The internet has made customer reviews ubiquitous, and smart businesses not only recognize the importance of these reviews, they actively manage them. According to one HBS study, the researcher determined that a one-star increase in Yelp rating leads to a 5-9 percent increase in company revenue. And the NY Times recently published an article about among other things the power of reviews on Amazon.
Where great reviews are welcomed by a business, some businesses have attempted to “silence” bad reviews using the fine print in customer agreements.
Attempts To Quiet The Customer
But some businesses have tried to prevent customers from posting bad reviews by including “non-disparagement clauses” in their customer agreements, and it has been taken too far. One business even sent a demand letter for $3,500 to a customer related to a bad review, and then reported the debt to credit agencies.
Introducing The Consumer Review Fairness Act (CRFA)
In response, effective March 14, 2017, the US Federal government enacted the Consumer Review Fairness Act (CRFA), which prohibits business from using form clauses prohibiting negative reviews. The restrictions are broad, covering many of the legal mechanisms businesses have tried to use. After December 14, 2017, the state attorneys general and the Federal Trade Commission (FTC) have authority to enforce the CRFA. This means companies could be subject to financial penalties, as well as a federal court order.
There is some good news out of this law for businesses – consumers can’t sue based on that law. It also states that contracts which are meaningfully negotiated, or relate to employment, are not covered. The CRFA does not prohibit civil actions where a review includes confidential, sensitive or private information, or constitutes defamation, libel or slander. The businesses is not at a total loss of control as they may remove posts on their own sites that are defamatory, obscene, explicit, harassing, false, unrelated to the business or misleading.
So where does that leave you? Check your form customer agreements, the ones your customers click through or sign without negotiation, and make sure that they don’t include non-disparagement clauses. And, although not legally required, it does seem to be smart business to consider ways to actively manage your customer reviews across the web.
This article was written by Jake Simon, an attorney and strategist with 19 years experience structuring, drafting and negotiating deals. Over the past decade, he has developed expertise providing innovative solutions with respect to intellectual property, privacy/security (Certified Information Privacy Professional (CIPP)) and digital consumer protection issues, and a working knowledge of a variety of business models including transactional, subscription and ad supported media.