The FTS and "Deceptive Trade Practices"

By Mark Zinman | Zona Law

Have you ever been looking into a business, and questioned whether the reviews were actually real and unbiased reviews? On the other hand, as a business owner and/or investor, do you try to reward customers and potential customers with benefits for writing reviews? Even if you are a mom-and-pop investor with only a few properties, you will find that your customers will review you or your properties based on their experience as your customer, whether due to the condition of the home or how they were treated during their tenancy.

The FTC is attempting to crack down on deceptive practices in this area, to ensure that the reviews customers are writing are not only written by actual customers but that the customer isn’t given special compensation to write a specific type of review.

Effective October 21, 2024, the Federal Trade Commission implemented a new rule that bans companies from giving compensation or paying people to write specific reviews. The FTC alleges that such conduct is a deceptive trade practice. 

Here is the exact language from the FTC:

“It is an unfair or deceptive act or practice and a violation of this part for a business to 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.”

This doesn't completely prohibit companies from giving out compensation to customers (applicants or residents in the rental world) for posting reviews. However, it does ban such compensation when it is conditioned on the person giving a specific type of review - whether negative or positive. In other words, we are aware that some properties/companies give out small gifts to people who write reviews. Such action is still ok, provided it’s given to anyone who writes a review, whether negative or positive, and it’s not conditioned on what they write.

The FTC provided the following clarifications:

"(The rule) only prohibits paid or incentivized consumer reviews when the business soliciting the review provides compensation or an incentive in exchange for a review expressing a particular sentiment."

In other words, you can still request that customers provide a review, and you can even provide some compensation. However, you cannot make the compensation conditioned upon the customer providing a specific type of review – whether negative or positive. 

Please note that areas of deceptive practices and unfair trade practices are outside the scope of our practice, and we are merely conveying the information as published by the FTC.