Consumer review fairness act sellers playbook

The FTC claimed that these three companies violated Section 2(c) of the CFRA by illegally using non-disparagement provisions in their consumer form contracts, such as:

A Waldron HVAC, LLC : "CUSTOMER and COMPANY agree that the within contract is a private and confidential matter and that the terms and conditions of the contract…shall not be made public, or given to anyone else to make public, INCLUDING THE BETTER BUSINESS BUREAU" and "Should the CUSTOMER breach this confidentiality clause, the CUSTOMER agrees to pay COMPANY liquidated damages. THE COMPANY MAY ALSO BE AWARDED COUNCIL [sic] FEES AND COSTS AS REQUESTED BY COMPANY."

NFD : "By signing this purchase order you are agreeing, under penalty of civil suit…not to publicly disparage or defame National Floors Direct in any way or through any medium."

LTVR : "CONFIDENTIALITY/NON DISPARAGEMENT – I agree not to call Animal Control or any governmental agency or individuals if there is a discrepancy to how the horses/animals or property are taken care of. You will be charged a minimum of $5,000.00 in damages if you report anything or making contact [sic] with any persons or agency or by having another individual(s) do it on your behalf"; and "I agree to our non-disparagement and protection of reputation clause. For the purposes of this Section, ‘disparage’ shall mean any negative statement, whether written or oral including social media about our Company, Volunteers, Owners, Representatives, etc."

Proposed Settlement Orders

Prohibits the three companies from including non-disparagement provisions in their consumer form contracts.

Prohibits the three companies from offering consumers form contracts that include review-limiting terms or require that a consumer conditionally accept such terms.

Requires the three companies to notify customers who, on or after March 14, 2017, entered into their form contracts containing non-disparagement clauses, that those provisions are void, cannot be enforced, and the customers can publish honest (negative) reviews.

Requires the three companies to submit signed acknowledgements that they received the proposed settlement orders.

Requires the three companies to file compliance reports with the FTC and maintain records that show they remain in compliance.

The FTC will publish a description of the settlement orders in the Federal Register. The settlement orders will then be subject to public comments, after which the FTC will determine to make the settlement orders final.

Key Take-Aways

These complaints and orders demonstrate that the FTC is prepared to enforce the CRFA on its own and not just as an addition to other infractions. Companies found violating the CRFA should be prepared to contact all customers who entered into contracts containing non-disparagement clauses and advise them that they may post their honest reviews without fear of retribution for negative comments. Businesses should review their form contracts (online and offline) to ensure removal of all non-disparagement clauses.

PLC US Commercial Transactions, PLC US Law Department