The FTC requires online sellers to make sure consumers can tell when content is advertising, when an endorser has been paid or otherwise connected to the brand, and when reviews are genuine. Those rules come from three main sources: the FTC’s 2015 Enforcement Policy Statement on Deceptively Formatted Advertisements, the Endorsement Guides (16 C.F.R. Part 255, revised in 2023), and the Rule on the Use of Consumer Reviews and Testimonials (16 C.F.R. Part 465), which took effect October 21, 2024 and allows civil penalties for knowing violations. All three rest on Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices.
This article explains what each one requires and what e-commerce businesses should do to comply.
Native Advertising: The FTC’s 2015 Enforcement Policy Statement
Native advertising is paid content designed to look like the editorial, organic or user-generated content around it, such as sponsored articles, in-feed social posts, promoted search results, or content recommendation widgets. In December 2015, the FTC issued its Enforcement Policy Statement on Deceptively Formatted Advertisements. The core principle is simple: an ad is deceptive if it misleads consumers about its commercial nature, even if every claim in it is true.
The FTC looks at the ad as a whole, including its overall appearance, how closely its format, visual style and subject matter resemble the surrounding non-advertising content, and how easily consumers can distinguish it from that content. The FTC’s Native Advertising: A Guide for Businesses applies these principles to search results, in-feed ads, recommendation widgets, social media, email and video.
What an Adequate Native Ad Disclosure Looks Like
Based on the FTC’s business guidance, a disclosure that content is advertising should be:
- Placed where consumers look first, near the ad’s focal point, generally in front of or above the headline, and not off to the right or below the content
- Prominent, in text large and visible enough to notice, with strong color contrast against the background
- Clearly worded, using terms such as “Ad,” “Advertisement,” “Paid Advertisement” or “Sponsored Advertising Content.” The FTC warns that terms like “Promoted” or “Promoted Stories” are ambiguous and may mislead consumers into thinking the publisher endorses the content
- Repeated where needed, including on the click-through landing page, and delivered before the advertising message in video or audio content
The FTC’s guidance holds advertisers, ad agencies and operators of affiliate advertising networks accountable, so a brand cannot shift all responsibility to its publisher or agency.
The Lord & Taylor Case
The first case the FTC brought after the 2015 Policy Statement involved a retailer. Lord & Taylor settled charges that it deceived consumers by paying for an article and an Instagram post by the online fashion magazine Nylon, without disclosing that they were paid promotions for its Design Lab clothing collection. The company also paid 50 fashion influencers to post Instagram photos wearing a dress from the collection, giving each the dress and thousands of dollars, without requiring them to disclose the arrangement. The final order prohibits Lord & Taylor from misrepresenting that paid ads come from an independent source and requires it to make sure its influencers clearly disclose compensation.
Endorsements and Influencers: The 2023 Endorsement Guides
On June 29, 2023, the FTC announced revised Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 C.F.R. Part 255. The Guides are not themselves a rule with penalties attached; they explain how the FTC applies Section 5 to endorsements. The core requirement is that when an endorser has a material connection to the brand that consumers would not expect, such as payment, free products, a business or family relationship, or employment, that connection must be clearly and conspicuously disclosed. Key updates in the 2023 revision include:
- A formal definition of “clear and conspicuous,” along with a warning that a platform’s built-in disclosure tool might not be adequate
- A broader definition of “endorsement” that covers fake reviews, virtual influencers and social media tags
- A new principle against procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting or editing consumer reviews in ways that distort what consumers think of a product
- Guidance on incentivized reviews, reviews by employees, and fake negative reviews of competitors
- A clearer explanation of potential liability for advertisers, endorsers and intermediaries, and an emphasis that child-directed advertising is of special concern
For practical guidance on influencer campaigns, see our articles on FTC rules for influencers and our e-commerce advertising compliance checklist.
Fake and Manipulated Reviews: The Consumer Reviews and Testimonials Rule
The FTC’s Trade Regulation Rule on the Use of Consumer Reviews and Testimonials, 16 C.F.R. Part 465, took effect October 21, 2024. Unlike the Guides, it is a binding rule, and courts may impose civil penalties for knowing violations. The maximum civil penalty is currently $53,088 per violation. That figure was set in the FTC’s 2025 inflation adjustment and remains in effect because there was no federal inflation adjustment for 2026. According to the FTC’s rule Q&A, the rule prohibits:
- Fake or false reviews and testimonials (§ 465.2), including reviews by people who do not exist or who had no actual experience with the product, and businesses can be liable for buying or disseminating reviews they knew or should have known were fake
- Buying reviews conditioned on sentiment (§ 465.4), meaning compensation or incentives expressly or implicitly conditioned on a positive or negative review
- Undisclosed insider reviews (§ 465.5), such as reviews by officers, managers, employees or agents that do not clearly and conspicuously disclose the relationship
- Company-controlled review websites (§ 465.6) that misrepresent that they provide independent reviews of products that include the company’s own
- Review suppression (§ 465.7), including unfounded or groundless legal threats, intimidation, or false accusations used to prevent or remove negative reviews
- Fake social media indicators (§ 465.8), such as buying or selling fake followers or views to misrepresent influence or importance
The FTC has signaled that it intends to use the rule. On December 22, 2025, it announced warning letters to 10 companies about possible violations. The letters are not formal findings, but they point to the practices most likely to draw enforcement: fake reviews, incentives tied to positive sentiment, undisclosed insider reviews and misused social media indicators. Our post on FTC enforcement against review hijacking and manipulation covers related enforcement.
A Compliance Checklist for Online Sellers
- Label paid placements. Audit sponsored articles, promoted listings, affiliate content and in-feed ads so disclosures are clear, appear before the content, and work on mobile.
- Put disclosure duties in your contracts. Influencer, affiliate and agency agreements should require compliant disclosures and let you monitor posts and remove noncompliant content.
- Monitor your endorsers. Check posts periodically and document corrective action when disclosures are missing.
- Clean up review programs. Never offer incentives for positive reviews only, stop review gating that filters out negative feedback, and require employees and their families to disclose relationships when they post reviews.
- Vet review vendors. Do not buy reviews, followers or engagement from third parties that cannot show their reviews come from real customers.
- Handle negative reviews lawfully. Respond to or report genuinely defamatory content, but do not use groundless legal threats to suppress honest reviews.
- Train your marketing team so disclosure and review rules are treated as legal requirements, not style choices.
Keep Your Advertising and Reviews on the Right Side of the FTC
The FTC’s position has stayed consistent since 2015: consumers are entitled to know when they are looking at an ad, when a recommendation is paid, and whether reviews reflect real customer experiences. What has changed is the penalty exposure. With the Consumer Reviews and Testimonials Rule in effect, fake or manipulated reviews can now lead to civil penalties, not just orders to stop.
If you sell online and need to review your native advertising, influencer program, or customer review practices, or you have received an FTC inquiry, the e-commerce advertising attorneys at Revision Legal can help. We work with e-commerce retailers to build practical compliance programs. Contact us through the form on this page or call (855) 473-8474.
