September 5, 2024

How the FTC’s New Rule on Fake Reviews Impacts Employee Reviews on Glassdoor

Everything you need to know about FTC’s 16 CFR Part 465 final rule and a company policy template for your handbook.

Matt R. Vance
Co-Founder & CEO
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In this article, you’ll learn:

  • Why did the Federal Trade Commission (FTC) pass a new law related to online reviews and testimonials?
  • What legislation did the FTC pass pertaining to online reviews and testimonials?
  • How are employee reviews different from consumer reviews as it pertains to this legislation?
  • How does each section of the legislation apply to employee reviews?
  • Do you need a new “Online Reviews & Testimonials” company policy in your handbook? (Hint: yes, and you’ll find it at the bottom of this article for you.)

NOTICE: This article is not intended to be legal advice and is provided as is for informational purposes only. For complete details, reference the full FTC ruling here: Trade Regulation Rule on the Use of Consumer Reviews and Testimonials. A summary article published by the FTC is available here: Federal Trade Commission Announces Final Rule Banning Fake Reviews and Testimonials

Why did the FTC pass a new law related to online reviews and testimonials?

‍The mission of the FTC is to protect consumers and promote competition in the US economy.

They documented evidence of review manipulation practices stifling competition and damaging consumers across ecommerce, service industries and more to the tune of $341.05 billion. Approximately ten percent of products or businesses are estimated to have some manipulated consumer reviews.

How the FTC law benefits U.S. consumers:
Improving the trustworthiness of consumer reviews results in specific benefits for consumers, including:
– Saved time and money from more efficient purchase searches online.
– Avoidance of suboptimal purchase decisions of low-quality products misrepresented by fake reviews.
It is estimated that Americans will save 1.7 billion hours per year researching purchases with improved reliability of reviews. Americans will also experience a welfare gain between $6.64 billion and $17.52 billion from better informed purchase decisions.

How the FTC law improves competition:‍
Fake reviews and review manipulation have been found to allow companies to surpass competitors in search results. Decreasing fake reviews would benefit consumers with an improved competitive environment for legitimate companies that do not depend on review manipulation to sell. Although this impact wasn’t quantified, the FTC believes it will be significant.

What legislation did the FTC pass pertaining to online reviews and testimonials?
‍On August 14, 2024, the Federal Trade Commission (FTC) passed a final ruling regarding the use of consumer reviews and testimonials.

When does the FTC’s new law, 16 CFR Part 465 go into effect? According to the Federal Registrar, it goes into effect on 10/21/2024.

The document is a whopping 163 pages and includes extensive contextual detail, considerations from public commentary and some review-related topics that did not make it into the final ruling. The final rule language and definitions (the actual language of the law that was finalized) is found on pages 153-163.

At a high level, the FTC’s new law prohibits selling or purchasing fake consumer reviews or testimonials, buying positive or negative reviews, certain insiders creating reviews without a clear disclosure of connection, creating company-controlled review sites falsely claiming to provide independent reviews, some review suppression practices, selling or purchasing fake social media indicators and more.

And the FTC is not joking around. The maximum civil penalty per violation is currently set at $51,744. With the clear definition of this new legislation and high penalties we expect the review landscape to improve. Just make sure your organization is specifically following the details of the law to avoid a costly penalty and potentially devastating negative PR.

At this point, you may be asking yourself…

Wait, how does this apply to employee reviews? Does this apply to Glassdoor, Indeed and other employer review sites? Yes it does. Here’s why.

Schedule a call with a Mobrium expert for answers to all your questions.

How are employee reviews different from consumer reviews as it pertains to this legislation?
‍This new FTC ruling does not differentiate between a “product review”, “hotel review”, “service review”, or “employee review”, nor does the language of the final ruling (actual law) list any specific platforms such as Amazon, Google, Yelp or Glassdoor. However, they specifically define a “consumer review” as follows:

‍Consumer review means a consumer’s evaluation, or a purported consumer’s evaluation, of a product, service, or business that is submitted by the consumer or purported consumer and that is published to a website or platform dedicated in whole or in part to receiving and displaying such evaluations. For the purposes of this part, consumer reviews include consumer ratings regardless of whether they include any text or narrative. – Federal Trade Commission, § 465.1 Definitions. Part (d).

At Mobrium, we believe this means employee reviews submitted on sites like Glassdoor, Indeed, Comparably, InHerSight and more fit into this definition.

An employee is a consumer of the employee experience your business offers.

Reviews submitted by employees are published to platforms (like Glassdoor) “dedicated in whole or in part to receiving and displaying such evaluations.” The word “such” in that sentence communicates differences in review platforms. For example, reviews on Amazon are primarily reflective of product experiences. Reviews on TripAdvisor are primarily reflective of travel and service experiences.

