Fake handbags and knock-off shoes are not the only counterfeits fashion brands need to be wary of online. On October 21, 2024, the Federal Trade Commission’s (FTC) new rule, formally titled the Trade Regulation Rule on the Use of Consumer Reviews and Testimonials, took effect, targeting a growing threat to brand integrity and consumer trust: fake online reviews.1[1]Rule on the Use of Consumer Reviews and Testimonials, 16 C.F.R. § 465 (2024). With generative artificial intelligence (AI) tools making it easier to flood websites with fraudulent testimonials, this rule aims to promote fair and honest advertising by prohibiting specific unfair or deceptive acts and empowering the FTC to seek civil penalties for violations.2[2]Jack Wenik & Theodora McCormick, Dissecting the New FTC Final Rule That Regulates “Fake Reviews” and More, Commercial Litigation Update (Aug. 29, 2024), https://www.commerciallitigationupdate.com/dissecting-the-new-ftc-final-rule-that-regulates-fake-reviews-and-more. This article explores the impact of the new FTC rule on fashion brands, particularly in an industry where online reviews can make or break a brand’s reputation.
The Rise of Fake Reviews in Fashion
The fashion industry, heavily reliant on online shopping, has become a prime target for deceptive reviews.3[3]Michael Atleson, We’ll Pay You to Give Our New Rule a Good Review, Federal Trade Commission (Aug. 14, 2024), https://www.ftc.gov/business-guidance/blog/2024/08/well-pay-you-give-our-new-rule-good-review. Shoppers depend on product feedback to compensate for the absence of in-store experiences, like feeling fabrics to assess quality or trying on clothes for fit.4[4]Colleen Tressler, Online Retailer, Fashion Nova, Gets a Dressing Down for Hiding Negative Reviews, Federal Trade Commission (Jan. 25, 2022), https://consumer.ftc.gov/consumer-alerts/2022/01/online-retailer-fashion-nova-gets-dressing-down-hiding-negative-reviews. While deceptive reviews are not new, the emergence of AI tools has accelerated the production of convincing fake reviews, making them more widespread and more challenging to detect.5[5]Haleluya Hadero, The Internet is Filled with Fake Reviews. Here are Some Ways to Spot Them, Associated Press (Dec. 23, 2024), https://apnews.com/article/fake-online-reviews-generative-ai-40f5000346b1894a778434ba295a0496. An estimated 30% of online reviews are fake, posing significant issues for consumers who rely on authentic testimonials when shopping online.6[6]Bettie Cross, Up to 30% of Online Reviews are Fake and Most Consumers Can’t Tell the Difference, CBS Austin (Nov. 1, 2022), https://cbsaustin.com/news/local/up-to-30-of-online-reviews-are-fake-and-most-consumers-cant-tell-the-difference.
For fashion brands, this trend presents unique challenges. When companies offer consumers free products or discounts in exchange for positive feedback, the line between genuine and misleading endorsements becomes blurred.7[7]Haleluya Hadero, The Internet is Filled with Fake Reviews. Here are Some Ways to Spot Them, Associated Press (Dec. 23, 2024), https://apnews.com/article/fake-online-reviews-generative-ai-40f5000346b1894a778434ba295a0496. Even popular platforms like Amazon have struggled to contain this issue, as sellers exploit loopholes in verification processes to boost their ratings artificially.8[8]Hridya Nambiar, Products and Fake Reviews: What is Real?, Fashion & Law Journal (Aug. 23, 2022), https://fashionlawjournal.com/products-and-fake-reviews-what-is-real/.
A prominent example of deceptive review practices in the fashion industry involves fast-fashion giant Fashion Nova. In 2022, the FTC reached a $4.2 million settlement with the retailer after discovering that it suppressed hundreds of thousands of negative reviews to inflate product ratings artificially.9[9]Fashion Nova will Pay $4.2 Million as part of Settlement of FTC Allegations it Blocked Negative Reviews of Products, Federal Trade Commission (Jan. 25, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/01/fashion-nova-will-pay-42-million-part-settlement-ftc-allegations-it-blocked-negative-reviews. Fashion Nova employed a third-party interface to automatically post positive reviews while withholding lower-starred feedback from public view.10[10]Id.
