Consumer Review Fairness Act

December 22, 2016

On December 15, 2016, President Obama signed into law the Consumer Review Fairness Act (CRFA). Effective immediately, the law prevents companies from contractually prohibiting their consumers from “disparaging” them in any manner, effectively preventing those consumers from publishing anything negative about those companies online.

The CRFA will make it illegal for companies to prohibit their consumers from leaving genuine negative reviews and/or criticisms about their goods or services online. Previously, companies sought to avoid the consequences of negative online reviews by having their consumers enter into non-disparagement clauses as a part of the underlying business transaction. Now, such clauses are effectively null and void (with a 90 day grace period from the date of the CRFA’s passage) and will be considered to constitute an unfair trade practice. If a company seeks any form of retribution against a consumer who posts a legitimate negative review online regarding that company’s good or services, it can be investigated as a violation of the law by the applicable state attorney general’s office with oversight from the Federal Trade Commission.

The CRFA’s main thrust is to prevent companies from including non-disparagement clauses in their consumer contracts as part of the sale of their goods and services. Increased concerns with the financial consequences of negative online reviews, as well as the continued rise of consumer online review websites, led many companies to seek a legal avenue to prevent such reviews from becoming an issue in the first place. Added to this frustration was a growing consensus among businesses that a considerable portion of online reviews affecting their profitability were simply fake or being maliciously published by business competitors.

To combat this growing fear, more and more companies began inserting language into their consumer contracts prohibiting consumers from “disparaging” the company in any manner (regardless of whether such criticisms were actually genuine). Congress felt that such “anti-gag” measures would have a chilling effect, both on providing an outlet for consumers to voice legitimate gripes about a company’s goods and services, as well as a general limitation on the right to free speech.

Despite the CRFA’s recent passage, companies are still afforded the opportunity to seek damages against consumers (and, many times, other business competitors) who post false negative reviews in violation of existing law. For instance, the CRFA merely prohibits businesses from contractually barring their consumers from publishing legitimate negative reviews of their goods and services online. However, if a consumer (or nefarious business competitor) posts a negative review that is demonstrably false (in other words, a review containing negative and damaging statements that go beyond mere opinions), and the adversely affected company can demonstrate suffering economic harm as a direct result of that online post, the company still has a right to file a legal action for defamation and related claims.  

Any company currently utilizing such non-disparagement clauses should immediately start the process of removing such language from its consumer contracts.

‹ Alerts