous for purposes of the rule. In a 
social media post promoting a brand, it might be sufficient to 
prominently disclose an employee relationship via a hashtag beginning 
with the brand name and followed by the word ``employee.'' Whether 
``#ad'' would be an adequate disclosure would depend on the specific 
context. It could be adequate at the beginning of a social media post 
by the testimonialist, but it would likely be inadequate in a 
television ad or magazine ad featuring the testimonialist. Because the 
only provision for which the definition is relevant is Sec.  465.5, 
which addresses the failure to disclose insider relationships, the 
disclosure could be as simple as the testimonialist describing a 
product as ``my company's'' or ``my wife's company's.''
---------------------------------------------------------------------------

    \132\ Retail Industry Leaders Association, Cmt. on NPRM at 5 
(Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0094 (``RILA Cmt.'').
    \133\ NRF Cmt. at 10.
---------------------------------------------------------------------------

    A commenter asserted that disclosures ``utilizing a social media 
platform's built-in disclosure tool should be . . . at least sufficient 
enough to avoid the risk of penalties under the FTC's rulemaking 
authority.'' \134\ As it has previously said, the Commission supports 
development of effective, built-in disclosure tools but is concerned 
that some of the existing tools lead to inadequate disclosures that are 
too poorly contrasting, fleeting, or small, or may be placed in 
locations where they do not catch the user's attention.\135\ Whether a 
business could be subject to civil penalties for social media posts by 
insiders who utilized a social media platform's built-in disclosure 
tool would depend on whether a court would find that the business met 
the knowledge standard of section 5(m)(1)(A) of the FTC Act.
---------------------------------------------------------------------------

    \134\ Id.
    \135\ Fed. Trade Comm'n, Guides Concerning the Use of 
Endorsements and Testimonials in Advertising, 87 FR 44288, 44290 
(July 26, 2022) (proposing changes to guides and soliciting public 
comment).
---------------------------------------------------------------------------

    A trade association's comment expressed concerns about the proposed 
requirement that ``[i]n 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.'' \136\ The commenter said that ``it is 
unnecessary and duplicative to require video endorsements that include 
visual and audio components to include both visual and audio 
disclaimers,'' and ``requiring an additional visual disclaimer, on top 
of a disclaimer that an endorser may easily include via audio, is 
cumbersome, and restricts companies' marketing capabilities.'' \137\ On 
reflection, in the context of this rulemaking and as to the 
relationships of company insiders, if a communication makes an 
endorsement in only its visual or audio portion, then it should be 
sufficient for a disclosure to appear in the same format as the claim 
that requires the disclosure. On the other hand, if an endorsement is 
conveyed in both the audio and visual portions of a communication, then 
the disclosure should be made in both the audio and visual portions. 
Consumers can watch a video with the sound off or listen to it without 
looking at the screen. The Commission is changing the relevant language 
to, ``[i]n any communication made through both visual and audible 
means, such as a television advertisement, the disclosure must be 
presented in at least the same means as the representation(s) requiring 
the disclosure.'' This change makes the rule less restrictive while 
still accomplishing the Commission's goal of ensuring that consumers 
are fully informed. A different trade association noted that the 
``simultaneous disclosure requirement is confusing and would benefit 
from examples of sufficient simultaneous disclosure.'' \138\ Because 
the Commission is not finalizing the simultaneous disclosure 
requirement contained in the proposed rule, it is not providing further 
guidance on the meaning of simultaneous.
---------------------------------------------------------------------------

    \136\ NRF Cmt. at 11.
    \137\ Id.
    \138\ RILA Cmt. at 5.
---------------------------------------------------------------------------

    The second trade association also asked ``if a social media 
influencer posts a video and discloses verbally in the video that they 
have a brand ambassador relationship with the retailer/brand, is it 
sufficient to display in the text accompanying the posted video some 
written disclosure'' or would the disclosure ``need to be embedded or 
flash across the video itself.'' \139\ The rule does not address or 
apply to an influencer's disclosure of a brand ambassador relationship. 
The rule's only disclosure requirements are in Sec.  465.5 and apply to 
company insiders. Whether a testimonial in a social media post by a 
company insider requires a superimposed textual disclosure depends on 
whether there is an endorsement communicated by the visual portion of 
the post. If there is an endorsement in the visual portion, there would 
need to be a disclosure in the visual portion. If the endorsement is 
communicated only in the audio portion of the post, there would not 
need to be a disclosure in the visual portion.
---------------------------------------------------------------------------

    \139\ Id.
---------------------------------------------------------------------------

d. Consumer Review
    The proposed rule defined ``consumer review'' as ``a consumer's 
evaluation, or a purported consumer's evaluation, of a product, 
service, or business that is

[[Page 68044]]

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.'' The proposed definition also noted that, 
for the purposes of the rule, consumer reviews include consumer ratings 
regardless of whether they include any text or narrative. The 
Commission has determined to finalize the definition of this term--
which is used in Sec. Sec.  465.2 through 465.6--with a minor, 
technical change.
    A comment from a review platform supported the proposed definition, 
calling it ``particularly clear and holistic.'' \140\
---------------------------------------------------------------------------

    \140\ Trustpilot Cmt. at 8.
---------------------------------------------------------------------------

    A comment from an individual asserted that the ``definition of 
`consumer' implies an individual who purchased the product for their 
own use'' and that when a ``product is provided by the company seeking 
a review, for the purposes of it being reviewed, the reviewer is 
arguably not a consumer.'' \141\ The Commission disagrees that a 
``consumer'' is necessarily a purchaser. For purposes of the rule, a 
consumer is a person who purchased, used, or otherwise had experience 
with a product, service, or business.
---------------------------------------------------------------------------

    \141\ Anonymous 2 Cmt. at 1.
---------------------------------------------------------------------------

    A trade association commenter suggested deleting the definition's 
element that a consumer review be ``published.'' \142\ It said that a 
``consumer review should still be considered a `review' before it is 
publicly displayed by a website or platform.'' \143\ Although that may 
be true for some purposes, the Commission declines to make that change. 
A consumer review that is submitted to a website or platform but never 
published does not in and of itself deceive consumers, although the 
failure to publish a review may be deceptive pursuant to paragraphs 
(a)(1) and (b) of Sec.  465.7. Paragraphs (a)(1) and (b) of Sec.  465.7 
are worded in a way that does not limit their application to published 
reviews, because they relate to suppressed reviews.
---------------------------------------------------------------------------

    \142\ IAB Cmt. at 13-14.
    \143\ Id.
---------------------------------------------------------------------------

    A comment from a consumer advocacy organization suggested deleting 
the portion of the definition that refers to publication to a website 
or platform ``dedicated in whole or in part to receiving and displaying 
such evaluations.'' \144\ It asked whether the definition would ``only 
apply to reviews on a website `dedicated' to posting reviews, such as 
Yelp'' and whether ``it include[s] any website where reviews are 
possibly posted, like Reddit?'' \145\ The commenter continued, ``Would 
a website be excluded if only a very small portion of the website 
contained consumer evaluations?'' \146\ The commenter asserted that 
``[a]ll fake reviews and ratings that are used to market a product or 
service should be captured in the . . . Rule--no matter where they are 
posted.'' \147\ The definition is not limited to consumer reviews on 
websites that are dedicated entirely to posting such reviews. It would 
also cover reviews on a portion of a website, no matter how small a 
portion, that is dedicated to receiving and displaying such reviews, 
such as a reviews page or the review sections of product pages on a 
retailer's website. The definition would not, however, cover consumer 
statements about products or services on a website or portion of a 
website, such as Reddit, that is not dedicated to receiving and 
displaying reviews. Such free-floating consumer statements are outside 
of the generally understood context in which content is submitted and 
published as reviews. Under some circumstances, such statements might 
be considered ``consumer testimonials,'' such as when an advertiser has 
paid for them.
---------------------------------------------------------------------------

    \144\ TINA Cmt. at 7.
    \145\ Id.
    \146\ Id.
    \147\ Id.
---------------------------------------------------------------------------

    A comment from a review platform raised two issues with the 
``consumer review'' definition.\148\ It said that ``[b]are ratings 
provide no context, making them virtually useless for other consumers 
or to businesses that might use consumer feedback to improve their 
services'' and suggested that ``the Commission differentiate between 
reviews and ratings.'' \149\ The fact that bare ratings do not provide 
context does not mean that consumers do not rely on them or on 
aggregate ratings that include bare ratings. The Commission does not 
see a reason to distinguish between reviews and ratings for the 
purposes of the rule, and the commenter did not provide such a reason. 
The same commenter also expressed ``concern[ ] with the definition's 
use of the word `purported[,]' . . . which has a negative connotation 
that feeds into the false narrative that consumer reviews are 
inherently unreliable'' and suggested replacing ``purported'' with 
different language.\150\ The definition simply recognizes and accounts 
for the undisputed fact that some reviews are fake. Just because some 
reviews are unreliable does not suggest that reviews are generally 
unreliable. The Commission declines to adopt this recommendation.
---------------------------------------------------------------------------

    \148\ Yelp Cmt. at 3-4.
    \149\ Id.
    \150\ Id. at 4.
---------------------------------------------------------------------------

    To conform with the Office of the Federal Register's drafting 
requirements, the Commission is changing a reference to ``this Rule'' 
to ``this part.'' \151\
---------------------------------------------------------------------------

    \151\ The Commission is making this change throughout the rule, 
including in Sec. Sec.  465.2(a), (b), and (c), 465.4, 465.5(a), 
465.6, 465.7, 465.8, and 465.9.
---------------------------------------------------------------------------

e. Consumer Testimonial
    The proposed rule defined ``consumer testimonial'' as ``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.'' The Commission is 
finalizing the definition of the term--which is used in Sec. Sec.  
465.2 and 465.5--as originally proposed.
    A trade association commenter expressed concern that consumers 
seeing a clearly dramatized television commercial might unreasonably 
believe that the actors' scripted lines actually reflected their 
opinions, beliefs, or experiences and could therefore be considered 
consumer testimonials.\152\ It suggested clarifying the definition by 
inserting ``reasonably in the circumstances'' after ``that consumers 
are likely to believe.'' \153\ The Commission agrees that it would not 
be reasonable for viewers to consider ``an obviously fictional 
dramatization'' to be an endorsement.\154\ The Commission does not, 
however, believe it is necessary to modify the definition. The concept 
of ``reasonable consumers'' from FTC jurisprudence \155\ is 
incorporated into the concept of consumers being likely to believe 
something.
---------------------------------------------------------------------------

    \152\ NFIB Cmt. at 2-3.
    \153\ Id. at 4.
    \154\ See Endorsement Guides, 16 CFR 255.0(g)(2).
    \155\ See, e.g., Fed. Trade Comm'n, FTC Policy Statement on 
Deception, 103 F.T.C. 174, 176-77 (1984) [hereinafter FTC Policy 
Statement on Deception] (appended to In re Cliffdale Assocs., Inc., 
103 F.T.C. 110 (1984)), available at https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
---------------------------------------------------------------------------

    The same public interest research center that commented, as 
discussed above, that the Commission should broaden the definition of 
``celebrity testimonials'' to explicitly include non-natural persons 
(such as businesses and

[[Page 68045]]

public sector entities) \156\ made the same comment with respect to the 
definition of ``consumer testimonials.'' \157\ The Commission declines 
to make that change in the latter definition for the same reason it 
declined to make it in the former definition.
---------------------------------------------------------------------------

    \156\ See supra Section IV.A.2.b of this document.
    \157\ EPIC Cmt. at 3.
---------------------------------------------------------------------------

f. Indicators of Social Media Influence
    The proposed rule defined ``indicators of social media influence'' 
as ``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.'' For the following reasons, the Commission adopts the 
definition of ``indicators of social media influence''--a term which is 
used in Sec.  465.8, Misuse of Fake Indicators of Social Media 
Influence--largely as proposed, with one modification described below.
    A comment from a consumer advocacy organization suggested 
explicitly including ``Saves'' and ``Shares'' within the definition of 
indicators of social media influence.'' \158\ The commenter explained 
that the number of times that social media posts are saved or shared 
serves as indicators of social media influence and that both ``Saves'' 
and ``Shares'' are offered for sale on the internet.\159\ Because the 
NPRM proposed to define the term as ``any metrics used by the public to 
make assessments of an individual's or entity's social media 
influence,'' ``Saves'' and ``Shares'' were already covered by the 
definition as originally proposed. However, merely for the purpose of 
clarification, the Commission is adding them to the listed examples of 
indicators. The same commenter also suggested that the Commission 
expand the definition to include engagement metrics that are not 
publicly visible but that are used to gain an algorithmic 
advantage.\160\ Such non-visible indicators are outside the scope of 
this rulemaking, and the Commission chooses not to address them at this 
time.
---------------------------------------------------------------------------

    \158\ NCL Cmt. at 3.
    \159\ Id. at 3-6.
    \160\ Id. at 6-8.
---------------------------------------------------------------------------

    One review platform commenter suggested that the Commission 
``simplify the definition to exhaustively list the current metrics that 
are such indicators.'' \161\ The commenter continued that ``whether a 
given metric is `used by the public to make assessments of an 
individual's or entity's social media influence' may become the subject 
of substantial dispute in future cases . . . in the absence of an 
exhaustive, disjunctive list of indicators.'' \162\ The Commission 
intends the listed indicators to be examples and non-exhaustive, a 
flexible and efficient approach that avoids having to modify the rule 
when such metrics change. The Commission has no reason to believe that 
its approach will result in substantial disputes in its cases.
---------------------------------------------------------------------------

    \161\ Yelp Cmt. at 4-5.
    \162\ Id. at 5.
---------------------------------------------------------------------------

    For the reasons explained in this section, the Commission is 
finalizing the definition of ``indicators of social media influence'' 
to mean 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, saves, shares, 
reposts, and comments.
g. Officers
    The proposed rule defined ``officers'' as ``including owners, 
executives, and managing members of a business.'' The Commission is 
finalizing the definition of this term--which is used in Sec. Sec.  
465.2 and 465.5.
    A review platform commenter said that including ``managing 
members'' in the definition of ``officers'' ``could suggest that 
managers are officers.'' \163\ The commenter also suggested that the 
definition of ``officers'' ``should be refined to only include `senior 
management members' of a business,'' thereby creating ``a clearer 
distinction between those in a position of leadership versus lower-
level employees, or staff that may have the title `manager' without any 
practical level of control and power to exert influence over others.'' 
\164\
---------------------------------------------------------------------------

    \163\ Trustpilot Cmt. at 12.
    \164\ Id.
---------------------------------------------------------------------------

    Because a ``managing member'' is a commonly understood term 
referring to an owner and senior manager of a limited liability 
company, and because the term does not refer to all ``managers'' of a 
business, the Commission declines to remove ``managing members'' from 
the definition of ``officer.'' As discussed below, the Commission 
continues to believe it appropriate that Sec. Sec.  465.2 and 465.5 
apply to both officers and managers and is therefore not limiting the 
definition of ``officers'' to ``senior management members.'' A new 
definition of ``managers'' is discussed below.\165\
---------------------------------------------------------------------------

    \165\ See infra Section IV.A.3.b of this document.
---------------------------------------------------------------------------

h. Purchase a Consumer Review
    The proposed rule defined ``purchase a consumer review'' as 
``provid[ing] something of value, such as money, goods, or another 
review, in exchange for a consumer review.'' For the following reasons, 
the Commission adopts the definition of ``purchase a consumer 
review''--a term which is used in Sec.  465.2, Fake or False Consumer 
Reviews, Consumer Testimonials, or Celebrity Testimonials--largely as 
proposed, with two modifications described below.
    An individual commenter wrote, ``[r]egarding payment for reviews, 
the use of . . . discounts on future purchases from the business should 
be specifically prohibited as well.'' \166\ A review platform commenter 
suggested ``that the Commission list additional examples of . . . what 
the Commission considers `value.' '' \167\ Specifically, it suggested 
adding ``gift certificates,'' ``services,'' ``discounts,'' ``coupons,'' 
and ``contest entries.'' \168\ Such examples of value were covered by 
the proposed definition, which applies to ``something of value'' 
provided in exchange for a consumer review'' but, for purposes of 
clarification, the Commission is adding these examples of value in the 
final definition. The review platform commenter also suggested adding 
``other incentives,'' \169\ which the Commission thinks is unnecessary, 
given that the list is only exemplary and preceded by the words ``such 
as.''
---------------------------------------------------------------------------

    \166\ John Christofferson, Cmt. on NPRM (Aug. 16, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0025.
    \167\ Yelp Cmt. at 5.
    \168\ Id.
    \169\ Id.
---------------------------------------------------------------------------

    Another review platform commenter suggested using language 
explicitly stating that the listed examples of ``value'' are not 
exhaustive.\170\ The Commission believes that, because the phrase 
``such as'' precedes the list of examples, this is already sufficiently 
clear from the language of the definition.
---------------------------------------------------------------------------

    \170\ Trustpilot Cmt. at 8.
---------------------------------------------------------------------------

    The proposed definition used the term ``goods.'' To ensure that 
terminology is used consistently throughout the rule, the Commission is 
replacing the term ``goods'' with the synonymous word ``products'' in 
the final definition.\171\
---------------------------------------------------------------------------

    \171\ The Commission is also replacing the term ``goods'' with 
the word ``products'' in the final definition of the phrase 
``purchase a consumer review'' (final Sec.  465.1(m)).
---------------------------------------------------------------------------

    For the reasons explained in this section, the Commission is 
finalizing the definition of ``purchase a consumer review'' to mean to 
provide something

[[Page 68046]]

of value, such as money, gift certificates, products, services, 
discounts, coupons, contest entries, or another review, in exchange for 
a consumer review.
i. Reviewer
    The proposed rule defined ``reviewer'' as ``the author or purported 
author of a consumer review.'' The Commission is finalizing the 
definition of the term--which is used in Sec. Sec.  465.2 and 465.5--as 
originally proposed.
    One review platform commenter objected to the use of the word 
``purported'' in the definition of ``reviewer,'' just as it objected to 
that word's inclusion in the definition of ``consumer review.'' \172\ 
The commenter asserted that ``purported'' feeds into the false 
narrative that consumer reviews are inherently unreliable. As discussed 
above, the use of the word ``purported'' simply recognizes and accounts 
for the undisputed fact that some reviews are fake.\173\ The Commission 
declines to modify the definition of ``reviewer.''
---------------------------------------------------------------------------

    \172\ Yelp Cmt. at 4.
    \173\ See supra Section IV.A.2.d of this document.
---------------------------------------------------------------------------

j. Substantially Different Product
    The proposed rule defined ``substantially different product'' as a 
product that differs from another product in one or more material 
attributes other than color, size, count, or flavor. The defined term 
appeared in proposed Sec.  465.3, Consumer Review or Testimonial Reuse 
or Repurposing, which the Commission is no longer planning on 
finalizing.\174\ Given that the Commission has decided not to proceed 
with proposed Sec.  465.3 at this time, it is not including a 
definition of ``substantially different product'' in the final rule.
---------------------------------------------------------------------------

    \174\ Some commenters suggested edits to the definition, such as 
removing ``flavor'' from the list of attributes that might not be 
material, adding other product attributes to that list, or adding 
flexibility by removing the listed attributes altogether. TINA Cmt. 
at 6; Amazon Cmt. at 9-10; Chamber of Commerce Cmt. at 6-7; RILA 
Cmt. at 3; NRF Cmt. at 7-8; IAB Cmt. at 8.; ANA Cmt. at 15-16; NRF 
Cmt. at 8. Other commenters asked questions about how the definition 
would apply to an updated version of a product or to different 
scenarios. Magana Cmt.; NADA Cmt. at 5.
---------------------------------------------------------------------------

k. Testimonialist
    The proposed rule defined ``testimonialist'' as ``the person giving 
or purportedly giving a consumer testimonial or celebrity 
testimonial.'' None of the comments received addressed the definition 
of testimonialist. As already discussed in section IV.A.2.b of this 
document, the Commission is substituting the word ``individual'' for 
the word ``person'' wherever the word appeared in the Commission's 
original proposal. Aside from this minor, clarifying modification, the 
Commission has determined that it will finalize the definition of the 
term--which is used in Sec. Sec.  465.2 and 465.5--as originally 
proposed.
l. Unjustified Legal Threat
    The proposed rule defined ``unjustified legal threat'' 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.'' 
For the following reasons, the Commission adopts the definition--a term 
which is used in Sec.  465.7, Review Suppression--largely as proposed, 
with two modifications described below.
    The NPRM asked whether ``the definition of `unjustified legal 
threat' is sufficiently clear.'' One company's comment said that the 
proposed definition was clear.\175\ A trade association said ``the term 
`unjustified' is a vague standard that leaves unclear what legal 
support a business must have for its legal position before it warns the 
creator of a review of possible legal proceedings.'' \176\ A comment 
from State Attorneys General suggested changing ``unjustified'' to 
``unfounded, groundless, or unreasonable'' in order to provide a more 
objective legal standard for evaluating the types of legal threats that 
are not permitted.\177\ The Commission agrees in part with this 
recommendation. As a clarification of what it intended, the Commission 
is changing ``unjustified'' to ``unfounded or groundless.'' 
Specifically, this change avoids the unintended, potentially broader 
scope of the term ``unjustified,'' which is also freighted with 
subjective considerations, in favor of terms that reflect objective 
legal standards. For similar reasons, the Commission is not adding 
``unreasonable,'' a term which is unnecessary and not as precise in 
this particular situation as ``unfounded or groundless.''
---------------------------------------------------------------------------

    \175\ Transparency Company Cmt. at 14.
    \176\ NFIB Cmt. at 4.
    \177\ State Attorneys General, Cmt. on NPRM at 2-3 (Sept. 29, 
2023), https://www.regulations.gov/comment/FTC-2023-0047-0100 
(``State AGs Cmt.'').
---------------------------------------------------------------------------

    The State Attorneys General comment also recommended that the 
definition include ``a threat to enforce an agreement that is void, 
voidable, or unenforceable.'' \178\ It said that the word 
``unjustified'' may be insufficient to address merchants arguing that 
their legal threats were justified by their non-disclosure agreements 
that limit consumer reviews.\179\ The change from ``unjustified'' to 
``unfounded or groundless'' addresses this concern. A comment from a 
review platform suggested that the Commission expand the definition to 
include threats based on form contracts that violate the Consumer 
Review Fairness Act (``CRFA'').\180\ Given that such form contracts are 
already prohibited by the CRFA,\181\ the Commission declines to address 
them in this rulemaking.
---------------------------------------------------------------------------

    \178\ Id. at 2.
    \179\ Id. at 3.
    \180\ Yelp Cmt. at 5.
    \181\ Consumer Review Fairness Act of 2016 Sec.  2(b)(1), 15 
U.S.C. 45b(b)(1).
---------------------------------------------------------------------------

    A consumer group's comment disagreed with the definition's use of 
the phrase ``baseless legal action'' on the basis that it ``open[s] 
just as many questions as the underlying term it attempts to define.'' 
\182\ A company's comment noted that the phrase ``a baseless legal 
action'' is vague, and recommend that the Commission instead adopt 
language that is based upon Rule 11(b)(2) of the Federal Rules of Civil 
Procedure.\183\ Specifically, the commenter recommended changing ``a 
baseless legal action'' to ``a legal action that is not warranted by 
existing law or a nonfrivolous argument for extending, modifying, or 
reversing existing law or establishing new law.'' \184\
---------------------------------------------------------------------------

    \182\ Consumer Reports Cmt. at 10.
    \183\ Family First Life Cmt. at 16.
    \184\ Id.
---------------------------------------------------------------------------

    The Commission is partially adopting the commenter's suggestion by 
adopting language that is loosely based upon Federal Rule of Civil 
Procedure 11(b)(2) and (3).\185\ However, the Commission is not 
adopting the phrase ``extending, modifying, or reversing existing law 
or establishing new law'' because it is highly doubtful that companies 
would threaten consumers by asserting that, while no lawsuit is 
warranted under existing law, they will bring a lawsuit anyway and try 
to change existing law. Instead, the Commission chooses to clarify the 
definition by changing ``threat to file a baseless legal action'' to 
``legal threat based on claims, defenses, or other legal contentions 
unwarranted by existing law or based on factual contentions that have 
no evidentiary support or will likely have no evidentiary support after 
a reasonable opportunity for further investigation or discovery.''
---------------------------------------------------------------------------

    \185\ See Fed. R. Civ. P. 11(b)(2) and (3).
---------------------------------------------------------------------------

    A review platform commenter was concerned that the proposed 
definition's ``wording opens the door to bad actors being able to claim 
defamation on weakly justified grounds and to seek to game the system 
by deliberately constructing legal terms which can then be deployed to 
suppress reviews.'' \186\ The Commission believes that the revised 
definition addresses this

[[Page 68047]]

concern, especially given its inclusion of language from Federal Rule 
of Civil Procedure 11(b)(2) and (3), which is intended to avoid such 
misuse of the court system. In any event, the Commission is deleting 
``such as an action for defamation that challenges truthful speech or 
matters of opinion'' because this example is unnecessary and possibly 
confusing in this context.
---------------------------------------------------------------------------

    \186\ Trustpilot Cmt. at 17-18.
---------------------------------------------------------------------------

    For the reasons explained in this section, the Commission is 
adopting the proposed definition of an ``unfounded or groundless legal 
threat'' with clarifying changes. The final definition provides that an 
``unfounded or groundless legal threat'' is a legal threat based on 
claims, defenses, or other legal contentions unwarranted by existing 
law or based on factual contentions that have no evidentiary support or 
will likely have no evidentiary support after a reasonable opportunity 
for further investigation or discovery.
3. Proposed Additional Definitions
    In Question 7 of the NPRM, the Commission asked what additional 
definitions, if any, are needed. In Questions 14 and 18 of the NPRM, 
the Commission asked whether it should define the terms ``managers'' 
and ``relatives,'' respectively. As discussed below, various commenters 
suggested that the Commission define the following terms and phrases 
that appear in the proposed rule: ``dissemination,'' ``manager,'' 
``relative,'' and ``purchase or procure fake indicators.'' One 
commenter suggested that the Commission define ``review hosting'' and 
exclude it from the scope of Sec.  465.2.\187\
---------------------------------------------------------------------------

    \187\ As discussed below in Section IV.H. of this document, the 
Commission is adding definitions of two phrases in response to 
concerns raised by commenters: ``fake indicators of social media 
influence'' and ``distribute fake indicators of social media 
influence.''
---------------------------------------------------------------------------

a. Dissemination
    The term ``disseminate'' appears in both proposed and final 
Sec. Sec.  465.2 and 465.5. A comment from a trade association stated 
that the Commission should define ``disseminate'' ``within Proposed 
Sec.  465.2(b) to include only the affirmative posting or intentional 
distribution of reviews, where a company has actual knowledge that the 
reviews are false or fraudulent in nature.'' \188\ The commenter 
continued by saying that ``disseminate'' should ``not include passive 
actions such as allowing a review to be posted or published on a 
company's web page, unless the company has actual knowledge that the 
review is false or fraudulent in nature'' or ``retailers sharing 
reviews with third-party platforms such as Google.'' \189\ Within both 
Sec. Sec.  465.2 and 465.5, however, ``disseminate'' applies only to 
testimonials, not to consumer reviews. One of the basic canons of 
statutory and regulatory construction is that words are to be 
understood in their ordinary, everyday meanings--unless the context 
indicates that they bear a technical sense.\190\ In Sec. Sec.  465.2 
and 465.5, the Commission intended for the term to have its ordinary, 
everyday meaning--that is, to spread or to convey something, rather 
than the proposed definition.\191\ Accordingly, the Commission declines 
to add the proposed definition.
---------------------------------------------------------------------------

