Muzzling the Muzzlers: The Consumer Review Fairness Act

February 01, 2018

When you’re the only lawyer in your family, you get a lot of legal questions from family members regardless of your practice area. Whether it’s personal injury, criminal law, real estate—whatever—you become the go-to source for all things legal. Even though I’ve been practicing in the technology, internet, and intellectual property fields for over two decades, anything legal apparently means everything legal where family is concerned. So… …My nephew, who is completing graduate school in Georgia, had a problem recently with his landlord because of water and mold in his now-former apartment. After I perused Georgia’s rather unfriendly tenant law (as opposed to Boston), he sent me his lengthy and equally unfriendly 39 page lease. That’s when I came across this harsh yet amusing(!) provision buried on page 5:

Resident and occupants shall not use the internet or cyberspace in any manner to disparage, defame, or injure the business or business reputation of the apartment owner or Management….[and] shall not publish, misuse, or use any photos or video of Management employees or the apartment community or signage….[and] shall not make, post, or publish misleading, deceptive, untruthful, groundless, false, or unfair statements or commentary about the apartment community, the Management employees, the owner, or Management on or to any internet website or domain, internet blog, internet social media, newspaper, magazine, television, radio, or other news or social media. Resident is prohibited from making, publishing, stating, or posting any statement or communication that, while partially true, lacks or fails to disclose other material facts in such a way such as to mislead the listener, viewer, or reader. Management shall be entitled to terminate the right of occupancy or lease of any Resident or occupant who violates any portion of this Use and Conduct provision. [emphases added]

I laughed when I read this gag/non-disparagement clause; a hearty internet LOL. Some days it seems like the internet is only about disparaging others. And sooner or later, bad reviews—especially very bad reviews—find their way online regardless of what anyone tries to do, and usually with a viral vengeance. Suppression leads to aggression. Not surprisingly, my nephew confirmed that the housing complex and its management company have dismal online reviews. The clause didn’t appear to be working very well. But who knows? Maybe it did scare some tenants from posting reviews about their residential overlords. I suspect though, that most of them didn’t wade through 39 tedious pages of small, condensed print to see this asinine restriction, especially the part where the landlord can kick a family out of their home over a bad review. (Oy--what callous, blackhearted lawyer drafted that? I could have a lot of fun with it in court…) It’s an absurd provision, but is it legal? Overlooking for the moment that it contains fatally vague language such as “misleading,” “groundless,” “partial truth,” and otherwise sets a high bar for inexactitude, the First Amendment typically only prohibits the government from interfering with your free speech rights. But what about private corporate entities? After all, there’s a reason you can’t hurl invective and insults at your boss and expect not to be fired, right? Private entities can and do interfere with your free speech rights in many contexts and do so without legal repercussions. Can a private management company impose this condition on its tenants in its standard lease? In a word: NO. Well…not anymore at least—if these clauses were ever enforceable to begin with under a miscellany of various states’ laws. As of March 14, 2017, the federal Consumer Review Fairness Act (“CRFA”) became effective nationwide which allows a consumer of any product or service to share their honest opinions in online forums, including on every type of social media. In other words, it protects a consumer’s right to complain. With the proliferation of online review sites like Yelp, YellowPages, TripAdvisor, etc., businesses have been forced to acknowledge the power and sway that online reviews hold over potential customers, who are looking to better inform themselves when making their purchasing decisions. Companies are acutely aware that reviews can go viral with the click of a mouse-button or tweet. If the reviews are positive, they can garner customer goodwill and increase sales; if they’re negative, especially very negative, they can have the opposite effect—and then not only remain online forever, but be what people tend to most remember. Bad reviews are akin to having cockroaches in your home: They multiply quickly, you can never kill them all, and they always show up when company’s around. The smart businesses have learned to engage disgruntled customers directly and turn negative reviews into positive and constructive experiences by making amends. The not-so-smart ones use provisions like the one in my nephew’s lease instead. As odious as this provision is though, it’s hardly unique. The CRFA came into being because of numerous instances where companies tried many contractual tactics to silence and emasculate their online critics. Businesses in healthcare, retail, hotels, vacation rentals, etc., have tried to use their standard contracts—which includes the ubiquitous click-through agreements found on all major commercial sites—as a sword when dissatisfied customers dared to voice their opinions. Some companies imposed monetary fines for negative reviews, and then customers who refused to pay were reported to credit agencies, creating all sorts of headaches. Other businesses banned customers from making additional purchases. Other companies would assign the copyright of the customers’ reviews to themselves and then try to have them removed by sending “takedown notices” under the Digital Millennium Copyright Act. There was no shortage of creative lawyering for those looking to insulate themselves from bad reviews. Hence the passage of the CRFA, which brings some much-needed clarity to this area. ENTER THE CRFA.... The CRFA puts a stop to these abusive practices. What does it prohibit? There are three main areas the law addresses. It is now illegal for any person—which includes companies, of course—to use a “form contract” that:

