What the FTC's fake review rule bans, and what it changes for testimonials

Fake and AI-generated reviews are the core prohibition

The rule bars a business from writing, creating or selling reviews or testimonials that are fake or false. The FTC's announcement gives three examples: reviews attributed to someone who does not exist, including AI-generated ones, reviews from people who never used the product or service, and reviews that misrepresent the writer's experience.

The ban also reaches buying and spreading them. A business may not purchase fake reviews, obtain them from insiders, or disseminate them when it knew or should have known they were fake or false.

FTC staff guidance from November 2024 adds that the rule contains no blanket ban on AI-generated avatars in marketing. An avatar is not giving a consumer review, but its message could be a testimonial, and that is prohibited only if the underlying testimonial is fake or false. The same guidance says using a celebrity's likeness without permission to suggest an endorsement can violate the rule.

Incentives are allowed, but not for a particular verdict

A business may not offer compensation or incentives conditioned on a review expressing a particular sentiment, positive or negative. The FTC says the condition can be explicit or implied.

Staff guidance draws the line at the sentiment, not the reward. Incentives for reviews are not prohibited unless there is an express or implied requirement that the review be positive. Offering an incentive for 5-star reviews violates the rule, including on third-party platforms. Consumers who accept an incentive are not liable under this section.

The guidance also notes that a review becomes a testimonial once the business has given an incentive for it, a distinction that matters for where the review can then be displayed.

Insider reviews and company-run review sites

Reviews or testimonials from insiders must clearly and conspicuously disclose the writer's material connection to the business. Officers and managers face additional limits. A business also may not share insider testimonials that it should have known came from officers, managers, employees or agents. Additional requirements apply when an officer or manager solicits reviews from relatives, or from employees or agents.

Staff guidance says the disclosure must be unavoidable, so one placed only behind a hyperlink may not qualify. Generalised solicitations to purchasers to post reviews about their experiences are exempt. The guidance also warns that insider reviews that materially raise a star rating could violate the FTC Act even when disclosed.

A separate prohibition covers sites a business controls. It may not claim that a website or entity it controls offers independent reviews of a product category that includes its own products or services.

Review suppression and fake followers

The rule bars using baseless legal threats, physical threats, intimidation or certain false public accusations to prevent or remove negative reviews. It also bars a business from claiming that the reviews it displays represent all or most reviews when negative or low-rated ones were suppressed.

Staff guidance sets out what does not count as suppression. Organising reviews by helpfulness or star rating is not suppression. A business can refuse patently false reviews about the wrong business. A policy of excluding reviews that mention other products is allowed if it applies equally to positive and negative reviews. Staff add that arranging reviews so negative ones are hard to find could still be unfair or deceptive under Section 5 of the FTC Act.

For social media, the rule prohibits buying or selling fake indicators of influence, such as followers or views from bots or hijacked accounts. Liability for a buyer requires that it knew or should have known the indicators were fake and used them to misrepresent its influence for commercial purposes. According to the guidance, an influencer asking real followers to follow a brand account is not covered.

Merely hosting consumer reviews is exempt, even if the business solicits reviews or aggregates star ratings.

What the penalties are, and where the figures are unsettled

The rule lets the FTC seek civil penalties against violators who act knowingly. Neither the FTC's announcement nor its staff Q&A states a dollar amount for the rule itself.

The FTC's published inflation adjustments list a maximum civil penalty of $53,088 for violations under Section 5(m)(1)(A) of the FTC Act, up from $51,744. That figure was effective on 17 January 2025. The release does not say the figure applies to this rule specifically or that it is calculated per violation.

The amounts are adjusted periodically, so the figure in force at any given time may differ from the 2025 number.

What changes in how a company collects and shows testimonials

Staff guidance treats testimonials as advertising. A business that posts them on its own website is disseminating them, not merely hosting them, so fake or false testimonials there could create liability. If a business features consumer reviews in its marketing, they become testimonials and the hosting exemption no longer applies.

Merely hosting consumer reviews is exempt, even if the business solicits reviews or aggregates star ratings. There is no general duty to screen every review for fakes. Liability arises where the business wrote fake reviews or bought ones it knew or should have known were false.

The should-have-known standard does not require investigating every review, according to the guidance. Where there are clear warning signs, failing to investigate may create liability. The examples given are reviews that appear suspiciously soon after purchase, an unusually large number of reviews in a short period, and reviews that refer to the wrong product.

The staff guidance is not binding. It states that it is not definitive or comprehensive, offers no safe harbour from liability, and that answers depend on the specific facts.