    \188\ NRF Cmt. at 3.
    \189\ Id. at 3-4. The Commission elsewhere addresses whether 
Sec.  465.2 applies to a business allowing reviews to be posted or 
published on its web page or to retailers sharing reviews with 
third-party platforms. See infra Section IV.B.5 of this document.
    \190\ See, e.g., Kouichi Taniguchi v. Kan Pac. Saipan, Ltd., 566 
U.S. 560, 566 (2012); Tanzin v. Tanvir, 592 U.S. 43, 48 (2020) 
(``Without a statutory definition, we turn to the phrase's plain 
meaning at the time of enactment.''); Lamar, Archer & Cofrin, LLP v. 
Appling, 584 U.S. 709, 715 (2018) (``Because the Bankruptcy Code 
does not define the words `statement,' `financial condition,' or 
`respecting,' we look to their ordinary meanings.'').
    \191\ Disseminate, Dictionary.com, LLC, https://www.dictionary.com/browse/disseminate (last visited July 5, 2024) 
(defining ``disseminate'' as ``to scatter or spread widely, as 
though sowing seed; promulgate extensively; broadcast; disperse''); 
Disseminate, Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/disseminate (last visited July 5, 2024) 
(defining ``disseminate'' as ``to spread abroad as though sowing 
seed'' or ``to disperse throughout''); Disseminate, Cambridge 
Dictionary, https://dictionary.cambridge.org/us/dictionary/english/disseminate (last visited July 5, 2024) (defining ``disseminate'' as 
``to spread or give out something, especially news, information, 
ideas, etc., to a lot of people'').
---------------------------------------------------------------------------

b. Manager
    The term ``manager'' appeared in proposed Sec.  465.5, Insider 
Consumer Reviews and Consumer Testimonials, and was undefined. Due to 
the clarifying changes to Sec.  465.2 that are discussed in further 
detail below, the term is now included in both final Sec.  465.5 and 
final Sec.  465.2, Fake or False Consumer Reviews, Consumer 
Testimonials, or Celebrity Testimonials.
    One business commenter noted that it is unnecessary to define 
``manager.'' \192\ An industry organization wrote in its comment that 
the failure to define the term ``manager'' ``raises concerns about the 
number of a firm's employees impacted.'' \193\ A review platform 
commenter said that using the term ``manager'' without any definition 
is particularly problematic,\194\ noting that someone ``may have the 
title `manager' without any practical level of control and power to 
exert influence over others. For example, it is possible in a business 
for a person to have the title `manager' while holding a relatively 
junior position and without having any employees that directly report 
to them.'' \195\ Proposed and final Sec.  465.5(c) address ``managers'' 
soliciting or demanding consumer reviews from employees or agents. In 
this context, the Commission's intent was for the term ``manager'' to 
be limited to those who supervise others. Thus, the Commission is 
adopting a definition for the term ``manager'' to make this 
clarification, which will ensure that Sec.  465.5(c) is not interpreted 
as more restrictive than the Commission intended.\196\
---------------------------------------------------------------------------

    \192\ Transparency Company Cmt. at 13.
    \193\ TechNet Cmt. at 3.
    \194\ Trustpilot Cmt. at 9.
    \195\ Id. at 12.
    \196\ If the term were only to appear in Sec.  465.2(c), such a 
clarification would not be needed. This is because Sec.  465.2(c) 
also covers employees and agents.
---------------------------------------------------------------------------

    A business commenter that operates in the insurance-marketing space 
explained that independent-contractor insurance agents who build their 
own agencies are referred to as ``managers'' and asked that the 
definition of ``managers'' expressly carve out ``managers in the 
insurance marketing space'' or at least clarify that managers are those 
``who are employed by the company.'' \197\ As similar situations may 
arise in other contexts, the Commission is adopting the commenter's 
latter recommendation, and clarifying that managers are employees of 
the businesses.
---------------------------------------------------------------------------

    \197\ Family First Life Cmt. at 13.
---------------------------------------------------------------------------

    For the reasons explained in this section, the final rule adopts a 
definition for the term ``manager.'' The final rule defines the term 
``manager'' as an employee of a business who supervises other employees 
or agents and who either holds the title of a ``manager'' or otherwise 
serves in a managerial role.
c. Relative
    The term ``relative'' appeared in proposed Sec.  465.5, Insider 
Consumer Reviews and Consumer Testimonials. It was undefined in the 
proposed rule.
    Two commenters suggested that the Commission define the term 
``relative.'' A comment from a review platform said that a plain 
reading of ``relative'' could cover ``an extremely broad range of 
people'' and ``is likely to extend to persons who may not be biased 
since they are in reality not close to the

[[Page 68048]]

business.'' \198\ The commenter suggested that the prohibition in Sec.  
465.5(c) be limited to close relatives such as immediate family 
members.\199\ A comment from a business organization said that the term 
``relative'' is too vague and that ``[i]t is unclear whether the rule 
applies to third cousins, the spouses of a stepbrother's child from a 
previous marriage, or friends that are considered family.'' \200\ The 
commenter continued that ``[l]arge companies creating monitoring 
programs for testimonials need some clarity about what relatives will 
be captured under the Rule.'' \201\
---------------------------------------------------------------------------

    \198\ Trustpilot Cmt. at 12.
    \199\ Id.
    \200\ Chamber of Commerce Cmt. at 7.
    \201\ Id.
---------------------------------------------------------------------------

    As discussed below, the Commission believes that some rule 
provisions should be limited to ``immediate relatives.'' \202\ The 
Commission is adding a definition of an ``immediate relative,'' which 
clarifies that the term refers to a spouse, parent, child, or sibling. 
In the final rule, the term ``immediate relative'' is used in 
Sec. Sec.  465.2(c) and 465.5(c).
---------------------------------------------------------------------------

    \202\ See infra Section IV.E.2 of this document.
---------------------------------------------------------------------------

d. Purchase or Procure Fake Indicators
    The phrase ``purchase or procure fake indicators of social media 
influence'' is used in proposed and final Sec.  465.8, Misuse of Fake 
Indicators of Social Media Influence. The phrase was undefined in the 
proposed rule.
    A consumer advocacy commenter stated that leaving the terms 
``purchase'' and ``procure'' undefined ``leaves ambiguity regarding 
which types of incentives are restricted,'' and suggested defining the 
phrase ``purchase or procure fake indicators of social media 
influence'' to mean ``to provide something of value, such as money, 
goods, or another indicator of social media influence (i.e.[,] a 
`like'), in exchange for a fake indicator of social media influence.'' 
\203\ The Commission declines to adopt the commenter's suggestion.\204\ 
The definition proposed by the commenter would unnecessarily narrow the 
types of actions that would be covered by the rule to an exchange. In 
the final rule, the Commission intends for the term ``procure'' to bear 
its ordinary, everyday meaning--that is, to obtain something.\205\ Even 
if there is any ambiguity in the term ``purchase,'' any exchange of 
value in order to obtain fake indicators of social media influence 
would be ``procuring'' the fake indicators.
---------------------------------------------------------------------------

    \203\ Consumer Reports Cmt. at 4.
    \204\ Commenters also expressed concern about or sought guidance 
on the meaning of the term ``procure'' as used in proposed Sec.  
465.2(c), but they did not expressly suggest that the Commission 
define the term. The use of the term ``procure'' in Sec.  465.2 is 
discussed below in the context of that substantive provision. See 
infra Section IV.B.4 of this document.
    \205\ See Procure (def. 1), Merriam-Webster.com Dictionary, 
https://www.merriam-webster.com/dictionary/procure (last visited 
July 5, 2024) (establishing that the word ``procure'' means, among 
other things, ``to get possession of (something)'' or ``to obtain 
(something) by particular care and effort'').
---------------------------------------------------------------------------

e. Review Hosting
    A retailer submitted a comment suggesting that ``review hosting'' 
be defined and excluded from the scope of Sec.  465.2.\206\ The 
commenter suggested the following definition:
---------------------------------------------------------------------------

    \206\ Amazon Cmt. at 7. As discussed below, other commenters 
also argued that Sec.  465.2 should not apply to merely hosting 
reviews. See infra section IV.B.5 of this document.

    Review hosting includes but is not limited to activity 
associated with maintaining a repository of consumer reviews and 
testimonials for display such as: offering review submission 
functionality, collecting and moderating reviews, organizing and 
displaying reviews, aggregating reviews into star ratings, and 
providing guidance to consumers about how to leave reviews where no 
incentive is offered.\207\
---------------------------------------------------------------------------

    \207\ Id. at 7.

    As discussed below, the Commission did not intend for its proposal 
to apply to simply hosting consumer reviews.\208\ The Commission is 
therefore, for the purpose of clarification, adopting a definition of 
the term ``consumer review hosting'' in order to exclude mere review 
hosting from certain provisions of the rule. The Commission is not 
adopting the commenter's proposed definition because it included 
activities that go beyond the core of mere review hosting and because 
it begins with the phrase ``include but is not limited to,'' which 
would allow it to include an unknown, larger category of activities. 
The final rule defines ``consumer review hosting'' as providing the 
technological means by which a website or platform allows consumers to 
see or hear the consumer reviews that consumers have submitted to the 
website or platform. The exclusion of ``consumer review hosting'' from 
certain sections of the rule is discussed below.
---------------------------------------------------------------------------

    \208\ See infra section IV.B.5 of this document.
---------------------------------------------------------------------------

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

    Proposed Sec.  465.2 addressed fake or false consumer reviews, 
consumer testimonials, and celebrity testimonials. Based on the 
following, the Commission has determined to finalize these 
prohibitions, with a number of revisions. The following paragraphs 
discuss comments relating to (1) proposed Sec.  465.2 generally, (2) 
common language in all three paragraphs, (3) the individual paragraphs, 
4) the knowledge standard, and (5) other potential requirements.
    Numerous individual commenters wrote about the importance of 
authentic reviews or testimonials and that fake or false ones should be 
prohibited.\209\ A technology company commenter wrote that it ``would 
welcome rules to prohibit fake reviews and place stronger obligations 
on businesses who host them to better protect consumers.'' \210\
---------------------------------------------------------------------------

    \209\ See, e.g., William Hardy, Cmt. on NPRM (July 31, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0002; Eric Beback, 
Cmt. on NPRM (Aug. 1, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0005 (``Beback Cmt.''); Hippensteel Cmt.; Anderson 
Cmt.; Nathan Wilson, Cmt. on NPRM (Aug. 2, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0008; fred foreman, Cmt. 
on NPRM (Aug. 6, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0012; Ravnitzky Cmt. at 1; Fribance Cmt.; Ian wolk, Cmt. 
on NPRM (Aug. 15, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0020; Edborg Cmt.; Anonymous 5, Cmt. on NPRM (Aug. 18, 
2023), https://www.regulations.gov/comment/FTC-2023-0047-0030; 
Anonymous 1 Cmt.; Steven Osburn, Cmt. on NPRM (Aug. 22, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0033 (``Osburn 
Cmt.''); Ludlam Cmt.; Janette Ponticello, Cmt. on NPRM (Sept. 5, 
2023), https://www.regulations.gov/comment/FTC-2023-0047-0042; 
Hannah Abbott, Cmt. on NPRM at 1 (Sept. 20, 2023),  https://www.regulations.gov/comment/FTC-2023-0047-0051 (Abbott Cmt.).
    \210\ Pasabi, Cmt. on NPRM at 2 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0103.
---------------------------------------------------------------------------

    A celebrity commenter wrote that he had ``received more than 100 
emails from consumers who have been induced to purchase fake products 
through the mis-use of . . . [his] image and the images of other Shark 
Tank `sharks.' '' \211\
---------------------------------------------------------------------------

    \211\ Mark Cuban, Cmt. on NPRM (Sept. 25, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0066.
---------------------------------------------------------------------------

    A business commenter suggested explaining the ``financial 
consequence of fake reviews,'' such as whether it is ``~$50,000 per 
fake review.'' \212\ The maximum civil penalty is currently $51,744 per 
violation, but courts must take into account the statutory factors set 
forth in section 5(m)(1)(C) of the FTC Act and may impose much lower 
per-violation penalties.\213\ Ultimately, courts will also decide how 
to calculate the number of violations in a given case.
---------------------------------------------------------------------------

    \212\ Transparency Company Cmt. at 9.
    \213\ See 15 U.S.C. 45(m)(1)(C).
---------------------------------------------------------------------------

1. Common Language in Sec.  465.2(a), (b), and (c)
    Proposed Sec.  465.2 consisted of three paragraphs, each of which 
sought to address unfair or deceptive conduct by

[[Page 68049]]

prohibiting specified types of reviews or testimonials: (1) by someone 
who ``does not exist,'' (2) by someone ``who did not use or otherwise 
have experience with the product, service, or business that is the 
subject'' of it, or (3) ``that materially misrepresents, expressly or 
by implication, the [person's] . . . experience with the product, 
service, or business.'' For the purpose of the following discussion, 
references to ``fake or false'' reviews or testimonials cover these 
three types of reviews or testimonials.
    A trade association asserted that the Commission lacked sufficient 
evidence of prevalence of reviews and testimonials that ``materially 
misrepresent[ ] . . . the reviewer's or testimonialist's experience.'' 
\214\ The trade association asserted that some of the cases cited by 
the Commission also involved ``actual fake reviews'' and therefore 
should not count as evidence of prevalence.\215\ The Commission 
disagrees: a fake or fabricated review misrepresents the purported 
reviewer's experience (e.g., that the reviewer used the product and 
what their experience was). The commenter also asserted that five of 
the cases cited by the Commission to establish prevalence ``provide no 
additional details about the unfair or deceptive act or practice at 
issue aside from bare allegations that the consumer testimonials in the 
case involved misrepresentations of the consumer's experience,'' and 
therefore are insufficient to establish prevalence.\216\ However, the 
quoted representations in each of the Commission's complaints makes 
clear the nature of the misrepresentations.\217\ Furthermore, even if a 
Commission complaint does not provide all details about a specific 
misrepresentation, that does not mean that it cannot serve as evidence 
of prevalence. The Commission thus has a strong basis for its 
conclusion that reviews and testimonials misrepresenting the 
experiences of the reviewers and testimonialists are prevalent.
---------------------------------------------------------------------------

    \214\ IAB Cmt. at 3.
    \215\ Id.
    \216\ Id. at 4 & n.12.
    \217\ Complaint at 8-11, 17-18, FTC v. NextGen Nutritionals, 
LLC, No. 8:17-cv-2807 (M.D. Fla. filed Nov. 20, 2017) (testimonials 
in ads made specific quantified claims of weight loss and blood 
pressure reduction); In re Esrim Ve Sheva Holding Corp., 132 F.T.C. 
736, 737 (2001) (testimonial made specific quantified claims about 
increased mileage and decreased harmful pollutants); In re Computer 
Bus. Servs., Inc., 123 F.T.C. 75, 78 (1997) (endorsers made specific 
quantified earnings claims); In re Twin Star Prods., Inc., 113 
F.T.C. 847, 849-51, 853-54 (1990) (endorsements made regarding a 
weight-loss product, a baldness treatment, and an impotency 
treatment); In re National Sys. Corp., 93 F.T.C. 58, 61-62 (1979) 
(testimonials about jobs obtained by graduates of respondents' 
schools).
---------------------------------------------------------------------------

    The same trade association and another one expressed concern that 
the ``prohibition on all reviews that are authored by individuals that 
[sic] `do not exist' or have not used the product would prohibit a wide 
swath of non-deceptive speech, including for example, any satirical 
reviews that a business authors, creates, sells, purchases, 
disseminates, or procures.'' \218\ As discussed in the NPRM, the 
Commission's intent was to prohibit misrepresentations resulting from 
reviews or testimonials by someone who does not exist or who did not 
use or otherwise have experience with the product, service, or 
business.\219\ The Commission is unsure of the extent to which there 
are satirical reviews that could run afoul of the provision as 
proposed. Nonetheless, upon a review of the comments, the Commission 
now recognizes that absent an express reference to material 
misrepresentations, the provision could be interpreted to prohibit 
other potentially non-deceptive speech, such as the use of virtual 
influencers.\220\ To avoid this unintended consequence, the Commission 
is clarifying that Sec.  465.2 is limited to prohibiting material 
misrepresentations. As finalized, the prohibitions in Sec.  465.2 are 
expressly limited to reviews and testimonials ``materially 
misrepresent[ing], expressly or by implication . . . that the reviewer 
or testimonialist exists; . . . that the reviewer or testimonialist 
used or had experience with the product, service, or business that is 
the subject of the review or testimonial; or . . . the reviewer's or 
testimonialist's experience with the product, service, or business that 
is the subject of the review or testimonial.''
---------------------------------------------------------------------------

    \218\ IAB Cmt. at 6; NRF Cmt. at 6.
    \219\ NPRM, 88 FR 49373.
    \220\ A virtual influencer is a computer-generated fictional 
character that can be used for a variety of marketing-related 
purposes, but most frequently for social media marketing, in lieu of 
human influencers. See, e.g., Koba Molenaar, Discover the Top 12 
Virtual Influencers for 2024--Listed and Ranked!, Influencer 
MarketingHub (Mar. 29, 2024), https://influencermarketinghub.com/virtual-influencers/.
---------------------------------------------------------------------------

    A different trade association raised several concerns about the 
common language of proposed Sec.  465.2. It asserted that the provision 
``would prohibit the use of a dead person's endorsement because 
arguably that person does not exist.'' \221\ The Commission does not 
interpret a person who ``does not exist'' to include a person who died 
after making an endorsement, but that concern should be resolved by the 
new language regarding material misrepresentations. The commenter went 
on to question ``what constitutes an `actual experience,' '' asking 
whether a person who saw a label had actual experience with it and 
whether a person who tasted an item purchased at a restaurant but did 
not visit the restaurant had actual experience.\222\ The proposed 
provision did not use the term ``actual experience,'' and the persons 
in the commenter's posited hypotheticals did have legitimate experience 
with the product or service but should not misrepresent that experience 
as more than it was. The commenter also said that ``it is unclear if 
the . . . element--materially misrepresenting the experience with the 
product or service--relates to the experience or an opinion about the 
product or service.'' \223\ It relates to the person's ``experience'' 
with the product or service, that is, what actually happened when they 
used or otherwise experienced it and not simply their ``opinion'' of 
it. The same commenter asked whether ``an actor portraying an actual 
reviewer'' is misrepresenting their experience as long as it is ``clear 
that it is an actor portrayal.'' \224\ The provision does not prohibit 
using an actor to portray a real testimonialist.
---------------------------------------------------------------------------

    \221\ ANA Cmt. at 12.
    \222\ Id.
    \223\ Id.
    \224\ Id.
---------------------------------------------------------------------------

    An individual commenter who raised the same concern about whether 
actors could portray real testimonialists \225\ went on to express 
concerns that the actor ``shouldn't misrepresent who the original 
person was,'' such as by misrepresenting ``the effectiveness/health 
benefits of [a] product by hiring a very fit in shape person.'' \226\ 
The Commission has issued guidance stating that ``use of an endorsement 
with the image or likeness of a person other than the actual endorser 
is deceptive if it misrepresents a material attribute of the 
endorser.'' \227\ Nevertheless, the Commission does not intend for 
Sec.  465.2 to address such misrepresentations.
---------------------------------------------------------------------------

    \225\ Beback Cmt.
    \226\ Id.
    \227\ See Endorsement Guides, 16 CFR 255.1(g).
---------------------------------------------------------------------------

    A consumer organization's comment requested that the Commission 
``explicitly indicate that fake . . . ratings are an independent and 
separate violation from deceptive narrative reviews.'' \228\ The 
Commission believes that making this distinction is unnecessary and 
declines to make this change.
---------------------------------------------------------------------------

    \228\ TINA Cmt. at 8.

---------------------------------------------------------------------------

[[Page 68050]]

2. Sec.  465.2(a)
    Proposed Sec.  465.2(a) would have made it a violation for a 
``business to write, create, or sell a consumer review, consumer 
testimonial, or celebrity testimonial'' that is fake or false.
    An individual commenter noted that the prohibition ``is too 
specific and it would be easy for a business to find an alternative 
method not prohibited by the rule.'' \229\ The commenter posited an 
example: ``a business could have someone next to them tell them their 
review and someone could transcribe it, technically the business did 
not create, make, or sell anything and thus would not be in 
violation.'' \230\ If a business is paying an individual to transcribe 
a fake or false review, it is creating or making the review, and would 
therefore have violated Sec.  465.2(a). Accordingly, the Commission 
declines to modify the prohibition in response to the commenter's 
concern.
---------------------------------------------------------------------------

    \229\ Albert Cmt. at 3.
    \230\ Id.
---------------------------------------------------------------------------

    A trade association submitted a comment asking the Commission to 
``confirm that when a real consumer authors the review, the business 
cannot be said to have written or created it, and thus . . . section 
[465.2(a)] could not apply.'' \231\ The Commission is unsure what the 
commenter means by a ``real consumer authors the review.'' The 
provision would apply if, for example, a business employs a ``real 
consumer'' to write fifty reviews of a product under different names.
---------------------------------------------------------------------------

    \231\ IAB Cmt. at 6.
---------------------------------------------------------------------------

    A comment from a retailer that publishes reviews said that ``review 
brokers and other bad actors . . . coordinate the high-volume writing, 
buying, and selling of fake reviews'' and that the rule should apply to 
those ``approaching customers, instructing them on how to create fake 
reviews and avoid detection, and connecting them with bad actors 
operating [fake] accounts.'' \232\ Brokers of fake reviews would 
generally fall under the provision's prohibition against selling a 
consumer review, given that such brokers are generally being paid to 
provide fake reviews.
---------------------------------------------------------------------------

    \232\ Amazon Cmt. at 6.
---------------------------------------------------------------------------

    A trade association commenter suggested clarifying that 
``business'' in Sec.  465.2(a) ``refers to a business that helps to 
create or sell reviews or testimonials.'' \233\ Although the paragraph 
does apply to such businesses, it also applies to a business that 
writes or creates fake reviews or testimonials for its own products or 
services. For this reason, the Commission declines to adopt the 
commenter's suggestion.
---------------------------------------------------------------------------

    \233\ Computer & Communications Industry Association, Cmt. on 
NPRM at 3 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0110 (``CCIA Cmt.'').
---------------------------------------------------------------------------

    An individual commenter asked whether the prohibition covers 
``people who leave reviews in good faith'' if ``they were getting paid 
for it.'' \234\ Neither Sec.  465.2(a) nor any section of the rule 
imposes liability on individual consumers who write honest reviews, 
even if they are paid for doing so.
---------------------------------------------------------------------------

    \234\ Wilson Cmt.
---------------------------------------------------------------------------

    Another individual commenter requested that civil penalties be 
imposed ``on the company for soliciting the reviews, rather than on the 
reviewer, unless the reviewer knowingly is leaving fake reviews.'' 
\235\ Under Sec.  465.2(a), an individual who is in the business of 
writing, creating, selling, or brokering reviews could be liable for 
creating consumer reviews that are fake or false. That individual could 
only be subject to civil penalties if they did so with actual knowledge 
or knowledge fairly implied on the basis of objective circumstances 
that they were engaging in an act or practice that is unfair or 
deceptive and is prohibited by the rule.\236\
---------------------------------------------------------------------------

    \235\ Osburn Cmt.
    \236\ See 15 U.S.C. 45(m)(1)(A) (establishing that the recovery 
of civil penalties requires a showing of ``actual knowledge or 
knowledge fairly implied on the basis of objective circumstances 
that such act is unfair or deceptive and is prohibited by such 
rule'').
---------------------------------------------------------------------------

    An individual commenter expressed concern that ``competing parties 
could potentially create fake reviews on another party in order to give 
the impression that the party is in violation of the'' rule.\237\ 
Although such misconduct is possible, the target of such misconduct 
would not be liable under Sec.  465.2(a), based on how it is worded. 
For example, the target would not have been the one who created, wrote, 
or sold the review, nor would the target have purchased the review. The 
competitor who engaged in such misconduct might be liable for deceptive 
or unfair conduct under the FTC Act.
---------------------------------------------------------------------------

    \237\ Slezak Cmt. at 1.
---------------------------------------------------------------------------

3. Sec.  465.2(b)
    Proposed Sec.  465.2(b) would have made it a violation for a 
business to ``purchase a consumer review'' or ``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'' was fake or false.
    A consumer organization commented that, by limiting Sec.  465.2(b) 
to a business posting reviews or disseminating or causing the 
dissemination of testimonials about ``the business or one of its 
products or services,'' the Commission's proposal limits liability to 
the business itself ``instead of including other . . . creators or 
disseminators of deceptive reviews and testimonials.'' \238\ In 
response to the commenter's concern, the Commission notes that those 
creating or disseminating deceptive reviews and testimonials could be 
liable under Sec.  465.2(a).
---------------------------------------------------------------------------

    \238\ TINA Cmt. at 6 n.23.
---------------------------------------------------------------------------

    A trade association asked whether a business `` `disseminates' 
reviews for its products merely by . . . placing them in advertising/
marketing materials.'' \239\ Section 465.2(b) applies only to the 
dissemination of testimonials, but if a business includes consumer 
reviews in its advertising or marketing materials, those reviews become 
``testimonials'' and are covered.
---------------------------------------------------------------------------

    \239\ NRF Cmt. at 5.
---------------------------------------------------------------------------

    Another commenter requested that the Commission ``clarify the 
limited applicability of `to disseminate or cause the dissemination' in 
proposed Sec.  465.2(b) so the definition does not wrongly apply to 
third parties that host or license reviews.'' \240\ The phrase ``to 
disseminate or cause the dissemination'' applies only to testimonials 
and not to consumer reviews, so it could not apply to third parties 
that host or license reviews. The only situation in which Sec.  
465.2(b) applies to consumer reviews is when a business purchases a 
consumer review.
---------------------------------------------------------------------------

    \240\ CCIA Cmt. at 3.
---------------------------------------------------------------------------

4. Sec.  465.2(c)
    Proposed Sec.  465.2(c) would have made it a violation 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'' was fake 
or false.
    Several commenters questioned the scope and ``vagueness'' of the 
undefined term ``procure'' in proposed Sec.  465.2(c).\241\ A trade 
association wrote that ``the Commission should explain that a retailer 
does not `procure a consumer review for posting on a third-party 
platform or website' simply by requesting that previous customers 
submit reviews, and then allowing submitted reviews to be posted on the 
retailer's own website or sharing customer reviews with Google.'' \242\ 
The

[[Page 68051]]

Commission did not intend to cover such activities. Instead, the 
Commission intended to cover a much more limited set of activities: the 
procurement of fake and false reviews from company insiders. The 
Commission is therefore revising Sec.  465.2(c) by limiting it to a 
business procuring consumer reviews ``from its officers, managers, 
employees, or agents, or any of their immediate relatives.''
---------------------------------------------------------------------------

    \241\ NRF Cmt. at 4; ANA Cmt. at 12; IAB Cmt. at 4; Amazon Cmt. 
at 7.
    \242\ NRF Cmt. at 4.
---------------------------------------------------------------------------

    A trade association's comment questioned the phrase ``its products 
or services'' in the context of what was proposed Sec.  465.2(c).\243\ 
It asked whether the term would apply to all of the products sold by a 
department store, an online marketplace, or a consignment 
business.\244\ The Commission recognizes that the phrase ``its products 
or services'' was ambiguous. In order to address this inadvertent 
ambiguity, the Commission is making clarifying changes by replacing the 
phrase ``its products or services'' with the phrase ``the products or 
services it sells'' in Sec.  465.2(b) and (c), as well as in other 
places where it appears in the rule.\245\ The revised language captures 
what the Commission originally intended and would apply to products 
sold by a department store, an online marketplace, or a consignment 
business.
---------------------------------------------------------------------------

    \243\ Id. at 5.
    \244\ Id. at 5-6.
    \245\ See Sec. Sec.  465.5(a), (b), and (c), 465.6, and 465.7(b) 
of the rule.
---------------------------------------------------------------------------

5. Sec.  465.2(d)
    Upon consideration of the comments received, the Commission is 
adding paragraph (d) in Sec.  465.2 to clarify the scope of Sec.  
465.2(b) and (c). The Commission recognizes that, when a business sends 
a broad solicitation to customers to post customer reviews, one or more 
recipients might also be employees of the business. If any such 
employee then posts reviews, one might consider those reviews to have 
been ``procured'' from the employee. Similarly, the Commission 
recognizes that broad, incentivized solicitations to the general public 
or past customers to post about a product on social media could be 
considered ``causing the dissemination'' of testimonials. It would not 
be reasonable to expect a business to know whether such resulting 
reviews or testimonials were fake or false, and the Commission did not 
intend to cover those reviews in this section of the proposed rule. 
Therefore, the Commission is adding Sec.  465.2(d)(1), which clarifies 
that Sec.  465.2(b) and (c) do not apply to ``generalized solicitations 
to purchasers to post reviews or post testimonials about their 
experiences with the product, service, or business that is the subject 
of the review or testimonial.'' By ``generalized solicitations,'' the 
Commission means to exempt from Sec.  465.2(b) and (c) solicitations 
sent to large groups of customers, such as those who purchased a 
particular item or who became customers during a given time period, 
where specific customers are not chosen based on the likelihood that 
they will express a particular sentiment. In contrast, solicitations 
made only to customers whom the business believes to be happy customers 
would not be ``generalized solicitations'' and would therefore be 
subject to Sec.  465.2(b) and (c).
    As the Commission said in the NPRM, Sec.  465.2 does not ``apply to 
any reviews that a platform simply publishes and that it did not 
purchase.'' In other words, the Commission did not intend for Sec.  
465.2 to apply to platforms that simply host third-party content and 
does not believe that the section can be interpreted otherwise. 
Nonetheless, numerous commenters expressed concern over whether the 
section covered the mere hosting of third-party content.\246\ A number 
of industry commenters and an individual commenter asked the Commission 
to expressly exempt those who host consumer reviews created by a third 
party.\247\ Three industry comments asked the Commission to create a 
safe harbor for review hosting when the company has reasonable 
processes in place to identify and remove fake reviews.\248\ Consistent 
with its statement in the NPRM, the Commission is adding Sec.  
465.2(d)(2) to provide an explicit exemption for ``merely engaging in 
consumer review hosting'' from the scope of Sec.  465.2(b) and (c).
---------------------------------------------------------------------------

