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Shopper Experience
21 October 2022
FTC looks to escalate the fight against fake reviews in ecommerce
The US regulatory agency opened up public comment on a proposed rule that would enact "stiff civil penalties."

Photo by Christian Wiediger on Unsplash
Fake reviews have been a yearslong problem in ecommerce to the point that illicit product ratings obtained in exchange for payment have created a marketplace of their own. As this activity became more well-documented over the last several years, Amazon has filed lawsuits to address the issue. Now, the Federal Trade Commission (FTC) is weighing additional action of its own.
According to a news release, the FTC on Thursday voted to open up public comment on a proposed rule that would ācombat deceptive or unfair review and endorsement practices.ā This would include practices such as fake reviews, suppressing negative reviews and paying for positive reviews.
Following a 3-1 vote, the FTC initiated publication of an Advance Notice of Proposed Rulemaking (ANPR) that seeks public comment on potential harms that such practices cause, as well as whether a rule would help consumers and ācreate a level playing field for honest marketers.ā
āCompanies should know by now that fake reviews are illegal, but this scourge persists,ā said Samuel Levine, director of the FTCās Bureau of Consumer Protection, in a statement. āWeāre exploring whether a rule that would trigger stiff civil penalties for violators would make the market fairer for consumers and honest businesses."
Exploiting ecommerce growth
Fake reviews prey on a key area of the ecommerce shopper experience: The availability of crowdsourced product reviews from people who have used a product. Amazon began including unbiased reviews on product pages in its earliest days, as founder Jeff Bezos argued that providing an authentic viewpoint was a key way that the site could help customers make decisions about a product that they could not otherwise inspect and hold in their hands.
It turned out to be a prescient move. Reviews have since become widely used, and are especially important for smaller brands seeking to build credibility. In a Pew Research study from 2016, roughly eight-in-ten Americans said they consult online ratings and reviews when buying something for the first time.
Ecommerce growth meant more new sites with more reviews. As marketplaces continue to expand, there will likely be more reviews. For instance, Albertsons implemented reviews on its ecommerce stores this year. But the illicit actors realized that it was possible to game the system. They set up incentive structures that paid people to buy a product, and leave a review that wasnāt true.
āThe rapid growth of online marketplaces and platforms has made it easier than ever for some companies to create and use fake reviews or endorsements to make themselves look better or their competitors look worse. It can be difficult for anyoneāincluding consumers, competitors, platforms, and researchersāto distinguish real from fake, giving bad actors big incentives to break the law,ā the FTC wrote in its press release.
Illicit actors, in turn, have manipulated this process to drive sales. A recent study published in the INFORMS journal Marketing Science found that marketers selling on Amazon, Walmart, Wayfair and other marketplaces purchase fake reviews. The study looked at fake reviews on Amazon, and found that they had an impact on sales and ratings of the brands.
āFor the products in our research observed buying fake reviews, roughly half of their reviews were eventually deleted, but the deletions occurred with an average lag of over 100 days, allowing sellers to benefit from the short-term boost in ratings, reviews and sales. Almost none of the sellers purchasing fake reviews were well-known brands,ā said Davide Proserpio of the Marshall School of Business at the University of Southern California, a co-author of the study with Sherry He and Brett Hollenbeck of the UCLA Anderson School of Management.
Amazon's action
Amazon has taken action to root out the problem. The latest example came at the same time as the FTC meeting on Thursday, as the company announced it filed criminal complaints in Italy and Spain against brokers of fake reviews. The company has filed a total of 10 lawsuits in the US, including one in July targeting Facebook Groups where arrangements for the fake reviews are made, and another in February against two companies that orchestrate fake reviews across multiple marketplaces. It also sent a cease and desist to five websites in Germany that were directing visitors to a fake review broker, and the site operators have since complied.
āHolding bad actors accountable through litigation and criminal referrals is one of many important ways that we protect customers so they can shop with confidence,ā said Dharmesh Mehta, Amazon VP of selling partner services, in a statement. āIn addition to continuing to advance our robust detection and prevention of fake reviews in our store, Amazon will remain relentless in identifying and enforcing against bad actors that attempt to engage in review abuse.ā
The FTC has been sending signals that it would bring more enforcement, as well. In 2021, it issued a warning to marketplaces such as Amazon, Walmart, Target and āan array of large companies, top advertisers, leading retailers, top consumer product companies and major advertising agencies." It aimed to put companies on notice that they could face fines of up to $43,792 per violation if deceptive practices were found to be in use. In January, it took enforcement step against Fashion Nova, ordering the site to pay $4.2 million for suppressing negative customer reviews on its website.