Reviews submitted on Glassdoor and other employer review sites are primarily reflective of the employee experience they have with the business.

So yes we believe employee reviews are consumer reviews and should be treated as such with regards to this new FTC law.

Let’s now go through section by section and discuss how the different parts of the legislation apply to employee reviews.

‍§ 465.2 Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials.
‍Essentially, businesses cannot do the following 3 things:
– Write, create, or sell a consumer review
– Purchase a consumer review, disseminate or cause the dissemination of a consumer review
– Procure a consumer review from its officers, managers, employees, or agents, or any of their immediate relatives,

…About the business or for it’s products or services, when the review materially misrepresents, expressly or by implication:
– that the reviewer or testimonialist exists;  (aka the review has to be from a real person)
– that the reviewer or testimonialist used or otherwise had experience with the product, service, or business that is the subject of the review or testimonial (aka, the reviewer must have had a real experience with the company, product or service)
– the reviewer’s experience with the product, service, or business that is the subject of the review or testimonial. (aka, the reviewer’s experience can not be misrepresented in ways like summarizing or misquoting)

How it applies to employee reviews:

– The business can’t post employee reviews, sell employee reviews or purchase employee reviews.
– All employee reviews should be from real employees, contractors, interns, etc who have had a real experience with the business
– The review must be focused on the reviewer’s experience with the business.
– The review can’t be misrepresented, for example in a spotlight on a careers page.

‍§ 465.4 Buying Positive or Negative Consumer Reviews.
‍Businesses cannot provide compensation or other incentives in exchange for, or conditioned expressly or by implication on, the writing or creation of consumer reviews expressing a particular sentiment, whether positive or negative, regarding the product, service, or business that is the subject of the review.

The FTC defines “Purchase a consumer review” as: to provide something of value, such as money, gift certificates, products, services, discounts, coupons, contest entries, or another review, in exchange for a consumer review.‍

How it applies to employee reviews:
– It is not legal for officers or managers of the company to ask for reviews of a specific sentiment, for example a positive review. This is likely the most common practice we see companies engaging in that will be illegal as of 10/21/24. Instead, all requests (in digital communications, verbal requests, etc) should ask for an honest review. That is the safe path forward and, honestly, is a more genuine request that will lead to more valuable feedback.

– Yes, it is possible to still legally incentivize a review IF there is an FTC-compliant disclosure regarding the incentive received and no requirement of “expressing a particular sentiment”. This also only applies to review platforms that allow incentivized reviews. Amazon, for example, does not. As far as we know, all employee review platforms do not allow incentives of any kind as part of their terms of service. Doing so would break their terms of service and jeopardize your profile all together. Simply don’t incentivize employee reviews.

‍§ 465.5 Insider Consumer Reviews and Consumer Testimonials.
– Officers and managers of businesses cannot create consumer reviews of the business, it’s products or services without a clear and conspicuous disclosure of the material relationship to the business…unless:
– The review from an officer or manager comes from a generalized solicitation to purchasers (aka, an automated review request that goes to all customers, one of which goes to an officer or manager who leaves a review unsolicited from the business.)
– The business merely engages in consumer review hosting.

  • A business cannot disseminate (aka, use in advertising) a review from an insider (officer, manager, employee or agent) without a clear and conspicuous disclosure of the material relationship to the business.
  • Officers and managers of a business cannot solicit or demand consumer reviews about the business, it’s products or services of immediate relatives, employees/agents or solicit or demand that employees/agents seek such reviews from their relatives when:
    • The reviews created do not have a disclosure of the reviewer’s material relationship to the business, and
      • The officer or manager:
        • Encouraged the prospective reviewer to omit the disclosure
        • Did not instruct the prospective reviewers to disclose their relationship to the business.
        • Knew or should have known that such a review appeared without a disclosure and failed to take remedial steps.

How it applies to employee reviews:

  • An employee who shares a product review on Amazon of their company’s product or writes a company review on Google (with limited exceptions) must “clearly and conspicuously” disclose they are an employee. This is not new. A disclosure of material connection is at the heart of FTC’s truth in advertising principles.
  • We would advise against asking relatives of employees for employee reviews. Relatives don’t have an employment experience to share, so their reviews would be defined as “fake reviews” according to section § 465.2.
  • But does an employee have to state “I’m an employee of ___ company.” when writing an employee review? The legislation does not explicitly omit the disclosure requirement for employee review platforms. Luckily most of the employee review platforms are doing this for you as part of the review submission process. We found that Glassdoor, Indeed and InHerSight all comply with the the FTC’s “clear and conspicuous” disclosure requirements while Comparably does not. See below:

‍

Glassdoor automatically tags employee reviews with a “clear and conspicuous” disclosure of material connection:

Indeed automatically tags employee reviews with a “clear and conspicuous” disclosure of material connection:

InHerSight automatically tags employee reviews with a “clear and conspicuous” disclosure of material connection:

Comparably does not tag employee reviews at all as of the time of this article being published.