    \246\ One industry commenter expressed a general concern that 
was not tied to a specific provision ``that the Proposed Rule 
imposes liability on companies for the dissemination and/or display 
of fake reviews that clashes with Section 230 of the Communications 
Decency Act.'' TechNet Cmt. at 3. As discussed below, the Commission 
is including exemptions for mere consumer review hosting in 
Sec. Sec.  465.2 and 465.5. See infra section IV.B.5 of this 
document.
    \247\ See, e.g., NRF Cmt. at 5-6; IAB Cmt. at 6; Amazon Cmt. at 
7-9; CCIA Cmt. at 3; Abbott Cmt.
    \248\ TechNet Cmt. at 2; IAB Cmt. at 5; NRF Cmt. at 7. A trade 
association also requested a ``safe harbor'' but did not tie it to 
any specific provision of the proposed rule. NADA Cmt. at 4.
---------------------------------------------------------------------------

    A trade association noted that, in the ``case of reviews being 
shared between retailers and third-party platforms,'' ``it would be 
unfair to immunize the search platform from liability for the review 
shared by the retailer, but not to immunize the retailer for the review 
created by the potential bad actor.'' \249\ However, a retailer or 
other entity will not be liable for sharing consumer reviews unless it 
would have been liable for displaying those same reviews on its own 
website.
---------------------------------------------------------------------------

    \249\ NRF Cmt. at 6.
---------------------------------------------------------------------------

    Two comments raised the issue of hosting both reviews and 
testimonials. A trade association commenter expressed concern that the 
Commission should ``avoid sweeping in companies such as online 
retailers that host consumer reviews and testimonials and engage in 
activities such as organizing, moderating, aggregating, and prompting 
the submission of reviews and testimonials.'' \250\ Another trade 
association made a very similar comment and ``urge[d] the FTC to 
confirm that liability under this section would require the company to 
do more than host reviews/testimonials.'' \251\ As for reviews, Sec.  
465.2 will not prohibit an online business that hosts reviews from 
prompting the submission of reviews from the general public or from 
organizing, moderating, or aggregating them. Nonetheless, certain 
unfair or deceptive conduct that involves prompting the submission of 
reviews or moderation could violate Sec.  465.4 or Sec.  465.7(b), 
respectively.\252\ As for testimonials, it is unclear what hosting 
scenarios the commenters are contemplating. The Commission is not 
adding an exemption for ``merely hosting testimonials'' because there 
is no provision in the rule that applies to testimonial hosting because 
testimonials are, by definition, advertising or promotional messages. A 
business that puts testimonials on its own website is ``disseminating'' 
them and is not merely ``hosting'' them. When such testimonials are 
fake or false, the business should face potential liability under this 
paragraph. On the other hand, a business that has on its website a 
community forum in which consumers can comment about the business and 
the products or services it sells could be merely hosting the community 
forum. A comment in the community forum touting one of the business's 
products, which was posted by a consumer who was not incentivized to do 
so and who has no other connection to the company, is not a testimonial 
in the first place, so it would not fall under Sec.  465.2(b). The same 
analysis would apply to a business that hosted a section on its website

[[Page 68052]]

where consumers could answer questions posed by other consumers.
---------------------------------------------------------------------------

    \250\ IAB Cmt. at 4.
    \251\ ANA Cmt. at 12-13.
    \252\ Prompting the submission of consumer reviews that must be 
positive in order to obtain an incentive could violate Sec.  465.4. 
Moderation of consumer reviews that results in the suppression of 
some of them based upon their ratings or their negative sentiment 
could violate Sec.  465.7(b).
---------------------------------------------------------------------------

    A business organization commenter said the Commission should ``make 
clear [that] Section 465.2 does not apply to platforms or retailers 
that display ratings even if they prompt review submissions or 
aggregate star ratings of submitted reviews.'' \253\ Paragraphs (b) and 
(c) of Sec.  465.2 do not apply to mere consumer review hosting, even 
if the business prompts review submissions or aggregates star ratings.
---------------------------------------------------------------------------

    \253\ Chamber of Commerce Cmt. at 4.
---------------------------------------------------------------------------

    The commenter continued by saying that ``the Commission must 
clearly indicate that the Rule provision would not apply to any website 
displaying a consumer review or testimonial that they did not purchase 
or procure,'' arguing that ``Section 230 [of the Communications Decency 
Act] . . . broadly immunizes providers of an interactive computer 
service from liability for presenting third party content.'' \254\ If a 
business creates fake or false reviews or testimonials and displays 
them on its website, it is not presenting third-party content. It could 
be liable for such reviews or testimonials under Sec.  465.2(a). The 
commenter made a similar argument with respect to the applicability of 
Sec.  465.2(b) to a website that displays a fake or false testimonial 
and thus causes its dissemination.\255\ Section 465.2(b) does apply if 
such testimonials are about the business or one of the products or 
services it sells. Such testimonials are advertising, not third-party 
content covered by section 230 of the Communications Decency Act (47 
U.S.C. 230).
---------------------------------------------------------------------------

    \254\ Id.
    \255\ Id.
---------------------------------------------------------------------------

6. Knowledge Standard
    Like proposed Sec.  465.2(b) and (c), final Sec.  465.2(b) and (c) 
are limited to situations in which businesses ``knew or should have 
known'' that they were engaging in the conduct that was prohibited. 
Commenters had varied reactions to this standard, with some finding it 
appropriate, others finding it too high, and others finding it too low.
    A corporate commenter noted that, for the purpose of Sec.  465.2(b) 
and (c), ```[s]hould have known' needs to be the standard.'' \256\ 
Similarly, an individual commenter recommended that the FTC adopt the 
``knew or should have known'' standard for purposes of Sec.  465.2(b) 
and (c):
---------------------------------------------------------------------------

    \256\ Transparency Company Cmt. at 11.

because it: (1) sufficiently effectuates consumers' shared interest 
in reducing the prevalence of unfair or deceptive online consumer 
reviews and testimonials, (2) avoids unfairly imposing liability on 
unwitting, blameless business transgressors, and (3) conveniently 
aligns with the FTC's existing ``has good reason to believe'' 
standard for similar purpose of application of FTC Act Section 5 to 
the use of endorsements and testimonials in advertising.\257\
---------------------------------------------------------------------------

    \257\ Poole Cmt. at 2.

    However, several commenters objected to the imposition of civil 
penalties based upon a ``should have known'' standard, believing that 
standard would be too onerous.\258\ For example, an industry 
organization said that proposed Sec.  465.2(b) and (c) are 
``problematic because [they] place[ ] the onus on the business to have 
knowledge of the author's state of mind as to whether their actual 
experience was expressed. . . , an impossible task for anyone but the'' 
author.\259\ The industry organization also claimed that the risk of a 
civil penalty will ``likely . . . compel businesses to drastically 
limit the consumer reviews or testimonials they seek out or even allow 
on their websites.'' \260\ Under section 5(m)(1)(A) of the FTC Act, 15 
U.S.C. 45(m)(1)(A), however, the Commission can seek civil penalties 
for a rule violation only by showing that a defendant had ``actual 
knowledge or knowledge fairly implied on the basis of objective 
circumstances that such act is unfair or deceptive and is prohibited by 
such rule'' (hereinafter shortened to ``actual knowledge or knowledge 
fairly implied''). A lower knowledge standard in a Commission rule--
such as the ``knew or should have known'' standard found within certain 
sections of the proposed rule--does not override the higher standard 
found in section 5(m)(1)(A) of the FTC Act. The Commission has not 
suggested otherwise in the course of this rulemaking.
---------------------------------------------------------------------------

    \258\ IAB Cmt. at 5-6; NRF Cmt. at 2-5; NADA Cmt. at 3-4; 
Chamber of Commerce Cmt. at 2-3; TechNet Cmt. at 2.
    \259\ TechNet Cmt. at 2.
    \260\ Id.
---------------------------------------------------------------------------

    Other commenters objected similarly, saying that ``knew or should 
have known'' is too low as a knowledge threshold and that the standard 
should be actual knowledge, but did not tie their concerns to the 
imposition of civil penalties.\261\ For example, some of the comments 
expressing concern about a ``knew or should have known'' standard 
appeared to focus primarily on the standard's supposed applicability 
to, and harsh impact on, websites hosting reviews.\262\ As another 
example, a trade association commenter recommended ``that the 
Commission define `knew,' as used in . . . Sec.  465.2, as `having 
actual knowledge,' and remove the `should have known' language.'' \263\
---------------------------------------------------------------------------

    \261\ Amazon Cmt. at 8; ANA Cmt. at 13; Trustpilot Cmt. at 5, 8; 
NRF Cmt at 3; Family First Life Cmt. at 5-8.
    \262\ Amazon Cmt. at 7-8; ANA Cmt. at 12-13; NRF Cmt. at 2-5. 
One trade association commenter disagreed, asserting that the ``knew 
or should have known'' standard the Commission proposed for Sec.  
465.2 will ``not unduly burden review platforms.'' Travel Tech Cmt. 
at 4.
    \263\ NRF Cmt. at 3.
---------------------------------------------------------------------------

    Additionally, two commenters advocated for a standard higher than 
``should have known'' but lower than actual knowledge. With respect to 
activities such as ``purchasing'' a review, they said that businesses 
should be held responsible for ensuring the reviews are authentic but 
recommended a ``knew or consciously avoided'' standard.\264\ One of the 
commenters asserted that the proposed ``should have known'' standard 
``is vague and does not provide adequate specificity about the sorts of 
actions businesses should take to ensure that they will not be held 
liable for not detecting that a review they purchased was fake.'' \265\ 
The commenter said a ``consciously avoided'' knowing standard would 
allow for liability when a business takes no steps to respond to 
receiving repeated complaints raising red flags about the authenticity 
of a particular purchased review.\266\
---------------------------------------------------------------------------

    \264\ Amazon Cmt. at 9; IAB Cmt. at 5.
    \265\ Amazon Cmt. at 9.
    \266\ Id.
---------------------------------------------------------------------------

    As part of the NPRM, the Commission also inquired whether, instead 
of the ``should have known'' standard, the Commission should adopt a 
``knew or could have known'' standard. Only two commenters addressed 
that proposed standard. An individual commenter said that such a 
standard would ``ambiguously expand the proposed Rule's prosecutorial 
scope and possibly open unsuspecting businesses to financial penalties 
for violations they had no inkling of having committed in the moment.'' 
\267\ Another individual commenter, who incorrectly thought the 
proposed rule provided a private right of action, said that such a 
standard ``provides scienter never used in consumer law'' and the 
``courts could potentially become overwhelmed with an influx of 
claims.'' \268\
---------------------------------------------------------------------------

    \267\ Poole Cmt. on at 1.
    \268\ Albert Cmt. at 3.
---------------------------------------------------------------------------

    Other commenters advocated for a lower standard than ``knew or 
should have known.'' An individual commenter did not think that ``knew 
or should have known'' was appropriate because it would make it ``very 
difficult to prove'' violations and recommended that the Commission 
require ``businesses to be able to show they used reasonable

[[Page 68053]]

diligence through policies and procedures to prove that the[ ] reviews 
are legitimate.'' \269\ A consumer organization said in its comment 
that ``there is no need for a knowledge or intent requirement under 
this Rule'' as ``Section 5 of the FTC Act does not otherwise require 
the Commission to prove knowledge or intent when enforcing against 
entities engaging in deceptive practices.'' \270\ It continued that 
``the Commission can and should consider knowledge and intent in 
deciding the equities of bringing any enforcement action.'' \271\
---------------------------------------------------------------------------

    \269\ Annie Horgan, Cmt. on NPRM at 1-2 (Sept. 22, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0058.
    \270\ Consumer Reports Cmt. at 4.
    \271\ Id. at 4-5. An individual commenter disagreed, stating 
that ``the complete removal of a knowledge requirement in favor of a 
strict liability approach would almost guarantee situations of 
unwarranted punishment under the proposed rule.'' Poole Cmt. at 3.
---------------------------------------------------------------------------

    After reviewing and considering the comments received, the 
Commission believes that the most appropriate standard for imposing 
liability under Sec.  465.2(b) and (c) is the ``knew or should have 
known standard.'' As discussed above,\272\ those paragraphs were not 
intended to apply to consumer review hosting and Sec.  465.2(d)(2) now 
contains an explicit exemption for consumer review hosting.\273\ Thus, 
the ``knew or should have known'' language in Sec.  465.2(b) and (c) 
will not have a harsh impact on review platforms, as some of the 
commenters suggested. Eliminating the knowledge standard altogether, 
however, may indeed have an overly harsh impact on businesses in some 
circumstances, and the idea garnered almost no public support. For 
example, it would be unreasonable to hold a company liable for 
publishing a testimonial when it had no reason to know that the 
testimonial misrepresented the testimonialist's experience. The 
Commission sees no reason why the standard should be higher than ``knew 
or should have known.'' The ``knew or should have known'' standard--
which the Commission has used in other rules \274\--thus best achieves 
the appropriate, equitable balance between protecting consumers and 
holding marketers accountable for deceptive conduct while not overly 
burdening marketers that engage in the responsible use of reviews and 
testimonials.
---------------------------------------------------------------------------

    \272\ See supra section IV.B.5. of this document.
    \273\ The final rule would therefore not require a business that 
is merely hosting consumer reviews on its platform to prove that the 
reviews it is hosting are legitimate.
    \274\ Other Commission rule provisions with a ``knew or had 
reason to know'' requirement include Sec.  460.8 of Labeling and 
Advertising of Home Insulation (commonly known as the R-Value Rule), 
which prohibits non-manufacturers of home insulation from relying on 
R-value data provided by the manufacturer if they ``know or should 
know'' the data is false or not based on proper tests. 16 CFR 460.8; 
see also 16 CFR 460.19(e) (non-manufacturers are liable only if they 
``know or should know that the manufacturer does not have a 
reasonable basis for the claim''); 16 CFR 436.7(d) (franchise 
sellers must notify prospective franchisees of any material changes 
``that the seller knows or should have known occurred'').
---------------------------------------------------------------------------

    Two trade associations' comments said that if ``the Commission . . 
. imposes a `should have known' standard, the Commission must provide 
greater clarity about what sorts of indicators of inauthenticity would 
provide companies with sufficient notice to trigger liability.\275\ 
They both said, ``Without that guidance and faced with the risk of 
significant civil penalty exposure for failing to stop the actions of 
undiscovered third parties, many businesses would likely be deterred 
from using consumer reviews or testimonials at all.'' \276\ The 
Commission has already addressed the knowledge standard found in 
section 5(m)(1)(A), which applies to the imposition of civil penalties. 
In the discussion of Sec.  465.2(b) and (c) below, the Commission 
provides further guidance as to what is intended by ``knew or should 
have known.''
---------------------------------------------------------------------------

    \275\ IAB Cmt. at 5-6; ANA Cmt. at 13. An individual commenter 
said that the Commission should ``provide some clear and objective 
criteria or indicators for identifying fake reviews, such as the use 
of bots, scripts, templates, or multiple accounts, or the lack of 
verifiable purchase or experience, or the inconsistency with other 
reviews or information'' and this ``would help businesses and 
consumers to distinguish between genuine and fake reviews.'' 
Ravnitzky Cmt. at 1.
    \276\ IAB Cmt. at 5-6; ANA Cmt. at 13. As explained above, these 
concerns are unwarranted given that the ``should have known'' 
standard has no bearing here on the imposition of civil penalties, 
for which the Commission must prove that a defendant met the higher 
knowledge standard of section 5(m)(1)(A) of the FTC Act.
---------------------------------------------------------------------------

    Several other commenters discussed general views about the 
application of the ``knew or should have known'' standard. For example, 
an individual commenter said that ``[a] business cannot always 
reasonably know that a testimonial contains testimony that is fake or 
false, if the influencer expresses to them that it is true.'' \277\ The 
Commission agrees with this assertion.
---------------------------------------------------------------------------

    \277\ Taylor V, Cmt. on NPRM at 2 (Sept. 22, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0062 (``Taylor V. Cmt.'').
---------------------------------------------------------------------------

    A comment from a public interest research center said that the 
``lack of an adequate endorser oversight program should be a per se 
violation of the `know or should have known' standard as that is 
tantamount to the company deliberately avoiding knowing.'' \278\ A 
consumer organization commenter said that the following actions should 
be considered knowledge that a review is fake or false: ``failure to 
meaningfully police'' for suspicious review activity, ``inducements to 
provide reviews without clearly instructing the reviewer to clearly 
disclose material conflicts,'' ``materially incentivizing reviews where 
it's impossible to convey material conflicts (e.g., providing a five-
star review with no accompanying narrative on TripAdvisor),'' and 
``failure to take meaningful steps to confirm the existence of the 
purported celebrity or meaningfully document the celebrity's purported 
experience with the product or service.'' \279\ The Commission 
encourages businesses to have endorser oversight programs, and whether 
a company has and follows such a program could impact the exercise of 
prosecutorial discretion. The Commission does not intend, however, for 
companies to be liable under this section of the rule based merely on 
the absence of an oversight program or on these other suggested bases.
---------------------------------------------------------------------------

    \278\ EPIC Cmt. at 3.
    \279\ Consumer Reports Cmt. at 5.
---------------------------------------------------------------------------

    A corporate commenter said that ``how a business `should have 
known' that a reviewer does not exist is not apparent,'' and posited 
that, under a ``should have known'' standard, ``perhaps [a] business 
may be under a duty to reach out to the reviewer, but it is unclear how 
many resources the business must expend to attempt to contact the 
reviewer.'' \280\ First, as noted, Sec.  465.2(d)(2) exempts businesses 
merely engaging in consumer review hosting from Sec.  465.2(b) and (c). 
Another key limitation here is the exemption for generalized 
solicitations under Sec.  465.2(d)(1). That exemption means that 
businesses can send such solicitations to their customers without 
creating any investigative obligation for resulting reviews under Sec.  
465.2(b) or (c), even if such reviews have been ``purchased.'' \281\
---------------------------------------------------------------------------

    \280\ Family First Life Cmt. at 6.
    \281\ Paying for or giving other incentives in exchange for 
consumer reviews expressing a particular sentiment regarding the 
product, service, or business that is the subject of the review 
would violate Sec.  465.4 of the rule.
---------------------------------------------------------------------------

    With respect to ``purchased'' reviews under Sec.  465.2(b)the 
rule's ``knew or should have known'' standard does not impose a general 
duty to reach out to the reviewers or investigate whether each 
resulting review is fake or false. While each case will depend on its 
specific facts, it is possible that a business may possess clear 
indications that purchased reviews are likely to be fake or false, in 
which case a failure to investigate further may trigger liability under 
the ``should have known''

[[Page 68054]]

standard. For example, a business that hires a third party to provide 
free samples of its products to consumers in order to generate reviews, 
without more, may have no reason to investigate the resulting reviews. 
However, a business may be on notice that the resulting reviews are 
likely fake or false if they are submitted too quickly after purchase 
or many of them are submitted in a very short period of time or refer 
to the wrong product. As for Sec.  465.2(c), which applies only to 
reviews by insiders, a possible reason for knowing that such reviews 
are likely fake or false could be that an insider sent emails to a 
manager over time that together showed that the insider was using 
multiple accounts to submit reviews to the same website.
    A company that is in the business of identifying fake consumer 
reviews described ways that a business purchasing or procuring a 
consumer review should know that the review is fake or false. These 
indications include the named reviewer not being a customer, the 
content of the review being vague or odd, many reviews arriving at 
once, and the use of unnatural language or ``keyword stuffing.'' \282\ 
A review platform commenter gave similar ways that a business could 
identify fake reviews, such as ``the review text describes a product or 
service that is not offered by the business, the review clearly 
references the wrong business name, or perhaps if a review . . . 
acknowledges that the reviewer has never shopped there.'' \283\ 
Although, as previously stated, each case depends on its specific 
facts, these various indications may indeed suggest that one or more 
purchased or insider reviews are likely fake or false, in which case a 
failure to reasonably investigate them may trigger liability under the 
``should have known'' standard.
---------------------------------------------------------------------------

    \282\ Transparency Company Cmt. at 11.
    \283\ Trustpilot Cmt. at 10.
---------------------------------------------------------------------------

    With respect to testimonials, there may be red flags that should 
indicate to a business that a testimonial is likely fake or false, and, 
thereby, would serve as indicia of the fact that the business should 
have known that the testimonials that it disseminated were fake or 
false. For example, the Commission alleged that Google asked 
iHeartMedia, Inc. radio personalities to record product testimonials 
for a smartphone using a standard script written for Google and refused 
to provide the radio personalities with the product when 
requested.\284\ If a business provides the text for a testimonial, it 
should have a reasonable basis to conclude, based on inquiry or 
otherwise, that the text is truthful for the testimonialist. A 
testimonialist asking for the product should cause a business to 
question whether the testimonialist used the product. If a business 
knows that a testimonialist is using a competing product, it should 
inquire into whether a testimonial for its own product is truthful. For 
example, a business should investigate whether a celebrity testimonial 
for its new smartphone is false if the testimonial claims the celebrity 
exclusively uses the smartphone, but the social media post containing 
the testimonial indicates that the celebrity posted it using a 
competing smartphone brand.
---------------------------------------------------------------------------

    \284\ Complaint at 2-5, In re Google, LLC, Nos. C-4783 and C-
4784 (F.T.C. Feb. 8, 2023).
---------------------------------------------------------------------------

    A review platform said in its comment that, ``if procuring fake 
reviews is the action of a single, rogue employee trying to help the 
business they work for, on a practical level it may be difficult for a 
business to have knowledge of'' it.\285\ The commenter suggested that 
the Commission consider ``whether it is in fact disproportionate for 
knowledge and liability to be attributed to a business because of the 
actions of a well-intentioned rogue employee.'' \286\ Whether a 
business will be held responsible under the rule for a rogue employee 
under a ``knew or should have known'' standard will be a fact-intensive 
inquiry. While a business may not be aware of every employee's 
activities, it should be pay attention to red flags. Assuming that the 
facts are such that the business should have known of the rogue 
employee's actions, whether the business would also be subject to civil 
penalties would depend on whether a court finds that the business met 
the actual knowledge or knowledge fairly implied standard of section 
5(m)(1)(A) of the FTC Act.
---------------------------------------------------------------------------

    \285\ Trustpilot Cmt. at 9-10.
    \286\ Id.
---------------------------------------------------------------------------

7. Other Proposals
    Some commenters suggested that the Commission impose additional 
requirements. Many commenters suggested that third-party platforms 
featuring reviews should be held responsible for certain conduct, such 
as for: failing to report businesses that they suspect are posting fake 
reviews,\287\ the ``lack of identification verifications,'' \288\ not 
posting notices reminding consumers that there is no guarantee of the 
veracity or accuracy of customer reviews,\289\ engaging in review 
``manipulation'' for advertising purposes,\290\ failing to disclose 
publicly certain information about posted reviews,\291\ or failing to 
employ reasonable measures to root out fraud and deceptive 
reviews.\292\ A review platform suggested imposing requirements on 
social media companies and internet service providers to address the 
sale of fake reviews,\293\ and a trade association proposed that the 
Commission require reviewers to identify themselves and that social 
media sites hosting reviews verify reviewers' identities.\294\ As 
explained above, the Commission's intent from the outset of this 
rulemaking was to focus on clearly unfair or deceptive conduct 
involving reviews and testimonials. This intent is reflected in, as 
explained above, the addition of a definition of the term ``consumer 
review hosting'' and the explicit exclusion of such mere hosting from 
the coverage of certain rule provisions. This focus should not be taken 
to signal that third-party platforms do not bear significant 
responsibility for combatting fake reviews.
---------------------------------------------------------------------------

    \287\ Anonymous 3 Cmt.
    \288\ Foster Cmt. at 2.
    \289\ Frieling Cmt. at 2; see also Anonymous 6, Cmt. on NPRM 
(Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0082.
    \290\ Wilhelmina Randtke, Cmt. on NPRM at 1 (Sept. 26, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0068.
    \291\ Fake Review Watch Cmt. at 2-3.
    \292\ Consumer Reports Cmt. at 3.
    \293\ Trustpilot Cmt. at 3, 7.
    \294\ ADA Cmt. at 2.
---------------------------------------------------------------------------

    An individual commenter recommended ``requir[ing] proof of purchase 
of [a] product for a consumer to leave a review.'' \295\ Another 
individual commenter would have the Commission hold businesses that 
recruit, direct, and compensate influencers responsible for the 
influencers' false or fake testimonials.\296\ A third commenter asked 
that the Commission ``ensure there is a way for anyone who is believed 
to have violated reviewing policies [to have] a chance to reinstate 
their ability to leave

[[Page 68055]]

reviews.'' \297\ A consumer organization recommended making clear that 
``it is a deceptive practice to aggregate fake reviews in a product's 
consumer rating'' and that ``reviews requiring a disclosure should not 
be included in a product's rating.'' \298\ The Commission appreciates 
these additional suggestions but declines to add any of them to the 
rule. The suggestions are beyond the scope of the rulemaking, which 
focuses instead on those responsible for clearly unfair or deceptive 
acts or practices regarding reviews and testimonials, and which is 
limited to those acts or practices for which the Commission has 
evidence of prevalence.
---------------------------------------------------------------------------

    \295\ Albert Cmt. at 4; see also Yanni Kakouris, Cmt. on NPRM at 
1, 3 (Sept. 22, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0055. The commenter also expressed concerns that ``violators 
are too difficult to track,'' asserted that civil penalties would 
somehow deter consumers from posting honest, negative comments about 
a business, and misunderstood the purpose and use of civil 
penalties, thinking that a large portion of civil penalties would go 
to businesses maligned by false comments. Id. at 1-2. A review 
platform commenter said that the proposed rule ``upholds legitimate 
consumer speech by ensuring that, `proposed Sec.  465.2 does not 
limit legitimate reviews to reviews by purchasers or verified 
purchasers' '' and ``by preserving anonymous reviews.'' Tripadvisor 
LLC, Cmt. on NPRM at 4-5 (Sept. 29, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0092 (``Tripadvisor 
Cmt.'').
    \296\ Taylor V. Cmt. at 2.
    \297\ Osburn Cmt.
    \298\ TINA Cmt. at 6.
---------------------------------------------------------------------------

    In response to other commenters suggesting that the Commission 
impose liability on review sites and online retailers, a trade 
association asked the Commission to make clear that sections 5 and 18 
of the FTC Act contain no express authorization for assisting-and-
facilitating liability.\299\ As this legal issue goes beyond, the 
context of this rulemaking, the Commission declines to address it here.
---------------------------------------------------------------------------

    \299\ Chamber of Commerce Cmt. at 2.
---------------------------------------------------------------------------

C. Sec.  465.3--Consumer Review or Testimonial Reuse or Repurposing

    Proposed Sec.  465.3 sought to address a business using or 
repurposing a consumer review written or created for one product so 
that it appears to have been written or created for a substantially 
different product. It also sought to cover businesses that caused such 
use or repurposing.
    The Commission received varied comments, both supportive and 
critical, about this provision.\300\ As described above, some 
commenters also raised concerns about the definition of ``substantially 
different product,'' a term that appeared only in this provision and is 
key to determining the circumstances in which the provision would 
apply; one of those commenters proposed a disputed issue of material 
fact related to that definition.\301\ The Commission would need to 
address those concerns before finalizing the provision. As it is not 
able to resolve those concerns on the current rulemaking record, the 
Commission has decided not to finalize the provision. If the Commission 
chooses later to engage in further rulemaking regarding the provision, 
it will address the comments at that time.
---------------------------------------------------------------------------

