FTC Approves Settlements With Companies that Allegedly Violated the CRFA
Following a public comment period, FTC attorneys have announced the approval of final orders settling charges that a handful of companies violated the Consumer Review Fairness Act by including provisions in form contracts that bar their customers from posting negative reviews.
The CRFA protects consumers’ ability to share their honest opinions about a business’s products, services, or conduct in any forum – and that includes social media. Contracts that prohibit honest reviews, or threaten legal action over them, harm people who rely on reviews when making their purchase decisions. FTC attorneys also believe that another group is also harmed when others try to suppress honest negative reviews: businesses that work hard to earn positive reviews.
The Consumer Review Fairness Act was passed in response to reports that some businesses try to prevent people from giving honest reviews about products or services they received.
According to the FTC’s administrative complaints, the first three of which were announced in May 2019 followed by two more in June 2019, the companies violated the CRFA by using form contracts with non-disparagement provisions that barred consumers from writing or posting negative reviews online or that imposed financial penalties for doing so. The companies and individuals named in the complaints are: 1) A Waldron HVAC, LLC and its owner, Thomas J. Waldron; 2) National Floors Direct, Inc. (NFD); 3) LVTR LLC (LTVR) and its owner, Tomi A. Truax; 4) Shore to Please Vacations LLC; and 5) Staffordshire Property Management, LLC.
The final orders settling the charges by FTC attorneys bar each company from using such non-disparagement provisions in form contracts for goods and services, and require them to notify consumers who signed such contracts that the prohibited language is not enforceable. The final order against Shore to Please also requires it to dismiss with prejudice a count in a private lawsuit in which the company alleged that a renter violated its non-disparagement agreement. The proposed orders also impose compliance and reporting requirements on the companies.
Here are some basic tips from an FTC attorney for complying with the law.
The law protects a broad variety of honest consumer assessments, including online reviews, social media posts, uploaded photos, videos, etc. It does not just cover product reviews. It also applies to consumer evaluations of a company’s customer service.
The CRFA makes it illegal for a company to use a contract provision that: (i) bars or restricts the ability of a person who is a party to that contract to review a company’s products, services, or conduct; (ii) imposes a penalty or fee against someone who gives a review; or (iii) requires people to give up their intellectual property rights in the content of their reviews.
The CRFA prohibits companies from including standardized provisions that threaten or penalize people for posting honest reviews. For example, in an online transaction, it would be illegal for a company to include a provision in its terms and conditions that prohibits or punishes negative reviews by customers. The law doesn’t apply to employment contracts or agreements with independent contractors, however.
The statute says it is acceptable to prohibit or remove a review that: (i) contains confidential or private information – for example, a person’s financial, medical, or personnel file information or a company’s trade secrets; (ii) is libelous, harassing, abusive, obscene, vulgar, sexually explicit, or is inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristic; (iii) is unrelated to the company’s products or services; or (iv) is clearly false or misleading.
The penalty for violating the Consumer Review Fairness Act is the same as violating an FTC rule. FTC lawyers will treat a violation as an unfair or deceptive act or practice. This means that your company could be subject to financial penalties, as well as a federal court order.
Review your form contracts, including online terms and conditions. Remove any provision that restricts people from sharing their honest reviews, penalizes those who do, or claims copyright over peoples’ reviews (even if you’ve never tried to enforce it or have no intention of enforcing it). Let people speak honestly about your products and their experience with your company.
Richard B. Newman is an advertising law attorney at Hinch Newman LLP.
Information conveyed herein is for informational purposes only and does not constitute, nor should it be relied upon, as legal advice. No person should act or rely on any information contained herein without seeking the advice of an attorney.