Washington, UNITED STATES: The US Federal Trade Commission (FTC) building Photo: PAUL J. ... [+]
The US Federal Trade Commission (FTC) is considering moves to tighten up its guidelines on fake reviews and misleading marketing.
The FTC Endorsement Guides give guidance to businesses on ensuring that advertising using endorsements or testimonials is truthful, and that advertisers need to be upfront with consumers and clearly disclose unexpected material connections between endorsers and a seller of an advertised product. They warn that advertisers who lie to consumers via endorsements or testimonials may violate the FTC Act.
However, the guides haven't been changed since 2009, leaving them ill-equipped to deal with the increasing use of use of social media and product reviews as marketing tools.
"We’re updating the guides to crack down on fake reviews and other forms of misleading marketing, and we’re warning marketers on stealth advertising that targets kids." says Samuel Levine, director of the FTC’s Bureau of Consumer Protection.
"Whether it’s fake reviews or influencers who hide that they were paid to post, this kind of deception results in people paying more money for bad products and services, and it hurts honest competitors."
The FTC is warning social media platforms that some of their tools for endorsers are inadequate, and may open them up to liability.
It's clarified that fake reviews are covered under the guides and added a new principle that in procuring, suppressing, boosting, organizing, or editing consumer reviews, advertisers shouldn't distort or misrepresent what consumers think of their products.
This would cover the suppression of reviews in cases like that of online fashion retailer Fashion Nova, which earlier this year was found to have suppressed reviews with ratings lower than four stars out of five, and was fined $4.2 million as a result.
And, says the FTC, tags in social media posts are covered under the guides, as are virtual influencers — computer-generated fictional characters. Finally, there'll be closer scrutiny of the microtargeting of specific audiences.
The FTC has also proposed adding a new section to the guides, highlighting that child-directed advertising is of special concern and that children may respond to advertising endorsements in a different way to adults.
Last year, says the FTC, it sent notices to over a thousand businesses regarding fake reviews and other misleading endorsements. However, the sector is far less heavily regulated in the US than in many other countries. In the UK, for example, recently-introduced rules mean that writing or hosting fake reviews can lead to fines of up to 10 per cent of global turnover.
