Is Your Conduct a Violation of the Consumer Review Fairness Act?

The Consumer Review Fairness Act passed both houses of Congress unanimously in December 2016. It has been effective since March 2017.

The CFRA generally makes provisions of form contracts between sellers and individual consumers void from inception if the provisions: (i) prohibit or restrict individuals from reviewing sellers’ goods, services, or conduct; (ii) impose penalties or fees on individuals for such reviews; or (iii) require individuals to transfer intellectual property rights in such reviews. The CRFA also bars sellers from offering form contracts with such provisions. The CRFA also contains certain exceptions, including for contract provisions that bar the submission of confidential, private or unlawful information.

What Do Businesses Need to Know About the Consumer Review Fairness Act?

Simply stated, the Consumer Review Fairness Act 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. According to the FTC, another group is also harmed when others try to squelch 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. Some companies put contract provisions in place, including in their online terms and conditions, that allowed them to sue or penalize consumers for posting negative reviews.

Federal Trade Commission attorneys have tips to help your company comply with the law.

Basic Tips for Complying With the CRFA

The CRFA 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.

What Conduct Does the CRFA Prohibit?

As referenced above, the CRFA makes it illegal for a company to use a contract provision that:

  1. Bars or restricts the ability of a person who is a party to that contract to review a company’s products, services, or conduct
  2. Imposes a penalty or fee against someone who gives a review, or
  3. Requires people to give up their intellectual property rights in the content of their reviews

The CRFA 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 unlawful for a company to include a provision in its terms and conditions that prohibits or punishes negative reviews by customers.

The CRFA does not apply to employment contracts or agreements with independent contractors, however.

What Steps Can a Company Take to Protect Itself?

The CRFA says that it is OK to prohibit or remove a review that:

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

Always consult with an experienced FTC attorney prior to making such decisions and legal rights may be impacted. According to the FTC, it is unlikely that a consumer’s assessment or opinion with which you disagree meets the “clearly false or misleading” standard.

What is the Penalty for Violating the Consumer Review Fairness Act?

Congress gave enforcement authority to the Federal Trade Commission and the state Attorneys General. The CRFA specifies that a violation will be treated the same as violating an FTC rule defining 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.

To ensure that your company is complying with the Consumer Review Fairness Act:

  1. Review your form contracts, including online terms and conditions
  2. Remove any provision that restricts people from sharing their honest reviews, penalizes those who do, or claims copyright over peoples’ reviews (even if you have never tried to enforce it or have no intention of enforcing it, and
  3. Consult with experienced FTC defense lawyer to ensure compliance with the CRFA.

The Federal Trade Commission seeks to protect U.S. consumers and ensure fair competition and business practices. The FTC believes that the wisest policy is to allow people speak honestly about your products and their experience with your company.

Enforcement and Remedies

There is no private right of action by individual consumers for violation of the CRFA. by individual consumer plaintiffs), but both the FTC and State Attorneys General possess enforcement authority. Regulatory investigations and enforcement actions are a reminder to implement preventative measures, such as reviewing consumer agreements for compliance.

In addition to injunctive relief, regulatory bodies can seek monetary penalties and demand that various ameliorative steps be implemented, such as notifying consumers. Importantly, even if a contract that restricts consumer reviews or complaints does not fall under the CRFA, the FTC could also pursue whether conduct that is an unfair or deceptive under Section 5 of the the FTC Act.

Richard B. Newman is an advertising practices attorney focusing digital marketing matters at Hinch Newman LLP. Follow him on Twitter @FTC defense lawyers.

Informational purposes only. Not legal advice. May be considered attorney advertising.

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