    \300\ See, e.g., IAB Cmt. at 7-8; ANA Cmt. at 14; Chamber of 
Commerce Cmt. at 5-6; Trustpilot Cmt. at 10; Consumer Reports Cmt. 
at 5-6; Amazon Cmt. at 10; CCIA Cmt. at 3; NRF Cmt. at 7-8; 
Ravnitzky Cmt. at 2.
    \301\ See supra sections I.C. and IV.A.2.j of this document.
---------------------------------------------------------------------------

D. Sec.  465.4--Buying Positive or Negative Consumer Reviews

    Proposed Sec.  465.4 sought to address businesses providing 
``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.'' Based on the 
following, the Commission has decided to finalize this provision with 
two modifications.\302\
---------------------------------------------------------------------------

    \302\ One minor modification is changing ``Rule'' to ``part.''
---------------------------------------------------------------------------

    Comments from a retailer and a trade association expressed that 
they found the section important and useful. The retailer said, ``This 
section is important to ensure that the rule covers bad actors that 
seek inauthentic reviews reflecting a particular predetermined 
sentiment.'' \303\ The trade association wrote, ``Providing 
compensation in exchange for reviews that must reflect a particular 
sentiment is a deceptive practice,'' and expressed support for ``the 
Commission's goal of targeting and eliminating this practice.'' \304\
---------------------------------------------------------------------------

    \303\ Amazon Cmt. at 6.
    \304\ IAB Cmt. at 8.
---------------------------------------------------------------------------

    Three individual commenters mistakenly thought that proposed Sec.  
465.4 banned paid or incentivized customer reviews and were opposed to 
such a ban. One of them said the proposed provision would ``ban reviews 
which are made by those who have been provided an item,'' that 
``[g]enerally the writer includes a list of sponsors on, or within, 
their blog/website,'' and that ``[i]f such sponsorship relationships 
are eliminated . . ., the ability of writers to review a variety of 
items will disappear.'' \305\ The second one wrote, ``Section 465.4 of 
the proposed rule prohibits the incentivization of or compensation on 
for the creation of consumer reviews or testimonials. . . . [I]t is 
unnecessarily restrictive.'' \306\ The third commenter did not support 
the provision ``forbidding paying for reviews'' because the practice 
``does not . . . deceive the public unless the paid review service 
dictates that the review must be positive.'' \307\ These commenters 
misunderstand the nature of Sec.  465.4. First, Sec.  465.4 does not 
apply to testimonials, only to consumer reviews, and then only to 
reviews that appear on a website or portion of a website dedicated to 
receiving and displaying such reviews. A blogger's ``review'' is not 
considered a consumer review for purposes of the rule; if such a review 
was incentivized, it would be considered a testimonial. Second, Sec.  
465.4 does not prohibit paid or incentivized consumer reviews. It only 
prohibits paid or incentivized consumer reviews when the business 
soliciting the review provides compensation or an incentive in exchange 
for a review expressing a particular sentiment.
---------------------------------------------------------------------------

    \305\ Alex Rooker, Cmt. on NPRM (Aug. 15, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0019.
    \306\ Frieling Cmt. at 2.
    \307\ Anonymous 7, Cmt. on NPRM (Aug. 15, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0021.
---------------------------------------------------------------------------

    In Question 12 of the NPRM, the Commission asked whether the 
prohibition in Sec.  465.4 should ``distinguish in any way between an 
explicit and implied condition that a consumer review express a 
particular sentiment.'' \308\
---------------------------------------------------------------------------

    \308\ NPRM, 87 FR 49389.
---------------------------------------------------------------------------

    A business commenter responded, ``Real consumers' reviews often 
contain multiple sentiments on what businesses did right and what they 
did wrong. This is helpful.'' \309\ The meaning of this comment is 
unclear.
---------------------------------------------------------------------------

    \309\ Transparency Company Cmt. at 12.
---------------------------------------------------------------------------

    Another business commenter responded to Question 12 of the NPRM by 
stating that Sec.  465.4 ``should unequivocally prohibit explicit 
conditions only,'' because this would ``provide[ ] a clear standard for 
businesses and reviewers to follow,'' and ``the lack of clarity in how 
the Proposed Rule would prohibit `implied conditions' [would] stifle[ ] 
businesses' ability to encourage and to entice reviews in a legitimate 
manner.'' \310\ The Commission disagrees and believes that businesses 
are capable of soliciting and encouraging reviews without suggesting 
that the reviews must be positive to obtain an incentive. The commenter 
also asserted that the Commission ``has no experience bringing 
enforcement actions against a business for allegedly creating an 
implied condition that a review or endorsement be positive,'' 
referencing the cases the Commission cited in the NPRM.\311\ That 
assertion is incorrect. The respondent in AmeriFreight, Inc. did not 
expressly state that the reviews needed to be positive but only implied 
it, encouraging past customers to submit reviews 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.'' \312\ The 
respondent also told past customers that

[[Page 68056]]

they should ``be creative and try to make your review stand out for 
viewers to read.'' \313\
---------------------------------------------------------------------------

    \310\ Family First Life Cmt. at 8-9.
    \311\ Id. at 10-11.
    \312\ In re AmeriFreight, Inc., 159 F.T.C. 1626, 1627-30 (2015).
    \313\ Id. at 1628.
---------------------------------------------------------------------------

    Two trade associations gave examples of what they asserted were 
innocuous requests for reviews that could be considered as implying 
that reviews need to be positive in order to receive an incentive. One 
said that its members will sometimes automatically contact customers 
saying, ``Tell us how much you loved [product] for 10% off your next 
purchase!'' and that such a request could ``be read to violate this 
Section of the Proposed Rule--even if a negative review would still 
entitle the consumer to the incentive or bonus.'' \314\ The other 
commenter wrote that, if the Commission says that ``a business may not 
implicitly seek positive reviews in exchange for incentives, then the 
rule could apply to such offers as, `Tell us how much you loved your 
visit to John's Steakhouse and get a $5 coupon' or `Tell your friends 
about all the fun you had at Jane's Arcade for a chance to win prizes,' 
'' and asserted that such requests are justified because businesses 
``prefer to use these enthusiastic and positive messages when seeking 
reviews, as opposed to less inspiring messages like, `Write a review 
and save 10% next time.' '' \315\ The problem with the enthusiastic and 
positive messages suggested by these commenters is that consumers 
receiving them could reasonably take the message that their reviews 
must be positive and enthusiastic in order to obtain the reward. As the 
second commenter noted, there are perfectly acceptable, albeit less 
``inspiring,'' alternatives. The second commenter also said that ``a 
reasonable consumer would infer that a business prefers positive 
reviews, and so even a neutral request such as, `Write a review and 
receive a discount off your next purchase,' might be construed as 
impliedly requesting a positive review.'' \316\ The Commission 
disagrees. The fact that businesses prefer positive reviews is not a 
basis on which to conclude that consumers would interpret any such 
``neutral request'' as containing an implied condition that reviews 
must be positive to receive the offered discount.
---------------------------------------------------------------------------

    \314\ NRF Cmt. at 8.
    \315\ ANA Cmt. at 8.
    \316\ Id.
---------------------------------------------------------------------------

    A consumer organization said in its comment that, ``[w]hen a 
reviewer feels pressured to express a certain sentiment, regardless of 
how that pressure was generated, the net result is a deceptive 
review,'' and that there should be ``no distinction made between 
explicitly and implicit conditioning of compensation or other 
incentives.'' \317\ A second consumer organization commenter said that 
``[i]mplied conditions may be just as salient as express conditions'' 
and quoting Aronberg v. FTC, 132 F.2d 165, 167 (7th Cir. 1942), said 
that, ``[i]n interacting with businesses, `[t]he ultimate impression 
upon the mind of the reader arises from the sum total of not only what 
is said but also of all that is reasonably implied.' '' \318\ The 
Commission agrees with both of these commenters.
---------------------------------------------------------------------------

    \317\ Consumer Reports Cmt. at 6.
    \318\ TINA Cmt. at 10. An individual commenter described the 
pressure they felt to leave a positive review of a car dealership in 
order to receive a gift card and said that proposed ``Sec.  465.4 
should . . . address both explicit and implied conditions of 
incentivization.'' Anonymous 8, Cmt. on NPRM at 3-5 (Sept. 22, 
2023), https://www.regulations.gov/comment/FTC-2023-0047-0061.
---------------------------------------------------------------------------

    Advocating for limiting the provision to express conditions, a 
trade association acknowledged that the NPRM clarified that the 
provision does not cover review gating,\319\ the mere solicitation of 
positive reviews, or incentivized reviews (except for those required to 
express a particular sentiment), but argued that, ``[r]egardless, the 
Proposed Rule still could be read to prohibit such behavior--i.e., when 
a Company solicits a review that it has reason to believe will be 
positive.'' \320\ The Commission does not consider this statement to be 
a fair reading of the provision. Just because a business engages in 
review gating or otherwise expects reviews to be positive does not mean 
there is either an express or implied requirement that reviews need be 
positive to obtain an incentive. The Commission notes that, although 
Sec.  465.4 does not cover ``review gating,'' review gating can 
nonetheless violate section 5 of the FTC Act.\321\
---------------------------------------------------------------------------

    \319\ As the Commission explained in the NPRM, ``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.'' See NPRM, 88 FR 
49379.
    \320\ NRF Cmt. at 9. The commenter went on to ask that ``the 
Rule be revised to only prohibit companies from `. . . provid[ing] 
compensation or other incentives in exchange for . . . consumer 
reviews explicitly required to express a particular sentiment, 
whether positive or negative. . . .' '' (emphasis in original). Id.
    \321\ See Endorsement Guides, 16 CFR 255.2(d) and (e)(11).
---------------------------------------------------------------------------

    A review platform commenter said that prohibiting an ``implied 
condition to express a particular sentiment could create a number of 
gray areas'' and ``encouraged the FTC to provide guidance and examples 
to businesses.'' \322\ The examples, discussed above, by the trade 
association asking consumers to say how much they ``love'' something or 
how much fun they had are excellent examples of implied conditions.
---------------------------------------------------------------------------

    \322\ Trustpilot Cmt. at 11.
---------------------------------------------------------------------------

    The Commission has decided to clarify that the rule prohibits 
businesses from providing incentives conditioned on the writing or 
creation of consumer reviews expressing a particular sentiment, 
regardless of whether the conditional nature of the incentive is 
express or implicit. For this purpose, the Commission is adding the 
phrase ``expressly or by implication'' in Sec.  465.4 to clarify that, 
although the incentive needs to be conditioned on the writing or 
creation of consumer reviews expressing a particular sentiment in order 
for conduct to violate Sec.  465.4, the condition may be implicit.
    Three commenters argued that the Commission should allow the 
compensation or incentives addressed in Sec.  465.4 as long as they are 
disclosed in the resulting reviews. For example, the first commenter 
wrote, ``A reasonable consumer can easily understand that when a 
reviewer is incentivized or compensated, the content they produce may 
be skewed in a more positive light. A mere disclaimer is sufficient to 
stave off misrepresentation.'' \323\ This statement may be correct for 
some incentivized reviews when there is no express or implied condition 
for those reviews to express a particular sentiment. For such reviews, 
an adequate disclosure that incentives were provided in exchange for 
the review may be able to cure a misleading impression that the reviews 
were independent and unbiased. However, such a disclosure does not 
reveal to consumers the requirement that reviews be positive. In 
addition, even if an individual review disclosed that it resulted from 
incentives requiring the review to be positive, such a disclosure would 
not be effective in instances where a consumer relies on the overall 
average star rating and does not read all individual reviews. 
Furthermore, the Commission believes that, if incentives are 
conditioned on reviews expressing a particular sentiment, many 
resulting reviews will not be merely misleading but false. For example, 
the offer of an incentive in exchange for a positive review may lead 
some reviewers to create positive reviews even when they had a negative 
experience with the product, service, or business. No disclosure can 
adequately cure a false review.\324\
---------------------------------------------------------------------------

    \323\ Frieling Cmt. at 3.
    \324\ See FTC Policy Statement on Deception, 103 F.T.C. at 180 
(``[P]ro forma statements or disclaimers may not cure otherwise 
deceptive messages''); Removatron Int'l Corp. v. FTC, 884 F.2d 1489, 
1497 (1st Cir. 1989) (``Disclaimers or qualifications in any 
particular ad are not adequate to avoid liability unless they are 
sufficiently prominent and unambiguous to change the apparent 
meaning of the claims and to leave an accurate impression. Anything 
less is only likely to cause confusion by creating contradictory 
double meanings.''); Joint FCC/FTC Policy Statement for the 
Advertising of Dial-Around and Other Long-Distance Services to 
Consumers (Mar. 1, 2000), https://www.ftc.gov/system/files/documents/public_statements/297751/000301jpsdeceptoveads.pdf (``If a 
claim is false, a disclosure that provides contradictory information 
is unlikely to cure the deception.''); FTC v. Direct Marketing 
Concepts, Inc., 624 F.3d 1, 12 n.9 (1st Cir. 2010) (``A statement 
that studies prove a product cures a certain disease, followed by a 
disclaimer that the statement is opinion and the product actually 
does not cure the disease, leaves an overall impression of nonsense, 
not clarity.'').

---------------------------------------------------------------------------

[[Page 68057]]

    The second commenter taking this position pointed to examples in 
the Endorsement Guides,\325\ claiming inaccurately that they stand for 
the proposition that businesses are allowed to offer incentives in 
exchange for positive reviews.\326\ The Endorsement Guides do contain 
an example involving incentives for reviews conditioned on the reviews 
being positive: ``[a] manufacturer offer[ing] to pay genuine purchasers 
$20 each to write positive reviews of its products on third-party 
review websites.'' \327\ However, consistent with the Commission's 
approach in this section, the Guides provide that ``[s]uch reviews are 
deceptive even if the payment is disclosed because their positive 
nature is required by, rather than being merely influenced by, the 
payment.'' \328\
---------------------------------------------------------------------------

    \325\ Endorsement Guides, 16 CFR 255.5(b)(2), (3), (7), (8), 
(9), and (11).
    \326\ Hammacher Schlemmer Cmt. at 3-4.
    \327\ Endorsement Guides, 16 CFR 255.2(e)(9).
    \328\ Id. (emphasis added).
---------------------------------------------------------------------------

    The third commenter taking this position suggested that it should 
be acceptable to use a disclosure like, ``We asked customers to tell us 
how much they loved their visit to John's Steakhouse, and here's what 
some of them said! (customers who submitted reviews received a $5 
coupon).'' \329\ The scenario the commenter describes does not involve 
consumer reviews. It involves consumer testimonials, which are not 
covered by Sec.  465.4. Further, it is unlikely that one could make 
such a disclosure in the context of consumer reviews, given how reviews 
are usually presented on a business's own website and the lack of 
control over the way they are presented on a third-party website. In 
addition, the disclosure does not communicate that the customers had to 
``tell how much they loved their visit in order to receive a $5 
coupon.'' Furthermore, as discussed above, many incentivized reviews 
conditioned on consumers saying how much they ``loved their visit'' are 
likely false regardless of such a disclosure.
---------------------------------------------------------------------------

    \329\ ANA Cmt. at 8.
---------------------------------------------------------------------------

    Two commenters, an individual and a review platform, requested that 
Sec.  465.4 go further and prohibit all incentives given in exchange 
for reviews regardless of any requirement to express a particular 
sentiment.\330\ An individual commenter would have the Commission 
``require businesses to disclose any form of incentive that they 
provide or arrange for reviewers.'' \331\ These requests are beyond the 
scope of this rulemaking but are addressed in the Endorsement Guides, 
which provide that unexpected material connections such as incentives 
given in exchange for customer reviews without any requirement as to 
the sentiment of the reviews must be disclosed clearly and 
conspicuously.\332\ The Commission continues to believe that this 
principle from the Endorsement Guides is an appropriate expression of 
what incentivized review practices would or would not violate section 5 
of the FTC Act. In any event, there is no basis on the current 
rulemaking record for the Commission to conclude that all incentivized 
reviews should be prohibited or that all incentivized reviews should 
require a disclosure.
---------------------------------------------------------------------------

    \330\ Anonymous 3 Cmt; Yelp Cmt. at 5-6.
    \331\ Ravnitzky Cmt. at 1.
    \332\ Endorsement Guides, 16 CFR 255.5(a) & (b)(6)(ii).
---------------------------------------------------------------------------

    Two commenters, an individual and a review platform, recommended 
that Sec.  465.4 also prohibit offering compensation to remove or 
change consumer reviews.\333\ Another individual commenter inquired 
about paid review removal without stating a position on the topic.\334\ 
The Commission previously noted that, ``[i]n procuring [or] suppressing 
. . . consumer reviews of their products, advertisers should not take 
actions that have the effect of distorting or otherwise misrepresenting 
what consumers think of their products.'' \335\ A product marketer 
paying consumers to change or remove truthful negative reviews may be 
engaging in an unfair or deceptive act or practice that has the effect 
of distorting or otherwise misrepresenting what consumers think of a 
marketer's products. Nevertheless, that act or practice is beyond the 
scope of this rulemaking.
---------------------------------------------------------------------------

    \333\ Camp-Martin Cmt. at 4-5; Yelp Cmt. at 7.
    \334\ Anonymous 4 Cmt.
    \335\ Endorsement Guides, 16 CFR 255.2(d).
---------------------------------------------------------------------------

E. Sec.  465.5--Insider Consumer Reviews and Consumer Testimonials

    Proposed Sec.  465.5 sought to prohibit certain undisclosed insider 
reviews and testimonials. It had three subparts. Proposed Sec.  
465.5(a) would have prohibited 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 failed to have a clear 
and conspicuous disclosure of the officer's or manager's relationship 
to the business.\336\ Proposed Sec.  465.5(b) would have applied to 
testimonials, but not consumer reviews. It would have prohibited a 
business from disseminating or causing the dissemination of a consumer 
testimonial about the business or one of the products or services by 
one of its officers, managers, employees, or agents, or any of their 
relatives, if that testimonial failed to have a clear and conspicuous 
disclosure of the testimonialist's relationship to the business or to 
the officer, manager, employee, or agent, and if the business knew or 
should have known of that relationship. Proposed Sec.  465.5(c) would 
have applied to consumer reviews, but not testimonials, and would have 
been limited to when an officer or manager of a business solicits or 
demands a consumer review about the business or one of its products or 
services from an employee, an agent, or a relative of any such officer, 
manager, employee, or agent. Proposed Sec.  465.5(c) would have 
prohibited that conduct when (1) the person requesting the review 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 request resulted in a consumer review without a disclosure, and 
(3) the person requesting the review (a) did not instruct the 
prospective reviewer to disclose clearly and conspicuously that 
relationship, (b) knew or should have known that such a review appeared 
without such a disclosure and failed to take remedial steps, or (c) 
encouraged

[[Page 68058]]

the prospective reviewer not to make such a disclosure. The Commission 
has determined to finalize proposed Sec.  465.5 with a number of 
modifications.\337\
---------------------------------------------------------------------------

    \336\ Due to an inadvertent drafting error, the regulatory text 
of proposed Sec.  465.5(a), which addressed an officer or manager of 
a business writing or creating a consumer review or consumer 
testimonial about the business or its products or services, only 
referenced disclosure of the officer's but not the manager's 
relationship to the business. The Commission clearly intended that 
proposed Sec.  465.5(a) require disclosure of the manager's 
relationship as well. See NPRM, 88 FR 49379 (``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.'').
    \337\ Proposed Sec.  465.5(b) and (c) are being renumbered as 
final Sec.  465.5(b)(1) and (c)(1).
---------------------------------------------------------------------------

    Two individual commenters shared their experiences with insider 
reviews. One individual commenter ``made a purchase based on a glowing 
review'' but ``later discovered that the person who wrote the review 
was, in fact, a salesperson for the same company, receiving a 
commission based on my purchase,'' and the purchase turned out to be 
``a fraudulent service.'' \338\ Another individual commenter shared 
their experience as an employee: ``I was asked to leave positive 
reviews in Amazon . . . and in other sites to boost the number of 
positive reviews for our products. The CEO asked employees to do this 
and include family members. In fact, I found the immediate family and 
friends of the CEO leaving glowing reviews of the product.'' \339\
---------------------------------------------------------------------------

    \338\ Anonymous 9, Cmt. on NPRM (Aug. 16, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0023.
    \339\ Anonymous 5 Cmt.
---------------------------------------------------------------------------

    A business commenter said, ``If you allow insider reviews, 
disclosure [of the reviewers' relationship to the business] should be 
mandatory.'' \340\ Another business commenter wrote that ``limiting . . 
. Sec.  465.5(a)-(c) to circumstances in which the requisite disclosure 
is absent is a fair restriction on businesses that would simultaneously 
protect consumers all while allowing businesses to effectively 
advertise.'' \341\ The commenter noted that the ``requirement for 
clear-and-conspicuous disclosure is used widely throughout federal and 
state consumer protection laws.'' \342\ The commenter was also 
concerned that a rule might ``infringe on the ability of employees and 
independent contractor agents . . . to inform others of their 
experiences with an employer or principal.'' \343\ To the extent that 
the commenter is referring to review websites that specialize in 
reviewing employers from the perspective of employees, it is obvious 
that the reviewers are employees or former employees, and no further 
disclosure appears necessary.
---------------------------------------------------------------------------

    \340\ Transparency Company Cmt. at 13.
    \341\ Family First Life Cmt. at 13.
    \342\ Id.
    \343\ Id. at 3.
---------------------------------------------------------------------------

    A trade association commented that it ``understands the 
Commission's concern that in some cases, employees may have an 
incentive to post positive reviews on behalf of their company's 
products,'' but the concern ``is already addressed through Section 5 
and the Endorsement Guides.'' \344\ The Commission continues to believe 
that certain conduct should be addressed by a trade regulation rule 
even if it can also be addressed through section 5 enforcement actions. 
Having specific conduct addressed by a rule provides the general public 
with further clarity as to what steps are necessary to conform its 
conduct to the requirements of the law, deters prevalent unlawful 
conduct, and allows the Commission to bring enforcement actions more 
efficiently and effectively.
---------------------------------------------------------------------------

    \344\ NRF Cmt. at 9.
---------------------------------------------------------------------------

    A retailer recommended that the provision ``be revised to further 
incorporate a requirement that the `insider' review/testimonial be 
`fake' or `false,' in order to better target the deceptive acts of bad 
actors that use their employees to generate fake reviews and 
testimonials that purport to be from actual customers.'' \345\ The 
Commission rejects that suggestion, as the intention of Sec.  465.5 is 
to address certain inherently biased reviews and testimonials. Fake and 
false reviews are already addressed by Sec.  465.2.
---------------------------------------------------------------------------

    \345\ Amazon Cmt. at 11.
---------------------------------------------------------------------------

1. Material Connections
    Commenters pointed out what they saw as inconsistencies between 
proposed Sec.  465.5 and section 5 of the FTC Act. A retailer commenter 
wrote that proposed Sec.  465.5 was ``inconsistent with the 
longstanding principles in the Endorsement Guides . . . that 
disclosures must be made when the connection between a reviewer and the 
sponsoring advertiser is material, meaning it would affect the weight 
or credibility that consumers give to the endorsement.'' \346\ A trade 
association noted in its comment that the section ``seeks to impose 
liability for reviews and testimonials authored by certain employees or 
their relatives that lack disclosures regardless of context, and 
whether that connection is material under the circumstances'' and 
``would impose civil penalties for reviews or testimonials that are not 
even deceptive.'' \347\ Another trade association opined ``that a 
reviewer's out-of-state second cousin [who] works a minimum-wage job at 
a retailer would (hopefully) not be a `material connection' requiring 
disclosure under the Endorsement Guides, because such connection would 
not bias the reviewer's review, and therefore would not make the review 
misleading.'' \348\ The same trade association and a business 
organization also commented that the provision poses concerns under the 
First Amendment by ``broadly prohibiting certain reviews or 
testimonials by `insiders' regardless of whether that speech is 
deceptive in context.'' \349\ The Commission intended for Sec.  465.5 
to be limited to unfair or deceptive failures to disclose material 
connections, and is now clarifying this intent. Specifically, in 
paragraphs (a) through (c) of Sec.  465.5, the Commission is limiting 
the covered relationships to ``material'' relationships. In Sec.  
465.5(a) and (b), the Commission is also clarifying that, under certain 
circumstances, the relationship of a consumer testimonialist may be 
clear to the audience without disclosure. For example, the audience may 
already be aware that an executive is associated with a particular 
company, or the context of an ad may otherwise communicate a 
relationship with a particular company. Specifically, in Sec.  
465.5(b), which applies only to consumer testimonials, the Commission 
is adding the requirement that ``the relationship is not otherwise 
clear to the audience,'' and in Sec.  465.5(a), which involves both 
consumer reviews and testimonials, it is adding, ``unless, in the case 
of a consumer testimonial, the relationship is otherwise clear to the 
audience.'' The Commission does not believe that, absent a disclosure, 
a relationship will ever be clear to consumers in the context of an 
ordinary consumer review.
---------------------------------------------------------------------------

    \346\ Id.
    \347\ IAB Cmt. at 9.
    \348\ NRF Cmt. at 9.
    \349\ Id. at 11; TechNet Cmt. at 3.
---------------------------------------------------------------------------

2. Relatives
    Proposed Sec.  465.5(b) and (c) would have required disclosures in 
some circumstances involving consumer testimonials or reviews from 
``relatives'' of a company's officers, managers, employees, or agents. 
Some commenters voiced concerns pertaining to these requirements.
    For example, a review platform, explaining that it prohibits 
reviews about a business or its products by someone whose immediate 
family owns or works for the business, asked how businesses would 
``know whether reviews have been submitted by the extended family (such 
as the second cousins) of their officers, managers, employees, or 
agents,'' questioned whether it would be proportional to seek penalties 
when extended family are involved, and suggested ``narrowing the scope 
of the family requirement'' to ``immediate family.'' \350\ A trade 
association said that ``relatives can include cousins, nieces/nephews, 
and other more distant familial

[[Page 68059]]

relationships,'' that ``even immediate family relationships (parents, 
children, siblings) are not always closely held'' because ``adult 
siblings are not necessarily in each other's day-today lives,'' and 
that ``it would be more appropriate to substitute the term . . . 
`members of the same household' as that would suggest individuals that 
have regular contact with an employee.'' \351\ A business organization 
wrote in its comment that the term ``relative'' is too vague and that 
``[i]t is unclear whether the rule applies to third cousins, the 
spouses of a stepbrother's child from a previous marriage, or friends 
that are considered family,'' concluding that ``[l]arge companies 
creating monitoring programs for testimonials need some clarity about 
what relatives will be captured under the Rule.'' \352\ A second trade 
association said in its comment that ``relatives'' of ``any company 
employee should not be considered `insiders''' because ``[i]n most 
cases, such family members would have no incentive to post a fake 
review.'' \353\ However, the Commission intended for Sec.  465.5 to 
address biased reviews and testimonials by insiders or their relatives, 
not the writing of ``fake [or false] reviews,'' which is addressed in 
Sec.  465.2.
---------------------------------------------------------------------------

    \350\ Trustpilot Cmt. at 5-6.
    \351\ RILA Cmt. at 6.
    \352\ Chamber of Commerce Cmt. at 7.
    \353\ NRF Cmt. at 9.
---------------------------------------------------------------------------

    To reduce the compliance burden, the Commission is removing 
relatives from Sec.  465.5(b) and limiting what was originally proposed 
as Sec.  465.5(c)(1), which is now split into three separate 
prohibitions. One prohibition addresses officers or managers soliciting 
or demanding a consumer review from ``any of their [own] immediate 
relatives.'' A second prohibition addresses officers or managers 
soliciting or demanding reviews from employees or agents. A third 
prohibition addresses solicitations or demands by officers or managers 
that ``employees or agents seek such [consumer] reviews from their 
relatives.'' In such instances the request will likely be a general one 
(such as ``Ask your relatives to review us'' or ``Get three family 
members to review us''), although it could also be more specific (such 
as ``Get your spouse to write us a review''). As set forth in Sec.  
465.5(c)(1)(i), any reviews resulting from demands that employees or 
agents solicit their relatives would only be violations if the 
resulting reviews were written by immediate relatives of the employees 
or agents.
3. Agents
    A trade association objected to the inclusion of the undefined term 
``agents'' in proposed Sec.  465.5(b) and (c) and suggested its 
removal. The commenter said that ``it is not clear what individuals 
would be considered `agents' of the business'' and the meaning of the 
term ``agent'' could ``dramatically expand the scope of the compliance 
programs that businesses will likely need to create in order to 
mitigate their risks under this section'' which ``would be particularly 
important for small businesses.'' \354\ The Commission intends for the 
term ``agents'' in this rule to apply only to those agents that promote 
the company or its products, such as representatives of advertising 
agencies, public relations firms, and review management firms. As 
discussed below, given the clarifications of and limitations to Sec.  
465.5(b)(1) and (c)(1), the Commission has no reason to believe that 
the inclusion of ``agents'' will ``dramatically expand the scope of the 
compliance programs.'' \355\
---------------------------------------------------------------------------

