The Federal Trade Commission’s (“FTC”) message is clear: companies can’t restrict consumers from publishing negative reviews as a condition of purchase. Provisions or clauses containing this sort of restriction are known as non-disparagement provisions, or “gag clauses.” The FTC’s Consumer Review Fairness Act (“CRFA”), which became effective in March 2017, prohibits such practices.
While the FTC has brought cases in the past related to non-disparagement clauses, those cases also included additional charges such as deceptive advertising. However, within the last month, the FTC has issued five citations focused exclusively on enforcing the CRFA.
Two property management companies are the most recent businesses to find themselves facing enforcement action after violating the CRFA. The first company dictated in its consumer contracts that any vacationer who posts a review giving the property less than a “5 star” or “absolute best” rating about a rental property and/or the company in any print form or on any website would owe the company $25,000 minimum. Multiple renters were sued by the owner of the company as a result of posting reviews that the owner deemed to be negative. The owner sought $25,000 plus attorney’s fees against each of the breaching renters.
The second company similarly included a non-disparagement clause that prevented a prospective tenant from disparaging the company or any of its employees, regardless of whether or not their rental application was ultimately approved.
As always, if you or your company handle consumer form contracts, it is encouraged to have them reviewed by experienced legal counsel in order to prevent any violations of consumer protection statutes, such as the CRFA.
* Kayley Lew contributed to this post.