Fake online reviews for products and services are costing consumers thousands of dollars each year, according to a new analysis.
The practice, which involves a company paying people to leave reviews or generating them with artificial intelligence, was officially banned by the Federal Trade Commission earlier this year and went into effect in October.
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A new report from The Transparency Company, which uses AI and other technology to identify fake reviews, said the practice of deceiving consumers with these reviews has resulted in over $300 billion in “estimated consumer harm.”
The average U.S. household has lost an estimated $2,385.43 annually thanks to review fraud, the report stated, and most people — 98% — said they rely on reviews before buying something.
Nearly 14% of online reviews studied for the analysis were considered “highly suspicious” or “likely fake," according to the report.
“Honest businesses are equally harmed, as companies engaging in review fraud use deceptive tactics to siphon customers away from legitimate operators,” The Transparency Company said in a statement regarding its report. “The result is a distortion of fair competition, where businesses that play by the rules are often penalized for their integrity.”
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The report said when consumers are deceived by fake reviews, they’re more likely to choose lower-quality or fraudulent service providers. These types of services can range from home repairs to medical procedures.
The rules passed earlier this year by the FTC bans reviews or testimonials that have been attributed to people who don’t exist or are generated by AI, as well as people who don’t have actual experience with the business or product.
The FTC’s ban also prohibits businesses from creating or selling reviews or testimonials. Those who do could be penalized.