    \354\ IAB Cmt. at 10.
    \355\ See infra section IV.E.4 and 5 of this document.
---------------------------------------------------------------------------

4. Scope
    Several comments addressed the scope of proposed Sec.  465.5, 
including the scope of liability of businesses in the context of 
insider reviews and testimonials. For example, a trade association 
asserted that Sec.  465.5 should ``be limited to the extent it 
references employees (or agents) who are not officers or managers, and 
who were not instructed by their superiors to post reviews.'' \356\ A 
retailer asked for a safe harbor that would apply to employee reviews 
and testimonials ``if businesses are not encouraging insider reviews 
and testimonials.'' \357\ The Commission intended for the provision to 
apply to reviews or testimonials by employees or agents who are not 
officers or managers only when (1) the reviews are requested or 
solicited by an officer or manager of the business or (2) the 
testimonials appear in advertising or promotional messages actively 
disseminated by the business. As discussed in this section, the 
Commission's clarifications and limitations should resolve any concerns 
arising from any broader interpretation.
---------------------------------------------------------------------------

    \356\ NRF Cmt. at 10.
    \357\ Amazon Cmt. at 11.
---------------------------------------------------------------------------

    Two trade associations and another industry organization asserted 
in their comments that Sec.  465.5 ``appears to impose liability on 
businesses for distributing the content of third parties, even when 
they had no knowledge that the content violated the proposed rule.'' 
\358\ As the commenters used the word ``distributing,'' the Commission 
assumes that these comments pertain to the liability of businesses 
under Sec.  465.5(b), which prohibits businesses from ``disseminating 
or causing the dissemination of consumer testimonials'' by insiders 
without disclosures. The testimonials covered by Sec.  465.5 are, by 
definition, a business's advertising or promotional messages, so the 
Commission does not consider them to be third-party content. The 
section covers such testimonials when disseminated by the business 
itself, by its officers or managers, or in response to solicitations or 
demands from its officers or managers. With respect to the commenters' 
concern that businesses will be liable even when they had no knowledge 
that the content violated the rule, the Commission discusses below the 
appropriate application of the ``knew or should have known'' standard.
---------------------------------------------------------------------------

    \358\ NRF Cmt. at 11; IAB Cmt. at 10; TechNet Cmt. at 3.
---------------------------------------------------------------------------

    A retailer's comment expressed ``significant concerns with this 
section if the FTC intends to apply it to marketplace service providers 
with hundreds of thousands of employees.'' \359\ A trade association 
said in its comment that, ``to the extent the Commission intends for 
this language to apply to reviews or testimonials written by employees 
of online retailers with hundreds of thousands of employees, the 
Commission has failed to demonstrate that this is an unfair or 
deceptive act or practice that is prevalent'' as ``[n]one of the cases 
cited in the NPRM involved this type of company.'' \360\ With respect 
to employees, the section applies only to (1) testimonials by employees 
that the company chooses to disseminate and (2) reviews that are 
solicited or demanded by company officers or managers. Further, the 
Commission has sufficient evidence of prevalence as to the use of 
insider reviews and testimonials,\361\ and that evidence need not 
specifically include examples of companies of every size, such as those 
``with hundreds of thousands of employees.''
---------------------------------------------------------------------------

    \359\ Amazon Cmt. at 11.
    \360\ IAB Cmt. at 9.
    \361\ See NPRM, 88 FR 49374-75.
---------------------------------------------------------------------------

    A trade association's comment ``urge[d] the Commission to add a 
safe harbor . . . that will assure businesses acting in good faith that 
they will not face civil penalty liability for the actions of rogue 
individuals.'' \362\ Again, whether a business will be subject to civil 
penalties will depend on whether

[[Page 68060]]

the facts show that the business had actual knowledge or knowledge 
fairly implied of the violation. A business will not violate the rule--
much less be subject to civil penalties--merely because employees write 
consumer reviews without disclosing their relationship to the business, 
but it may violate the rule when an officer or manager of the company 
solicited or demanded such reviews. A business will also not be liable 
under Sec.  465.5 simply because one of its employees (other than an 
officer or manager) or agents makes an unsolicited social media post. 
However, as discussed above, a business might be liable under Sec.  
465.2(a) for an employee posting fake testimonials to social media on 
behalf of the company.\363\
---------------------------------------------------------------------------

    \362\ IAB Cmt. at 10.
    \363\ See supra section IV.B.2 of this document.
---------------------------------------------------------------------------

    Two commenters addressed general review solicitations from 
businesses to their customers. A trade association said that 
``[b]usinesses which seek reviews from their customers generally seek 
reviews from all customers, and again, do not currently monitor or 
screen for potential relatives or agency relationships.'' \364\ A 
review platform operator wrote in its comment, ``An automated review 
invitation system can operate via integration with, for example, a 
C[ustomer] R[elationship] M[anagement] platform where customer details 
are automatically fed through to generate review invitations following 
on from purchases or experiences. The information within the system 
could be as minimal as a name and email address. . . . It could 
therefore be possible for businesses to inadvertently invite persons 
that are related to an officer, manager, employee, or agent . . . . In 
practice, it will be difficult to check whether any invitation 
recipients could fall within the very wide group of persons outlined at 
[Sec.  ] 465.5(c), and it will also be difficult to draw a firm line 
between what types of indicators are sufficient to warrant imputing 
constructive knowledge.'' \365\ The Commission did not intend for Sec.  
465.5(c) to cover such generalized invitations to past purchasers to 
write reviews. The Commission is therefore adding language in Sec.  
465.5(c)(2) to clarify that Sec.  465.5(c)(1) ``does not apply to 
generalized review solicitations to purchasers for them to post reviews 
about their experiences with the product, service, or business.'' The 
Commission is making a similar clarification in Sec.  465.5(b)(2)(i); 
specifically, that Sec.  465.5(b)(1) ``does not apply to generalized 
review solicitations to purchasers for them to post testimonials about 
their experiences with the product, service, or business.''
---------------------------------------------------------------------------

    \364\ NADA Cmt. at 6.
    \365\ Trustpilot Cmt. at 13.
---------------------------------------------------------------------------

    The Commission has also added Sec.  465.5(b)(2)(ii), which exempts 
``merely engaging in consumer review hosting'' from Sec.  465.5(b)(1). 
Thus, an unsolicited employee review merely appearing on the business's 
website cannot violate the provision against disseminating insider 
testimonials.
    A trade association noted that ``[l]arge national retail chains 
collectively employ millions of workers who are also their customers'' 
and ``[w]hile a retailer may provide guidance on disclosing their 
relationship, it should not be liable for policing their customer 
reviews for posts that may have been submitted by any one of their 
thousands or millions of employees--who in many cases may be using 
ambiguous screennames or not be readily identifiable.'' \366\ The 
Commission points out that only Sec.  465.5(c) applies to customer 
reviews by employees, and that provision only applies to employee 
reviews that an officer or manager has solicited or demanded. If there 
are no such solicitations or demands, then Sec.  465.5 does not apply 
to employee reviews. When an officer or manager does solicit or demand 
a review, the business would only be liable if the officer or manager 
(1) ``encouraged the prospective reviewer not to make . . . a 
disclosure,'' (2) ``did not instruct that prospective reviewers 
disclose clearly and conspicuously their relationship to the 
business,'' \367\ or (3) ``knew or should have known that such a review 
appeared without such a disclosure and failed to take remedial steps.'' 
It is only under the last of the three clauses that a business might be 
liable for any ``policing'' of reviews, and, as discussed below, any 
such obligations should not be unduly burdensome.\368\
---------------------------------------------------------------------------

    \366\ RILA Cmt. at 6.
    \367\ The Commission has slightly modified this clause, changing 
``did not instruct the prospective reviewer to disclose clearly and 
conspicuously that relationship'' to ``did not instruct that 
prospective reviewers disclose clearly and conspicuously their 
relationship to the business'' for purposes of clarity.
    \368\ See infra section IV.E.5 of this document.
---------------------------------------------------------------------------

    An industry organization commenter expressed concern that Sec.  
465.5 ``would require the disclosure of personally identifying 
information'' and impact employees' privacy.\369\ The Commission does 
not see how the provision requires the disclosure of personally 
identifying information. Section 465.5 requires the disclosure of 
unexpected material connections but does not require that employees 
identify themselves by name. Testimonialists and reviewers could be 
anonymous, or use pseudonyms, and include general phrases indicating 
their relationship to the business, such as ``my employer's product,'' 
``my company's,'' or ``my spouse's company.''
---------------------------------------------------------------------------

    \369\ TechNet Cmt. at 3.
---------------------------------------------------------------------------

5. Knowledge Standard
    A number of commenters discussed the ``knew or should have known'' 
standard contained in Sec.  465.5(b) and (c). A trade association said 
that a `` `knew or should have known' standard . . . [in] Sec.  465.5 
aptly reflects that the rule is targeting bad actors that intend to 
commit fraud through fake reviews.'' \370\ A consumer organization 
``advise[d] the Commission against relying on knowledge standards that 
will introduce unnecessary evidentiary burdens in the enforcement 
process'' and against making it ``a condition of liability,'' noting 
that instead ``the Commission can and should consider knowledge and 
intent in deciding the equities of bringing any enforcement action.'' 
\371\ A review platform said ``that `should have known' is too low as a 
knowledge threshold and this should therefore be limited to `knew', 
i.e., actual knowledge.'' \372\ A trade association called the ``should 
have known'' standard ``vague.'' \373\ A business commenter also 
described ``should have known'' as vague and suggested limiting the 
knowledge standard to actual knowledge.\374\ A trade association and a 
retailer said that civil penalties should not be based upon a ``should 
have known'' standard.\375\ The retailer continued, ``In the 
alternative, if the Commission refuses to elevate the knowledge 
standard for this section, the final rule must provide greater guidance 
on the sorts of scenarios that would give rise to liability.'' \376\ 
Specifically, the retailer asserted that the Commission would have to 
provide ``additional information about when a company or officer/
manager `should' know that an `insider' review or testimonial violates 
the rule.'' \377\ A trade association wrote in its comment that ``the 
Commission should raise the knowledge standard for this section to 
actual knowledge,'' which ``would ensure that companies that are 
actually complicit in the proliferation of deceptive insider reviews 
and testimonials are the targets of this section, rather than well-
meaning

[[Page 68061]]

businesses that fail to discover and remedy reviews or testimonials by 
employees, managers, officers, agents, or any of those individuals' 
relatives that lack disclosures.'' \378\ The commenter continued, 
``[r]egardless of the knowledge standard the Commission imposes, the 
final rule must provide greater guidance on what sorts of scenarios 
would give rise to liability under this section.'' \379\
---------------------------------------------------------------------------

    \370\ Travel Tech Cmt. at 4.
    \371\ Consumer Reports Cmt. at 8.
    \372\ Trustpilot Cmt. at 5, 8.
    \373\ NRF Cmt. at 9.
    \374\ Family First Life Cmt. at 15.
    \375\ NADA Cmt. at 3; Amazon Cmt. at 11.
    \376\ Amazon Cmt. at 11.
    \377\ Id.
    \378\ IAB Cmt. at 9.
    \379\ Id. at 10.
---------------------------------------------------------------------------

    The Commission chooses to retain the proposed ``knew or should have 
known'' standard in Sec.  465.5(b)(1) and (c)(1)(ii)(c). First, the 
Commission notes again that it cannot obtain civil penalties under 
section 5(m)(1)(A) of the FTC Act for a rule violation unless it proves 
that a defendant had actual knowledge or knowledge fairly implied that 
the act or practice is unfair or deceptive and is prohibited by the 
rule. With respect to Sec.  465.5(b)(1), the provision applies only to 
testimonials that the business disseminates or causes to be 
disseminated, i.e., it applies to the business's own advertising and 
promotional activities. As noted above, Sec.  465.5(b)(1) does not 
apply to unsolicited social media posts by employees or to social media 
posts that result from generalized solicitations. The Commission does 
not expect that a business will ask every potential testimonialist 
whether they are an agent of the business. There may be red flags, 
however, that should cause a business to realize that a prospective 
testimonialist is likely an insider, such as the testimonial featuring 
an image of that person standing in front of the company's 
headquarters. If a business routinely asks prospective testimonialists 
how they became interested in the business or its products, it should 
not avoid looking at answers that might indicate a covered connection.
    With respect to Sec.  465.5(c)(1)(ii)(c), the Commission believes 
that, if officers and managers of a business request or demand that the 
business's employees or agents write consumer reviews or solicit or 
demand that such employees or agents seek such reviews from their 
relatives, it is more than reasonable to have those officers and 
managers take on certain responsibilities with respect to those 
reviews. The employees, agents, and relatives on the receiving end of 
such requests or demands are likely to assume that their reviews should 
be positive, which gives such reviews an inherent bias. Therefore, 
officers and managers should instruct that prospective reviewers make 
disclosures. When they demand that employees or agents seek reviews 
from their relatives, the officers or managers should instruct the 
employees or agents to ask their immediate relatives to make 
disclosures. The officers and managers should also take remedial steps 
when they know or should know that resulting insider reviews appeared 
without a disclosure. The Commission does not expect an officer or 
manager to scour every review of the business for possible insider 
reviews appearing without a disclosure. There may be red flags, 
however, that should cause officers or managers to inquire further. An 
example that is at least applicable to smaller companies is a review 
without a disclosure by someone the soliciting officer or manager 
recognizes as having the same last name as an employee whom the officer 
or manager told to obtain reviews from relatives. Another example is an 
employee sending a soliciting officer or manager a link to the 
resulting review, in which case the officer or manager should take the 
time to see if that review has a disclosure. By taking ``remedial 
steps,'' the Commission means that the officer or manager should 
request that the reviewer delete the review or add a clear and 
conspicuous disclosure to it.
6. Other Suggestions
    Commenters recommended that the Commission adopt a number of 
additional requirements or prohibitions. An individual commenter said 
that insider reviews should be banned and that disclosures are 
insufficient to cure them.\380\ One consumer group proposed that (1) 
``non-disclosed insider ratings'' should be ``independent and separate 
violation[s] from deceptive narrative reviews;'' (2) ``symbolic 
ratings--both independently and when aggregated--should feature a clear 
and conspicuous disclosure of necessary material connections;'' and (3) 
``reviews requiring a disclosure should not be included in a product's 
aggregate rating without a disclosure.'' \381\ Another consumer group 
suggested the following: (1) Sec.  ``465.5(a) and (c) should apply to 
all employees and board members of a business;'' (2) Sec.  465.5(b) and 
(c) be extended ``to employees or board members of other companies with 
a material business relationship with the first business;'' (3) Sec.  
465.5(c) should be extended ``to include solicitations or demands of 
employees of companies with which the business conducts material 
business;'' (4) Sec.  465.5(c) should prohibit ``any employee or board 
member of a business to solicit or demand from another employee or 
board member (or relative of an employee or board member) a consumer 
review about the business or one of its products or services;'' and (5) 
``employees of a business should not be permitted to provide star or 
numerical reviews that count toward an aggregate or average rating, 
even if their conflict of interest is otherwise disclosed in an 
accompanying narrative review.'' \382\ Some of these proposals go 
beyond the scope of this rulemaking. Based on its policy expertise, the 
Commission declines to make any of these changes at this time. The 
Commission notes, however, that some may, in certain situations, 
involve unfair or deceptive acts or practices that violate section 5 of 
the FTC Act.
---------------------------------------------------------------------------

    \380\ Anonymous 3 Cmt.
    \381\ TINA Cmt. at 6 and 8.
    \382\ Consumer Reports Cmt. at 7-8.
---------------------------------------------------------------------------

F. Sec.  465.6--Company-Controlled Review Websites or Entities

    Proposed Sec.  465.6 sought to prohibit a business from 
representing, 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. Based on the following, the Commission has 
determined to finalize this provision with two limiting 
modifications.\383\
---------------------------------------------------------------------------

    \383\ Two modifications are changing ``Rule'' to ``part'' and, 
as discussed above, changing ``its products or services'' to ``the 
products and services it sells.'' See supra section IV.B.4. of this 
document.
---------------------------------------------------------------------------

    A business organization, a retailer, and a review platform 
submitted comments supporting the intent of proposed Sec.  465.6.\384\ 
For example, the business organization noted that it ``was supportive 
of a . . . rule aimed at addressing the practice of marketers setting 
up purportedly independent websites, organizations, or entities to 
review or endorse their own product.'' \385\
---------------------------------------------------------------------------

    \384\ Chamber of Commerce Cmt. at 6; Amazon Cmt. at 12; 
Trustpilot Cmt. at 4-5.
    \385\ Chamber of Commerce Cmt. at 6.
---------------------------------------------------------------------------

    Some commenters argued that, as drafted, the provision was overly 
broad and would prohibit conduct that was not deceptive or unfair. A 
business organization said that, as drafted, proposed Sec.  465.6 ``. . 
. could capture retailers that sell their own house brands'' and 
``prevent media companies from operating general review websites that 
publish reviews by independent critics and consumers about films or 
television produced by affiliated studios or divisions.'' \386\ A 
consumer

[[Page 68062]]

organization similarly said that, ``as written, . . . [proposed Sec.  
465.6] would make it illegal for companies to host any reviews 
whatsoever so long as some of the reviews touch on a category of 
business, products, or services the company provides'' and would 
prohibit ``customer review forums on sites such as Home Depot and 
Amazon.'' \387\ A retailer said that ``the plain text of . . . 
[proposed Sec.  465.6 would] sweep[ ] in more conduct that is neither 
deceptive nor unfair--for example, where Company A provides customer 
reviews authored by others to Company B, without disclosing an 
ownership relationship.'' \388\ A trade association wrote that proposed 
Sec.  465.6 ``could be applied to prohibit retailers from representing 
that any consumer reviews or opinions featured on their own websites 
are independent, even if they are.'' \389\ A retailer commented that 
proposed Sec.  465.6 is ``overly broad and would prohibit a business 
from using a related entity from [sic] testing or comparing products in 
good faith and publishing those results, even if the company clearly 
disclosed that the test or comparison was done by an affiliate.'' \390\ 
A review platform asked in its comment that the Commission clarify that 
the section would not ``unintentionally lead[ ] to review sites being 
unable to host reviews of their own company or sector.'' \391\ The 
Commission recognizes and agrees with the above concerns and is making 
two responsive modifications to narrow final Sec.  465.6 in a way that 
better reflects the Commission's intent. The Commission is excluding 
``consumer reviews'' from the scope of final Sec.  465.6 and changing 
the prohibition against ``represent[ing]'' to a prohibition against 
``materially misrepresent[ing].''
---------------------------------------------------------------------------

    \386\ Id.
    \387\ Consumer Reports Cmt. at 9.
    \388\ Amazon Cmt. at 12. The commenter suggested that the 
Commission ``clarify the regulatory language to make clear that it 
covers only reviews authored by the owner company or its agents.'' 
Id. The Commission is not adopting this approach because Sec.  465.6 
is not limited to websites with reviews. It also applies to 
organizations or entities that misrepresent that they provide 
independent reviews or opinions (e.g., seals) about a category of 
businesses, products, or services including the business or one or 
more of the products or services it sells.
    \389\ NRF Cmt. at 11-12.
    \390\ Hammacher Schlemmer Cmt. at 5.
    \391\ Trustpilot Cmt. at 5.
---------------------------------------------------------------------------

    A trade association commented that ``many retailers host product 
reviews on their online shopping websites and make no direct claims 
that the reviews are independent'' and asked the Commission to ``make 
clear that it is permissible for retailers to host product reviews on a 
site they control and operate.'' \392\ Assuming that the commenter is 
referring to retailers hosting independent consumer reviews on a site 
they operate or control, then this is permissible under Sec.  465.6. If 
the retailer's website misrepresents that it provides independent 
reviews or opinions by experts or organizations, then the retailer 
could be liable under Sec.  465.6.
---------------------------------------------------------------------------

    \392\ RILA Cmt. at 7.
---------------------------------------------------------------------------

    Two commenters asked the Commission to adopt a safe harbor 
provision for disclosures of the relationship between the business and 
the provider of the purportedly independent reviews or opinions.\393\ 
The Commission's modifications address this request effectively by 
providing that businesses do not violate Sec.  465.6 if they are not 
materially misrepresenting independence. The Commission believes that 
contradictory disclosures cannot cure a false express claim, such as a 
false express claim of independence. If a false claim of independence 
is merely implied, whether a disclosure is adequate to cure it will 
depend on the net impression of the website or advertisement, i.e., 
whether it materially misrepresents independence even with the 
disclosure.
---------------------------------------------------------------------------

    \393\ Hammacher Schlemmer Cmt. at 6-7 (proposing that the 
Commission adopt Sec.  465.6 with the addition of the following 
clause: ``unless the business discloses that there is a relationship 
or affiliation between the business and the website, organization, 
or entity that it controls, owns, or operates and why the reviews or 
opinions are `independent', including the steps that the business 
takes to ensure objectivity or independence in obtaining such 
reviews or opinions.'' (emphasis omitted)); Frieling Cmt. at 4.
---------------------------------------------------------------------------

    A trade association commented that ``[i]t would be helpful to make 
it clear that . . . Sec.  465.6 only applies to websites or entities 
whose core service is providing reviews or opinions.'' \394\ The term 
``core service'' is ambiguous, and it is not clear how one would 
determine whether it applies to reviews or opinions provided by a given 
website or other entity. False material claims that a website or entity 
provides independent reviews or opinions would still be deceptive even 
if such reviews or opinions are not the website's or entity's core 
service. The NPRM cited a number of cases in which businesses created 
purportedly independent seals or badges that they then awarded to their 
own products; the awarding of such seals or badges was clearly not 
their core business.\395\ The NPRM also cited cases involving 
purportedly independent review websites, and, although such review 
websites might have appeared to be a ``core service,'' the true core 
business was selling the respondent's or defendant's own products.\396\ 
Focusing on the ambiguous term ``core services'' would likely open the 
door to manipulation and evasion of the prohibition. The commenter 
further noted that it would also be ``useful to clarify what 
`independent reviews or opinions' means.'' \397\ In this context, the 
term ``independent'' merely refers to explicit or implicit claims that 
reviews or opinions are not coming from a business that offers any of 
the products or services being reviewed or evaluated.
---------------------------------------------------------------------------

    \394\ CCIA Cmt. at 3.
    \395\ NPRM, 88 FR 49375.
    \396\ Id.
    \397\ CCIA Cmt. at 3.
---------------------------------------------------------------------------

    A business organization commenter suggested that the Commission not 
finalize Sec.  465.6 because ``the fraudulent nature of reviews on 
purportedly independent websites would likely be covered by . . . 
[Sec. Sec.  ] 465.2 and 465.5 of the . . . Rule.'' \398\ Those sections 
are limited to consumer reviews and consumer or celebrity testimonials 
and do not apply to reviews, seals, or other opinions by purportedly 
independent experts, organizations \399\ or other entities. Therefore, 
Sec.  465.6 is not duplicative of either Sec.  465.2 or Sec.  465.5.
---------------------------------------------------------------------------

    \398\ Chamber of Commerce Cmt. at 6.
    \399\ ``Endorsements by organizations, especially expert ones, 
are viewed as representing the judgment of a group whose collective 
experience exceeds that of any individual member.'' Endorsement 
Guides, 16 CFR 255.4(a).
---------------------------------------------------------------------------

G. Sec.  465.7--Review Suppression

    Proposed Sec.  465.7 sought to prohibit two different types of 
consumer review suppression.
1. Sec.  465.7(a)
    Proposed Sec.  465.7(a) sought to prohibit anyone from using 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 to cause a consumer review or 
any portion thereof to be removed. Based on the following, the 
Commission is finalizing Sec.  465.7(a) with several revisions for the 
purpose of clarity.\400\
---------------------------------------------------------------------------

    \400\ One modification is changing ``Rule'' to ``part.''
---------------------------------------------------------------------------

    A number of commenters supported the provision.\401\ The NPRM asked 
whether it is ``appropriate that . . . Sec.  465.7(a) focuses on the 
specific types of listed threats or activities,'' and two

[[Page 68063]]

business commenters responded that it is.\402\ One of the commenters 
said that ``[t]his narrow approach protects consumers, all while 
ensuring clarity for businesses and avoiding the pitfall of ambiguity 
in the . . . Rule.'' \403\ However, as already noted above, based on 
the comments and on the proposed definition for the phrase 
``unjustified legal threat,'' the Commission is adopting a definition 
for the phrase ``unfounded or groundless legal threat,'' instead of a 
definition of the phrase ``unjustified legal threat,'' as originally 
proposed.\404\
---------------------------------------------------------------------------

    \401\ Anonymous 10, Cmt. on NPRM (Aug. 3, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0009; TT in PA, Cmt. on 
NPRM (Aug. 9, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0016 (``TT in PA Cmt.''); Kurt Braun, Cmt. on NPRM (Aug. 17, 
2023), https://www.regulations.gov/comment/FTC-2023-0047-0026; 
Superguest Cmt.; Tripadvisor Cmt. at 5-6; Consumer Reports Cmt. at 
9-10; State AGs Cmt. at 2.
    \402\ Transparency Company Cmt. at 14; Family First Life Cmt. at 
15.
    \403\ Family First Life Cmt. at 15.
    \404\ See supra section IV.A.2.l of this document.
---------------------------------------------------------------------------

    A trade association commenter noted that `` `intimidation' means 
threat of the use of force'' so it ``duplicates `physical threat' '' 
and should be deleted.\405\ A review platform commenter questioned why 
the ``proposed text is limited to `physical threats' '' and said that 
non-physical threats, such as verbal threats in the form of abusive or 
coercive language, should not be tolerated and should be acted 
against.'' \406\ A consumer group's comment said that ``[t]he term 
`intimidation' seems sufficiently broad to cover most types of threats 
not otherwise covered by `legal' or `physical' threats.'' \407\ The 
Commission disagrees with the first commenter because, in this context, 
``intimidation'' means things other than legal or physical threats. 
Intimidation can include abusive communications, stalking, character 
assassination, and sexual harassment when those things are used to 
intimidate, that is to force someone into or deter someone from taking 
some action by inducing fear.\408\
---------------------------------------------------------------------------

    \405\ NFIB Cmt. at 4.
    \406\ Trustpilot Cmt. at 17.
    \407\ Consumer Reports Cmt. at 10.
    \408\ See Intimidate (def. 3), Dictionary.com, LLC, https://www.dictionary.com/browse/intimidate (last visited July 5, 2024) 
(establishing that the word ``intimidate'' means, among other 
things, ``to force into or deter from some action by inducing 
fear'').
---------------------------------------------------------------------------

    Three commenters voiced concerns about the fact that proposed Sec.  
465.7(a) included ``false accusation[s]'' as a type of conduct that 
could amount to review suppression. A review platform noted that the 
determination of whether an accusation is false ``introduces an element 
of subjectivity,'' and that it would ``be preferable to ground this in 
a legal basis, such as defamation.'' \409\ A trade association wrote 
that ``a statement by a business about a consumer review or the 
consumer making a review may sometimes be in order,'' and a prohibition 
on false accusations should ``allow breathing room for First Amendment 
free speech concerns, such as requiring a guilty mental state from the 
maker of an accusation before culpability attaches.'' \410\ It 
recommended adding ``knowing that it is false or with reckless 
disregard as to its truth or falsity.'' \411\ A second trade 
association asserted that proposed Sec.  465.7(a) was ``not narrowly 
tailored to serve a compelling state interest because it applies 
regardless of the magnitude of the alleged error or intent or state of 
mind of the business that makes the false statement.'' \412\ In order 
to illustrate its point, the second trade association also posited a 
scenario involving false accusations by a restaurant owner in a private 
conversation with a disgruntled patron.\413\ The owner in the 
hypothetical did not know the accusations were false and did not act 
recklessly. In response to these comments, final Sec.  465.7(a) adopts 
the phrase ``a public false accusation in response to a consumer review 
that is made with the knowledge that the accusation was false or made 
with reckless disregard as to its truth or falsity,'' rather than the 
phrase ``false accusation,'' as originally proposed. This change 
resolves the commenters' concerns regarding the accuser's state of 
mind, clarifies the Commission's intent that the provision applies only 
to public accusations, and provides greater clarity, thereby making 
compliance less burdensome. In response to the concern about 
subjectivity, the Commission notes that courts can make objective 
determinations of whether a given accusation is false. One of these 
commenters also asserted broadly that Sec.  465.7(a) ``regulates `pure 
speech,' not conduct, because it applies to the use of words to convey 
a message'' and that speech is not commercial speech if it does not 
propose a commercial transaction.\414\ This assertion has no basis in 
First Amendment law and is an overly limited articulation of what 
counts as commercial speech. When a business makes a public false 
accusation in response to a consumer review in an attempt to cause the 
review to be removed, the speech at issue is clearly commercial speech 
because it is intended to promote the product, service, or business 
that was the subject of the negative consumer review.
---------------------------------------------------------------------------

