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New Federal Law Prohibits Contracts With "Anti-Yelping" Provisions

18 January 2017

Late last year, President Obama signed into law the Consumer Review Fairness Act (CRFA). Intended to protect individuals who write unflattering online reviews of businesses, the CRFA voids contractual provisions in form contracts that: (1) prohibit non-disparagement; (2) impose liquidated damages or fines; or (3) exert control over the review through an assignment of intellectual property rights. Importantly, it also prohibits companies from offering form contracts with these provisions.

The CRFA empowers the Federal Trade Commission (“FTC”) and the states to enforce the law, and the FTC is directed to issue nonbinding best practices for compliance with the CRFA.

The CRFA is a congressional response to several highly publicized cases in which businesses have attempted to sue individuals for writing negative reviews on Yelp and similar platforms. One recent example involves a pet-sitting company that unsuccessfully sued its customer for US$1 million based on a Yelp review she had written, invoking a non-disparagement clause in the service contract. As another example, a wedding venue received backlash in 2014 for fining couples US$500 for each negative online review written by their guests. And in 2013, an online retailer attempted to fine a Utah couple US$3,500 for a negative review, which reportedly affected the couple’s credit rating.

In recent years, state legislatures and federal regulators have moved to prohibit these practices. In 2015, the FTC sued Roca Labs over its attempts, through the use of non-disparagement clauses, to prevent negative reviews of its supplements. California and Maryland, among other states, have also recently passed “right to Yelp” laws. The CRFA follows on the heels of such efforts.

Despite the tenor of the CRFA and related laws, companies still have legal options at their disposal to manage important reputational concerns. The CRFA explicitly preserves a company’s ability to seek removal of material that is false, misleading, libelous, defamatory, proprietary or sensitive in nature, or unrelated to the good or service at issue.  

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