February 06, 2017
The 2016 Consumer Review Fairness Act and Non-Disparagement Clauses in Form Contracts
The Consumer Review Fairness Act of 2016 takes effect March 14, 2017. The act prohibits non-disparagement provisions in form contracts that are imposed on an individual without a meaningful opportunity to negotiate. Emory Ireland and Maximilian Traut discuss what businesses need to know about the act.
Emory Ireland, Maximilian W. Traut
On Dec. 14, 2016, President Obama signed into law H.R. 5111, the Consumer Review Fairness Act of 2016 (CRFA) (Public Law No. 114-258). The CFRA is intended to protect consumer reviews of product and services. Contracts entered into on or after March 14, 2017, are subject to the CFRA.
The CFRA voids a provision in a form contract, and makes it unlawful for a person to such provision, if such provision:
- prohibits or restricts the ability of an individual who is party to the form contract to engage in a covered communication;
- imposes a penalty or fee against an individual who is a party the form contract for engaging in a covered communication; or
- transfers or requires an individual who is 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.
A “covered communication” is a “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 party to a form contract with respect to which such person is also a party.
A “form contract” means “a contract with standardized terms (i) used by a person in the course of selling or leasing the person’s good or services; and (iii) imposed on an individual without a meaningful opportunity for such individual to negotiate the standardized terms. Employer-employee and independent contractor contracts are specifically excluded from the definition of “form contract.”
Exceptions to the CFRA
There are a number of exceptions to the CFRA. Important to note that the CFRA does not affect
- “any duty of confidentiality imposed by law;”
- “any civil cause of action for defamation, libel, or slander, or any similar cause of action; and
- any person’s right to remove or refuse to publicly display, on its website, a covered communication that contains personal information, a likeness of another person, is obscene, vulgar or sexually explicit, is inappropriate with respect to race, sex or gender, is unrelated to the good or services offered by such person, or is clearly false or misleading.
Treatment of Violations
A violation of the CFRA is treated as an unfair or deceptive act or practice prescribed under section 18(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).
Any person that violates the CFRA is subject to the penalties and entitled to the immunities provided in the Federal Trade Commission Act (15 U.S.C. 41 et seq.).
The CFRA also gives state attorneys general and other state consumer protection officers the power to bring a civil action on behalf of its residents against any person to whom such state attorney general or state consumer protection officer has reason to believe that an interest of the residents of the State has been or is threatened or adversely affected by a person’s violation of the CFRA.
The Federal Trade Commission and state attorneys general can enforce the CFRA with respect to contracts entered into on or after Dec. 14, 2017.
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