Last month, the Federal Trade Commission (“FTC”) issued three separate proposed administrative complaints and orders enforcing the Consumer Review Fairness Act (“CRFA”) – the first enforcement actions since the CRFA went into effect in March 2017. The CRFA prohibits businesses from using “form contract” provisions that bar consumers from writing or posting negative reviews online, or threatening them with legal action if they do.
According to the FTC’s complaints, the three companies had contracts with consumers which barred the consumers from posting negative reviews about their products or services. The agreements also contained confidentiality provisions, which stated that information gained by the consumer over their use of the products or services was confidential, and a breach of that provision resulted in liquidated damages.
Under the FTC’s proposed settlement orders, the companies are each prohibited from offering a form contract to any consumer that contains a review-limiting contract term or requires that a customer accept such terms as a condition of the company complying with the contract. Furthermore, the orders require the companies to notify all consumers with contracts containing allegedly illegal non-disparagement clauses that such provisions are void and of no effect. Lastly, the companies agreed to create and maintain certain records, submit compliance reports, and subject themselves to compliance monitoring by the FTC.
Takeaway: The FTC’s enforcement of the CRFA means advertisers must be sure to carefully review their consumer contracts and online terms and conditions to verify that they do not contain any provisions limiting consumers’ rights to post fair and honest reviews.