Consumer Review Fairness Act

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How important are online reviews in your shopping experience? Many rely heavily on consumer reviews in order to generate business. But what happens when instead of providing customers the candid information that they deserve, companies try to silence their critics in order to improve their online reputation?

In recent years, companies selling products and services have included non-disparagement clauses (“gag clauses”) in their contracts in hopes of curtailing online criticism. Gag clauses are aimed at discouraging customers from writing honest reviews that criticize the company—and punished customers for their negative reviews in the form of liquidated damages. The problem is such clauses are illegal. In 2016, as we had previously written, Congress passed the Consumer Review Fairness Act, which prohibits companies from implementing gag clauses in non-negotiable consumer form contracts. In so doing, lawmakers sought to encourage free speech, consumer rights and the integrity of truthful criticism regarding goods and services sold online.

We have previously written about the U.S. legal landscape regarding consumers’ rights to post negative reviews of products or services on the internet, including some of the implications of the Consumer Review Fairness Act on these rights. The Consumer Review Fairness Act was passed in December of 2016 in response to some businesses’ efforts to prevent customers from giving honest reviews by signing non-disparagement or similar agreements as a condition to receiving a particular product or service.

This post concerns an issue involving the federal Communications Decency Act of 1996 (the “CDA”) and its relationship to rights and obligations of companies that provide a forum for reviews and ratings of businesses (the “review sites”), the reviewers, and the businesses that are reviewed. In July of this year, the Supreme Court of California issued an opinion, styled Hassell v. Bird, that analyzed the relationship of these entities and provided some guidance and clarity as to legal rights provided by the CDA in this context.

We have all seen the reviews of products or services that disgruntled consumers post on review sites such as Yelp. Lately, however, some consumers have faced lawsuits for violating “gag orders,” or non-disparagement clauses, found in agreements between businesses and consumers. These clauses restrict consumers’ ability to publish any negative criticism about their experiences and are often placed in the fine print of form contracts.  These agreements provide that, when the consumer posts a negative review, or even speaks negatively about the business’s products, services, or conduct, the business would have a cause of action against the consumer for breach of contract.