Commercial Litigation Update

On August 14, 2024, the Federal Trade Commission (“FTC”) announced a new final rule aimed at regulating fake consumer reviews, testimonials, insider reviews, company-controlled websites, and fake indicators of social media influence (e.g., “likes”) (the “Final Rule”).  The Final Rule was promulgated pursuant to Section 18 of the FTC Act, which authorizes the FTC to issue rules that define acts or practices that are unfair or deceptive within the meaning of Section 5(a)(1) of the FTC Act, and it enables the FTC to seek civil monetary penalties for violations.

While it covers ground similar to the FTC’s recently updated endorsement guides (the “Guides”), which we wrote about last year, the Guides regulate the conduct of individuals who are paid or incentivized to endorse products, whereas the Final Rule applies directly to companies advertising through consumer reviews, testimonials, and social media.

The Final Rule has six primary subsections: (1) Fake or False Consumer Reviews, Consumer Testimonials, or Celebrity Testimonials (§ 465.2); (2) Buying Positive or Negative Consumer Reviews (§465.4); (3) Insider Consumer Reviews and Consumer Testimonials (§465.5); (4) Company-Controlled Review Websites or Entities (§465.6); (5) Review Suppression (§465.7); and (6) Misuse of Fake Indicators of Social Media Influence (§465.8). 

For months, if not years, you received distribution checks from the business in which you own an interest. The funds came without question and like clockwork. You relied on them. Then suddenly, they stopped coming. Is this the result of a downward business cycle or something more sinister? Before jumping to conclusions, you should seek answers. Here’s how.

Often privately held businesses are organized as limited liability companies (“LLCs”). LLCs are hybrids of corporations and partnerships. They typically insulate members from personal liability to outside parties, a ...