Business receive both positive and negative reviews all over the internet. But, can a business force consumers not to post negative product reviews?
Federal Trade Commission’s Regulation
The Federal Trade Commission (FTC) enforces the Consumer Review Fairness Act (CRFA). Under the CRFA, it is unlawful for a business to offer a form contract containing provisions that
- Prohibits or restricts people from posting reviews on a company’s products, service, or conduct
- Imposes a penalty or fee against a person for posting reviews
- Transfers or requires a person to transfer the intellectual property rights in review or feedback content (with some exceptions).
There are some expressed exceptions to the regulation, for example, (1) trade secrets or commercial or financial information obtained from a person and considered privileged or confidential, (2) certain information that would constitute a clearly unwarranted invasion of personal privacy, or (3) certain unlawful content.
A form contract is defined to be a standardized terms (1) used by a person in the course of selling or leasing the person’s goods or services; and (2) imposed on an individual without a meaningful opportunity for such individual to negotiate the standardize terms. Express exceptions to this definition are employer-employee or independent contractor contracts.
Within E-commerce Business
It is important to be able to identify common form contracts and understand the common clauses that may get a business in trouble.
Form Contracts: In an e-commerce business form contracts may be the main sales agreement. The sales agreement may be in the terms of use, terms of sale, or the standard sales agreement. If a business is providing services, the form contract may be the service agreements. The exception in the regulation does specifically state that employee-employer contract and independent contractors is not included.
Prohibited Contract Provisions: Some clauses that are added in form contracts include, but not limited to, confidentiality clauses and non-disparagement clauses. These clauses generally state that a customer must keep information about the product or service confidential or a customer cannot make any negative statements about the business, the product, or service. The clauses also try to get drafting in a way to avoid making a prohibition by imposing a penalty or fee for making negative reviews.
There may be certain contracts where the prohibited contract provisions may be included. For example, settlement agreements in relation to a dispute may not be considered a form contract because it is not a standard agreement for all customers to purchase a product. In addition, to these certain contracts, sufficient negotiation power should be provided to the customer when entering into non-form contracts just to be safe.