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Why The FTC is Poised to Crackdown on Fake Reviews in 2022

By January 7, 2022 No Comments

FTC Poised to Begin Fake Review Crackdown in 2022

By: Greg Sterling

VP of Market Insights for Uberall 

The Federal Trade Commission (FTC) has review fraud in its sights

In October, the agency notified more than 700 national advertisers that “misleading use of endorsements could lead to major financial penalties.” The FTC considers online reviews to be a subspecies of endorsements and fake reviews to be a form of “consumer deception,” which falls within its enforcement purview.

Review fraud is rampant online in both product and service categories. Its frequency and scope vary by industry and by consumer site. The most comprehensive study done to date, published earlier this year by my company, Uberall, and The Transparency Company, analyzed four million reviews on Google, Facebook, Yelp and Tripadvisor in 19 business categories. Restaurants was one of those.

The analysis used a variety of techniques to spot fake reviews, including machine learning, natural language processing, user and IP location, review profile analysis and a number of others. Of the four sites, Google had the most fake reviews overall (10.7%), followed by Yelp (7.1%), Tripadvisor (5.2%) and Facebook (4.9%). However, there were business categories that had higher percentages of review fraud. On Google, for example, moving companies, plumbers and locksmiths all featured more than 20% fake reviews.

Restaurants had one of the lower incidences of review fraud in the study. It was 15th out of the 19 categories in descending order. Overall, only 4.3% of restaurant reviews across all four sites were inauthentic or fake. Google had the highest percentage of fake restaurant reviews at 5.1%, while Yelp had the lowest at 3.4%.

While these restaurant percentages may seem relatively low, compared to 20% for example, they still represent millions of online reviews. Our report estimated that well over 100 million reviews (across categories) on Google were questionable or potentially fake. Google itself acknowledged that in 2020 it “blocked or removed 55 million policy-violating reviews.”

This gives you a sense of the scale of the problem.

Consumers have become increasingly aware of fake reviews over the past few years. This is partly because of increasing media coverage. Uberall consumer survey data show that now two-thirds (67%) of U.S. consumers are concerned about review fraud; however, most people are unable to spot fake reviews through ordinary observation.

What surprises many people is discovering that the majority of review fraud is being perpetrated by or on behalf of businesses themselves. In other words, businesses are generating (or buying) fake positive reviews to improve their visibility and online reputations. In this context that means restaurant owners.

Enter the FTC and its warning to brands and advertisers.

The agency has been working on a strategy for months to go after online review fraud. The major challenge it faces is Section 230 of the Communications Decency Act, which protects online platforms and search engines from liability for user-generated content (e.g., reviews). The FTC can’t go after Google or Yelp, so it’s relegated to going after individual violators.

Each potential “misleading endorsement” (fake review) brings potential penalties of $43,792. So ten fake reviews could mean a fine of more than $430,000. However, the FTC has yet to bring an action for review fraud under this framework.

As a practical matter, pursuing thousands of independent, local restaurants who’ve cheated their reviews isn’t feasible. So the FTC is looking for larger or more egregious examples of online review fraud to deter future behavior. A national or regional restaurant franchise with significant review fraud, that would bring a meaningful financial penalty and national news, would be an “ideal target” for the agency.

We’ll wait and see if that happens. It may take a little while.

In the meantime, consumers will continue to read and use online restaurant reviews – but with increasing caution and skepticism. That will boost the stock of trusted editorial reviews and roundups as a hedge against fraud.

Greg Sterling is the VP of Market Insights for Uberall. He is a recognized expert on a range of digital marketing topics, including SMB SaaS and local marketing. He was also a contributing editor for Search Engine Land for 14 years. Before Uberall, Sterling was VP of Strategy for trade association LSA (now Localogy). Prior to entering the world of digital media, Sterling was an attorney and practiced civil litigation in San Francisco.

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