Complying with the FTC’s New Rule on Customer Reviews: What Dealerships Need to Know

By Hilary Holmes Rheaume

The Federal Trade Commission’s (the “FTC”) final rule on the use of customer reviews and testimonials went into effect on October 21, 2024, aiming to curb deceptive review practices and ensure that consumer opinions accurately reflect customer experiences.  For automobile, equipment, and powersports dealers, customer reviews are not just a marketing tool—they’re essential for building trust.  However, the FTC can now impose strict penalties on companies that manipulate customer reviews.  This article provides a closer look at the rule and strategies to keep your dealership compliant.

Understanding the FTC’s New Rule on Consumer Reviews and Testimonials

The FTC’s new rule establishes stricter standards for dealerships managing online reviews and testimonials.  Some key provisions include:

• Prohibition on Fake Reviews: Posting fake reviews are strictly prohibited, regardless of whether the fake review is authored by an employee or third party.
• Ban on Review Manipulation: A company cannot modify reviews to improve the appearance of a service or product.  This includes hiding negative reviews, showing only positive reviews, or otherwise altering reviews.
• Disclosure of Incentives: If a dealership offers any incentive, such as a discount, gift, etc., in exchange for a review, the incentive must be explicitly disclosed in the review.
• Penalties for Limiting Reviews: The new rule prohibits a dealership from limiting or controlling the types of reviews visible to the public, such as only positing positive feedback.

Strategies for Compliance

Dealerships should adopt best practices to align with the new FTC regulation to avoid potential pitfalls, such as:

• Establishing a Clear Review Policy: Dealerships should create and implement a review policy that provides how reviews are collected, posted, and managed.
• Educating Sales and Marketing Staff: Sales and marketing staff should understand the specifics of the new rule to avoid unintentional consequences, and sales and service staff should know how to manage customer feedback appropriately.
• Auditing Existing Reviews for Compliance: Dealerships should assess their current reviews for FTC guideline compliance by removing any fake reviews and/or clearly disclosing any incentives that were provided in exchange for a review.
• External Review Service: The dealership can be held accountable for actions taken by third parties acting on its behalf. If the dealership uses a third-party platform to manage reviews, the dealership should verify that it also follows the FTC’s guidelines.

Penalties for Non-Compliance

The FTC has made it clear that violations of its new rule will result in significant penalties.  In fact, the FTC can seek civil penalties up to $51,744 per violation, along with other relief, such as injunctive relief.  For dealerships, this means that a handful of violations could lead to costly consequences.

In summary, the FTC’s final rule makes it easier for the FTC to pursue monetary damages against a dealership for deceptive trade practices arising out of customer reviews and testimonials.  The FTC’s final rule serves a reminder that the FTC remains focused on the relationship between businesses and consumers, especially as it pertains to customer feedback.  In the event you are concerned with your dealership’s current customer review and testimonial practices, you should speak with legal counsel as soon as possible.

Hilary Holmes Rheaume is a Shareholder at Bernstein Shur whose litigation practice has a specialized focus on representing automotive, equipment and powersports dealerships throughout New England.  For more information, contact Hilary at hrheaume@bernsteinshur.com.