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Amazon, Facebook Among Companies Facing FTC Warning Over Reviews

Oct. 13, 2021, 6:56 PM

Companies including Amazon.com Inc. and Facebook Inc. could face fines over fake reviews or other misleading endorsements online, according to a warning from the Federal Trade Commission.

The warning comes as social media has blurred the line between authentic content and advertising, according to the FTC’s Wednesday announcement. Practices such as influencer marketing leave some consumers confused about when posters are paid to endorse a product, if their connection to the brand isn’t clearly disclosed.

The agency sent more than 700 companies a notice that they could incur penalties of up to $43,792 per violation if they use endorsements in ways that run counter to past FTC enforcement cases.

The notices demonstrate FTC chair Lina Khan’s efforts to ramp up enforcement under the commission’s existing authorities, following a recent U.S. Supreme Court ruling that limited the agency’s ability to seek monetary awards in court.

The commission’s move on endorsements relies on an agency authority that allows for civil penalties against a company that engages in conduct that it knows has been found unlawful in a previous FTC administrative order, other than a consent order.

Earlier in October, the commission sent a similar notice to for-profit higher education institutions, advising against making false promises about their graduates’ job and earnings prospects. Both actions concern practices that are deemed deceptive or unfair under Section 5 of the FTC Act.

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

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editor responsible for this story: Kibkabe Araya at karaya@bloombergindustry.com

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