    \409\ Trustpilot Cmt. at 17.
    \410\ NFIB Cmt. at 4.
    \411\ Id. at 5.
    \412\ ANA Cmt. at 10.
    \413\ Id. at 9-10.
    \414\ Id.
---------------------------------------------------------------------------

    Two commenters, a review platform and a trade association, said 
that the provision should be strengthened by also covering attempts to 
force a consumer review or a portion thereof to be changed or 
edited.\415\ Proposed Sec.  465.7(a) would have prohibited certain acts 
made in an attempt to, among other things, ``cause a consumer review or 
any portion thereof to be removed.'' The Commission believes that, in 
most cases, changing or editing a review would necessarily require 
removing a portion of it. Accordingly, the Commission is clarifying 
that final Sec.  465.7 applies to such modifications of reviews by 
adding ``whether or not that review or a portion thereof is replaced 
with other content,'' immediately after ``cause a consumer review or 
any portion thereof to be removed.''
---------------------------------------------------------------------------

    \415\ Yelp Cmt. at 7; CCIA Cmt. at 4.
---------------------------------------------------------------------------

    A trade association's comment asked that the ``Rule be clarified to 
emphasize that it does not prohibit companies from contacting customers 
who post negative reviews to resolve the reported issues.'' \416\ The 
commenter was concerned that ``sensitive customers could argue that 
such communication from the Company (no matter how innocuous) amounts 
to intimidation.'' \417\ The Commission does not believe that a company 
engages in intimidation by merely contacting customers to resolve 
reported issues or simply asking satisfied customers to update their 
reviews. Specifying that a consumer's concerns will be addressed only 
if the consumer changes or removes a truthful negative review may be an 
unfair or deceptive act or practice that has the effect of distorting 
or otherwise misrepresenting what consumers think of a marketer's 
products,\418\ but that issue is beyond the scope of this rulemaking.
---------------------------------------------------------------------------

    \416\ NRF Cmt. at 12.
    \417\ Id.
    \418\ See Endorsement Guides, 16 CFR 255.2(d).
---------------------------------------------------------------------------

    A consumer organization's comment said that, ``[j]ust as businesses 
may use threats or intimidation to prevent a consumer from leaving a 
negative review, they may use similar tactics to ensure receipt of a 
positive review,'' thus concluding that Sec.  465.7(a)'s ``prohibitions 
. . . should also apply to compelled creation of positive reviews.'' 
\419\ Although compelling the creation of positive reviews through 
threats or intimidation may be an unfair or deceptive act or practice, 
the

[[Page 68064]]

Commission declines to address that practice in this rulemaking at this 
time.
---------------------------------------------------------------------------

    \419\ Consumer Reports Cmt. at 9. Although it does not involve 
Sec.  465.7(a), a business urged the Commission to ``deter meritless 
legal threats by platforms against providers and users of pro-
consumer tools.'' Mozilla Cmt. at 6. Such threats are beyond the 
scope of this rulemaking.
---------------------------------------------------------------------------

    A dental trade association expressed that, because Federal and 
State privacy laws prohibit dentists and other health care providers 
from disclosing patient information, their ability to correct the 
record when they are themselves a target of deceptive or unfair reviews 
is limited.\420\ The commenter asked the Commission to permit dentists 
and other health care providers to disclose patient information in 
response to a review (limited to the scope of the topics addressed in 
the review) without violating any FTC privacy-based prohibitions.\421\ 
This request is beyond the scope of this rulemaking.
---------------------------------------------------------------------------

    \420\ ADA Cmt. at 1.
    \421\ Id. at 1-2.
---------------------------------------------------------------------------

2. Sec.  465.7(b)
    Proposed Sec.  465.7(b) sought to prohibit a business from 
misrepresenting, ``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.'' Proposed 
Sec.  465.7(b) enumerated reasons for suppressing reviews that would 
not be considered suppression based upon their ratings or their 
negativity, so long as the criteria for withholding reviews are applied 
to all reviews submitted without regard to the favorability of the 
review. Proposed Sec.  465.7(b) listed the following valid reasons for 
review suppression: (1) ``the review contain[ed] . . . [(a)] trade 
secrets or privileged or confidential commercial or financial 
information, . . . [(b)] libelous, harassing, abusive, obscene, vulgar, 
or sexually explicit content, . . . [(c)] the personal information or 
likeness of another person, . . . [(d)] content that is discriminatory 
with respect to race, gender, sexuality, ethnicity, or another 
protected class, or . . . [(e)] content that is clearly false or 
misleading;'' (2) ``the seller reasonably believe[d] 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.'' Based on 
the following, the Commission has determined to finalize this 
prohibition with some modifications.\422\
---------------------------------------------------------------------------

    \422\ One modification, discussed above, is changing ``its 
products or services'' to ``the products and services it sells.'' 
See supra section IV.B.4. of this document. Another modification 
discussed above is changing ``person'' to ``individual.'' See supra 
section IV.A.2.b of this document. As it has done elsewhere in the 
rule, the Commission is limiting the misrepresentations prohibited 
to ``material'' misrepresentations. Nonetheless, in the context of 
Sec.  465.7(b), the Commission believes that all such 
misrepresentations would likely always be material.
---------------------------------------------------------------------------

    Multiple commenters said that the practice of product sellers 
suppressing less favorable reviews was problematic. One individual 
commenter said they were ``[d]isgusted by businesses who[ ] filter/have 
control over their . . . reviews.'' \423\ Another individual commenter 
stated that ``[t]he removal of reviews that are critical, but accurate 
of the service or good creates an illusion and ultimately, defrauds the 
consumer of their choice,'' but also worried about how ``the FTC [will] 
catch companies that delete negative reviews.'' \424\ A third 
individual commenter said that the ``Rule should prohibit businesses 
from suppressing . . . honest negative reviews.'' \425\ A fourth 
individual commenter wrote that ``[b]usiness should be barred from 
misrepresenting reviews on their websites and from suppressing negative 
reviews.'' \426\ The State Attorneys General said that, when ``a 
merchant . . . only posts positive consumer reviews on its website, 
instead of both favorable and negative reviews, [it] can potentially 
mislead consumers into believing that such reviews represent most or 
all of the reviews submitted to the merchant's website.'' \427\ A 
retailer wrote that it ``support[s] the goals of section 465.7[(b)], 
which prohibits sellers from suppressing customer reviews based on 
their negativity'' and ``believe[s] that it is critically important 
that customers not be deprived of useful, negative feedback when 
deciding whether to purchase a product.'' \428\
---------------------------------------------------------------------------

    \423\ Hippensteel Cmt.
    \424\ Superguest Cmt.
    \425\ Ravnitzky Cmt. at 2.
    \426\ TT in PA Cmt.
    \427\ State AGs Cmt. at 3.
    \428\ Amazon Cmt. at 12.
---------------------------------------------------------------------------

    The NPRM asked whether ``it [is] appropriate that proposed Sec.  
465.7(b) is limited to circumstances in which reviews are being 
suppressed based on rating or negativity,'' and a business commenter 
agreed that it was.\429\
---------------------------------------------------------------------------

    \429\ Transparency Company Cmt. at 14.
---------------------------------------------------------------------------

    A trade association commenter said ``that the Commission has . . . 
failed to satisfy the requirement that the specific unfair or deceptive 
acts or practices identified in the rule be prevalent.'' \430\ 
According to the commenter, ``The rulemaking record cites only one 
case, one closing letter, and one comment in support of the 
Commission's conclusion that review suppression is prevalent.'' \431\ 
The commenter understates the significance of the evidence that the 
Commission considered in finding that the suppression of reviews based 
upon their rating or sentiment is prevalent. The closing letter to 
Yotpo, a company that provided review management services, is 
significant because the investigation revealed that more than 4,500 
Yotpo merchant clients were automatically publishing only 4- or 5-star 
reviews and that most 1-star reviews and 2-star reviews submitted to 
those merchants were suppressed.\432\ The investigation of Yotpo shows 
that there was widespread suppression of negative reviews. The 
Commission thus has a strong basis for its conclusion that the 
suppression of negative reviews on retailer or business websites is 
prevalent.
---------------------------------------------------------------------------

    \430\ IAB Cmt. at 11.
    \431\ Id.
    \432\ NPRM, 88 FR 49376.
---------------------------------------------------------------------------

    A review platform's comment suggested changing ``based upon their 
ratings or their negativity'' to ``based upon their ratings or their 
sentiment'' because ``reviews can be difficult to categorize as wholly 
`negative' or `positive.' '' \433\ The Commission intended for the 
phrase ``based upon their ratings or their negativity'' to refer to the 
suppression of reviews based on their ratings or their sentiment. 
However, in light of the comment, the Commission now realizes that the 
use of the word ``negativity'' in this context could be subject to 
misinterpretation and be construed to imply that a review must be 
wholly negative for its suppression to be problematic. Accordingly, the 
Commission is clarifying its original intent by changing ``their 
negativity'' to ``their negative sentiment.'' The commenter also said 
that ``consumer harm may result if someone suppresses a review, 
regardless of the sentiment expressed in the review.'' \434\ The 
Commission is not expanding the rule to address other types of review 
suppression not based on ratings or negative sentiment. There are 
numerous legitimate reasons for suppressing consumer reviews, including 
those listed in Sec.  465.7(b)(1), (2), and (3). Furthermore, such an 
expansion would be beyond the scope of the rulemaking.
---------------------------------------------------------------------------

    \433\ Yelp Cmt. at 7-8.
    \434\ Id.
---------------------------------------------------------------------------

    A trade association's comment requested that the Commission ``carve 
out the use of reviews in marketing materials'' because the provision 
``could effectively prohibit retailers from highlighting any customer 
reviews in advertising--even though customers understand that 
advertising normally highlights particularly positive

[[Page 68065]]

reviews.'' \435\ The Commission did not intend for proposed Sec.  
465.7(b) to cover the use of consumer reviews in marketing materials. 
Specifically, proposed Sec.  465.7(b) was only intended to cover 
misrepresentations about the body of reviews in a ``reviews'' section 
of a website or platform--that is, a portion of a website or platform 
dedicated in whole or in part to receiving and displaying consumer 
reviews--and not misrepresentations about whether a highlighted review 
is ``representative.'' The Commission is clarifying this by changing 
``displayed on its website or platform'' to ``displayed in a portion of 
its website or platform dedicated in whole or in part to receiving and 
displaying consumer reviews.'' The Commission notes however, that the 
use of non-representative consumer reviews in marketing could be 
deceptive in violation of section 5 of the FTC Act.\436\
---------------------------------------------------------------------------

    \435\ NRF Cmt. at 12.
    \436\ An individual commenter said it would be helpful to have 
rule language ``around a business being allowed to highlight 
specific testimonial reviews on their website as long as there is a 
disclaimer or prominent indication that the page does not represent 
all reviews for the business.'' Anonymous 3 Cmt. The rule does not 
prohibit such ``highlighting'' of specific reviews or testimonials, 
but the creation of a safe harbor for such highlighting is beyond 
the scope of the rule. In addition, the Commission believes that the 
wording of the proposed disclosure is likely inadequate.
---------------------------------------------------------------------------

    A trade association asked that the Commission ``clarify what it 
means for a review to be ``suppressed (i.e., not displayed).'' \437\ 
The trade association said that ``[m]any businesses that operate 
websites that display consumer reviews will organize those reviews in 
reasonable ways to help consumers navigate what might be a large corpus 
of varying consumer commentary'' and that, ``[i]f a business takes 
reasonable steps to organize their reviews, those reviews should not be 
considered `suppressed.' '' \438\ The Commission agrees that organizing 
reviews does not qualify as suppressing reviews. The Commission notes, 
however, that organizing reviews in a way that makes it difficult for 
consumers to know about or find negative reviews could be an unfair or 
deceptive act or practice in violation of section 5 of the FTC Act. The 
commenter also asked that the Commission change ``not displayed'' to 
``not displayed or accessible.'' \439\ The Commission is instead 
clarifying its original intent by changing ``not displayed'' to ``not 
displayable,'' so that the provision only covers reviews that consumers 
will be unable to view even if they were to sort or filter the reviews 
differently. Another trade association's comment said that ``the Rule 
should explicitly allow retailers to sort reviews by objective measures 
unrelated to the positivity of the review, where the sorting method is 
disclosed.'' \440\ As modified, Sec.  465.7(b) does not prohibit the 
sorting or organization of reviews, so the proposed modification is 
unnecessary.
---------------------------------------------------------------------------

    \437\ IAB Cmt. at 11.
    \438\ Id. at 11-12.
    \439\ Id. at 12.
    \440\ NRF Cmt. at 13.
---------------------------------------------------------------------------

    Four industry commenters argued that there are legitimate reasons 
for suppressing consumer reviews beyond those listed in proposed Sec.  
465.7(b).\441\ One of these commenters, a retailer, gave examples of 
other legitimate reasons for suppressing a review: ``describing 
violence, encouraging illegal activities or misuse of the product, 
incorporating hyperlinks that could jeopardize customer online safety, 
or using a language not supported by the website.'' \442\ Three of the 
industry commenters said that, by limiting review suppression to the 
listed reasons, the provision violated the First Amendment and section 
230 of the Communications Decency Act,\443\ and all four asked the 
Commission to clarify that the listed reasons are not exhaustive.\444\ 
The Commission agrees that there are legitimate reasons for suppressing 
reviews beyond those listed and is clarifying that the listed criteria 
for review suppression are non-exhaustive examples.
---------------------------------------------------------------------------

    \441\ IAB Cmt. at 11; Technet Cmt. at 3; Amazon Cmt. at 12; NRF 
Cmt. at 13.
    \442\ Amazon Cmt. at 12. A different commenter gave the example 
of a snowstorm ``obstruct[ing] the delivery of a package to a buyer 
who could claim failure to deliver on time.'' TechNet Cmt. at 3. The 
Commission does not agree that this is a legitimate reason for 
suppressing consumer reviews.
    \443\ IAB Cmt. at 12; Amazon Cmt. at 12; NRF Cmt. at 13.
    \444\ IAB Cmt. at 11; TechNet Cmt. at 3; Amazon Cmt. at 12; NRF 
Cmt. at 12-13.
---------------------------------------------------------------------------

    Proposed Sec.  465.7(b) provided that suppression was not violative 
``so long as the criteria for withholding reviews are applied to all 
reviews submitted without regard to the favorability of the review.'' 
The Commission is clarifying that the criteria must be applied to all 
reviews equally. Additionally, to be consistent with the above 
clarification regarding sentiment, the Commission is changing ``without 
regard to the favorability of the review'' to ``without regard to 
sentiment.''
    An individual commenter asked whether a company could ``have a 
policy of not posting reviews that mention other products'' or suppress 
a review that is ``patently false (wrong company, wrong product, wrong 
location, etc.).'' \445\ As long as the policy is applied to all 
reviews equally, those could be legitimate reasons for suppressing 
reviews.
---------------------------------------------------------------------------

    \445\ Anonymous 4 Cmt.
---------------------------------------------------------------------------

    A trade association commented that one of the listed, acceptable 
reasons for suppressing reviews is too limited. Specifically, it said 
that ``libelous'' reviews would not cover reviews with an oral 
component that were ``slanderous,'' and it thus recommended using the 
word ``defamatory.'' \446\ The Commission intended to cover all 
defamatory consumer reviews, not just written ones, and the Commission 
is making that clarification.
---------------------------------------------------------------------------

    \446\ NFIB Cmt. at 5.
---------------------------------------------------------------------------

    Another one of the listed, acceptable reasons for suppressing 
reviews was that ``the seller reasonably believes the review is fake.'' 
A review platform commented that it is important that this criteria 
``cannot be used by a business to seek to censor consumer reviews based 
on a valid experience'' and said that, without information about the 
reviewer, the reviewer's location, and the reviewer's other reviews, 
``it can be difficult to accurately identify fake reviews.'' \447\ One 
individual commenter wrote that this ``is overbroad and gives sellers 
leeway to suppress reviews at their discretion so long as they claim a 
belief that said reviews were fake.'' \448\ The commenter recommended 
``revising this provision to add specificity and identify the 
parameters of what a fake review looks like.'' \449\ A seller does not 
risk liability if the suppression occurs for a reason other than the 
review's rating or negative sentiment. The provision's phrase ``such 
as'' recognizes that it is proper to suppress reviews for legitimate 
reasons. For this specific enumerated exception, ``the seller [only 
needs to] reasonabl[y] believe[ ] the review . . . [to be] fake.'' 
Thus, if there are indicia that would lead a reasonable person to 
believe that the review is fake, the seller would meet this exception.
---------------------------------------------------------------------------

    \447\ Trustpilot Cmt. at 18.
    \448\ Madeline D'Entrmont, Cmt. on NPRM at 1 (Sept. 22, 2023), 
https://www.regulations.gov/comment/FTC-2023-0047-0064.
    \449\ Id.
---------------------------------------------------------------------------

    A different, listed acceptable reason for suppressing reviews was 
``content that is discriminatory with respect to race, gender, 
sexuality, ethnicity, or another protected class.'' The Commission is 
changing ``protected class'' to ``intrinsic characteristic'' in order 
to more closely echo the language in the CRFA on which the reason is 
based.\450\
---------------------------------------------------------------------------

    \450\ See Consumer Review Fairness Act of 2016 Sec.  
2(b)(2)(C)(i), 15 U.S.C. 45b(b)(2)(C)(i).

---------------------------------------------------------------------------

[[Page 68066]]

    A trade association noted that the ``FTC should not prohibit 
sellers from excluding reviews that solely discuss service experience 
and do not include comments on the product.'' \451\ The rule as 
clarified does not prohibit suppressing reviews that solely discuss 
customer service as long as the criteria is applied equally to all 
reviews. The Commission notes, however, that it has expressed the view 
that suppressing customer reviews about a ``particular seller's 
customer service, delivery, returns, and exchanges'' can be deceptive 
in violation of section 5 of the FTC Act.\452\
---------------------------------------------------------------------------

    \451\ RILA Cmt. at 4.
    \452\ Endorsement Guides, 16 CFR 255.2(e)(8)(ii).
---------------------------------------------------------------------------

    A consumer organization expressed concern that proposed Sec.  
465.7(b) ``allows businesses to suppress reviews when they contain 
`harassing,' `abusive,' or `obscene' content, which are highly 
subjective terms likely to be interpreted broadly by businesses that 
have a clear interest in suppressing reviews that may harm their public 
perception.'' \453\ The commenter suggested that, ``to preserve the 
public benefit of reviews that contain instances of objectionable 
content,'' the Commission could ``allow businesses to redact such 
content but require them to leave the remainder of the review along 
with any corresponding score or numerical rating available for public 
consumption.'' \454\ Appropriate redaction of portions of consumer 
reviews may be difficult or infeasible in some instances. The 
Commission declines to impose such a requirement at this time.
---------------------------------------------------------------------------

    \453\ Consumer Reports Cmt. at 10.
    \454\ Id.
---------------------------------------------------------------------------

    The State Attorneys General asked in their comment that the 
Commission ``delete[ ] the phrase `based upon their ratings or their 
negativity' at the end of the first sentence.'' \455\ The State 
Attorneys General's reasoning for this request was that the language is 
unnecessarily limiting and superfluous'' because ``a company seeking to 
suppress negative reviews could potentially succeed by offering reasons 
that are proxies for negativity'' and ``any legitimate suppression 
should already be sufficiently covered by the robust carve-outs set 
forth in Sec.  465.7(b)(1).'' \456\ The Commission declines to make 
that change, as the enumerated ``carve-outs'' do not exhaustively 
identify every legitimate reason for suppressing reviews.
---------------------------------------------------------------------------

    \455\ State AGs Cmt. at 4.
    \456\ Id.
---------------------------------------------------------------------------

    A business organization asserted that proposed Sec.  465.7(b) 
``implies a `gross feedback score' must be disclosed along with the 
`net feedback score,' which is the actual number of reviews viewable to 
a user.'' \457\ The commenter is incorrect, as Sec.  465.7(b) contains 
no such disclosure requirements.
---------------------------------------------------------------------------

    \457\ TechNet Cmt. at 3.
---------------------------------------------------------------------------

    An individual commenter expressed concern as to how the FTC will 
``catch companies that delete negative reviews'' and suggested offering 
rewards ``for individuals or organizations to help address'' the 
problem.\458\ The Commission will use the investigative and law 
enforcement tools at its disposal to identify bad actors who suppress 
reviews.
---------------------------------------------------------------------------

    \458\ Superguest Cmt.
---------------------------------------------------------------------------

    In connection with proposed Sec.  465.7(b), several commenters 
recommended that the Commission impose additional consumer review-
related requirements. An individual commenter asked the Commission to 
``require businesses to display consumer reviews in a fair and 
transparent manner, such as by allowing consumers to choose how they 
want to sort or filter reviews, and by disclosing any criteria or 
algorithm that they use to rank or highlight reviews.'' \459\ Another 
individual commenter said that ``companies . . . should be required to 
maintain and periodically disclose records of review suppression,'' 
which would, at a minimum, ``contain the number of reviews suppressed 
at each rating level and an associated justification.'' \460\ A review 
platform recommended the Commission expand the scope of the rule to (1) 
prevent reviews from ``being misquoted and manipulated via quoting 
select parts of reviews,'' and (2) require that the criteria on which 
consumer reviews are selected for showcasing (e.g., on a website 
carousel) be made clear.\461\ A consumer organization commented that 
consumers should be able to assume that the reviews that they see on a 
business's website are representative of the reviews the business 
receives, and if ``a business wishes to curate reviews, the business 
should have the burden to transparently communicate the fact and nature 
of the curation to consumers.'' \462\ One individual commenter asked 
that the proposed rule be ``extended to include penalties for Pay-to-
Play platforms that engage in practices such as manipulating ratings 
and suppressing negative reviews for businesses that advertise on their 
websites,'' \463\ and another commenter thought the rule should cover 
``companies that profit from shaming businesses by posting negative 
reviews while unilaterally determining positive reviews are 
`unverified'--effectively holding any positive sentiment back until the 
business subscribes to the platform.'' \464\ Some of these proposed 
requirements are beyond the scope of this rulemaking, although some of 
the acts and practices described may be deceptive or unfair in 
violation of section 5 of the FTC Act. For example, misquoting reviews 
can be deceptive \465\ and showcasing or curating reviews might 
deceptively represent that the reviews presented are representative or 
typical of the reviews received. Based on its policy expertise, the 
Commission declines to address any of these practices in this 
rulemaking at this time.
---------------------------------------------------------------------------

    \459\ Ravnitzky Cmt. at 2.
    \460\ Rob Levy, Cmt. on NPRM at 2 (Sept. 22, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0057.
    \461\ Trustpilot Cmt. at 18.
    \462\ Consumer Reports Cmt. at 11.
    \463\ Anonymous 11, Cmt. on NPRM (Aug. 16, 2023), https://www.regulations.gov/comment/FTC-2023-0047-0022.
    \464\ Anonymous 4 Cmt.
    \465\ Endorsement Guides, 16 CFR 255.0(g)(1) and 255.1(b).
---------------------------------------------------------------------------

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

    Proposed Sec.  465.8(a) sought to prohibit anyone from selling or 
distributing fake indicators of social media influence that can be used 
by persons or businesses to misrepresent their influence or importance 
for a commercial purpose. Proposed Sec.  465.8(b) sought to prohibit 
anyone from purchasing or procuring fake indicators of social media 
influence to misrepresent their influence or importance for a 
commercial purpose. Based on the following, the Commission has 
determined to finalize these prohibitions with certain 
modifications.\466\
---------------------------------------------------------------------------

    \466\ One modification is changing ``Rule'' to ``part.'' Another 
modification, discussed above, is changing ``persons'' to 
``individuals.'' See supra section IV.A.2.b of this document.
---------------------------------------------------------------------------

    Several commenters raised concerns about the meaning of the term 
``fake'' in the context of indicators of social media influence. A 
trade association asked, ``Does `fake' only mean that the likes and 
followers were created by bots or through fake accounts? If a social 
media influencer were to recommend that their followers also follow 
another business' social media account, would that also be `procuring' 
of `fake' indicators of social media influence? . . . If the FTC means 
to capture a specific category of `likes,' `follows,' or other metrics 
that do not reflect any real opinions, findings, or experiences with 
the marketer or its products or services, it should make that

[[Page 68067]]

intention more clear.'' \467\ A retailer asked for ``confirmation . . . 
that this provision would not apply where companies award legitimate 
indicators of influence to certain users upon satisfaction of objective 
criteria, even if those individuals are later discovered to have 
circumvented or abused those criteria.'' \468\ A second trade 
association said that, ``[w]hen . . . indicators are awarded based on 
legitimate criteria, they serve this informative and non-deceptive 
purpose'' and the ``innovative companies that develop these indicators 
of influence should not be punished if bad actors try to abuse the 
processes,'' so the Commission ``should . . . clarify that this section 
applies to true `fake' indicators of social media influence.'' \469\ In 
response to these comments, the Commission is clarifying what it 
intended as ``fake indicators of social media influence.'' For this 
purpose, the final rule includes a definition of the phrase ``fake 
indicators of social media influence'' in Sec.  465.1(h), which defines 
the phrase as indicators of social media influence derived from bots, 
purported individual accounts not associated with a real individual, 
accounts created with a real individual's personal information without 
their consent, hijacked accounts, or that otherwise do not reflect a 
real individual's or entity's activities, opinions, findings, or 
experiences. If a social media influencer were to recommend that their 
followers also follow another social media account, any resulting 
followers of the second account would not be ``fake.'' If a company 
awards legitimate indicators of influence to certain users upon 
satisfaction of objective criteria reflecting the influence of the 
users, the company would not be selling ``fake'' indicators, even if 
bad actors were able to deceive the company.
---------------------------------------------------------------------------

    \467\ ANA Cmt. at 17-18.
    \468\ Amazon Cmt. at 13.
    \469\ IAB Cmt. at 13.
---------------------------------------------------------------------------

    Three commenters addressed the section's lack of a knowledge 
requirement. A retailer commenter wrote that ``a business could be in 
violation of this provision even if it innocently sold or procured a 
fake indicator, without knowledge or any indication that the indicator 
was fake,'' which it said ``is patently unreasonable.'' \470\ A second 
retailer similarly ``recommend[ed] that the rule be revised so that it 
only applies when the seller/buyer knows the indicators are fake.'' 
\471\ A trade association suggested ``revising this section to 
additionally require that the seller or purchaser act `with knowledge 
that the indicators of influence are fake.' '' \472\ The Commission 
recognizes that someone could think that they were paying for a 
promotional campaign to increase their followers but, unbeknownst to 
the purchaser, the entity offering the campaign was lying and just 
providing fake followers. It is also possible that a company might 
bestow a legitimate indicator of social media influence, like a seal, 
that the company does not know is based upon or derived from fake 
indicators of social media influence. The Commission is therefore 
narrowing the provision by adding ``that they knew or should have known 
to be fake'' to both Sec.  465.8(a) and (b).
---------------------------------------------------------------------------

    \470\ Hammacher and Schlemmer Cmt. at 7.
    \471\ Amazon Cmt. at 13.
    \472\ IAB Cmt. at 13.
---------------------------------------------------------------------------

    A trade association's comment asserted that ``the Commission failed 
to meet the prevalence requirement'' because ``the evidence the 
Commission . . . cited in the NPRM . . . all relate[s] to the use of 
actual `fake' indicators of influence that the seller or purchaser knew 
were fake.'' \473\ The Commission believes that, with the addition of 
the definition of ``fake indicators'' and the knowledge requirement, it 
has sufficiently addressed the commenter's concerns.
---------------------------------------------------------------------------

    \473\ Id. at 12.
---------------------------------------------------------------------------

    A trade association expressed concern that the provision would 
``hold[ ] retailers vicariously liable for the actions of independent 
endorsers,'' that is, the influencers and other endorsers that they 
hire.\474\ That was not the Commission's intention. The distribution of 
fake indicators of social media influence was intended to mean the 
distribution to individuals or businesses who could use the indicators 
to misrepresent their influence, not causing the dissemination of 
social media by users of such fake indicators, e.g., by hiring 
influencers who happen to have fake followers. The Commission is 
clarifying this intent by adding a definition of ``distribute fake 
indicators of social media influence'' in Sec.  465.1(g).
---------------------------------------------------------------------------

    \474\ NRF Cmt. at 13.
---------------------------------------------------------------------------

    Although no commenter specifically raised the issue in the context 
of Sec.  465.8, the Commission is adding the concept of materiality to 
both Sec.  465.8(a) and (b) in terms of the scope of misrepresentations 
covered therein, so as to be consistent with other parts of the rule.
    A consumer organization said in its comment that the Commission 
``should clarify that `procure' '' in Sec.  465.8(b) ``includes the 
creation of automated bot or other fake accounts that `follow' or 
`subscribe' to an account, artificially inflating the popularity of 
that account.'' \475\ The Commission declines to make this change. It 
is not the creation of the bot or fake account, itself, that the rule 
makes illegal, but the use of the bot or fake account to follow another 
user, watch another user's videos, or create other fake indicia of 
social media influence. The same commenter said the Commission should 
``remove the word `fake' from the Rule to clarify that it covers the 
purchase or procurement of any social media engagement . . . from both 
real and fake accounts unless those incentives can be disclosed to 
people who can view the engagement.'' \476\ The use of incentivized 
indicia of social media influence is not necessarily deceptive in all 
cases, and it is beyond the scope of this rulemaking.
---------------------------------------------------------------------------

    \475\ Consumer Reports Cmt. at 11.
    \476\ Id.
---------------------------------------------------------------------------

    Finally, a trade association and a retailer suggested changing the 
prohibition in Sec.  465.8(a) from selling or distributing fake 
indicators that ``can be used'' by persons to misrepresent their 
influence to those that ``are used'' by persons to misrepresent their 
influence.\477\ The trade association said that ``[a]pplying this 
section to indicators of social media influence that `can be' used for 
this purpose, but are not, would mean that the rule prohibits conduct 
that is not deceptive.'' \478\ Such fake indicators are not physical 
products that people collect and then use later as desired. Instead, 
their existence is premised on and limited to situations in which they 
appear deceptively on a social media site. Therefore, any person or 
business that obtains fake indicators of social media influence is 
misrepresenting their social media influence. While some individuals 
may not be doing so for a commercial purpose, those individuals are 
excluded from the rule's scope. Further, a person or entity that is in 
the business of selling or distributing fake indicia of social media 
influence is engaging in commerce, and it is unreasonable to posit that 
no buyers would use such indicia to misrepresent their social media 
influence for a commercial purpose. The Commission therefore declines 
to make the suggested modification.
---------------------------------------------------------------------------

    \477\ IAB Cmt. at 13; Amazon Cmt. at 13.
    \478\ IAB Cmt. at 13.
---------------------------------------------------------------------------

I. Sec.  465.9--Severability

    Proposed Sec.  465.9 provided that the provisions of the rule are 
separate and severable from one another and that, if any provision is 
stayed or determined to

[[Page 68068]]

be invalid, the remaining provisions shall continue in effect. The 
Commission did not receive any comments regarding proposed Sec.  465.9. 
The Commission is changing ``shall continue in effect'' to ``will 
continue in effect'' which is more precise. With that clarification, 
the Commission is finalizing Sec.  465.9.

