FTC Ups Consumer Review Fairness Act Enforcement
The FTC recently announced three administrative enforcement actions under the Consumer Review Fairness Act (CRFA), the agency's first actions alleging solely CRFA violations. Passed by Congress in 2016, the CRFA prohibits form contracts that limit a consumer's ability to communicate his or her assessment of a company's products or services. The CRFA also prohibits penalizing customers for such activity. In the proposed consent orders settling the cases, each company is prohibited from using review-limiting contract terms in the future and is required to notify consumers that these terms in existing contracts are void and unenforceable.
While non-disparagement clauses are perhaps the most common term that could run afoul of the CRFA, these enforcement actions illustrate that the FTC is also on the lookout for other types of restrictions companies may use. For example, the FTC cited terms that prohibited consumers from contacting or complaining to government agencies or the Better Business Bureau. The agency also cited a term in one form contract that prohibited consumers from making the contract terms public. Furthermore, the challenged form contracts imposed monetary penalties or made consumers liable for legal fees and costs if they violated the challenged terms.
These enforcement actions are a reminder to companies to review their consumer agreements for any terms that could be interpreted as limiting or imposing penalties for consumer reviews or complaints in any way. In addition to injunctive relief, the FTC can seek civil penalties of up to $42,530 per violation for knowing violations of the CRFA. Moreover, even if a contract that restricts consumer reviews or complaints does not fall under the CRFA, the FTC could also investigate whether it is an unfair or deceptive practice under Section 5 of the FTC Act.
© Arnold & Porter Kaye Scholer LLP 2019 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.