Online reviews are everywhere. Amazon, Yelp, Google, and many other sites have forced businesses to acknowledge the influence that online reviews can have on potential customers looking to make informed purchasing decisions. Companies are acutely aware that positive reviews can garner goodwill and increase sales. But if they’re negative, especially very negative, they can have the opposite effect—and then remain online forever and be what people tend to most remember.
Some businesses engage unhappy customers and try to turn negative reviews into constructive experiences by making amends. Others have taken a more controversial approach and have used contractual terms to prohibit negative reviews instead. I’ve occasionally had clients who want these provisions in their website terms of service and other standard contracts. What do they look like? Take this one, which was in my nephew’s lease. It’s harsh—yet strangely amusing:
Resident and occupants shall not use the internet or cyberspace in any manner to disparage, defame, or injure the business or business reputation of the apartment owner or Management….[and] shall not publish, misuse, or use any photos or video of Management employees or the apartment community or signage….[and] shall not make, post, or publish misleading, deceptive, untruthful, groundless, false, or unfair statements or commentary about the apartment community, the Management employees, the owner, or Management on or to any internet website or domain, internet blog, internet social media, newspaper, magazine, television, radio, or other news or social media. Resident is prohibited from making, publishing, stating, or posting any statement or communication that, while partially true, lacks or fails to disclose other material facts in such a way such as to mislead the listener, viewer, or reader. Management shall be entitled to terminate the right of occupancy or lease of any Resident or occupant who violates … this [provision]. [emphases added]
I laughed at this; a hearty LOL. Termination of the lease…and eviction? It’s absurd. Overlooking its vague language like “misleading,” “groundless,” and “partial” truth for the moment, the First Amendment only prohibits the government from interfering with your free speech rights. But what about private entities? After all, you can’t insult your boss to his face and then expect not to be fired. Private entities can and do interfere with free speech in many contexts and do so without legal repercussions—just look at any “inappropriate use” policy on a website. Is this lease provision enforceable?
NO—well, not anymore at least. Since 2017, the federal Consumer Review Fairness Act (“CRFA”), allows consumers to share their opinions online or off. In other words, it protects a consumer’s right to complain, which we Americans love to do. The CRFA was passed because companies tried to silence their online critics using various contractual tactics. Some imposed monetary fines for negative reviews, and then customers who didn’t pay were reported to credit agencies. Others banned customers from making more purchases. Some even assigned the copyright of their customers’ reviews to themselves and then had them removed using “takedown notices” under the Copyright Act. They got creative.
Enter the CRFA….
The CRFA stops these practices and addresses three main areas. It’s illegal to use a “form contract” that:
1. Prohibits or restricts the ability of an individual who is a party to the contract to review a company’s products, services, or conduct;
2. Imposes a penalty or fee against an individual who gives a review;
3. Requires an individual to give up or transfer his/her intellectual property rights in the review’s content.
An anti-review provision falling into one of these areas is void and has no legal force. The remainder of the contract is presumably unaffected. But as discussed below, other provisions could perhaps be impacted too.
This only applies to “form contracts” for goods and services. These are contracts with “standardized terms” imposed “without a meaningful opportunity…to negotiate the standardized terms” (also called adhesion contracts). This covers almost all online agreements (e.g., terms of service, end user licenses, etc.), as well as physical contracts like the above lease since they’re all non-negotiable. But the statute exempts independent contractor and employer-employee agreements, which may still contain such clauses whether “standardized” or not. And contracts where parties have actually negotiated are exempt too.
The CRFA encompasses every type of review (a “covered communication”) and medium of expression, such as “a written, oral, or pictorial [photos/videos] review, performance assessment of, or other similar analysis of ... the goods, services, or conduct of a person by an individual who is party to a form contract….” It’s quite broad in defining what a review is and how it appears.
Those Pesky Exceptions
Where would we lawyers be without exceptions? The CRFA has some exclusions which allow form contracts to prohibit submission or disclosure of a review, or even its removal in certain instances, if it’s: (1) “unrelated to the goods or services” offered on the company’s site; (2) “clearly false or misleading”; or (3) information gathered for “law enforcement purposes.” Or if a review contains: (4) trade secrets or other confidential, privileged, or private information (like personnel and medical info); (5) “viruses, worms, or other potentially damaging computer code”; (6) 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;” or (7) other “unlawful” content.
Most reviews are not in these categories. And while some exceptions are clear about what’s prohibited, such as explicit sexual content and trade secrets, others are ambiguous and problematic. For example, suppose a consumer reviews a company’s services and states that the CEO is cheating on his wife. Even if it’s true, the review can be prohibited by the company’s standardized contract as it’s “unrelated” to the services. But what if the review states that the CEO is leaving the company because of his affair and the incoming CEO is changing and improving services. Is the infidelity still “unrelated”? Maybe, but it’s a closer question. Relevance is a broad legal concept.
The “clearly false or misleading” exception could be problematic too. Suppose a review for a housecleaning service states that it “fails to perform complete criminal background checks on its employees.” But perhaps the company is diligent and does this. In this consumer’s mind, maybe “complete” means overseas criminal background checks for foreign employees too. Is this review “misleading”? Perhaps. But it’s a very fact-dependent question and easy to see where problems can arise—the type of problem that can spawn expensive litigation.