āThese practices donāt only harm the consumers who place their trust in fake reviews,ā said Khan, in a statement issued at the meeting. āThey also pollute the marketplace and put honest businesses at a competitive disadvantage.ā
The publication of the advanced notice this week marks an escalation. FTC Chairwoman Lina Khan said the rule ācould enable us to obtain civil penalties and return money to consumers injured as a result of deceptive or unfair reviews and endorsements.ā
It is expected to be published āshortly,ā according to the FTC, and the public will then have 60 days to comment.
A dissenting view
Commissioner Christine S. Wilson opposed the publication, and was the lone dissenting voice on Thursday.
In a statement, Wilson said she āagrees that these practices are unlawful,ā but questioned whether additional rulemaking was the best use of FTC resources when it has already made other enforcement tools available, and added that āthe harm that results from the deception at issue is speculative in nature.ā
āRather than churning out another proposed rule, perhaps we should stay the course on these initiatives and devote the incremental resources to enforcement in other critical areas,ā Wilson said. Wilson called on the commission to pay more attention instead to enforcing the Opioid Addiction Recovery Fraud Prevention Act, which inflicts penalties on bogus treatment programs.
āThe opportunity cost of yet another rulemaking should not be understated,ā Wilson said.
Here is the complete list of practices that the proposed rule would address:
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Marketing
10 March
Amazon leads in retail media, with nearly 40% market share
MediaRadar shares the top five brands spending on retail media.
Photo by Christian Wiediger on Unsplash
Retail media has exploded in recent years, as the power of ecommerce marketplaces has presented opportunities for brands to reach consumers by advertising on the same platform where they shop and buy products.
During this expansion, retailers from Michaels to Best Buy to Kroger launched their own retail media networks to create avenues for brands to leverage first-party data that comes from sales and loyalty programs for advertising on marketplaces. Gradually, that data is also being used to advertise across the web, as well.
Now, a new market that crosses advertising and commerce is coming into view. In all, retail media is now worth an estimated $100 billion, according to a new study from advertising intelligence and sales enablement platform MediaRadar.
Top advertisers with Amazon. (Source: MediaRadar)
When it comes to the retail leaders in the space, findings from MediaRadar included the following:
Amazon is the dominant force in retail media, capturing 37% of market share. Over 14,200 companies advertised 17,000-plus brands on the online giant in 2022.
General/mass retailers, including Walmart and Target collectively captured 36% of ad spend in retail media.
That means the largest players in the space accounted for 73% of retail media ad investment in 2022.
Still, the gap between Amazon and the rest of the field is notable. Amazon reported having a $31 billion advertising business in early 2022, and growth only continued from there as it posted growth north of 20% in each quarter of the year.
Just as Amazon has the lead in ecommerce, it also has the lead in retail media. This makes the company not only a powerhouse in commerce, but also one of the largest digital advertising giants.
"Amazon has such a tight grip on the digital space that they really sit in a category of their own," said Todd Krizelman, CEO and cofounder of MediaRadar, in a statement. "Other players are growing quickly, but it will be difficult for legacy brick and mortar retailers to beat Amazon on its own terrain. Retailers should explore other opportunities to extend retail media - such as in-store digital experiences or other channels like email newsletters, where Amazon doesn't have as much traction."
Top advertisers with general retailers (Source: MediaRadar)
When it comes to brand adoption of this channel, MediaRadar shared the following:
In all, nearly 26,000 companies advertised almost 40,000 brands across retail media networks.
Top categories for retail media included consumer electronics (15% of spend), housewares (6%), snacks & desserts (6%), household maintenance products (5%), and furniture/decor (5%). This accounted for 37% of total retail ad spend last year.
The top five brands spending in retail media include HP, Palmolive, Pepperidge Farm, Planters, Ritz, Epson and Starbucks.
For brands, retail media is serving as a viable new advertising channel at a time when privacy-oriented shifts like Appleās App Tracking Transparency and the coming demise of third-party cookies are making long-used tools for social media-based advertising less efficient than they once were.
"Brands are making a big push into retail media right now," said Krizelman. "This trend will only continue as more advertisers seek lower funnel channels to drive performance for their spend, and as identity-based advertising on the open web continues to decline. Retail media offers a solution to these issues."
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