The settlement required Fashion Nova to cease these deceptive practices and for all customer reviews to be displayed on their site, excluding only obscene or irrelevant content.11[11]Id. This case set a critical precedent, signaling to other fashion brands that the FTC is committed to holding companies accountable for such tactics. The passing of the new rule reinforces this commitment by granting the FTC greater enforcement power, ensuring that violations now come with more precise consequences and the potential for significant financial penalties. As recently as January 2025, the FTC sent 148,351 payments totaling nearly $2.4 million to customers who filed a valid claim against Fashion Nova because of this litigation.12[12]Fashion Nova Settlement, Federal Trade Commission (Jan. 2025), https://www.ftc.gov/enforcement/refunds/fashion-nova-settlement.
Breaking Down the FTC’s New Rule
The FTC’s rule is designed to crack down on deceptive practices that undermine consumer trust.13[13]Caitlin Zeytoonian, et al., FTC Issues Final Rule on Consumer Reviews and Testimonials, Morgan Lewis (August 26, 2024), https://www.morganlewis.com/pubs/2024/08/ftc-issues-final-rule-on-consumer-reviews-and-testimonials. While these actions were already unlawful, the new rule enhances enforcement by not only introducing significant penalties but also establishing more explicit liability standards and expanding the FTC’s ability to take direct action against violators.14[14]Michael Murphy, Morgan Nickerson, Adam Husik, Keeping Online Reviews Honest – The FTC Announces Final Rule to Combat Fake Reviews, Testimonials and Related Misrepresentations, Fashion Law Watch (Aug. 20, 2024), https://www.fashionlawwatch.com/2024/08/20/keeping-online-reviews-honest-the-ftc-announces-final-rule-to-combat-fake-reviews-testimonials-and-related-misrepresentations/. The rule contains the following six subsections:
(1) Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials. This provision addresses reviews and testimonials that falsely claim to be from real individuals—including AI-generated content—or people who have not had actual experience with the business or its products or services.15[15]89 Fed. Reg. 52782 (Aug. 22, 2024) (to be codified at 16 C.F.R. § 465.3). It also applies to reviews that misrepresent the experience of the person giving the testimonial.16[16]Federal Trade Commission Announces Final Rule Banning Fake Reviews and Testimonials, Federal Trade Commission (Aug. 14, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/08/federal-trade-commission-announces-final-rule-banning-fake-reviews-testimonials. The rule prohibits businesses from creating, selling, purchasing, or disseminating such reviews, particularly when the business knew or should have known that the reviews were fake or false.17[17]Id. While businesses are not explicitly penalized for unknowingly hosting fake reviews, they may still face scrutiny if they fail to implement reasonable measures to detect and prevent deceptive content on their platforms.18[18]Caitlin Zeytoonian, et al., FTC Issues Final Rule on Consumer Reviews and Testimonials, Morgan Lewis (August 26, 2024), https://www.morganlewis.com/pubs/2024/08/ftc-issues-final-rule-on-consumer-reviews-and-testimonials.
(2) Buying Positive or Negative Consumer Reviews. Businesses cannot offer compensation or other incentives contingent upon expressing a specific sentiment in consumer reviews, whether positive or negative.19[19]16 C.F.R. § 465.4. This prohibition applies even if the conditional nature of the incentive is implied rather than explicitly stated.20[20]Id.
(3) Insider Consumer Reviews and Consumer Testimonials. Employees or individuals with a vested interest in a company cannot post reviews without clearly disclosing their relationship to the brand.21[21]16 C.F.R. § 465.5. This ensures that testimonials are transparent and unbiased.
(4) Company-Controlled Review Websites or Entities. Companies are barred from creating or controlling review platforms that appear independent but are biased in their favor, preventing manipulation of consumer perception through seemingly impartial third-party sites.22[22]16 C.F.R. § 465.6; Michael Murphy, Morgan Nickerson, Adam Husik, Keeping Online Reviews Honest – The FTC Announces Final Rule to Combat Fake Reviews, Testimonials and Related Misrepresentations, Fashion Law Watch (Aug. 20, 2024), https://www.fashionlawwatch.com/2024/08/20/keeping-online-reviews-honest-the-ftc-announces-final-rule-to-combat-fake-reviews-testimonials-and-related-misrepresentations/.
(5) Review Suppression. Businesses cannot hide or delete negative reviews to present a falsely positive image of their products.23[23]16 C.F.R. § 465.7. All feedback must be equally visible to represent consumer experiences truthfully.
(6) Misuse of Fake Indicators of Social Media Influence. The rule also addresses the manipulation of social media metrics, such as fake likes, followers, or comments, which can mislead consumers about a brand’s popularity and credibility.24[24]16 C.F.R. § 465.8.
