The FTC is readying its war on fake reviews

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The Federal Trade Commission has long been keeping a skeptical eye on fake product ratings online, undisclosed payments for posts, and all those secret influencer partnerships. Now the agency seems ready to escalate the skirmishes into a formal assault that could have big consequences for Amazon, TikTok, and more.

The commissioners will vote to kick off a rulemaking on “fake reviews and endorsements,” according to a little announcement the FTC tucked into its preliminary agenda for next week’s public meeting.

• The announcement didn’t come right out and say how the FTC would shape a rule. In fact, most of the commission’s regulatory efforts have to kick off with questions , which can look nauseatingly long and expansive to the industry.
• To even start the process, though, the FTC has to focus on “ prevalent ” practices that appear to violate the law.
• Regulations appeal to the FTC in part because they mean a much greater ability to fine businesses almost $50,000 per instance of wrongdoing.

The FTC has already been complaining about big parts of the influencer and ecommerce apparatus, and they’re likely to keep digging in.

• Almost exactly a year ago, for instance, the commission sent letters to more than 700 companies, including all of Big Tech, to warn about secret sponsored content and fishy five-star ratings.
• The FTC had also previously nudged influencers themselves, and settled with Fashion Nova for $4.2 million over allegedly blocking negative reviews.
• Just this summer, the agency and six states went after rental platform Roomster over claims it paid for fake praise and was “then charging for access to phony listings.”

Tech companies, especially Amazon, seem to be aware this is a complaint from regulators.

• Earlier this year, the ecommerce giant sued the people behind more than 10,000 Facebook groups helping to provide bogus Amazon product reviews around the world, and the company has been cracking down on Chinese sellers who use sham ratings.
• The company’s problem with phony testimonials is really big too, even while it’s going all-in on QVC-like livestreams that bring on influencers to drive shoppers to Amazon’s website in India.
• This isn’t just an outside-the-U.S. phenomenon either: TikTok is reportedly thinking about bringing something similar to the states in the coming weeks.

What this all means for tech, especially ecommerce companies and the social media apps that nurture sales, depends greatly on just how much the FTC thinks it can go after the places these reviews live.

• After all, the actual sellers of goods and services are mostly the ones engaging in dodgy marketing. The platforms just make it easy.
• Amazon can be both, but for the most part TikTok, Instagram, or YouTube are only the latter.
• Amazon and Khan don’t agree on much these days, though, and the FTC is eager to see platforms make themselves far more inhospitable to this sort of thing.

Any rulemaking could take years to finalize, and the FTC is, by Khan’s own admission, stretched quite thin . That said, though, the commission tends to take a very dim, bipartisan view of deception and companies might still want to keep in mind just how much they’re asking us to tolerate.

— Ben Brody ( email | twitter )

In Washington

The Federal Communications Commission is set to impose a full ban on Huawei and ZTE imports on national security grounds. The ban follows an earlier prohibition on telecom companies using either companies’ gear, although companies that already have exemptions will reportedly still be allowed to receive equipment. Still, the Chinese telecommunications equipment companies hardly make up any of the U.S. telecom infrastructure as it stands.

Dozens of high-ranking officials at the FTC made suspicious stock trades, according to a damning investigation from The Wall Street Journal. Around 30 senior FTC officials — nearly 1 in 4 of the agency’s top officials — owned or traded stocks of companies such as Alphabet, Amazon, Meta, Microsoft, and Oracle that were being scrutinized by the agency.

The Department of Commerce granted Samsung a crucial chipmaking import exemption. For another year, the South Korean company will be allowed to still receive imports for advanced chipmaking equipment being used in China production facilities, even as the U.S. attempts to more broadly limit China’s access to such equipment.

Sen. John Hickenlooper called on the SEC to regulate crypto. In a letter to SEC Chair Gary Gensler, Hickenlooper said the SEC should determine necessary investor disclosures for crypto projects, establish digital asset issuance processes, and create a registration regime for digital asset trading platforms.

A MESSAGE FROM ERICSSON

Standardization is why phones from different companies can still connect, and Ericsson’s inventors have been at the table helping to establish standards for every generation of cellular technology, from 2G to 5G. On World Standards Day, learn how this underappreciated concept keeps innovation churning forward.

