On December 15, 2016, former President Obama signed into law the Consumer Review Fairness Act of 2016 (the “Act”).  The Act makes certain provisions of a form contract void if the provisions prohibit or restrict an individual from engaging in a review of a seller’s goods, services, or conduct.

The Act applies to “Covered Communications,” which is defined as “written, oral or pictorial review, performance assessment of, or other similar analysis of, including by electronic means, the goods, services or conduct of a person by an individual who is a party to a form contract with respect to which such person is also a party.”  Under the Act, “Form Contract” is defined as “a contract with standardized terms that is: (1) used by a person or entity in the course of selling or leasing its goods or services; and (2) imposed on individuals without a meaningful opportunity for them to negotiate the standard terms.”

The following provisions are void and it is unlawful for a person or entity to include such clauses in Form Contracts in effect on or after March 14, 2017:

  • Clauses that prohibit or restrict the ability of an individual who is a party to the Form Contract to engage in Covered Communications;
  • Clauses that impose a penalty or fee against an individual who is a party to the Form Contract for engaging in a Covered Communications; or
  • Clauses that transfer or require an individual who is a party to the Form Contract to transfer to any person any intellectual property rights in review or feedback content, with the exception of a non-exclusive license to use the content, that the individual may have in any otherwise lawful covered communication about such person or the goods or services provided by such person.

The Act does not protect individuals who post libelous reviews, publically slander a company or violate any duty of confidentiality imposed by law.  Additionally, companies have the right to remove or refuse to display publicly on an Internet website or webpage owned, operated or otherwise controlled by such a party any content that contains the personal information or likeness of another person, or is libelous, harassing, abusive, obscene, vulgar, sexually explicit, or is inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristic; is unrelated to the goods or services offered by or available at such party’s Internet website or webpage; or is clearly false or misleading.  Finally, the Act preserves a party’s right to establish terms and conditions with respect to the creation of photographs or video of such party’s property when those photographs or video are created by an employee or independent contractor of a commercial entity and solely intended for commercial purposes by that entity.

At this point, the Federal Trade Commission has not instituted a civil or administrative action with respect to the violation of the Act.  Instead, the attorney general or other consumer protection officer of any state has the right to bring a civil action on behalf of its residents to obtain the appropriate relief.

All companies should review their Form Contracts and remove any prohibited clauses from such contracts by March 14, 2017.  Additionally, companies who post consumer reviews on their websites should review their terms of use agreements and community guidelines to ensure they are in compliance with the Act.  For assistance in reviewing your contracts or terms of use, the attorneys at Navigato & Battin are here to offer assistance.