Violators face civil penalties of up to $51,744 per instance, alongside potential consumer redress and other corrective measures. 25[25]Caitlin Zeytoonian, et al., FTC Issues Final Rule on Consumer Reviews and Testimonials, Morgan Lewis (Aug. 26, 2024), https://www.morganlewis.com/pubs/2024/08/ftc-issues-final-rule-on-consumer-reviews-and-testimonials. This strengthened regulatory approach directly addresses the limitations the Supreme Court imposed in AMG Capital Management, LLC v. FTC, 593 U.S. 67 (2021). That decision significantly restricted the FTC’s ability to seek monetary relief under Section 13(b) of the FTC Act. 26[26]Phyllis H. Marcus & Nicole R. Johnson, FTC Issues Final Rule Targeting Fake Consumer Reviews and Testimonials, Including Those Generated by Artificial Intelligence (AI) and Online Bots, The National Law Review (Aug. 20, 2024), https://natlawreview.com/article/ftc-issues-final-rule-targeting-fake-consumer-reviews-and-testimonials-including.
In AMG Capital, the FTC sued a payday lending company for deceptive business practices and sought monetary restitution under Section 13(b). 27[27]AMG Capital Management, LLC v. FTC, 593 U.S. 67 (2021). The Supreme Court ruled that Section 13(b) allows the FTC to seek only injunctive relief, such as stopping illegal conduct, and does not authorize the Commission to demand monetary restitution or disgorgement in federal court. 28[28]Id. This decision removed one of the FTC’s most effective enforcement tools and forced the agency to rely on other legal avenues, such as lengthy administrative proceedings, to recover financial penalties. 29[29]Id.; Federal Trade Commission Announces Final Rule Banning Fake Reviews and Testimonials, Federal Trade Commission (Aug. 14, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/08/federal-trade-commission-announces-final-rule-banning-fake-reviews-testimonials..
The new trade regulation rule provides the FTC with a clear legal basis to seek civil penalties and consumer redress under its statutory rulemaking authority. 30[30]Id. Unlike in AMG Capital, where the FTC lacked explicit statutory backing for monetary relief, this rule allows the agency to impose financial penalties through Section 19 of the FTC Act. 31[31]15 U.S.C. § 57b. That provision authorizes monetary remedies when businesses violate formal FTC regulations.32[32]Id. By codifying these prohibitions, the FTC establishes a lawful mechanism to enforce financial penalties instead of relying solely on Section 13(b), which the Supreme Court limited.
What This Rule Means for Fashion Brands
The new FTC rule places significant responsibilities on fashion brands operating in the e-commerce space. Companies must now ensure transparency in their review processes, establishing clear policies that treat both positive and negative feedback equally.33[33]Michael Murphy, Morgan Nickerson, Adam Husik, Keeping Online Reviews Honest – The FTC Announces Final Rule to Combat Fake Reviews, Testimonials and Related Misrepresentations, Fashion Law Watch (Aug. 20, 2024), https://www.fashionlawwatch.com/2024/08/20/keeping-online-reviews-honest-the-ftc-announces-final-rule-to-combat-fake-reviews-testimonials-and-related-misrepresentations/. Monitoring influencer marketing has become essential, as brands must ensure that endorsements are genuine and appropriately disclosed to maintain compliance.34[34]Frank Gorman, Amy Gopinathan, Reade Jacob, FTC Finalizes Rule Banning Fake Reviews and Testimonials & Touts New Rule at Open Commission Meeting, WilmerHale (Oct. 9, 2024), https://www.wilmerhale.com/en/insights/client-alerts/20241009-ftc-finalizes-rule-banning-fake-reviews-and-testimonials-and-touts-new-rule-at-open-commission-meeting. Additionally, brands utilizing AI tools in marketing must verify that these technologies are not generating fake reviews or suppressing negative ones.35[35]Kathleen Benway, Alexander Brown, Graham Gardner, FTC Issues Final Rule on Fake Reviews and Testimonials, JD Supra (Oct. 23, 2024), https://www.jdsupra.com/legalnews/ftc-issues-final-rule-on-fake-reviews-9204927/.
Failure to comply with these regulations could result in hefty fines and reputational damage. More importantly, it risks eroding consumer trust, a crucial asset in the competitive world of fashion retail.
The FTC’s new rule is more than just a regulatory update; it is a call for greater authenticity in the digital marketplace. For fashion brands, this means embracing transparency as a marketing strategy and a legal obligation. In an industry where reputation is everything, compliance with these new standards is not just good practice; it is essential for survival.
Sydney Wall is a 2026 J.D. Candidate at Brooklyn Law School