V. Final Rule

    For the reasons described above, the Commission has determined to 
adopt the provisions of Sec. Sec.  465.1, 465.2, and 465.4 through 
465.9 with clarifying or limiting modifications. The Commission 
declines to finalize proposed Sec.  465.3 regarding consumer review or 
testimonial reuse or repurposing.

VI. Final Regulatory Analysis Under Section 22 of the FTC Act

    Under section 22 of the FTC Act, the Commission, when it 
promulgates any final rule for a ``rule'' as defined in section 
22(a)(1), must include a ``final regulatory analysis.'' 15 U.S.C. 57b-
3(b)(2). The final regulatory analysis must contain (1) a concise 
statement of the need for, and objectives of, the final rule; (2) a 
description of any alternatives to the final rule which were considered 
by the Commission; (3) an analysis of the projected benefits, any 
adverse economic effects, and any other effects of the final rule; (4) 
an explanation of the reasons for the determination of the Commission 
that the final rule will attain its objectives in a manner consistent 
with applicable law and the reasons the particular alternative was 
chosen; and (5) a summary of any significant issues raised by the 
comments submitted during the public comment period in response to the 
preliminary regulatory analysis, and a summary of the assessment by the 
Commission of such issues. 15 U.S.C. 57b-3(b)(2)(A)-(E).
    The Commission received several comments that included elements 
that the Commission identified as specifically in response to the 
preliminary regulatory analysis. Two trade associations asserted that 
compliance costs would be higher than estimated by the Commission. 
These associations stated that the risk of statutory penalties would 
lead many of their members to engage in compliance activities beyond 
those assumed for the high-cost compliance scenario in the NPRM.\479\ 
In the preliminary regulatory analysis, the high-cost compliance 
scenario assumed an average compliance burden of 8 hours of attorney 
time for firms with greater than 500 employees. This average is 
consistent with some firms, especially the largest ones in industries 
more reliant on reviews and testimonials, choosing to make more 
extensive improvements to their compliance programs. In addition, the 
Commission has narrowed the rule and clarified the rule requirements as 
described in section IV of this document. For these reasons, the 
Commission continues to believe the high-cost scenario likely 
overestimates compliance costs, and chooses to not modify its estimate 
of possible compliance costs for that scenario, but it does present a 
sensitivity analysis below that assesses what effect systematic 
underestimation of compliance costs would have on the rule's net 
benefits to the public.
---------------------------------------------------------------------------

    \479\ NRF Cmt. at 2-3, 13-14; IAB Cmt. at 5, 15. IAB also raised 
this issue in the context of the informal hearing discussed above in 
section I of this document. See, e.g., Petition by Interactive 
Advertising Bureau to Designate Disputed Issues of Material Fact 
(Feb. 12, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/r311003iabpetition20240212.pdf. As noted above, the presiding 
officer at that hearing found that IAB had not shown that compliance 
costs would be more than minimal.
---------------------------------------------------------------------------

    One individual commenter asserted that the benefits the Commission 
estimated in the NPRM did not justify the estimated compliance costs 
because the same results could be obtained using the FTC's existing 
section 5 authority.\480\ As explained in detail in this final 
regulatory analysis, the Commission believes that the final rule will 
increase deterrence of unfair or deceptive acts or practices involving 
consumer reviews and testimonials relative to relying on its existing 
authority and that the net benefits of the rule justify its 
promulgation.
---------------------------------------------------------------------------

    \480\ Camp-Martin Cmt. at 2-3.
---------------------------------------------------------------------------

    A second individual commenter claimed that it was unreasonable to 
assume that the rule would eliminate the entire loss to consumers, in 
terms of choosing products optimally, from the impact of bad 
information in false reviews. The commenter asserted that deterrence 
would be only partial because some circumstances would make it 
difficult to identify such reviews.\481\ The Commission believes that 
its estimate of the benefits of reducing manipulated reviews is 
appropriate, as discussed further below. However, the Commission 
presents additional sensitivity analysis below that assesses the effect 
of systematic overestimation of the degree to which the rule would fix 
review manipulation, and determines that, even conceding that point, 
the quantified net benefits are highly positive.
---------------------------------------------------------------------------

    \481\ Slezak Cmt. at 3.
---------------------------------------------------------------------------

    Finally, a business offering third-party review fraud detection 
tools offered research that it claimed showed that the rule would 
generate benefits of $180.83 billion and that the benefits would 
outweigh the costs 100:1.\482\ These estimates are similar to those of 
the Commission.
---------------------------------------------------------------------------

    \482\ Transparency Company Cmt. at 6-9.
---------------------------------------------------------------------------

A. Need for, and Objectives of the Final Rule

    The Commission believes that the final rule will substantially 
improve its ability to combat certain specified, clearly unfair or 
deceptive acts or practices involving consumer reviews or testimonials. 
Although such unfair or deceptive acts or practices are already 
unlawful under section 5 of the FTC Act, the rule will increase 
deterrence of such conduct by allowing courts to impose civil penalties 
against the violators. In addition, the final rule will allow the 
Commission to seek court orders requiring violators to compensate 
consumers for the harms caused by their unlawful conduct. The 
Commission believes that the rule will accomplish these goals without 
significantly burdening honest businesses and that the rule will 
provide significant benefits to consumers and honest competitors.
    The final rule will allow courts to impose civil penalties under 
section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 45(m)(1)(A), against those 
who engage in the deceptive or unfair conduct that the final rule 
prohibits. The ability to obtain civil penalties is important because 
it can be difficult to quantify consumer losses that stem from the use 
of unfair or deceptive consumer reviews and testimonials. Without civil 
penalties, persons who engage in such conduct might avoid monetary 
consequences for their unlawful conduct simply because there is 
insufficient evidence to link their unlawful conduct to quantifiable 
losses suffered by consumers. And if there are no monetary 
consequences, potential wrongdoers have little incentive to refrain 
from engaging in unlawful practices. Because the final rule will allow 
courts to impose civil penalties for violations, it provides the 
deterrence necessary to incentivize compliance with the law, even in 
cases where it is difficult to quantify consumer harm.
    In addition, the final rule is necessary to allow the Commission to 
recover redress more efficiently to redress consumer harm resulting 
from the unfair or deceptive use of reviews or testimonials. In 2021, 
the U.S. Supreme Court in AMG Capital Management, LLC

[[Page 68069]]

v. FTC \483\ ruled that section 13(b) of the FTC Act \484\ did not 
authorize the Commission to seek court orders requiring wrongdoers to 
return money unlawfully taken from consumers through unfair or 
deceptive acts or practices or give up the unjust gains they earned 
from engaging in such unlawful conduct. The AMG ruling has made it 
significantly more difficult for the Commission to return money to 
injured consumers, particularly in cases that do not involve rule 
violations.\485\
---------------------------------------------------------------------------

    \483\ 141 S. Ct. at 1352.
    \484\ 15 U.S.C. 53(b).
    \485\ See ANPR, 87 FR at 67425, 67425 n.1 (discussing AMG Cap. 
Mgmt.).
---------------------------------------------------------------------------

    Since AMG, the primary means for the Commission 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), typically requires the Commission to first 
conduct an administrative proceeding to determine whether the 
respondent violated the FTC Act; if the Commission finds that the 
respondent did so, the Commission issues a cease-and-desist order, 
which might not become final until after the resolution of any 
resulting appeal to a Federal court of appeals. After the conclusion of 
the administrative proceeding (and any appeal), the Commission must 
initiate an action in Federal court to obtain monetary relief under 
section 19 and, in that action, the Commission must prove that the 
violator engaged in objectively fraudulent or dishonest conduct.\486\ 
In effect, the section 19(a)(2) pathway requires the Commission to file 
two separate actions to obtain monetary relief.
---------------------------------------------------------------------------

    \486\ 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.'').
---------------------------------------------------------------------------

    The more efficient path to monetary relief is under section 
19(a)(1), which allows the Commission to recover redress in one Federal 
court action for violations of a Commission rule relating to unfair or 
deceptive acts or practices.\487\ Only a small portion of the 
Commission's past cases challenging unfair or deceptive consumer 
reviews or testimonials involved rule violations that would allow the 
Commission to seek monetary relief under section 19(a)(1). With the 
final rule, however, the Commission will be able to use section 
19(a)(1) to obtain redress for consumer losses attributable to 
violations of the rule.
---------------------------------------------------------------------------

    \487\ Certain statutes, such as the Restore Online Shoppers' 
Confidence Act, 15 U.S.C. 8401-05, include provisions that treat 
violations of the statute as a violation of a rule for purposes of 
section 19(a)(1). See 15 U.S.C. 8404(a).
---------------------------------------------------------------------------

    Overall, outlawing egregious review and testimonial practices in 
the final 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 
harmed. The unfair or deceptive acts or practices involving reviews and 
testimonials encompassed by this final rule are prevalent and harmful 
to consumers and honest businesses. Thus, the unlocking of additional 
remedies through this rulemaking--particularly, the ability to obtain 
civil penalties against violators and redress for consumers or others 
injured by the conduct--will allow the Commission to more effectively 
police and deter harmful review and testimonial practices that plague 
consumers and honest businesses.

B. Anticipated Costs and Benefits of the Final Rule

    As discussed below, the Commission has determined that the rule's 
benefits greatly outweigh its costs. The rule promotes accuracy in 
reviews and testimonials by prohibiting certain unfair or deceptive 
acts or practices involving reviews and testimonials. Thus, this rule 
will help the vast majority of American consumers who rely on such 
reviews and testimonials to make better-informed purchase decisions. 
The rule prohibits (1) the creation, sale, purchasing, or procurement 
from insiders of fake or false reviews, and (2) buying of reviews 
conditioned on the reviews expressing particular sentiments. It also 
includes prohibitions on fake or false consumer or celebrity 
testimonials, certain insider reviews without adequate disclosures, 
misleading company-controlled review websites or entities, certain 
review suppression practices, and the misuse of fake indicators of 
social media influence.
    In the analysis below, the Commission describes the anticipated 
impact of the rule. Where possible, the Commission quantifies the 
benefits and costs. If a benefit or cost is quantified, the Commission 
indicates the sources of the data relied upon. If an assumption is 
needed, the analysis makes clear which quantities are being assumed. 
The Commission measures the benefits and costs of the rule against a 
baseline in which no rule has been promulgated by the Commission. For 
the remainder of section VI, and in the interest of brevity, the term 
``reviews'' collectively refers to both reviews and testimonials.
    Quantifiable benefits stem from consumer welfare improvements and 
consumer time savings. With the rule, reviews will be more accurate 
overall, leading consumers to purchase higher-quality products or 
products that are better-matched to their preferences. The 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 rule and to 
take any preemptive or remedial steps to comply with its provisions. 
Because the 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 ten years is used in the baseline scenario because FTC 
rules are subject to review every ten years.\488\ Quantifiable 
aggregate benefits and costs are summarized as the net present value 
over this ten-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 a discount factor raised to the power of the 
number of years in the future the net benefit accrues.
---------------------------------------------------------------------------

    \488\ Fed. Trade Comm'n, Notice Announcing Ten-Year Regulatory 
Review Schedule and Request for Public Comment on the Federal Trade 
Commission's Regulatory Review Program, 76 FR 41150, 41150 (July 13, 
2011), https://www.govinfo.gov/content/pkg/FR-2011-07-13/pdf/2011-17513.pdf (``all rules and guides are scheduled to be reviewed ten 
years after implementation and ten years after completion of a 
regulatory review.'')

[[Page 68070]]



                Table 1.1--Present Value of Net Benefits
                        [2024-2033 (in billions)]
------------------------------------------------------------------------
                                      Present value:     Present value:
                                     low-end estimate  high-end estimate
------------------------------------------------------------------------
Total Benefits:
    3% Discount Rate..............             $67.40            $269.55
    7% Discount Rate..............              57.03             230.44
Total One-Time Costs..............               0.87               0.00
Net Benefits:
    3% Discount Rate..............              66.53             269.55
    7% Discount Rate..............              56.16             230.44
------------------------------------------------------------------------

1. Estimated Benefits of the Final Rule
    This section describes the beneficial impact of the rule, provides 
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 rule. This analysis does not calculate 
benefits from the other aspects of the rule--that is, the prohibitions 
on fake or false celebrity testimonials, company-controlled entities 
that deceptively purported to provide independent opinions, review 
suppression, and the misuse of fake indicators of social media 
influence--because of the limited quantitative research in these areas. 
Some of these benefits are likely to be substantial. The quantified 
benefits are presented by benefit category, rather than stemming from a 
specific provision of the 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; 
specifically that 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.\489\
---------------------------------------------------------------------------

    \489\ 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 that 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.\490\
---------------------------------------------------------------------------

    \490\ See, e.g., Chrysanthos Dellarocas, Strategic Manipulation 
of Internet Opinion Forums: Implications for Consumers and Firms, 
52(10) Mgmt. Sci., 1577-93 (2006), https://www.jstor.org/stable/pdf/20110630.pdf; Michael Anderson & Jeremy Magruder, Learning from the 
Crowd: Regression Discontinuity Estimates of the Effects of an 
Online Review Database, 122(563) Econ. J., 957-89 (2012); Michael 
Luca & Georgios Zervas, Fake It Till You Make It: Reputation, 
Competition, and Yelp Review Fraud, 62(12) Mgmt. Sci., 3412-27 
(2016), https://dash.harvard.edu/handle/1/22836596; Jonathan Zinman 
& Eric Zitzewitz, Wintertime for Deceptive Advertising?, 8(1) Am. 
Econ. J. Applied, 177-92 (2016), https://www.aeaweb.org/articles?id=10.1257/app.20130346; Imke Reiners & Joel Waldfogel, 
Digitization and Pre-purchase Information: The Causal and Welfare 
Impacts of Reviews and Crowd Ratings, 111(6) Am. Econ. Rev., 1944-71 
(2021), https://www.aeaweb.org/articles?id=10.1257/aer.20200153.
---------------------------------------------------------------------------

    A secondary benefit is deterrence of the specified review 
practices. The rule is essentially the only means for imposing civil 
penalties in most cases involving such practices. Civil penalties are 
not available for conduct that violates section 5(a)'s prohibition on 
unfair or deceptive acts or practices--rather, a violation of an FTC 
rule is necessary to impose civil penalties under section 5(m)(1)(a). 
Civil penalties act as a deterrent to fraud and deception in connection 
with reviews.\491\
---------------------------------------------------------------------------

    \491\ In October 2021, the Commission authorized a Notice of 
Penalty Offenses concerning endorsement practices that the FTC 
determined to be unfair or deceptive in prior administrative cases, 
including falsely claiming an endorsement by a third party; 
misrepresenting whether an endorser is an actual, current, or recent 
user; and failing to disclose an unexpected material connection with 
an endorser. See, e.g., Press Release, Fed. Trade Comm'n, FTC Puts 
Hundreds of Businesses on Notice about Fake Reviews and Other 
Misleading Endorsements (Oct. 13, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/10/ftc-puts-hundreds-businesses-notice-about-fake-reviews-other-misleading-endorsements. The notice 
allows the agency to seek civil penalties pursuant to section 
5(m)(1)(B) of the FTC Act against a company that received the notice 
and then engages in conduct that the Commission previously 
determined to be unfair or deceptive. 15 U.S.C. 45(m)(1)(B).
---------------------------------------------------------------------------

    To obtain redress without alleging a rule violation, the Commission 
must typically first determine in an administrative proceeding that the 
respondent violated the FTC Act, successfully defend that determination 
in any appeal to a Federal court of appeals, and then initiate a second 
action in Federal district court under section 19(a)(2) in which the 
Commission must prove that the conduct at issue is ``one which a 
reasonable man would have known under the circumstances was dishonest 
or fraudulent.'' \492\ Although these requirements are likely to be 
satisfied in cases involving the conduct covered by
---------------------------------------------------------------------------

    \492\ 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).

---------------------------------------------------------------------------

[[Page 68071]]

the rule, it would take substantially more time and resources, and 
would significantly delay any redress to consumers, compared to a 
single Federal court action alleging a rule violation, in which the 
court adjudicates both whether the defendant violated the rule and, if 
so, the appropriate amount of monetary relief to award.\493\
---------------------------------------------------------------------------

    \493\ 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(a)(2) action against Telebrands Corp. that was brought 
after the conclusion of litigation over a 2003 administrative 
complaint alleging violations of section 5).
---------------------------------------------------------------------------

    Given the prevalence of unfair or deceptive conduct involving 
reviews and testimonials, the Commission will have no shortage of bad 
actors to investigate; it can invest the extra resources freed up by 
the final rule into more investigations and actions with respect to 
consumer reviews or testimonials. In sum, the potential consumer-
redress benefits of the rule are significant: the Commission can put a 
stop to more inarguably unfair or deceptive consumer reviews, return 
more money to consumers, 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 $0.12 for every dollar spent in an experimental 
setting.\494\ The study considers a limited number of kinds of review 
manipulation, which notably does not include suppression of negative 
reviews or misrepresenting the independence of reviews, which might 
mean that $0.12 is an underestimate of the effect of the rule. However, 
the study also measures the effect of complete elimination of inflated 
star ratings and false written narratives, which might mean that $0.12 
is an overestimate of the effect of the rule. Thus, the Commission 
believes that a reasonable proxy for the effect of the rule's 
elimination of much review manipulation is that consumers will gain an 
estimated $0.12 for every dollar spent on goods whose online reviews 
included fake or false ones.
---------------------------------------------------------------------------

    \494\ See Jesper Akesson et al., The Impact of Fake Reviews on 
Demand and Welfare, National Bureau of Economic Research Working 
Paper 31836, Nov. 2023, https://www.nber.org/papers/w31836.
---------------------------------------------------------------------------

    To estimate consumer welfare benefits from better-informed purchase 
decisions, the Commission first estimates the total amount of sales for 
which consumers consult online reviews. U.S. e-commerce sales by retail 
firms totaled $1.119 trillion in 2023.\495\ The Commission assumes that 
all online retail sales had some form of user-generated commentary 
(e.g., on third-party review platforms or on company websites), and 
that this commentary factored into consumers' purchase decisions for 
these goods.
---------------------------------------------------------------------------

    \495\ See U.S. Census Bureau, Quarterly Retail E-Commerce Sales 
4th Quarter 2023, Feb. 20, 2024, https://www2.census.gov/retail/releases/historical/ecomm/23q4.pdf.
---------------------------------------------------------------------------

    Online reviews are also important for commerce that is 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 
$980.15 billion in 2022, which includes revenue from restaurants and 
bars.\496\ The Commission assumes that 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 that online reviews 
do not impact revenues of chain restaurants.\497\ Accordingly, the 
Commission assumes that consumers rely on reviews for twenty-five 
percent of the total revenue generated in the food services and 
drinking places sector (twenty-five percent of $980.15 billion, or 
$245.04 billion).\498\
---------------------------------------------------------------------------

    \496\ U.S. Census Bureau, Service Annual Survey (SAS), Jan. 30, 
2024, https://www.census.gov/programs-surveys/sas.html (listing 
total revenue of $980,153,000,000 for NAICS Code 722 in 2022, the 
most recent year with data).
    \497\ See Michael Luca, Reviews, Reputation, and Revenue: The 
Case of Yelp.com, Harvard Bus. Sch. Working Paper 12-016 (2016).
    \498\ Twenty-five percent is likely 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. 
Justin Guinn, What is the Average Restaurant Revenue for a New 
Restaurant?, https://pos.toasttab.com/blog/on-the-line/average-restaurant-revenue (last visited July 5, 2024). This is 
approximately twenty-five percent of average revenue for restaurants 
overall ($486,000, according to the website Eat Pallet, see Shari 
Mason, How Much Do Restaurants Make in a Day? Solved, May 24, 2024, 
https://eatpallet.com/how-much-do-restaurants-make-in-a-day).
---------------------------------------------------------------------------

    Online reviews are also important for sales in other service 
sectors. In 2022, total revenue was $316.35 billion for the 
accommodations sector (which includes hotels and vacation rentals), and 
total revenue was $67.70 billion for personal services (including 
beauty salons, barber shops, health clubs, and non-veterinary pet 
care), totaling $384.05 billion for both sectors.\499\ About half of 
hotel revenue is generated by business travelers, who might rely less 
on online reviews than leisure travelers do.\500\ 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. For these 
reasons, the Commission 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 
Commission assumes that twenty-five percent of total accommodation and 
personal care services revenue is impacted by consumer reviews (twenty-
five percent of $384.05 billion, or $96.01 billion). The total 
estimated revenue for services impacted by consumer reviews is $341.05 
billion (the sum of $245.04 billion and $96.01 billion). Combining the 
revenue estimates described above yields $1.461 trillion in estimated 
sales of goods or services for which consumers incorporate reviews into 
their decision-making.
---------------------------------------------------------------------------

    \499\ See U.S. Census Bureau, Service Annual Survey (SAS), supra 
note 496 (listing total 2022 revenue of $316,350,000,000 for NAICS 
Code 721 and listing total 2022 revenue of $67,698,000,000 for NAICS 
Codes 812111 through 812199 and NAICS Code 81291.
    \500\ 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.
---------------------------------------------------------------------------

    Quantitative estimates of the incidence of fake or false reviews 
vary by source.\501\ 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 ten percent 
of products or businesses have some manipulated

[[Page 68072]]

consumer reviews.\502\ Thus, a basic approximation of total e-commerce 
sales involving some review manipulation is ten percent of $1.119 
trillion, or $111.9 billion. Similarly, a basic approximation of 
review-dependent service industry sales involving some review 
manipulation is ten percent of $341.05 billion, or $34.1 billion.
---------------------------------------------------------------------------

    \501\ These estimates range from the single digits to over 
twenty percent. See Tripadvisor, 2023 Review Transparency Report, 
https://www.tripadvisor.com/TransparencyReport2023 (last visited 
July 5, 2024) (finding that 4.4 percent of review submissions were 
fraudulent); Trustpilot, Transparency Report 2024, https://assets.ctfassets.net/b7g9mrbfayuu/7p63VLqZ9vmU2TB65dVdnF/6e47d9ee81c145b5e3d1e16f81bba89a/Trustpilot_Transparency_Report_2024.pdf (last visited July 5, 2024) 
(stating that its software removed 6 percent of reviews due to being 
fake); Yelp, 2023 Yelp Trust & Safety Report (Feb 28, 2024), https://trust.yelp.com/trust-and-safety-report/2023-report (stating that 16 
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, (Feb. 27, 2023), 
https://deveshraval.github.io/reviews.pdf (Working Paper) (finding 
that the share of hidden (likely fake) Yelp reviews is as high as 47 
percent).
    \502\ 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, Fake It Till 
You Make It: Reputation, Competition, and Yelp Review Fraud, supra 
note 490 (finding that ten percent of Boston 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 501 (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 that independent firms and sellers 
offering lower-quality products are more likely to engage in review 
manipulation.\503\ Therefore, e-commerce sales affected by review 
manipulation are likely to be lower than the $111.9 billion in sales 
described above. A more conservative estimate of e-commerce sales 
involving review manipulation can be obtained by using price 
differentials of review-manipulated products versus others. Because 
products with online review manipulation have price points that are 
approximately 19 percent of the average price of goods sold online 
(according to research using data from Amazon),\504\ a more 
conservative estimate of review-manipulated products' revenue is 1.9 
percent (19 percent x 10 percent) of all $1.119 trillion in e-commerce 
sales, or $21.26 billion. Because the Commission does not have data on 
the revenue or quantities sold of review-manipulated products, it 
assumes that revenue is constant across price points and relies solely 
on the price differential to approximate revenue. The Commission 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.
---------------------------------------------------------------------------

    \503\ See, e.g., Sherry He et al., The Market for Fake Reviews, 
41(5) Mktg. Sci. 896 (2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3664992; Dina Mayzlin et al., Promotional 
Reviews: An Empirical Investigation of Online Review Manipulation, 
104(8) Am. Econ. Rev. 2421-55 (2014).
    \504\ 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 one study see Semrush Inc., Amazon Pricing 
Study: The Most Expensive Products, Category Volatility, and 
Seasonal Price Shifts, Mar. 22, 2022, https://www.semrush.com/blog/amazon-pricing-study).
---------------------------------------------------------------------------

    The Commission estimates annual welfare gains by applying the $0.12 
estimate, described above, to the estimated amount of U.S. sales that 
are likely to have some manipulated consumer reviews, yielding an 
annual estimate of welfare gains in the range of $6.64 billion (12 
percent of $55.36 billion, the sum of $21.26 billion and $34.1 billion) 
and $17.52 billion (12 percent of $146.0 billion, the sum of $111.9 
billion and $34.1 billion). Assuming that e-commerce sales increase 
linearly over the next ten years at the same rate as they did in the 
past year,\505\ the present value of consumer welfare improvements from 
better-informed purchasing decisions is estimated to be between $57.03 
and $230.36 billion as described in Table 2.1.
---------------------------------------------------------------------------

    \505\ E-commerce sales increased by 7.6 percent from 2022 to 
2023. See U.S. Census Bureau, Quarterly Retail E-Commerce Sales 4th 
Quarter 2023, supra note 495. 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) and grew 7.7 percent from 2021 to 2022. This analysis 
does not project revenues for non-e-commerce industries because 
linear trends during recent 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
                                                   [2024-2033]
----------------------------------------------------------------------------------------------------------------
                                         Total annual welfare     Total 10-year (2024-     Total 10-year (2024-
                                          improvements from          2033) welfare            2033) welfare
    Percent of e-commerce revenue          better-informed          improvement, 3%          improvement, 7%
   impacted by review manipulation      purchase decisions (in     discount rate  (in       discount rate  (in
                                              billions)                billions)                billions)
----------------------------------------------------------------------------------------------------------------
10...................................                   $17.52                  $230.36                  $196.91
1.9..................................                     6.64                    67.40                    57.03
----------------------------------------------------------------------------------------------------------------

b. Consumer Time Savings From Increased Reliability of Summary Ratings
    The rule's prohibitions against deceptive and unfair consumer 
review acts and practices would increase the reliability of consumer 
reviews. The Commission assumes that 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 rule is likely to result in some amount 
of time savings for consumers who consult online reviews before making 
purchases.
    Approximately eighty percent of Americans are online shoppers.\506\ 
Of those who shop online, fourteen percent shop online more than once a 
week, twenty percent shop online once a week, twenty-three percent shop 
online once every two weeks, twenty-five percent shop online once a 
month, and the remainder do so every few months.\507\ 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.\508\ This analysis does 
not incorporate time spent by consumers researching reviews of

[[Page 68073]]

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.
---------------------------------------------------------------------------

    \506\ 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.
    \507\ 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.
    \508\ 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 2023 was $31.48.\509\ Recent research suggests that individuals 
living in the United States value their non-work time at eighty-two 
percent of average hourly earnings.\510\ Thus, Americans overall value 
their non-work time at $25.81 per hour on average.
---------------------------------------------------------------------------

    \509\ Bureau of Labor Statistics, May 2023 National Occupational 
and Wage Estimates, Unites States, https://www.bls.gov/oes/current/oes_nat.htm (listing mean hourly wage of $31.48 for all 
occupations).
    \510\ 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 that the time listed in the 
survey results pertains to the purchase of a single product. It also 
assumes that the implementation of the rule will reduce the time spent 
reading reviews by ten percent. Combining the above figures results in 
$2.49 billion in consumer time savings per year, or a present value of 
$33.53 billion to $39.19 billion over a 10-year period, as described in 
Table 2.2.
    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.
    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 Commission 
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 that are 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.

