More reason to check your website’s use policy and not squash bad online reviews: the FTC is enforcing the Consumer Review Fairness Act

Back in 2016 we wrote about the Consumer Review Fairness Act passed by congress to protect people’s ability to share “their honest opinions about a business’s products, services, or conduct, in any forum, including social media.”

The Act makes it illegal for a company, like a craft brewery, to use a contract provision (this includes doing it in the terms of service on your website) that:

• bars or restricts the ability of a person who is a party to that contract to review a company’s products, services, or conduct;
• imposes a penalty or fee against someone who gives a review; or
• requires people to give up their intellectual property rights in the content of their reviews.

Recently the FTC has upped its enforcement of the Act and distillers, brewers and vintners, along with other manufacturers, are well advised to review their terms of service (which may very well not have been reviewed or updated since you put your website in place) to ensure you do not have provisions that violate the Act.

As a recent example the FTC recently settled with three different businesses for practices they engaged in violating the Consumer Review Fairness Act.

• In one, had a form contract for purchases that included a non disparagement clause applicable to consumers which also purported to liquidate damages of $5,000.00 per infringing instance against the consumer.
• In another, a company used a form agreement that prohibited customers from leaving online reviews that disparaged or defamed the company.
• Finally, one used form agreements that awarded attorneys’ fees to the company for breaching the confidentiality of their consumer contract and made all parts of the contract confidential thereby effectively making any online review about the service, a breach to which the customer would be obligated for the company’s attorneys’ fees in seeking an injunction or bringing another lawsuit to have the materials removed from a website.

The companies resolved the disputes and have been ordered/agreed to stop utilizing the contracts containing these clauses and have also agreed to reach out to every customer who purchased under such terms to let them know the clauses were improper and that the customers are free to read online reviews.

While none of these suits ended in a direct monetary fine, the FTC’s director, Andrew Smith, has not ruled out such penalties in the future. Director Smith said of these resolutions: “Many online shoppers use customer reviews and ratings to get information, but these companies used gag clauses in their form contracts to stop customers from posting honest but negative feedback,” … “These gag clauses are illegal, and companies that know it but use them anyway will be subject to civil penalties.”

The Takeaway: The infringing contracts can take many forms such as regular purchase agreements or be as innocuous as terms and conditions or use policies on websites, many of which have not been updated since the Act took effect. Companies should review their agreements, customer terms and conditions, websites and other public facing materials that contain conditions for use or purchase to ensure none of the terms violated th Act.