The Federal Trade Commission has stepped up enforcement of the Consumer Review Fairness Act of 2016 (CRFA) which prohibits companies from barring honest consumer reviews of their products and services. While enforcement of the CRFA was initially slow, that changed this year.
On August 16, 2019, the FTC announced that it had approved final settlement orders in five separate cases against companies for violating the CRFA. The violations vary and include banning anything less than a 5-star rating, prohibiting negative comments about the company or its employees on social media, and even barring customers of a horseback riding company from calling Animal Control:
- A Waldron HVAC, LLC d/b/a Waldron Electric Heating and Cooling, LLC – The FTC alleged that this Pittsburgh-based electrical, heating and cooling company (and its owner) violated the CRFA by including non-disparagement language in its form contracts. Specifically, the contracts stated that customers had to keep the contract confidential and could not share its contents with anyone, including the BBB, and they would have to pay liquidated damages if they did so.
- National Floors Direct, Inc. – The FTC alleged that this Massachusetts flooring company included language in its contracts prohibiting customers from “publicly disparaging or defaming National Floors Direct in any way or through any medium,” in violation of the CRFA. Not abiding by this clause would result in a penalty up to three times the monetary value of the purchase order.
- LVTR LLC, d/b/a Las Vegas Trail Riding – The FTC alleged that this recreational horseback riding company and its owner impermissibly required customers to “agree not to call Animal Control or any governmental agency or individuals if there is a discrepancy to how the horses/animals are taken care of,” and restricted them from making “any negative statements, whether written or oral including social media about our Company, Volunteers, Owners, Representatives, etc.” Further, “the only allowance for less than a 5 star review” was on the company’s own review platform. Violation of this provision would result in a $5,000 fine and payment for the company’s legal representation.
- Shore to Please Vacations – The FTC alleged that this company offering rental properties in Florida (and its owner) violated the CRFA by prohibiting its customers from leaving negative reviews—which included any review less than “5-star” or “absolute best,” or “any review or comment deemed to be negative” by a company officer or member. Breach of this clause would result in $25,000 liquidated damages.
- Staffordshire Property Management, LLC – The FTC alleged that this Baltimore-based residential property management company included impermissible language in its rental contracts barring prospective renters from disparaging the management company or any of its employees and from disseminating any material or communications related to the company or the application process.
The FTC’s consent decrees require each of the five companies to refrain from using “review-limiting contract terms” in their form contracts. The companies must post a notice on their websites or individually notify all customers who entered into contracts containing the violating language. The notice will advise customers that the company used contract language that can no longer be enforced against them and that customers have the right to post an honest review, even if it’s negative. The companies are also required to submit compliance reports to the Commission and create and retain certain personnel and contract records for several years after entering the settlement order.
The CRFA does not provide a private right of action, although it remains an open question as to whether the use of “review-limiting” contract language will constitute an unfair or deceptive business practice under state consumer protection laws. The recent increased scrutiny by the FTC may spur private litigation on these same issues. Accordingly, businesses should be vigilant in excising these kinds of provisions from any form contracts to avoid government enforcement, but also to curb potential costly class-action litigation.