We’ve all heard it before: social media is fake. Now it might get a legal wake-up call. In an effort to combat AI-generated reviews online, the Federal Trade Commission (FTC) recently voted to ban companies and websites from using fake reviews to promote their products. As part of the new FTC rule, the FTC also issued new regulations regarding fake followers and other measures of artificially inflating influence. The FTC recently issued charges to online review platforms like Sitejabber for violating the review portion of the rule. However, the artificial influence piece has yet to be publicly enforced since it became effective in late October 2024.
The FTC prohibition is limited to situations in which the user “knew or should have known” that the indicators were fake and misrepresent the user’s influence or importance “for a commercial purpose” (“users” in this context refers to companies, businesses and/or individuals such as influencers). The FTC defines “fake indicators of social media influence” as followers, likes, or other social media engagement that is “generated by bots, purported individual accounts not associated with a real individual, accounts created with a real individual’s personal information without their consent, or accounts that otherwise do not reflect a real individual’s or entity’s activities, opinions, findings, or experiences.” With these definitions in mind, identifying bad actors seems to be complex, if not impossible.
Bots make up almost 15% of all social media accounts on social media, with X as the platform with the highest suspected rate of fake users. Given how prevalent fake users are, it seems difficult for the FTC to pinpoint exactly which users are soliciting fake influence absent a paper trail detailing transactions for the same. The more egregious offenders may be easy to spot by closely monitoring engagement and follower lists or using online platforms to evaluate the “trustworthiness” of a given account, but a more skilled user may be able to avoid detection.
While it is unclear exactly how the FTC intends to detect violators of this portion of the rule, they have made it clear that businesses are not the only social media users subject to this regulation. In the guidance accompanying the rule, representatives stated that individuals and companies alike can be fined for manipulating algorithms in their favor to benefit themselves, “especially when the [user] knowingly misrepresents their influence for commercial gain.” This includes influencers who artificially inflate their following, views, or other engagement, whether a part of a brand deal or not. If a user stands to benefit financially from the influence, then it is subject to the rule.
To mitigate the risk of costly penalties and safeguard their reputations, it is essential for both content creators and businesses to stay vigilant, adapt their strategies, and ensure full compliance with the new regulations moving forward. The new rule allows regulators to issue fines up to $51,745 USD per violation, and many brands have already started to take measures to avoid potential liability, such as introducing clauses to their influencer brand deals to prevent “artificial inflation”. Creators should monitor their accounts closely and ensure that they do not participate in any engagement “pods” or other methods of inflating their social media metrics. As the FTC begins to enforce these new regulations, it’s crucial for users to ensure full compliance to protect from costly penalties.
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