Fake Online Reviews: A Growing Challenge for Small Businesses and How the FTC is Stepping In

The Importance of Online Reviews

Online reviews and testimonials have become crucial for small businesses looking to attract new customers and boost product sales. A positive review can significantly influence consumer decisions, helping companies build credibility and trust. However, the increasing prevalence of fake reviews undermines this system, making it difficult for potential customers to distinguish between genuine feedback and fraudulent claims.

The Impact of Fake Reviews

Fake reviews have become a persistent issue for small businesses, many of which heavily rely on authentic recommendations to thrive. These deceptive practices not only erode consumer trust but can also severely damage a business’s reputation. Negative fake reviews, in particular, can lead to financial loss and a tarnished image, which is incredibly challenging for small businesses with limited resources to combat these attacks. Moreover, consumers who rely on these reviews for their purchasing decisions can end up with subpar products or services, further highlighting the detrimental effects of fake reviews.

Case Study: Sage Dental’s Struggle with Fake Reviews

Avi Israeli, a dentist and owner of Sage Dental in Wall, N.J., knows all too well the damage fake reviews can cause. His practice, which employs 15 staffers, has been targeted by erroneous reviews from individuals who need to be connected to his office. Furthermore, some reviewers have mistakenly associated his practice with a similarly named chain, posting inaccurate and harmful feedback that is difficult and costly to remove.

“They have significantly tarnished our reputation and are, unfortunately, very difficult and costly to remove,” Israeli shared.

FTC’s New Rule Against Fake Reviews

In response to the growing problem of fake reviews, the Federal Trade Commission (FTC) has implemented a new rule to crack down on those who engage in this deceptive practice. The rule, effective on October 21, prohibits the sale or purchase of fake reviews and testimonials and empowers the FTC to seek civil penalties against those who knowingly violate the rule, giving small businesses a sense of empowerment and control over their online reputation.

FTC Chair Lina M. Khan emphasized the significance of this move, stating, “Fake reviews not only waste people’s time and money but also pollute the marketplace and divert business away from honest competitors.” She added that the rule will help protect consumers, ensure fair competition, and hold businesses accountable, instilling a sense of reassurance and confidence in the fairness of the online marketplace.

Specific Prohibitions of the FTC Rule

The FTC’s rule bans several specific practices:

  • Reviews and testimonials attributed to people who do not exist or are generated by AI.
  • Reviews from individuals without experience with the business or its products/services.
  • Misrepresentations of a person’s experience with a business.
  • Businesses creating, selling, or disseminating fake reviews, including those procured from company insiders.

Additionally, the rule prohibits selling or purchasing fake indicators of social media influence, such as followers or views generated by bots or hijacked accounts.

The Impact on Businesses Like Conversational

Tanya Lamont, CEO of Conversational, a virtual receptionist service based in Dallas, Texas, experienced firsthand the damage fake reviews can inflict. False claims that her staff was unprofessional and mishandled sensitive client information hurt her business, leading to a drop in new client inquiries and concerns among existing customers.

Despite her company’s efforts to mitigate the damage by responding to each review and reporting them to the relevant platforms, the negative impact on revenue was significant. Lamont views the FTC’s crackdown as a “much-needed step” for businesses like hers that rely heavily on their online reputation.

“We’re hopeful that stronger enforcement will help protect businesses from the harm caused by these malicious acts,” Lamont said.

How Businesses and Consumers Can Fight Back

The FTC encourages affected businesses and consumers to report any concerns related to fake reviews. Consumers and business owners can file complaints about fraud, scams, and unethical business practices at ReportFraud.ftc.gov.

As the October 21 enforcement date approaches, small businesses can look forward to a more level playing field, where genuine reviews are valued, and dishonest tactics are penalized.