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Consumer Review Fairness Act

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You Cant Tell Your Customers to 'Shut Up' Anymore

Bad idea: Set up a business and provide poor goods or services; receive bad reviews online for your poor goods or services.

Worse idea: Instead of treating your customers' feedback as free expert advice and listening to their suggestions on how to improve your business, sue your customers - experience the Streisand Effect - resulting in increased media coverage highlighting your lousy goods, service, and treatment of customers.  Ensure that negatives reviews of your business get the widest exposure possible.

Businesses attempted to substantiate gag clauses with claims of

  • Patient / customer assigns copyright of any reviews to business
  • Trademark infringement
  • Breach of Contract
  • Privacy
  • Confidentiality
Worser Idea:  Attempt to solve this problem by telling your customers to shut-up. Insert a gag-clause in your terms of service so that it is a breach of contract for your customers to provide negative reviews of your service.

Jennifer Kulas Palmer testified before Congress about her negative experience with online business  According to Palmer, in 2008 her husband ordered about $20 worth of Christmas gifts from KlearGear.  When it did not arrive, they attempted to reach out to the company, but to no avail.  Like so many consumers who have had a bad experience, they wrote a negative online review.  Three years later, Palmer heard from KlearGear, claiming that Palmer had violated their Terms of Sale and that Palmer owed KlearGear $3500. Attorneys from Public Citizen represented the Palmers and filed a successful lawsuit against KlearGear. See Palmer v. KlearGear.

If there was any doubt that this type of thing is a bad idea, in this year of divided and partisan politics, Congress unanimously voted to end attempts to silence customer reviews. The Consumer Review Fairness Act was signed into law by President Obama on December 14th.

Prohibition: "In summary, the Act makes it illegal for a company to use a contract provision that:

  1. bars or restricts the ability of a person who is a party to that contract to review a company’s products, services, or conduct;
  2. imposes a penalty or fee against someone who gives a review; or
  3. requires people to give up their intellectual property rights in the content of their reviews." [FTC] [Sec. 2(b)(1)]

The Consumer Review Fairness Act establishes that you cannot tell consumers to shut up - it does not, however, protect consumers from liability for what they say.  Businesses can, for example, still seek redress for defamatory reviews. [CRFA § 2(b)(2)(B)]. Consumers can review but they may still be held responsible for their words.

There is lots more detail and exceptions in the statute.

Remedy: According to the new law, 'form contracts' (those terms of service or standard forms shoved in front of customers to sign without ability to negotiate individual terms) provisions are "void" if they prohibit customer reviews. [Sec. 2(b)(1)]  Any such gag provisions are also "unlawful" [Sec. 2(c)] and are subject to enforcement by the Federal Trade Commission (FTC actions pre-empt state actions. [Sec. 2(e)(4)] or the states. [Sec. 2(d)&(e)] [FTC] There is no private right of action. [Ponte, Glass Half Full p. 11] See also anti-SLAPP laws.

Of course, one of the best remedy is to take advantage of reviews as free feedback on business performance, and as good businesses provide good service, encourage customers to provide positive reviews. Going to war with your own customers has a habit of backfiring, highlighting a business's poor service, resulting in the Streisand Effect. [Barbara Ross, Manhattan Dentist Sues Five Patients in Four Years Over Negative Web Reviews, Daily News July 26, 2016] [Pet Sitting Business Bites Back After Getting Bad Yelp Review, CBSNews Feb. 16, 2016] Encouraging positive reviews results in a high review count, and can thereby position a business higher in rankings than a business with a small review count or reviews that are out of date. Happy customers tend to give positive reviews. [Lin] According to the FTC, "The wisest policy: Let people speak honestly about your products and their experience with your company." [FTC]

All of this comes about in the context of the Good Samaritan provisions of the Communications Decency Act, 47 USC 230(c), which says that an online services are not liable for the third party content.  This means that Yelp, TripAdvisor, Amazon, Google, and all the other review sites can encourage people to provide reviews of goods and services - without those online services becoming liable for those reviews. 47 USC 230(c) legally set the foundation for the interactive web where many third parties contribute without the host becoming liable for every utterance.

In the information economy, the information of reviews have become a currency. The reviews generated by third parties enable better informed consumers who can take advantage of the wisdom of those who came before them. Most consumers consult review sites to determine which restaurant has the best pizza, which bike shop has the best service, or which toaster makes the best toast. [Local Review Consumer Survey 2016, Brightlocal ("91% of consumers read online reviews for local businesses")] Businesses that invest in themselves and provide the best service are rewarded with positive reviews and exposure. They get more business and they can raise prices. [Anderson, C. (2012). The impact of social media on lodging performanceCornell Hospitality Report, 12(15), 6-11 ("transactional data from Travelocity illustrate that if a hotel increases its review scores by 1 point on a 5-point scale (e.g., from 3.3 to 4.3), the hotel can increase its price by 11.2 percent and still maintain the same occupancy or market share.")] [How Much Are Online Reviews Actually Worth, RevLocal ][The Importance of Online Customer Reviews, Invespcro ("Customers are likely to spend 31% more on a business with 'excellent' reviews.")] Businesses that provide inferior service, that have fewer reviews or have reviews that are out of date, lose. [Brian Sparker, 7 Online Review Tactics to Boost Your Social Media Marketing, SproutSocial Nov. 16, 2015 ("4 out of 5 consumers reverse their purchase decisions based on negative reviews")] [Dan Hinckley, New Study: Data Reveals 67% of Consumers Are Influenced by Online Reviews, Moz Sept. 2, 2015 ("Have four or more negative articles about your company or product appearing in Google search results? You’re likely to lose 70% of potential customers")]

See also FTC Guides Concerning the Use of Endorsement and Testimonials in Advertising - requiring individuals to disclose when they are paid for online endorsements


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