Companies Could Face Over $43K in Fines Per Fake Review as FTC Cracks Down on Practice

Businesses could face over $43,000 in fines per each fake review or deceptive endorsement as the Federal Trade Commission (FTC) cracks down on "an explosion" of businesses using social media to promote themselves through misleading messages.

The FTC said it has sent formal warnings to about 700 companies for false advertising penalty offenses, notifying businesses that they could face penalties of up to $43,792 for each violation.

Federal regulators taking action against the companies in violation signals the agency's commitment to issue penalties to enforce consumer protection laws. Samuel Levine, head of the agency's consumer protection bureau, warned businesses against deceptive advertising.

"Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses," Levine said. "Advertisers will pay a price if they engage in these deceptive practices."

Included in the notices sent to companies were a number of practices the FTC has determined to be unfair or deceptive, including failing to disclose an unexpected material connection with an endorser and misrepresenting that the endorser's experience is representative of a consumer's typical experience.

The warnings and notices come as FTC chair Lina Khan ramps up the agency's enforcement efforts under its existing authority.

For more reporting from the Associated Press, see below.

FTC Fines
The Federal Trade Commission said it issued a notice to around 700 companies, warning against deceptive advertising practices. The above stock image shows a gavel resting on a pile of money. Getty Images

The FTC said it has warned hundreds of major corporations and smaller businesses that they could face fines if they use bogus endorsements to deceive consumers.

"The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace," the FTC said in a news release Wednesday.

The companies receiving the notices are a who's who of Corporate America—including major corporations, big retailers and consumer product companies, as well as leading advertisers and ad agencies.

They include tech giants Amazon, Apple, Facebook, and Google and its YouTube video service, as well as internet service providers like AT&T and Comcast. Others run from retailer Abercrombie & Fitch and brewer Anheuser-Busch to manufacturers General Electric, General Motors and Honda. Popular shopping and review sites such as eBay and Yelp also are included.

The FTC, however, stressed that a company having received a notice does not suggest that it has engaged in deceptive or unfair conduct.

The notice cites practices the agency found previously to be unfair or deceptive. They include falsely claiming a third-party endorsement, misrepresenting whether an endorser is an actual user, or using an endorsement to make deceptive performance claims.

FTC Building
Businesses that violate the FTC's new rules on advertising could be fined over $40,000 for each offense. The above image shows the Federal Trade Commission building in Washington, D.C., on January 28, 2015. Alex Brandon, File/AP Photo