Consumer Review Fairness Act: Recent FTC Complaints Put Spotlight on Legislation
Consumers often search for online reviews before making a purchase. This includes reading reviews of auto dealerships before buying a new or used vehicle.
Given the importance of online reviews in the purchase process today, federal regulators and lawmakers are taking steps to protect their availability and legitimacy. One step is passing legislation to thwart efforts by businesses to prevent customers from posting honest product reviews.
Contracts can’t impede reviews
Congress passed the Consumer Review Fairness Act (CRFA) in 2016 to stop businesses, including dealerships, from including provisions in contracts that allow them to penalize or sue customers for writing or posting negative online reviews about them or their products. Specifically, the CRFA voids standardized “form contracts” that impede customer reviews, and makes it illegal for businesses to present these contracts to customers.
Under the CRFA, form contracts cannot contain provisions that restrict a customer’s ability to post online reviews or performance assessments about the business’s goods, services or conduct.
Businesses also cannot:
• Assess a penalty or fee to a customer who posts an online review, or
• Require customers to sacrifice their intellectual property rights in the content of reviews.
The CRFA provisions apply to all customer contracts and agreements entered at the dealership, or in the terms and conditions posted by the dealership online. The law protects the ability of customers to share their honest opinions not only about vehicles they purchase from you, but also about the level of service they receive and the conduct of your salespeople and other employees.
Even if you don’t enforce provisions …
Your dealership could be found in violation of the CRFA even if you don’t try to enforce prohibited provisions. As long as such provisions are included in your form contracts, you could be found out of compliance with Section 5 of the Federal Trade Commission (FTC) Act.
Violations are generally met by consent decrees that impose specific requirements on the business, such as compliance and reporting requirements, as well as injunctive relief. Repeated violations of CRFA provisions could lead to financial penalties against your dealership.
The CRFA does allow dealerships to prohibit, in form contracts, certain kinds of reviews. These include reviews that contain confidential or private information (such as financial information or business trade secrets); are libelous, abusive, obscene or otherwise inappropriate; are unrelated to the dealership’s products or services; and are clearly false or misleading.
FTC issues complaints
Earlier this year, the FTC issued administrative complaints and proposed enforcement actions against two nondealership businesses that allegedly had violated the provisions of the CRFA. The FTC complaints claim that the businesses illegally used nondisparagement provisions in their consumer form contracts.
For example, it alleged that a vacation rental business’s contracts barred renters from leaving negative reviews about the property in any print form or on any website. The business also stipulated that customers who breached the clause would be subject to liquidated damages of at least $25,000.
Earlier this year, the FTC announced enforcement actions against several other businesses it alleged violated CRFA provisions. These included an HVAC company that inserted a prohibited confidentiality clause into its contract and a flooring company that included a nondisparagement clause in its contract, prohibiting customers from defaming the business through any medium. Both agreements also specified damage amounts that would be imposed on customers who violated the clauses.
Review your contracts
None of these FTC complaints or enforcement actions were issued against auto dealerships. But it might be wise to review your customer contracts with an attorney to make sure they adhere to the CRFA.
In a guidance document designed to help businesses comply with the CRFA, the FTC summed up their advice this way: “Let people speak honestly about your products and their experience with your company.” Consult with your attorney if you have more questions about how to comply with the CRFA.