FTC ACTIONS: IT’S ILLEGAL TO PROHIBIT NEGATIVE CUSTOMER REVIEWS

Good customer reviews are gold. Bad customer reviews are poison. The negative effect of bad customer reviews can be painful. The proper solution is to provide great products and services that garner good reviews. However, some businesses would like to not make such efforts and just use scare tactics in order to limit negative reviews. Not exactly a good business practice.

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So, the Consumer Review Fairness Act, in effect since 2017, prohibits putting a provision in a form contract that restricts a consumer from giving negative or disparaging reviews or comments on a business’s products or services. This prohibition also applies to imposing any penalty on a consumer for making such comments. A business also may not require the consumer to assign the copyright in his or her comments.

This last restriction needs some explanation. In the past, probably on the recommendation of a creative lawyer, a business included in its terms that customers must assign the copyright in their comments to the business. The idea was that then posting those comments, which are owned by the business, became a copyright infringement of the business’s IP, and so can be removed by the business. This was a wacky attempt to control customer reviews – but – to the credit of the wacky lawyer – this strategy merited being included in the Act as a prohibited activity.

Obviously, the Act still allows a business to initiate legal action for defamation, libel, or slander, or any similar cause of action and allows for removal of comments that contain personal information or likeness of another person, or is harassing, abusive, obscene, vulgar, sexually explicit, or is inappropriate with respect to race, gender, sexuality, or ethnicity, etc.

The FTC recently announced several settlements for violations of the Act. The facts of one case, as alleged by the FTC, are worth reviewing, if for no other reason, for comic relief:

Certain rental properties in Florida were managed by “Shore to Please Properties.” Apparently, this company was not so Shore about their ability to please so they included in their form agreement that any vacationer that posted less than a 5 star rating, or other less than great review, would owe the company $25,000. Outrageous? Of course, but the company had the chutzpa to actually file law suits to enforce the provision! Here’s the provision from their agreement:

By signing below, you agree not to defame or leave negative reviews (includes any review or comment deemed to be negative by a Shore to Please Vacations LLC officer or member, as well as any review less than a “5 star” or “absolute best” rating) about this property and/or business in any print form or on any website . . . . Due to the difficulty in ascertaining an actual amount of damages in situations like this, breaching this clause . . . will immediately result in minimum liquidated damages of $25,000 paid by you to Shore to Please Vacations LLC.

Bottom line is to provide good products and services!

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William Galkin manages GalkinLaw. Mr. Galkin has dedicated his legal practice to representing Internet, e-commerce, computer technology and new media businesses across the U.S. and around the world. He serves as a trusted adviser to both startup and multinational corporations on their core commercial transactions.

  
                                                                                                         
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