Social media sites such as Yelp and Facebook provide consumers with a platform to share their opinions about businesses that sell goods or services to the public.
While businesses rely on this kind of digital word-of-mouth to boost sales and positive brand awareness, unflattering online reviews are inevitable and have the potential to cause considerable damage.
But stopping customers from giving bad feedback, even if unwarranted, is difficult.
An increasingly popular approach has been to include a clause in form customer agreements that prevent the customer from making negative statements about the business.
These “anti-disparagement clauses” are not only unpopular with consumers but also have increasingly been the subject of legal challenges.
Recently, Congress stepped in and put an end to any debate about these clauses, making them illegal in many types of consumer contracts.
To avoid running afoul of the new legislation, businesses need to scrub anti-disparagement provisions from their consumer-facing contracts to ensure compliance under the law.
The Consumer Review Fairness Act
On Dec. 15, 2016, President Obama signed the Consumer Review Fairness Act of 2016 into law.
In general, the CRFA requires businesses to remove any provision in a form agreement that makes it difficult for a customer to review a company’s goods, services, or conduct.
In addition, the law voids any provision that automatically gives a company intellectual property rights to a customer’s reviews.
Previously, businesses had removed negative reviews by using such provisions or by filing copyright takedown notices with website hosts.
The CRFA does not give consumers free rein to say whatever they feel, no matter how inaccurate.
Similarly, the CRFA does not prevent businesses from restricting the disclosure of confidential business information, law enforcement information, or personnel or medical files.
Finally, the CRFA does not give consumers free rein to say whatever they feel, no matter how inaccurate.
Consumers can still be liable for defamatory statements, and social media platforms can remove reviews if the content is clearly false or misleading, libelous, vulgar, harassing or abusive, unrelated to the goods or services, or inappropriate with respect to certain intrinsic characteristics.
Complying with CRFA
Moving forward, businesses will need to review and update their consumer contracts to ensure compliance under the law.
Companies have until March 31, 2017, to eliminate any problematic provisions in their agreements.
Once that grace period ends, the inclusion of an anti-disparagement clause will be treated as an unfair or deceptive act or practice under the Federal Trade Commission Act, which is enforceable by both the FTC and state attorneys general starting Dec. 15, 2017.
Moreover, plaintiffs may attempt to use violations of the law to assert claims under “Little FTC Acts,” many of which include class actions, punitive damages, and attorneys’ fees provisions.
About the authors: Robert M. Langer is a partner at Wiggin and Dana LLP and co-chair of the firm’s Antitrust and Consumer Protection Practice Group in Hartford; John Doroghazi is a partner at Wiggin and Dana LLP in New Haven; and Timothy C. Wright is an associate at Wiggin and Dana LLP in New Haven.