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FTC Fines for Fake Reviews: What Does it Mean for Local Businesses?

Andrew Adams
Man looking at reviews on iPhone

The Federal Trade Commission announced that it would crackdown on the use of fake or misleading reviews that deceive consumers. A warning also accompanied the announcement for more than 700 companies that the FTC was watching their use of reviews.

While most local businesses aren’t on the FTC’s radar, it is a good reminder that honest and genuine reviews are key to success. If you’re using reviews as part of your marketing campaigns or showcasing them on your website, you want to make sure that you’re using them in an honest way. Only showcasing part of a review that can mislead consumers into thinking a particular outcome is an example of using reviews to be deceptive.

Depending on your industry, you may also have rules about using reviews based on an association that you’re involved in. For instance, ethics rules for lawyers warn against using reviews or testimonials that may mislead potential clients into expecting a specific outcome. There are similar rules that may apply to home services and medical industries as well.

You will also want to be sure to always follow rules and guidelines for where you are getting reviews. Yelp, Google, Facebook, and other marketplaces all have their own rules and regulations when it comes to reviews.

The FTC’s regulations can include a fine of up to $43,000 for each deceptive or misleading review so it is also important to make sure your reviews are genuine across all mediums including your website, social media, etc. You can use a local marketing platform to help manage and monitor your reviews.

In a press release, the FTC said, “The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace. Fake online reviews and other deceptive endorsements often tout products throughout the online world.”

For local businesses, reviews are critical to marketing and gaining new business. To ease the stress of regulations for business owners, remember to use genuine reviews from actual customers. It’s easy to have family members or friends excite your company and give you 5-star reviews, but it is important that they have used your service or purchased your product.

The FTC also released a list of things they will not allow when it comes to reviews, including:

  • falsely claiming an endorsement by a third party
  • misrepresenting whether an endorser is an actual, current, or recent user
  • continuing to use an endorsement without good reason to believe that the endorser continues to subscribe to the views presented
  • misrepresenting that an endorsement represents the experience, views, or opinions of users or purported users
  • using an endorsement to make deceptive performance claims
  • failing to disclose an unexpected material connection with an endorser
  • misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience

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

The FTC created a guide to help companies understand the nuances of reviews and endorsements.

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