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Consumer Review Fairness Act of 2016 — Beware of the Negative Online Review

By Cheryl A. Falvey & Joe Meadows on December 28, 2016
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Retailers and consumer products companies need to be aware of a new law affecting negative online reviews. On December 14, 2016, President Obama signed the Consumer Review Fairness Act of 2016 (H.R. 5111) into law. The Act voids “non-disparagement clauses” in form contracts designed to prevent consumers from posting negative comments and online reviews of products and services. The Act also makes it unlawful for companies to include these clauses in their form contracts. The Federal Trade Commission will enforce the Act in the same way it enforces against unfair or deceptive trade practices under its jurisdiction; state attorneys general may also enforce the Act under certain conditions. For existing contracts, the Act will take effect in 90 days and FTC/state enforcement may commence one year from now.

According to the sponsoring House Committee on Energy and Commerce, the Act is designed to “curtail non-disparagement clauses in order to preserve the credibility and value of online consumer reviews.” The Act arose following high profile actions by companies to suppress negative consumer reviews pursuant to “gag” clauses in form contracts. In one instance, a company referred a bad review to a debt collector to enforce a $3,500 contract penalty against the consumer.

Whether the Act leads to serious FTC/state enforcement of the now-banned clauses is uncertain. The Congressional Budget Office estimates that enforcement collections will be “insignificant” because of the small number of cases that will be pursued. More likely, companies will simply remove non-disparagement clauses from their contracts to comply with the law, or otherwise be in a position to defend these clauses under the Act’s exceptions. Those exceptions include clauses prohibiting disclosure of, or allowing the removal of, trade secrets, privileged or confidential information, private medical information, and clearly false or misleading content.

The Act is careful to make clear that it does not restrict companies’ rights to take actions against false, abusive, vulgar, or discriminatory reviews. Companies may still take down such reviews and/or pursue defamation and similar claims against reviewers. The Act’s scope is thus intentionally narrow: companies cannot include (and must now remove) non-disparagement clauses in their form contracts.

Photo of Cheryl A. Falvey Cheryl A. Falvey

Cheryl A. Falvey helps clients launch innovative new products while protecting their brand and reputation, avoiding and defending liability in the marketing of their products, building safety and security into their products with science-based risk assessment, and successfully navigating product safety challenges with…

Cheryl A. Falvey helps clients launch innovative new products while protecting their brand and reputation, avoiding and defending liability in the marketing of their products, building safety and security into their products with science-based risk assessment, and successfully navigating product safety challenges with rapid response.

An experienced trial lawyer, and a former general counsel of the United States Consumer Product Safety Commission (CPSC), Cheri defends class actions, unfair competition, product liability and other mass tort claims arising out of consumer, occupational, and environmental exposures. She also provides brand and consumer protection counseling services, with a focus on product safety and security, including the Internet of Things; privacy; anti-counterfeiting; and digital media. Cheri represents a wide range of clients, from emerging companies to multinational Fortune 500 conglomerates.

Cheri is widely recognized as a leader in her field. She is one of an elite group of attorneys to be ranked in Chambers USA, Band 1 for Product Liability: Regulatory. She is highly regarded for her considerable experience advising clients on regulatory issues, including risk assessments, product recalls and CPSC investigations.

She represents clients on litigation and counseling matters regarding:

  • Compliance with statutes and regulations enforced by the CPSC, FDA, NHTSA, and the FTC.
  • Handles product recalls conducted in cooperation with NHTSA, CPSC, and FDA, and defends clients in agency enforcement actions seeking civil and criminal penalties.
  • Advises manufacturers faced with the potential release of unfair and inaccurate information by the government.
  • Counsels and defends clients on the sale and marketing of consumer products on the Internet, including compliance with the Children’s Online Privacy Protection Act, the FTC’s Green Guides, and state and federal privacy laws.

Prior to joining Crowell & Moring, Cheri served as the general counsel of the CPSC. In that capacity, she oversaw all federal court litigation, including civil and criminal cases referred by the Commission to the Department of Justice. Her tenure at the CPSC included advising the agency on the implementation of the Consumer Product Safety Improvement Act, a sweeping change to its statutes that had an impact across diverse industry sectors.

Cheri serves as Vice -chair of the American Bar Association’s Consumer Products Regulation Committee, Administrative Law & Regulatory Practice Section. She was named to the National Law Journal’s 2014 list of Governance, Risk & Compliance Trailblazers & Pioneers. Prior to joining the CPSC, Cheri had over 20 years of private practice experience as a partner with another international law firm where she chaired the firm’s D.C. litigation practice. Cheri is also a former member of Crowell & Moring’s Management Board.

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  • Posted in:
    Business and Commercial
  • Blog:
    Retail & Consumer Products Law Observer
  • Organization:
    Crowell & Moring LLP
  • Article: View Original Source

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