Consumer Reviews – The Rules Have Changed

There’s no doubt in today’s electronically driven economy, online reviews are an important part of business. Tools such as Google, Yelp, Facebook and others provide platforms for consumers to share experiences and opinions before, during and after their transactions. An increase of just a single star on a restaurant’s Yelp profile can correspond to an increase in sales by 5 percent to 9 percent. However, the converse is also true – 60 percent of people in another survey stated that negative reviews deter them from patronizing a listed business. 

With so much at stake, it is tempting for businesses to try to exert more control over customer reviews, especially bad reviews. In the past, some creative companies have taken steps to limit the possibility of bad reviews by writing so called “gag” clauses into their contracts, restricting the other side’s ability to post a negative review. If the patron posted a negative review, the company could sue for breach of contract. Other companies have attempted to control the copyrights of customer reviews to dictate whether a review was made public and where it was displayed.

However, the rules all changed in March 2017, with the passage of the Consumer Review Fairness Act (CRFA). The item was passed with little fanfare and many are still unaware of its existence. Although the CRFA may not have made headlines, it is important for businesses to be aware of and for companies to conduct a review of their contracts to make sure they are not in violation of the new law.

What does the CRFA do?

As stated by the Federal Trade Commission (the administrative agency charged with enforcing the law), the CRFA protects people’s ability to share their honest opinions about a business’ products, services or conduct in any forum, including social media. To that end, the CRFA makes it illegal for a company to use any contractual provision that: 

• Bars or restricts the ability of a person who is a party to that contract to review a company’s products, services or conduct;
• Imposes a penalty or fee against someone who gives a review; or
• Requires people to give up their intellectual property rights in the content of the review.

The CRFA does not leave companies completely powerless, but instead allows businesses to prohibit or remove reviews that:

• Contain confidential or private information (e.g. a person’s financial, medical or personnel file information or a company’s trade secrets);
• Are libelous, harassing, abusive, obscene, vulgar, sexually explicit or  are inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristics;
• Are unrelated to the company’s products or services; or
• Are clearly false or misleading

Before businesses set their sights on that last point, it should be noted that the FTC strongly cautions that, “It’s unlikely that a consumer’s assessment or opinion with which you disagree meets the ‘clearly false or misleading’ standard.” Any company found to violate the CRFA will be treated as if they violated the FTC rules regarding an unfair or deceptive act or practice and will be subject to financial penalties (up to $40,000 per violation), as well as a federal court order prohibiting the illegal conduct.

In light of the new law, there are actions that businesses should take now to make sure they are in compliance.

1. Companies should review all customer/client contracts, including any terms of service (TOS) for their website, as well as any e-commerce terms. One common term in standard website TOS’s is that the company owns the content of any inquiries or other communications submitted to the company. These provisions need to be examined to see if they fall within the purview of the statute
2. Companies should take steps to remove any provisions that could be interpreted as restricting a person’s right from sharing an honest review, penalize someone for a bad review, or claim copyright over the content of peoples’ reviews. This would apply even if you have never enforced such a provision nor intend to do so in the future. Liability under the CRFA is due to the mere existence of these provisions, not their actual enforcement.
3. Lastly, what should a business do if they get a bad review? Even before the passage of the CRFA, many on-line reputation experts would caution companies from taking any action against bad reviews.This is due to what is known as the Streisand Effect, in which attempts to hide, remove, or censor a piece of information usually has the unintended (and often negative) consequence of actually disseminating the information to a wider audience than it would have originally been exposed to if no action was taken.

Truly the best way to combat negative reviews is to provide goods and services that generate more positive reviews than bad.