             Table 2.2--Estimated Benefits From Time Savings
                               [2024-2033]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
 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 spend            48,991,116
     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)..                $25.81
    Percentage of time saved......................                   10%
    Total annual time savings.....................        $4,461,017,378
    Total 10-year (2024-2033) time savings, 3%                    $39.19
     discount rate (in billions)..................
    Total 10-year (2024-2033) time savings, 7%                    $33.53
     discount 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 that online reviews are particularly 
important for independent and newer firms.\511\ 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.\512\
---------------------------------------------------------------------------

    \511\ See Luca, Reviews, Reputation, and Revenue: The Case of 
Yelp.com, supra note 497 (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, https://economics.sas.upenn.edu/sites/default/files/filevault/u475/tawelfare.pdf (Working Paper) 
(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).
    \512\ 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, false, and manipulated online reviews allow 
companies to surpass competitors. One study found that 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).\513\ It follows that 
by curbing the number of fake, false, or manipulated reviews, the 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). While the 
benefits resulting

[[Page 68074]]

from improvements in the competitive environment are difficult to 
quantify, the Commission believes they are likely to be substantial.
---------------------------------------------------------------------------

    \513\ See Theodoros Lappas et al., The Impact of Fake Reviews on 
Online Visibility: A Vulnerability Assessment of the Hotel Industry, 
27(4) Inf. Sys. Research 940-961 (2016), https://pubsonline.informs.org/doi/abs/10.1287/isre.2016.0674.
---------------------------------------------------------------------------

2. Estimated Costs of the Final Rule
    This section describes the costs associated with the rule, provides 
quantitative estimates where possible, and describes costs that are 
only assessed qualitatively. While the Commission only quantifies 
benefits from reduced review manipulation and not the other rule 
provisions above, the Commission quantifies compliance costs for all 
aspects of the rule.
a. Compliance Costs
    The acts and practices prohibited by the rule are unfair or 
deceptive under section 5 of the FTC Act. The rule targets acts or 
practices that are clear violations of section 5, and businesses that 
are already compliant will not experience any additional compliance 
costs as a result of the rule. Moreover, the FTC routinely provides 
guidance to businesses on complying with FTC law, which will make the 
implications of the rule easy to understand for a wide range of 
businesses. Finally, in response to the comments, the Commission has 
both narrowed and clarified the rule requirements relative to the 
proposed rule (see section IV of this document). Accordingly, one of 
the scenarios reflected in Table 3.1 assumes that businesses will spend 
a de minimis amount of time interpreting the rule and make no changes 
to their current policies.
    However, because businesses now face the potential for civil 
penalties if they engage in conduct that violates the final rule, 
businesses may choose to incur additional administrative burdens to 
ensure compliance. The Commission presents another scenario in Table 
3.1 where businesses notify their employees of the 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 of the 
FTC Act, these steps might be out of caution so as not to risk the 
possibility of violating the 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 a 
violation of the relevant rule provision (Sec.  465.7(b)), the 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 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 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 
Commission makes assumptions about the number of businesses impacted 
and the number of person-hours involved in compliance activities. In 
2021, there were approximately 34.77 million total firms in the United 
States. Of these firms, 19,688 had 500 or more employees (``large 
companies''), and the remaining 34.75 million had fewer than 500 
employees (``small companies'').\514\ The Commission assumes that all 
19,688 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 that 74 percent of the 
34.75 million small companies (25.71 million companies) had an online 
consumer review presence.\515\
---------------------------------------------------------------------------

    \514\ See U.S. Census Bureau, 2021 SUSB Annual Data Tables by 
Establishment Industry, https://www.census.gov/data/tables/2021/econ/susb/2021-susb-annual.html (last visited July 5, 2024) (listing 
6.29 million total firms with at least one paid employee) and U.S. 
Census Bureau, Nonemployer Statistics, https://www.census.gov/programs-surveys/nonemployer-statistics.html (listing 28.48 million 
firms with no paid employees) (last visited July 5, 2024).
    \515\ Seventy-four percent of small businesses have at least one 
Google review. See BrightLocal, Google Reviews Study: How Many 
Reviews Do Local Businesses Need?, Oct. 31, 2018, https://www.brightlocal.com/research/google-reviews-study/.
---------------------------------------------------------------------------

    With heightened compliance review, the Commission assumes that 
lawyers at large companies, whose time is valued at $70.08 per 
hour,\516\ will spend eight hours conducting a one-time review of the 
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 rule. It assumes that small company 
owners, whose time is valued at $33.48,\517\ and are less likely have 
formal compliance programs, spend one hour doing the same.
---------------------------------------------------------------------------

    \516\ See Bureau of Labor Statistics, Occupational Outlook 
Handbook: Lawyers, https://www.bls.gov/ooh/legal/lawyers.htm (last 
visited July 5, 2024).
    \517\ See Payscale, Average Small Business Owner Salary, https://www.payscale.com/research/US/Job=Small_Business_Owner/Salary (last 
visited July 5, 2024) (reporting median base salary of $69,648 for 
small business owners). We assume small business owners work 2,080 
hours per year.
---------------------------------------------------------------------------

    In addition, some companies may spend time reviewing their 
automated processes to ensure that they comply with the rule. These 
costs, which companies might incur just once or on a recurring basis, 
are likely to be minimal. The Commission 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 total estimated costs are tabulated in Table 3.1.

                  Table 3.1--Estimated Compliance Costs
------------------------------------------------------------------------
                                                           2024 Only
------------------------------------------------------------------------
                          Scenario 1--No Review
------------------------------------------------------------------------
No cost..............................................                 $0
                                                      ------------------
    Total cost.......................................                 $0
------------------------------------------------------------------------
                Scenario 2--Heightened Compliance Review
------------------------------------------------------------------------
Number of large companies (in thousands).............              19.69
Cost per hour of rule review and related activities..             $70.08
Number of hours of rule review and related activities                  8
Subtotal (in millions)...............................             $11.04
Number of small companies with online reviews (in              25,715.23
 thousands)..........................................
Cost per hour of rule review and related activities..             $33.48

[[Page 68075]]

 
Number of hours of rule review and related activities                  1
Subtotal (in millions)...............................            $860.95
                                                      ------------------
    Total cost (in millions).........................            $871.98
------------------------------------------------------------------------

b. Other Impacts of the Rule
    There are several other potential effects from the rule. While the 
proposed requirements are far from onerous, there is the possibility 
that some sellers may ``overcorrect'' in response to the penalties 
available for rule violations. For example, a firm may encounter an 
excess of fake, negative reviews from a competitor. While Sec.  
465.7(b) permits the suppression of reviews that 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 rule. Alternatively, such a 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 that 
such unintended consequences of the rule are very unlikely, especially 
in light of how the rule has been clarified and narrowed in response to 
the comments.

C. Reasonable Alternatives and Explanation of Why Particular 
Alternative Chosen

    The Commission has attempted to catalog and quantify the 
incremental benefits and costs of the provisions included in the final 
rule. Extrapolating these benefits over the 10-year assessment period 
and discounting to the present provides an estimate of the present 
value for total benefits and costs of the rule, with the difference--
net benefits--providing one measure of the value of regulation.
    Using our low-end estimate above, the present value of quantified 
benefits for consumers from the rule's requirements over a 10-year 
period using a 7% discount rate is estimated at $57.03 billion. The 
present value of quantified costs for covered firms of complying with 
the rule's requirements over a 10-year period using a 7% discount rate 
is estimated at $0.83 billion. This generates an estimate of the 
present value of quantified net benefits equal to $56.16 billion using 
a discount rate of 7%. Using the upper-end assumptions discussed in the 
preceding analysis results in net benefits of $230.44 billion using a 
discount rate of 7%.
    To examine the sensitivity of the net benefits conclusions to the 
possibility of systematic underestimating of compliance costs, the 
Commission calculates costs and benefits in a scenario where all labor 
costs turn out to be ten times larger than the parameter values in the 
heightened compliance review scenario. For both small and large 
companies, the number of hours of rule review and related activities 
are increased by a factor of ten. All benefits and other cost 
parameters are unchanged in this analysis. With these new parameters, 
compliance review will cost $8.72 billion in 2024, and the present 
value of quantified net benefits will be equal to $48.31 billion using 
a discount rate of 7%. Thus, while the Commission believes compliance 
costs in the heightened compliance scenario are likely overestimates, 
even if they are instead severe underestimates, the quantified net 
benefits are highly positive.
    To examine the sensitivity of the net benefits conclusions to the 
possibility of systematic overestimating of the effectiveness of 
deterrence, the Commission calculates costs and benefits in a scenario 
in which the rule only partially eliminates the welfare losses to 
consumers caused by the various types of review manipulation covered by 
the rule. For this scenario, the Commission instead assumes that 
consumers will gain an estimated $0.04, rather than $0.12, for every 
dollar spent on goods whose online reviews included fake or false ones, 
the minimum welfare improvement reported for partial elimination of 
review manipulation in the study on which these estimates are 
based.\518\ Under this scenario, the present value of quantified net 
benefits under a 7% discount rate is $18.14 billion instead of $56.16 
billion. Combining the two scenarios, if the Commission both 
systematically underestimates compliance costs and systematically 
overestimates the effectiveness of the rule in preventing review 
manipulation, the present value of quantified net benefits under a 7% 
discount rate is $10.29 billion. Thus, even if the main compliance cost 
estimates above are underestimates and the main welfare benefits above 
are overestimates, the quantified net benefits are highly positive.
---------------------------------------------------------------------------

    \518\ See Akesson, The Impact of Fake Reviews on Demand and 
Welfare, supra note 494 (reviews for inferior products that had 
inflated star ratings but accurate written narratives caused 
consumers to lose $0.04 in welfare for every dollar spent).
---------------------------------------------------------------------------

    One alternative to the final rule would be to terminate the 
rulemaking and rely instead on the existing tools that 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. 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 net benefits outlined above.
    The Commission expects unquantified benefits to outweigh 
unquantified costs for this rule. As noted above, the benefits from 
several rule provisions are unquantified, while the compliance costs of 
all rule provisions are quantified. Thus, the quantified net benefits 
of $56.16 billion above likely underestimate the benefits to the 
public. Furthermore, these estimates are robust to uncertainty. Even 
assuming systematic underestimation of compliance costs and systematic 
overestimation of the rule effectiveness, the quantified net benefits 
are large and positive. Therefore, this regulatory analysis indicates 
that adoption of the rule will result in benefits to the public that 
outweigh the costs.

VII. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501 et seq., 
requires Federal agencies to seek and obtain Office of Management and 
Budget (``OMB'') approval before undertaking a collection of 
information directed to ten or more persons. As part of the NPRM, the 
Commission noted that the proposed rule did not contain an information 
collection requirement. However, for the purpose of confirmation, in 
Question 4 of the NPRM, the Commission nonetheless asked commenters 
whether the proposed rule contained a collection

[[Page 68076]]

of information.\519\ One commenter responded, ``Yes, it does. It 
contains our research and others' research, as well as valuable 
estimates to harm/costs for all 3 parties: consumers, businesses, and 
government.'' \520\ The Commission believes that this commenter was 
addressing whether the NPRM was collecting information, as opposed to 
whether the proposed rule would contain a collection of information 
within the meaning of the PRA. No other comments responding to the NPRM 
or Notice of Hearing addressed this question. While the Commission 
finalizes the proposed rule with some limiting modifications and 
clarifications based on the comments it received, it has not added any 
new requirements that would collect information from the public. 
Accordingly, the Commission has determined that the final rule neither 
includes a new collection of information, nor modifies an existing 
collection of information.
---------------------------------------------------------------------------

    \519\ NPRM, 88 FR 49388.
    \520\ Transparency Company Cmt. at 10.
---------------------------------------------------------------------------

VIII. Regulatory Flexibility Act--Final 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 that the rule will not have a significant economic 
impact on a substantial number of small entities.\521\ The purpose of a 
regulatory flexibility analysis is to ensure that an agency considers 
potential impacts on small entities and examines regulatory 
alternatives that could achieve the regulatory purpose while minimizing 
burdens on small entities.
---------------------------------------------------------------------------

    \521\ See 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    In the NPRM, the Commission provided an IRFA, stating its belief 
that the proposal will not have a significant economic impact on small 
entities, and soliciting comments on its burden estimate. In addition 
to publishing the NPRM in the Federal Register, the Commission 
announced the proposed rule through press and other releases. The 
Commission received comments from small businesses and associations 
that represent small businesses. In order to reduce compliance burdens 
on small businesses and other small entities, the Commission finalizes 
the proposed rule with some limiting modifications and clarifications 
as described in section IV of this document.
    The Commission believes that the rule will not have a significant 
economic impact upon small entities, although it may affect a 
substantial number of small businesses. The rule primarily prohibits 
certain unfair or deceptive acts or practices involving consumer 
reviews or testimonials and does not impose a reporting or 
recordkeeping requirement upon businesses. In addition, the Commission 
does not anticipate these changes will impose any additional 
significant additional costs upon 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 $33.48.\522\ Therefore, the rule imposes no 
new significant burdens on law-abiding small businesses. The Commission 
has determined, nonetheless, that it is appropriate to publish an FRFA 
to identify the impact of the rule on small entities. Therefore, the 
Commission has prepared the following analysis:
---------------------------------------------------------------------------

    \522\ See infra section VIII.F of this document.
---------------------------------------------------------------------------

A. Reasons for the Rule

    The Commission describes the reasons for the rule in section VI.A. 
of this document. The FTC's law enforcement, outreach, and other 
engagement in this area indicate that certain unfair or deceptive acts 
or practices involving consumer reviews or testimonials are prevalent. 
The rule will benefit consumers and legitimate businesses without 
imposing significant burdens.

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

    The Commission describes the objectives for the rule in section 
VI.A of this document. The legal basis for the 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. Issues Raised by Comments, the Commission's Assessment and Response, 
and Any Changes Made as a Result

    One individual commenter accepted the Commission's estimated 
compliance costs on small businesses but said it was unfair that 
``small companies with online reviews would bear almost all of the 
[rule's] estimated compliance costs.'' \523\ As the Commission stated 
in the NPRM, it is likely that only a minority of small businesses 
would elect to conduct optional compliance review and the total 
compliance costs for small businesses is likely to be significantly 
lower than the Commission's estimate.\524\
---------------------------------------------------------------------------

    \523\ Camp-Martin Cmt. at 2-3.
    \524\ NPRM, 88 FR 49388.
---------------------------------------------------------------------------

    One trade association simply asserted that certain provisions of 
the proposed rule could be detrimental to small businesses but did not 
specifically address the IRFA.\525\ This commenter expressed concern 
about: (1) civil penalty exposure for failing to stop the actions of 
undiscovered third parties providing reviews and testimonials appearing 
on a business's website; (2) a subsequent broadening of the proposed 
rule to prohibit incentivized reviews other than those required to 
express a particular sentiment; and (3) potential liability when an 
agent's review or testimonial appears without a disclosure.\526\ The 
Commission addresses these specific concerns in section IV of this 
document and has narrowed the rule or provided clarification as 
appropriate.
---------------------------------------------------------------------------

    \525\ IAB Cmt. at 1-15.
    \526\ Id. at 2, 5-6, 8-9, 10.
---------------------------------------------------------------------------

    The Commission does not believe that it needs to make any changes 
to its IRFA in response to these comments.
    Section IV provides a section-by-section analysis that discusses 
the provisions proposed in the NPRM, the comments received, the 
Commission's responses to the comments, and any changes made by the 
Commission as a result.

D. Comments by the Chief Counsel for Advocacy of the SBA, the 
Commission's Assessment and Response, and Any Changes Made as a Result

    The Commission did not receive any comments from the Chief Counsel 
for Advocacy of the SBA.

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

    The final rule could impact small entities that currently have, or 
might potentially, solicit consumer reviews or disseminate consumer 
testimonials. It could also impact small entities that use celebrity 
testimonials or have a social media presence. It is likely that the 
rule will primarily affect businesses that sell products or services 
directly to consumers. For example, the rule is less likely to impact 
small entities that manufacture niche raw materials for other 
businesses or small agricultural

[[Page 68077]]

firms that do not sell directly to consumers. Nevertheless, for a 
conservative estimate of total costs, the Commission assumes that the 
rule will impact all industry classes of small entities.
    As described in section VI.B.2 of this document, there are 
approximately 34.75 million small businesses in the United States. 
Prior research has found that 74 percent of small businesses have at 
least one Google review.\527\ On the one hand, 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. On the other hand, it is 
likely that many of these firms do not interact with reviews and such 
passive firms would not be affected by the rule. The Commission does 
not have the appropriate data to refine this estimate. Therefore, its 
best estimate is that no more than 25.71 million (74 percent x 34.75 
million) small businesses will be impacted by the rule.
---------------------------------------------------------------------------

    \527\ See supra note 515.
---------------------------------------------------------------------------

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

    The rule contains no reporting or recordkeeping requirements. 
Therefore, many law-abiding businesses are likely to incur no 
additional compliance costs with the rule.
    As described in section VI.B.2 of this document, a cautious firm 
may elect to undertake additional compliance review due to the 
potential for civil penalties for rule violations. If every small 
business impacted by the rule conducts one hour of compliance review, 
each firm would incur $33.48 of compliance costs, which reflects the 
estimated hourly earnings of a small business owner.\528\ Therefore, 
under the conservative estimate of heightened compliance review for all 
small businesses, costs to small businesses would total $860.95 million 
(25.71 million x $33.48). Because it is likely that only a minority of 
small businesses will elect to conduct optional compliance review, 
total compliance costs for these entities are likely to be 
significantly lower than this estimate.
---------------------------------------------------------------------------

    \528\ See Payscale, Average Small Business Owner Salary, supra 
note 517.
---------------------------------------------------------------------------

G. Description of Steps Taken To Minimize Impact of the Rule on Small 
Entities

    In response to comments, the Commission has narrowed the rule and 
clarified the rule requirements as described in section IV of this 
document, which should minimize further any economic impact on small 
entities. In its IRFA, the Commission described an alternative to the 
proposed rule, namely, to rely on the Commission's previously existing 
tools, such as consumer education and enforcement actions brought under 
sections 5 and 19 of the FTC Act, to combat the specified review and 
testimonial practices. The Commission believes that promulgation of the 
rule will 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 VI.B.1.c of this document, 
the rule will not only result in significant benefits to consumers but 
also improve the competitive environment, particularly for small, 
independent, or new firms. Therefore, the rule appears to be superior 
to this alternative for small entities.

IX. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs has designated this 
rule as a ``major rule,'' as defined by 5 U.S.C. 804(2).

List of Subjects in 16 CFR Part 465

    Advertising.

0
For the reasons set forth above, the Federal Trade Commission amends 16 
CFR Chapter I 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 [Reserved]
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 who sells products or services, a 
partnership that sells products or services, a corporation that sells 
products or services, 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 
individual 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 in at least the same means as the 
representation(s) requiring the disclosure.
    (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

[[Page 68078]]

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 part, consumer reviews 
include consumer ratings regardless of whether they include any text or 
narrative.
    (e) Consumer review hosting means providing the technological means 
by which a website or platform enables consumers to see or hear the 
consumer reviews that consumers have submitted to the website or 
platform.
    (f) 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.
    (g) Distribute fake indicators of social media influence means the 
distribution of fake indicators of social media influence to 
individuals or businesses who could use the indicators to misrepresent 
their influence.
    (h) Fake indicators of social media influence means indicators of 
social media influence generated by bots, purported individual accounts 
not associated with a real individual, accounts created with a real 
individual's personal information without their consent, or hijacked 
accounts, or that otherwise do not reflect a real individual's or 
entity's activities, opinions, findings, or experiences.
    (i) Immediate Relative means a spouse, parent, child, or sibling.
    (j) 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, saves, shares, reposts, and comments.
    (k) Manager means an employee of a business who supervises other 
employees or agents and who either holds the title of a ``manager'' or 
otherwise serves in a managerial role.
    (l) Officers include owners, executives, and managing members of a 
business.
    (m) Purchase a consumer review means to provide something of value, 
such as money, gift certificates, products, services, discounts, 
coupons, contest entries, or another review, in exchange for a consumer 
review.
    (n) Reviewer means the author or purported author of a consumer 
review.
    (o) Testimonialist means the individual giving or purportedly 
giving a consumer testimonial or celebrity testimonial.
    (p) An unfounded or groundless legal threat is a legal threat based 
on claims, defenses, or other legal contentions unwarranted by existing 
law or based on factual contentions that have no evidentiary support or 
will likely have no evidentiary support after a reasonable opportunity 
for further investigation or discovery.


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 part for a business to write, create, or sell a consumer review, 
consumer testimonial, or celebrity testimonial that materially 
misrepresents, expressly or by implication:
    (1) That the reviewer or testimonialist exists;
    (2) That the reviewer or testimonialist used or otherwise had 
experience with the product, service, or business that is the subject 
of the review or testimonial; or
    (3) 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 part 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 the products or 
services it sells, which the business knew or should have known 
materially misrepresented, expressly or by implication:
    (1) That the reviewer or testimonialist exists;
    (2) That the reviewer or testimonialist used or otherwise had 
experience with the product, service, or business that is the subject 
of the review or testimonial; or
    (3) 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 part for a business to procure a consumer review from its 
officers, managers, employees, or agents, or any of their immediate 
relatives, for posting on a third-party platform or website, when the 
review is about the business or one of the products or services it 
sells, and when the business knew or should have known that the review 
materially misrepresented, expressly or by implication:
    (1) That the reviewer exists;
    (2) That the reviewer used or otherwise had experience with the 
product, service, or business that is the subject of the review; or
    (3) The reviewer's experience with the product, service, or 
business that is the subject of the review.
    (d) However, paragraphs (b) and (c) of this section do not apply 
to:
    (1) Reviews or testimonials that resulted from a business making 
generalized solicitations to purchasers to post reviews or testimonials 
about their experiences with the product, service, or business; or
    (2) Reviews that appear on a website or platform as a result of the 
business merely engaging in consumer review hosting.


Sec.  465.3  [Reserved]


Sec.  465.4  Buying positive or negative consumer reviews.

    It is an unfair or deceptive act or practice and a violation of 
this part for a business to provide compensation or other incentives in 
exchange for, or conditioned expressly or by implication 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.

    (a) It is an unfair or deceptive act or practice and a violation of 
this part for an officer or manager of a business to write or create a 
consumer review or consumer testimonial about the business or one of 
the products or services it sells that fails to have a clear and 
conspicuous disclosure of the officer's or manager's material 
relationship to the business, unless, in the case of a consumer 
testimonial, the relationship is otherwise clear to the audience.
    (b)(1) It is an unfair or deceptive act or practice and a violation 
of this part for a business to disseminate or cause the dissemination 
of a consumer testimonial about the business or one of the products or 
services it sells by one of its officers, managers, employees, or 
agents, which fails to have a clear and conspicuous disclosure of the 
testimonialist's material relationship to the business, when the 
relationship is not otherwise clear to the audience and the business 
knew or should have known the testimonialist's relationship to the 
business.

[[Page 68079]]

    (2) However, paragraph (b)(1) of this section does not apply to:
    (i) Generalized solicitations to purchasers for them to post 
testimonials about their experiences with the product, service, or 
business, or
    (ii) Merely engaging in consumer review hosting.
    (c)(1) It is an unfair or deceptive act or practice and a violation 
of this part for an officer or manager of a business to solicit or 
demand a consumer review about the business or one of the products or 
services it sells from any of their immediate relatives or from any 
employee or agent of the business, or to solicit or demand that such 
employees or agents seek such reviews from their relatives, when:
    (i) The solicitation or demand results in an officer's or manager's 
immediate relatives, an employee or agent, or the immediate relatives 
of an employee or agent writing or creating such a review without a 
disclosure of the reviewer's material relationship to the business, and
    (ii) The officer or manager:
    (A) Encouraged the prospective reviewer not to make such a 
disclosure,
    (B) Did not instruct that prospective reviewers disclose clearly 
and conspicuously their relationship to the business, or
    (C) knew or should have known that such a review appeared without 
such a disclosure and failed to take remedial steps.
    (2) However, paragraph (c)(1) of this section does not apply to 
generalized solicitations to purchasers for them to post reviews about 
their experiences with the product, service, or business.


Sec.  465.6  Company-controlled review websites or entities.

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


Sec.  465.7  Review suppression.

    It is an unfair or deceptive act or practice and a violation of 
this part:
    (a) For anyone to use an unfounded or groundless legal threat, a 
physical threat, intimidation, or a public false accusation in response 
to a consumer review that is made with the knowledge that the 
accusation was false or made with reckless disregard as to its truth or 
falsity, in an attempt to:
    (1) Prevent a review or any portion thereof from being written or 
created, or
    (2) Cause a review or any portion thereof to be removed, whether or 
not that review or a portion thereof is replaced with other content, or
    (b) For a business to materially misrepresent, expressly or by 
implication, that the consumer reviews of one or more of the products 
or services it sells displayed in a portion of its website or platform 
dedicated in whole or in part to receiving and displaying consumer 
reviews represent most or all the reviews submitted to the website or 
platform when reviews are being suppressed (i.e., not displayable) 
based upon their ratings or their negative sentiment. For purposes of 
this paragraph, a review is not considered suppressed based upon rating 
or negative sentiment if the suppression occurs based on criteria for 
withholding reviews that are applied equally to all reviews submitted 
without regard to sentiment, such as when:
    (1) The review contains:
    (i) Trade secrets or privileged or confidential commercial or 
financial information,
    (ii) Defamatory, harassing, abusive, obscene, vulgar, or sexually 
explicit content,
    (iii) The personal information or likeness of another individual,
    (iv) Content that is discriminatory with respect to race, gender, 
sexuality, ethnicity, or another intrinsic characteristic, or
    (v) Content that is clearly false or misleading;
    (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 part for anyone to:
    (a) Sell or distribute fake indicators of social media influence 
that they knew or should have known to be fake and that can be used by 
individuals or businesses to materially misrepresent their influence or 
importance for a commercial purpose; or
    (b) Purchase or procure fake indicators of social media influence 
that they knew or should have known to be fake and that materially 
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 will continue in effect.

    By direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2024-18519 Filed 8-21-24; 8:45 am]
BILLING CODE 6750-01-P