And in today’s “woke” world, the very nebulous exception that a review may be “inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristic” is vague and inherently problematic. Explicit racial slurs would surely qualify, but what about a review that just mentions race? For instance: “This Boston hotel is top-notch. The mostly Haitian staff is very friendly and accommodating, which is what I love about the Haitian people. Boston needs hotels like this.” Is this review “inappropriate”? Does mentioning the staff’s race—and stereotyping Haitians as “friendly and accommodating”—mean that it can be contractually banned and removed? It’s hard to say.
But Can I Sue….and Make My Lawyer’s Day?
Sadly, no. The CRFA doesn’t give consumers the right to sue. Only a state’s Attorney General or the Federal Trade Commission can enforce it and sue violators. A consumer’s recourse is to file a complaint with these agencies, which may or may not pursue them. But the CRFA doesn’t prevent a state from passing its own law to address these practices, which may give its consumers even more rights (as California has done). However, the statute doesn’t operate in a vacuum either and could potentially have other consequences, as discussed in the next section.
Can the CRFA Affect Other Contract Terms?
Time for some creative lawyering. Let’s consider how the CRFA could have a broader impact on an agreement which contains these prohibited provisions. If an anti-review provision is tied to other form contract terms, could it invalidate them too? For example, could a standard “Limitation of Liability” clause, which limits financial exposure, be voided and thereby greatly increase a company’s liability?
Suppose you have an online contract with XYZ cloud service to backup your data for $60/month. It will almost certainly have a limitation of liability provision restricting XYZ’s damages to perhaps just your monthly fee should anything happen. The company then gets hacked, your personal info is exposed, and you become a victim of identity theft costing you thousands of dollars. What’s XYZ’s liability? Probably only $60. That’s all. It sounds very unfair to you but not to the company (and maybe it’s just an odd coincidence the acronym for these clauses is “LOL”). Nevertheless, this type of limitation is commonplace and typically valid. And let’s say you leave a scathing review for XYZ too.
But there’s an overly broad anti-review clause in XYZ’s contract. The limitation of liability applies to the entire contract—including the anti-review provision—and protects XYZ in all sorts of situations such as breaches, failures of performance, and tortious conduct. Could you circumvent the limitation and sue XYZ for more than $60 for the hacking and identity theft? Even though your lawsuit has nothing to do with the anti-review clause, it’s still an illegal and void provision courtesy of the CRFA. Could the limitation clause be voided too? (It would be quite helpful to you.) In other words, can the mere presence of an anti-review clause affect other provisions?
The CRFA states: “[A] provision of a form contract is void from the inception of such contract if such provision… imposes a penalty or fee against an individual … for engaging in a covered communication.” (emphases added). Could you argue that because the limitation of liability significantly and broadly curtails XYZ’s exposure it essentially operates as a “penalty” for an online review since $60 is all that you can ever collect for the company’s use of an illegal anti-review provision? Should the limitation therefore be void also? Even though you can’t sue under the CRFA, perhaps you could sue for other review-related reasons (like if the company responds and defames you or discloses confidential info). Again, the issue isn’t whether your review is problematic, but only that the contract contains an anti-review provision in the first place.
In other words, should XYZ have the right to restrict your ability to leave a review while at the same time limiting its liability in all instances to only $60? This seems somewhat punitive to me and could arguably fall within the CRFA’s scope. Remember, the statute requires that the entire provision must go. So if the limitation of liability clause is invalidated, could you recover all your identity theft damages from XYZ? I don’t know. But this hypothetical illustrates that things are not always as simple as they may look. I sometimes tell clients: Do you really want be a test case? It could be an expensive lesson.
Hey Siri, Let’s Negotiate that Terms of Service!
So, what can businesses do if they still want to use these provisions unhampered by the statute? They might try to get more creative. For example, they may allow consumers a “meaningful opportunity to negotiate” certain standardized terms so they can add more restrictive anti-review terms to the agreement. Nothing in the CRFA requires that a company actually accept what a customer wants to negotiate—only a “meaningful opportunity” to do so. What does “meaningful” mean in this context? Good question.
While giving consumers this opportunity just to potentially muzzle them later may be too costly and time-consuming for most businesses right now, the internet constantly strives to make transactions more frictionless. Rapid advances in artificial intelligence and “smart contracting” may mean that some form of negotiation is on the horizon. Have you ever tried to “meaningfully negotiate” with AI? Me neither….but it’s coming (and probably sooner than you think)—and the statute is currently silent about how this negotiation takes place. For now though, the CRFA has some teeth; the FTC has brought successful enforcement actions, including against businesses here in Massachusetts.
“We’re from the FTC. And we’re here to help.”
For those companies that have anti-review provisions in their standardized agreements, I can say this: Proceed with caution. They need to be narrowly tailored to comply with the CRFA—and any state statutes too. The FTC’s mandate prohibiting “unfair or deceptive acts or practices” is quite broad (as is a state Attorney General’s). And if the FTC gets involved with a business, it can be a looong relationship. In addition to imposing monetary penalties (which increased in January of 2024), the FTC’s orders and consent decrees can impose terms of up to 20 years, which means the agency gets to monitor the company’s compliance during that period.
And what business owner doesn’t want two decades of direct government oversight? It sounds, uh.…delightful. So just be aware that the CRFA is out there and could be a problem if your company overreaches contractually when trying to control what customers say online. One more thing: By reading this blog post, you’ve consented to never giving it a negative review. If you do, you have to clean my apartment. I probably should have mentioned that at the outset. Is there a problem?