No one likes to be criticized or disparaged, including businesses. Websites like Yelp, TripAdvisor, and Amazon allow customers to write and post reviews of the products or services they have purchased, both positive and negative. In recent years, however, some companies have tried to protect themselves from negative reviews by contractually prohibiting consumers from writing or posting negative comments, and even threatened fines and lawsuits. The Federal Consumer Review Fairness Act of 2017 prohibits this practice and the Federal Trade Commission (FTC) has been enforcing it. This article will take a closer look at what business’s may and may not do under the law. Note that this law applies to consumers, and not business customers.
Recent contractual “gag” clauses
In a recent FTC case, people who were using a website service to find vacation rentals in Florida found a company called Shore to Please Vacations. This company required potential renters to sign a rental contract, which is common. However, the contract contained language stating that the renter agreed not to “defame or leave negative reviews.” If a renter wrote or posted any online review giving “less than a 5 star or absolute best rating”, the renter would “owe” Shore to Please Vacations $25,000. Shore to Please Vacations did file lawsuits against several renters whom it decided had posted negative reviews.
In another case, a heating company in Pittsburgh included a clause in its form contracts that attempted to impose a penalty on any customer who filed a complaint with the Better Business Bureau about the company (or even just disclosed the terms of the contract). A flooring company in Massachusetts included a non-disparagement clause in its contracts imposing a “penalty” of up to three times the value of the contract, plus attorney’s fees, if a customer disparaged the company “in any way or through any medium.” Finally, and perhaps more disturbing, a Nevada company offering trail riding had a provision in its contract stating that if a customer called Animal Control or any other agency about how the company treated it’s horses, the company would assess at least $5,000 in damages and hold the customer responsible for all fines and attorney’s fees.
In each of these cases, the FTC reached a settlement with the company requiring them to notify customers that these provisions are void and unenforceable.
Requirements of Consumer Review Fairness Act
The Consumer Review Fairness Act (CRFA) protects honest consumer (that is, written by an individual customer, not a business customer) assessments, including in writing, online reviews, videos or photos, social media posts, etc. It applies to both products and services. Under CRFA, a company may not use a contract to do any of the following:
- Restrict or prohibit the other party from reviewing the products, services, or conduct of the company providing those
- Impose or charge a fee or penalty on a consumer giving a review
- Require people to give up any intellectual property rights in the content of their review (such as signing over the copyright rights in a posted photo or video so that they could not use it somewhere else)
However, CRFA does allow a company to prohibit, and even remove, a review that contains confidential or private information; is false, misleading, defamatory, harassing, obscene or vulgar; or is unrelated to the company’s products or services.
Penalties for violation of CRFA
The FTC enforces CRFA, but state attorneys general may also enforce the law. Violations are in the same category as an unfair or deceptive trade practice, and the FTC can impose fines as well as request court orders that companies cease and desist from violating the law. Most companies that the FTC goes after will enter into some form of consent agreement, as did the ones mentioned above.
What can companies do to avoid violating CRFA?
As I said earlier, no business likes to be publicly criticized. But imposing gag orders and financial “penalties” on customers who write a negative review is not only against the law, it is bad for business. Over ten years ago, in the early days of online posting, I worked at a large retailer which freaked out whenever a customer wrote a negative review. The business people wanted to sue the customer for defamation, libel, you name it. We attorneys counseled them to address the customer’s concerns directly, and make any changes to business practices, products, etc. to ensure it did not happen in the future.
So what should business’s serving consumers do to avoid violating CRFA? It is pretty simple: review any form contracts on online terms and conditions to make sure that they do not contain any language prohibiting customers from writing any kind of review or imposing any penalties or damages for writing a negative review. Even if you have such provisions but never enforce them, they are still in violation of CRFA. And if someone does write a review that is truthful and honest, but negative, address the issue and try to resolve it. Your company doesn’t need more negative publicity.
It is important to review your contracts and website terms and conditions periodically to make sure that they are in compliance with changes in the law. If you have any questions, please contact Mark Spitz, Spitz Legal Counsel LLC, at 720-575-0440 or by email at mark@spitzlegalcounsel.com.