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Will the New Federal Law Prohibiting "Anti-Yelp" Contract Terms Affect Your Business?

On December 15, 2016, former president Obama signed into law H.R. 5111 titled the “Consumer Review Fairness Act of 2016” (CRFA). The CRFA goes into effect next week so it is worth a look to see how this new law may affect your business.

Consumer reviews are vital to your business in this day and age. Positive reviews can guide consumers toward your business. Negative reviews, regardless of their veracity, can spell disaster. Recognizing the importance of consumer reviews, some businesses have taken extreme measures to manage how consumer reviews shape their public image. Over the past few years, some companies have tried to prevent negative reviews by inserting non-disparagement provisions (gag clauses) in their sale and services contracts.

The CRFA is designed to protect individuals who post honest, yet truthful, negative reviews online. The CRFA applies to any review of goods or services by an individual who is a party to a form contract. The CFRA appears to cover every conceivable method of consumer review, whether made as an online review, social media post, or as an uploaded video or photo.

Specifically, the CRFA makes it illegal for businesses to include provisions in their form contracts that:

1. Prohibits or restricts the ability of a consumer to review a company’s product, service, or conduct;

2. Imposes a monetary penalty or fee against someone who provides a review; or

3. Requires someone to give up their intellectual property rights in the content of their review.

Any contract provision in violation of the CRFA is void ab initio, or from the beginning. More importantly, the Federal Trade Commission is empowered to treat a violation of the CFRA as an unfair or deceptive act or practice, which could subject an offending business to financial penalties.

The good news for business owners is that there are limitations on the reach of the CRFA. The FTC’s guidance on the CRFA clarifies that the CFRA does NOT cover provisions in employment contracts or agreements with independent contractors. Additionally, businesses can still remove content that:

1. Contains confidential or private information;

2. Is libelous, harassing, abusive, obscene, or otherwise inappropriate;

3. Is unrelated to the goods or services offered by the company; or

4. Is clearly false or misleading.

At this point it is unclear how aggressive the FTC will be in enforcing the CRFA. Consequently, Hight Law recommends that all our business clients selling goods or services to individuals be proactive and review their standard contracts to ensure compliance with the CRFA.

Keywords:  Consumer Reviews, Consumer Review Fairness Act, Consumer Review Freedom Act, Gag Clause, Non-Disparagement Clause, Anti-Review Clause, Anti-Yelp Clause.

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