The internet has made it easy for consumers to share their opinions and experiences regarding products and businesses. While easy access to reviews can help consumers make informed purchasing decisions, the anonymity of the internet can be difficult for businesses that believe they have received unfair reviews. In recent years, some businesses have tried to crack down on negative reviews by including language in form contracts that penalize customers for giving negative reviews. These gag-clauses, or anti-review clauses, have popped up in contracts across a broad range of industries including medical services, vacation rentals, online consumer goods, wedding venues, and pet-sitting services.
In December 2016, former President Obama signed into law the Consumer Review Fairness Act of 2016 (“CRFA”) which makes certain clauses of a form contract void if the contract prohibits, or restricts, an individual from engaging in a review of a seller’s goods, services, or conduct. The law went into effect on March 14, 2017.
Specifically, the new law applies to form contracts used in the course of selling or leasing goods or services. Such contracts may not prohibit or penalize written, oral, and pictorial reviews of goods and services. (A picture of a product or service alone may constitute a pictorial review, giving this law broad coverage in today’s picture snapping society). The law also prohibits form contracts from requiring exclusive transfers of intellectual property rights in review or feedback content. The law does not give consumers direct remedies, but will make void any clauses that are in violation of the CRFA. The law gives enforcement authority to the Federal Trade Commission and state Attorneys General. A violation of the CRFA will be treated the same as violation of an FTC rule defining unfair or deceptive acts or practices and could subject companies to financial penalties.
Companies still have some rights to protect themselves from inappropriate or irrelevant content. Under the CRFA, companies can remove a review that contains confidential or private information, is libelous, harassing, abusive, unrelated to the company’s products or services, or clearly false or misleading and can prohibit disclosure of such information in form contracts.
Several states have passed similar laws and the CRFA does not pre-empt those laws. For example, the CRFA does not provide for consumer lawsuits based on anti-review clauses, but some state consumer protection laws or unfair competition laws may provide consumers a cause of action.
Implementation of the CRFA is a good opportunity for businesses to review their form contracts to make sure they are up to date and compliant with the law.