Learn more

In the states

U.S. soldiers aren’t taking to Microsoft’s HoloLens goggles, according to leaked military documents obtained by Bloomberg. The vast majority of soldiers testing the headsets reported discomfort, with one tester even complaining that “the devices would have gotten us killed.” But Microsoft needn’t fear — despite the many complaints, a high-ranking Army official recommended they prioritize improvements before deploying AR goggles more broadly. The Army plans to spend nearly $22 billion on goggles and related expenses.

Peter Thiel plans to spend another $5 million on Blake Masters’ Arizona Senate campaign. Thiel previously donated $15 million to a super PAC that contributed to Masters, and he had reportedly been feuding with Senate Minority Leader Mitch McConnell over whether he or the Republican party should provide more funds.

In the courts

The Texas social media law won’t go into effect quite yet. Instead, a federal appellate court on Wednesday granted a temporary halt, which gives social media companies time to take their case to the Supreme Court. The companies plan to argue the law forces them to carry content thus violating the First Amendment, according to POLITICO.

A crypto nonprofit sued the Treasury Department Office of Foreign Asset Control over the Tornado Cash ban. Tornado Cash allowed crypto users to obfuscate the blockchain trail — making it useful for hackers trying to get away with financial crime. Coin Center, the nonprofit behind the lawsuit, claims that the OFAC’s ban violates privacy rights and could even set the stage for OFAC to ban the entire protocols of Bitcoin and Ethereum.

Alex Jones owes nearly $1 billion in compensatory damages to eight families of Sandy Hook victims and one FBI agent, a Connecticut jury determined.

Around the world

Elon Musk wants the Pentagon to start picking up Starlink’s tab in Ukraine. Last week, Musk took to Twitter to complain Starlink’s operation cost in Ukraine would exceed $100 million by the end of 2022. He sent a letter to the Pentagon asking for $124 million to fund the operation through the remainder of 2022. Musk professes to be a staunch libertarian and has previously said he can’t figure out why governments keep subsidizing his projects even though he believes “all subsidies should be eliminated.”

Alphabet, Amazon, and Meta hired an outside lobby group but failed to disclose it in the EU, The Washington Post reported . Members of EU parliament say the tech giants broke transparency rules by failing to disclose the funding, which was being directed to influence the Digital Markets Act and Digital Services Act.

In the media, culture, and metaverse

Republican campaigns aren’t using Google's Gmail spam exemption program, The Verge reports . In September, Google launched a special program in response to Republicans claiming their emails were being disproportionately picked up by the Gmail spam filter. The program is supposed to allow campaigns to apply for spam exemption — though they have to meet certain requirements — but it’s received little interest from the Republican campaigns that complained about the original problem.

Google employees complained about Incognito Mode not actually being that private, according to leaked documents obtained by Bloomberg. Last year, the company’s chief marketing officer, Lorraine Twohill, sent an email to Sundar Pichai informing him that “we are limited in how strongly we can market Incognito because it’s not truly private, thus requiring really fuzzy, hedging language that is almost more damaging.”

Truth Social finally got approved by Google for distribution on the Google Play Store. The news sent shares of the SPAC that intends to acquire Truth Social up over 14% through the course of the day.

In data

8.2%: That’s how much the overall consumer price index increased in September compared to a year prior. The reading sent a wave of panic through the markets, as the stubbornly high rates show that the Federal Reserve rate increases aren’t bringing down the CPI as intended. Drivers of the high CPI reading include housing, medicine, and food, all of which have continued to increase.

A MESSAGE FROM ERICSSON

Standardization is why phones from different companies can still connect, and Ericsson’s inventors have been at the table helping to establish standards for every generation of cellular technology, from 2G to 5G. On World Standards Day, learn how this underappreciated concept keeps innovation churning forward.

Learn more

Ghostwriter for hire

Ever wonder how some VCs have time to tweet so much? Apparently some of them aren’t actually tweeting — they’re hiring ghostwriters to the tune of $10,000 for 10 original tweets per month, an anonymous writer-for-hire told Insider . That writer — who also is a startup founder — said he was paid $100,000 for Twitter threads announcing funding rounds.