FTC Brings One of the First CRFA Cases

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. Some companies put contract provisions in place, including in their online terms and conditions, that allow them to sue or penalize consumers for posting negative reviews.

The Consumer Review Fairness Act protects consumers’ ability to share their honest opinions about a business’s products, services or conduct in any forum, including social media.

The FTC recently initiated one of the first Consumer Review Fairness Act cases. The first case of its kind since the CRFA took effect, the matter is a conspicuous reminder for marketers to ensure that form contracts to not seek to silence consumers.

In short, the CRFA renders provisions of form contracts between sellers and individual consumers void from inception, if:

1. Individuals are prohibited or restricted from reviewing sellers’ goods, services, or conduct;
2. Penalties or fees are imposed on individuals for such reviews; or
3. Individuals are required to transfer intellectual property rights in such reviews.

Form contracts with such provisions are strictly barred pursuant to the CFRA. Exceptions include contract provisions that bar the submission of confidential, private or unlawful information.

The FTC believes that contracts that prohibit honest reviews or threaten legal action over them, harm people who rely on reviews when making their purchase decisions, as well as businesses that work hard to earn positive reviews.

The CRFA protects a broad variety of honest consumer assessments, including online reviews, social media posts, uploaded photos, videos, etc. Additionally, the CFRA covers more than just product reviews. It also applies to consumer evaluations of a company’s customer service.

The CFRA makes it illegal for companies to include 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 does not apply to employment contracts or agreements with independent contractors, however.

The law says it’s OK to prohibit or remove a review that:

  • Contains confidential or private information – for example, a person’s financial, medical, or personnel file information or a company’s trade secrets;
  • Is libelous, harassing, abusive, obscene, vulgar, sexually explicit, or is inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristic;
  • Is unrelated to the company’s products or services; or
  • Is clearly false or misleading.

CRFA enforcement authority is vested in the Federal Trade Commission and the state Attorneys General. The law specifies that a violation of the CRFA will be treated the same as violating an FTC rule defining an unfair or deceptive act or practice. This means that a company could be subject to financial penalties, as well as a federal court order.

Consult with an FTC defense lawyer to ensure that your company is complying with the Consumer Review Fairness Act:

  • Review your form contracts, including online terms and conditions; and
  • 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).

The safest policy is to permit people speak honestly about your products and their experience with your company.

Read more about the Consumer Review Fairness Act, here.

Richard Newman is an FTC advertising compliance and defense attorney at Hinch Newman LLP.

Informational purposes only. Not legal advice. Always seek the advice of an attorney. Previous case results do not guarantee similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777

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