January 23, 2018

January 23, 2018

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January 22, 2018

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Consumer Review Fairness Act’s Point of “No Return”

On December 14, 2016 the United States Congress passed an act known as the “Consumer Review Fairness Act of 2016” (“CRFA”)[1]. The stated goal of this new legislation is “to prohibit the use of certain clauses in form contracts that restrict the ability of consumers to communicate regarding the goods or services offered in interstate commerce that were the subject of the contract.” The reach of the legislation’s protection of honest consumer reviews and opinions extends beyond content that may be posted on a company’s own website, as the Federal Trade Commission has clarified that the CRFA “protects people’s ability to share their honest opinions about a business’s products, services, or conduct, in any forum, including social media.”[2] Subject to certain exceptions under the CRFA relating to content that a company may be able to remove, edit, or suppress, CRFA generally provides that a provision contained in a form contract is void at inception if the provision: (i) “prohibits or restricts the ability of an individual who is a party to the form contract to engage in a covered communication;” (ii) “imposes a penalty or fee against an individual who is a party to the form contract for engaging in a covered communication; or;” or (iii) “transfers or requires 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.” Sections of the CRFA prohibiting and invalidating covered contract clauses became effective as of March 14, 2017, while sections providing for Federal Trade Commission and State enforcement become effective as of December 14, 2017.

Practice Take Away

The practical effect of this legislation is that a company or person offering goods or services needs to ensure that its “Terms of Use” and any other non-negotiable contract in place with its customers does not prohibit or restrict the customer’s ability to post a product or performance review, except as permitted under the terms of the CRFA. The following are some examples of commentary or review content for which removal, editing, or suppression may not be affected by the CRFA:

  • 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;

  • Content that is unrelated to the goods or services offered by or available at such party’s Internet website or webpage;

  • Content that is clearly false or misleading;

  • Content that contains trade secrets or commercial or financial information obtained from a person and considered privileged or confidential;

  • Content that contains personnel and medical files and similar information the disclosure of which would constitute a clearly unwarranted invasion of personal privacy;

  • Content that contains records or information compiled for law enforcement purposes, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy;

  • Content that is unlawful in nature; or

  • Content that contains any computer viruses, worms, or other potentially damaging computer code, processes, programs, applications, or files.

In order to prevent a violation of the CRFA, companies or persons that offer goods or services online should conduct an audit of their Terms of Use and any other form contracts containing a provision pertaining to customer reviews and feedback to ensure their practices are in compliance with this new legislation.

[1] For the full text of the CRFA visit: https://www.congress.gov/114/plaws/publ258/PLAW-114publ258.pdf

[2] For the FTC’s guidance on “What Businesses Need to Know” about the CRFA visit: https://www.ftc.gov/tips-advice/business-center/guidance/consumer-review-fairness-act-what-businesses-need-know

Copyright © 2018, Sheppard Mullin Richter & Hampton LLP.


About this Author

Robert A. Darwell, Entertainment, Technology, Advertising, Attorney, Sheppard

Robert Darwell heads the firm's internationally acclaimed Transactional Entertainment, Technology and Advertising Practice Group, which was recently ranked by U.S. Legal 500 in its top tier. He is a partner in the firm's Century City and New York offices. Mr. Darwell enjoys a global practice representing major motion picture studios, television networks, independent producers, new media companies, financial institutions, investors, financiers and other institutional and individual entertainment, media and convergence clients around the world in connection with all aspects of the...

Cameron L. Mabrie, Sheppard Mullin, Entertainment, Technology, and Advertising Practice lawyer

Cameron L. Mabrie is an associate in the Entertainment, Technology, and Advertising Practice Group in the firm's Century City office.

Mr. Mabrie’s practice focuses on advising clients on various transactional entertainment matters.  Prior to joining Sheppard Mullin, Mr. Mabrie practiced as a transactional associate at both Skadden Arps and Eisner Jaffe, where he advised clients on a broad range of transactions, both domestic and international, including mortgage and asset based financings and re-financings, acquisitions and dispositions of various types of real estate assets, complex joint venture and partnership formations, private placements of various types of real estate securities, and commercial leasing. He has also counseled clients on various corporate transactions including mergers and acquisitions, equity financings, debt financings, public and private offerings, and other strategic business transactions.