We suspect Comparably may soon add disclosures to reviews on their platform in order to be FTC compliant. If they do not before the law takes effect on 10/21/24, we recommend companies instruct their employees to add “I work for ___ company.” to their reviews.

§ 465.6 Company-Controlled Review Websites or Entities.
‍Essentially, a business cannot operate an independent review website or platform if they sell products and services that are being compared on the platform.

How it applies to employee reviews:
-This is not applicable, unless you are Glassdoor, Indeed or one of the other employer review platforms. We interpret this to mean Glassdoor can’t have employee reviews on their own platform. It will be interesting to see how it plays out. As of the time of this publication, Glassdoor, Indeed, Comparably and InHerSight all have company profiles on their own platform.

‍§ 465.7 Review Suppression.
‍Essentially, businesses and individuals cannot use unfounded legal threats, physical threats, intimidation or a public false accusation in response to a consumer review in an attempt to prevent a review from being created or cause a review to be removed.

  • A business claims most or all of submitted reviews on a website/platform when reviews are being suppressed (i.e. not displayable) based on the rating or negative sentiment.
    • There are some caveats here. If the business moderates all reviews equally regardless of sentiment, reviews are not considered suppressed if they are withheld for the below criteria
  • The review contains:
    • trade secrets or privileged or confidential commercial or financial information
    • defamatory, harassing, abusive, obscene, vulgar, or sexually explicit content
    • the personal information or likeness of another individual
    • content that is discriminatory with respect to race, gender, sexuality, ethnicity, or another intrinsic characteristic
    • content that is clearly false or misleading;
  • the seller reasonably believes the review is fake; or
  • the review is wholly unrelated to the products or services offered by or
  • available at the website or platform.

How it applies to employee reviews:-This is not applicable, unless you are Glassdoor, Indeed or one of the other employer review platforms and are hosting consumer reviews. Basically reviews have to be moderated equally, regardless of sentiment. If vulgarity is a community guideline, you can’t keep a 5-star review with vulgarity and suppress a negative review with vulgarity. Both would have to be suppressed.

Schedule a call with a Mobrium expert for answers to all your questions.

Mobrium template: Online Reviews & Testimonials Company Handbook Policy
‍Yes, we created this for you to copy and modify as desired for your company’s handbook. We assume no responsibility for this document and recommend you consult your legal counsel.

To ensure truth in advertising for customers, potential customers and all stakeholders of the company, [ADD COMPANY NAME] employees:

(1) Must refrain from:

Creating, selling or purchasing online reviews, ratings, testimonials or social media indicators for our products, services and company that misrepresents:

  • the reviewer or testimonialist exists.
  • the reviewer or testimonialist used or otherwise had an experience with the product, service or company.
  • the reviewer’s/testimonialist’s experience with the product, service, or business that is the subject of the review/testimonial.

(2) May only provide compensation or other incentives in exchange for consumer reviews or testimonials when:

  • There is no condition of sentiment (positive or negative) required.
  • The reviewer or testimonialist has had a genuine experience with the product, service or our company for which we are requesting feedback.
  • The reviewer or testimonialist is explicitly required to leave a “clear and conspicuous” disclosure of the incentive in the appropriate manner fitting for the application.
  • The business representative interacting with the reviewer/testimonialist will take remedial steps to ensure a proper disclosure of material connection is made public in the case that the reviewer or testimonialist fails to include the requested disclosure.
  • The website or platform where the review or testimonial is to be shared allows for such purchased reviews to be posted on their platform.
  • Approved by management.

(3) Must refrain from:

  • Creating reviews or testimonials without a clear and conspicuous disclosure of the material relationship to the business. The only exception is when a review request comes from generalized solicitations to all purchasers, as applicable.
  • Using a review or testimonial in advertising that is from an employee without a clear and conspicuous disclosure of the material relationship to the business.

(4) Who are officers or managers must refrain from:

  • Soliciting or demanding consumer reviews about the business, its products and or services from employees and immediate relatives of employees without a clear and conspicuous disclosure of the material relationship to the business.
  • Soliciting or demanding a review from employees and immediate relatives of employees expressing a particular sentiment, whether positive or negative.

Still have questions about FTC law and employee reviews?

Mobrium is here for you. We go to great lengths to ensure our products and services are FTC-compliant, giving you confidence to ask for genuine employee reviews and authentically strengthen your ratings.

Our proprietary software will save you time while maximizing the quantity of employee reviews you can receive across top employer review sites like Glassdoor, Indeed and more.

For a broader look at how employee engagement and employer reputation work together, see our HR Leader’s Guide to Employee Engagement Software.

Want to learn more?

Schedule a call with a Mobrium expert today!
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