Enter to open, tab to navigate, enter to select
Review Your Review Policy: the Consumer Review Fairness Act
Practical Law Legal Update w-006-6144 (Approx. 5 pages)
Review Your Review Policy: the Consumer Review Fairness Act
by Practical Law Commercial Transactions
| Published on 07 Mar 2017 • USA (National/Federal) |
The Consumer Review Fairness Act (CRFA) of 2016 protects consumers who write reviews of products, services, and business conduct in any media, including traditional, digital, and social media. The law prohibits businesses from using standardized contract clauses to deter customers from posting negative reviews and voids certain clauses in form contracts, including non-disparagement clauses. The Federal Trade Commission (FTC) has issued guidance for business to help businesses comply with the new law.
Companies have a vested interest in consumer reviews of their products and services. Reviews can:
- Drive business to or from a company.
- Impact overall brand health.
- Trigger government oversight of a company's advertising practices.
The information age has made it easier than ever for consumers to publicly express their opinions of products and services on company websites or via third-party platforms like Yelp.
To protect consumers who write honest public reviews of products, services, and business conduct, Congress passed the Consumer Review Fairness Act (CRFA) in late 2016. President Obama signed the CRFA into law on December 14, 2016 and the Federal Trade Commission (FTC) issued guidance for businesses on February 21, 2017.
Background
The proliferation of consumer reviews on various digital media and social media platforms in recent years prompted some companies to seek compensation for negative reviews posted online. Companies invoked the terms and conditions buried in their form contracts for goods or services to justify receiving payment for negative reviews. A few of those cases received considerable media attention and laid the groundwork for the CRFA:
- In 2013, a California couple sued Kleargear.com for attempting to fine them $3,500 for a negative review posted on the website Ripoff Report. Consumer groups backed the plaintiffs and the case led California to bar the use of non-disparagement clauses in consumer contracts.
- In 2014, a wedding venue in Hudson, New York, attracted national press for a policy that fined couples $500 for each negative review posted by one of their guests.
- In 2016, a petsitting company in Plano, Texas attempted to sue customers for $1 million in damages after they posted a negative review on Yelp. The case was dismissed in August 2016.
In response to public and media pressure surrounding these cases, Congress passed the CRFA.
FTC Guidance
According to the FTC's guidance on the CRFA, contracts that prohibit or stifle honest negative reviews harm both consumers who rely on reviews and the companies that work hard to earn positive reviews.
The CRFA protects honest consumer assessments of:
- Products.
- Services.
- Company conduct, including customer service.
The CRFA protects reviews on all media, including popular digital platforms:
- Online reviews.
- Social media posts.
- Photos, videos, and other audio and visual communications uploaded to websites like Facebook and YouTube.
The law prohibits companies from including standard contract provisions that threaten or penalize people for posting honest reviews that fall into any of the above categories. Specifically, companies may not use clauses that:
- Bar or restrict a consumer's ability to review a company's products, services, or conduct.
- Impose a penalty or fee on a consumer who gives a review.
- Require consumers to give up their intellectual property rights in the content of their reviews.
The law does not apply to employment contracts or agreements with independent contractors. The law also specifically allows companies to take non-exclusive licenses in reviews.
Under the CRFA, companies retain the rights to prohibit or remove certain reviews, provided the reviews:
- Contain confidential or private information, such as company trade secrets or personal medical information.
- Are libelous, harassing, abusive, obscene, vulgar, sexually explicit, or are inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristics.
- Are unrelated to the company's products or services.
- Are clearly false or misleading.
The FTC notes that "clearly false or misleading" is unlikely to apply to reviews with which a company simply disagrees. For instance, a review that describes a product as "terrible" is likely not misleading simply because the company finds the description unfair.
The FTC and state Attorneys General can enforce the CRFA, but the act does not grant a private right of action. Violations of the CRFA can subject companies to financial penalties or federal court orders.
Practical Implications
Companies should review their form contracts, shrinkwrap licenses, and online terms and conditions and remove any provision that:
- Restricts honest reviews.
- Penalizes individuals who post honest reviews.
- Claims copyright or other ownership of reviews or an exclusive license for reviews.
The prohibition on these types of clauses goes into effect on March 14, 2017. Companies should remove these clauses even if they do not intend to enforce them. In reviewing form contracts, companies may want to consult the following Standard Documents:
Additionally, companies should keep in mind that consumer reviews are one mechanism that can trigger an FTC investigation. For more, see Practice Note, FTC Consumer Protection Investigations and Enforcement: Triggers for an Investigation. For a discussion of other consumer protection laws, see Practice Note, Consumer Protection: Overview.