The US Federal Trade Commission (FTC), is looking at ways to tighten its guidelines regarding fake reviews and misleading advertising.
FTC Endorsement Guides provide guidance for businesses about ensuring endorsements or testimonials are truthful. Advertisers need to be open with consumers and disclose any unexpected material connections between endorsers, sellers of advertised products, and clear disclosures to that effect. Advertisers who use testimonials or endorsements to lie to consumers may be in violation of the FTC Act.
The guides have not been updated since 2009, making them inept to handle the growing use of social media and product reviews, which has made them less able to adapt to the changing marketing methods.
“We are updating the guides to crackdown on fake reviews, misleading marketing, as well as warning marketers about stealth advertising targeting children. Samuel Levine is the director of FTC’s Bureau of Consumer Protection.
This kind of deceit, whether it’s fake reviews, or influencers that hide they were paid to write, results in people paying more for bad products, and it hurts honest competition.”
FTC warns social media platforms that their tools for endorsed are not adequate and could expose them to liability.
The guides now cover fake reviews. We also added a new principle: advertisers should not distort, misrepresent or fabricate consumer opinions when soliciting, suppressing or boosting them.
This would include the suppression of reviews in cases such as Fashion Nova’s case, where it was discovered that Fashion Nova had suppressed reviews with ratings below four stars from five. Fashion Nova was fined $4.2 Million.
According to the FTC, social media tags are covered by the guidelines, as well virtual influencers, which are computer-generated fictional characters. The microtargeting of particular audiences will also be under closer scrutiny.
FTC also suggested adding a section to the guides to highlight that child-directed advertisement is of special concern. Children may react differently to endorsements than adults.
According to the FTC it sent notices last year to more than a thousand businesses about fake reviews and misleading endorsements. The sector is less regulated than other countries. For example, new rules in the UK can result in fines up to 10% for hosting or writing fake reviews.