1. Prohibits or restricts the ability of an individual who is a party to the contract to review a company’s products, services, or conduct;

2. Imposes a penalty or fee against an individual who gives a review; or

3. Requires an individual to give up or transfer his/her intellectual property rights in the review’s content.

An anti-review provision which falls into one of these covered areas has no legal force and is void at inception. The statute doesn’t affect the remainder of the contract, which is presumably still enforceable. But as discussed below, the law might impact other provisions in the contract under certain circumstances. The CRFA defines a “form contract” as a contract with “standardized terms” that a person uses to sell (or lease) goods or services and are imposed “without a meaningful opportunity…to negotiate the standardized terms.” 15 U.S.C. § 45b(a)(3)(A)(i) & (ii). This covers practically all online agreements, as well as physical contracts like my nephew’s lease, since they are usually non-negotiable. The statute, however, expressly exempts independent contractor and employer-employee agreements, which may still contain restrictive non-disparagement clauses whether such contracts are “standardized” or not (even though agencies like the National Labor Relations Board disfavor them). And custom-drafted contracts where parties are engaged in customary and significant negotiation do not fall within the statute’s scope either. The term “covered communication” is used to broadly encompass every type of review: It means “a written, oral, or pictorial review, performance assessment of, or other similar analysis of...the goods, services, or conduct of a person by an individual who is party to a form contract….” 15 U.S.C. § 45b(a)(2). Furthermore, the definition of “pictorials” includes photographs and video (among other things). § 45b(a)(4). Since a picture or video is often worth a thousand words and can be more effective than a written review at times, they are protected too. Therefore, the statute is far-reaching and covers every common medium of expression that someone could use (currently) to review a product or service. So, the language in my nephew’s lease prohibiting a tenant from publishing “any photos or video of Management employees or the apartment community or signage” suffers the same fate as the rest of the provision: IT’S DEAD ON ARRIVAL. THOSE PESKY EXCEPTIONS But where would we lawyers be without exceptions? There are some express exclusions in the CRFA which allow companies to use form contracts to prohibit submission or disclosure of reviews, or even remove them, in certain limited instances. For example, a review could be prohibited or removed if it:

1. Contains trade secrets or other confidential, privileged, or private information. This includes medical, employment, and financial info if the disclosure is a “clearly unwarranted invasion of personal privacy”;

2. Is “unrelated to the goods or services” offered by or on the company’s website;

3. Is “clearly false or misleading”;

4. Is information gathered for “law enforcement purposes”;

5. Contains “viruses, worms, or other potentially damaging computer code”;

6. Contains the “personal information or likeness of another person, or is libelous, harassing, abusive, obscene, vulgar, sexually explicit, or is inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristic; or

7. Contains other content “that is unlawful.”

See 15 U.S.C. § 45b(2) & (3). Most reviews don’t fall into these categories, so the exceptions won’t diminish the CRFA’s effectiveness in curtailing the use of anti-review clauses. Some of these exceptions are clear about what’s prohibited, such as defamatory content, trade secrets, and viruses. However, other exceptions are ambiguous and could be problematic—which in lawyer-speak means: can lead to litigation down the road. For example, if a consumer reviews a webhosting company’s services and states that the CEO is cheating on his wife. Even if it’s true, the review can be prohibited by the company’s standardized contract as it’s “unrelated” to the services. See 15 U.S.C. § 45b(b)(2)(C)(ii). But what if the review states that the CEO is cheating and getting a divorce, leaving the company because of it, and the new CEO will be making big changes to the services. Is his infidelity still “unrelated”? Possibly, but it’s a closer question. After all, the new CEO wouldn’t be making those changes if not for his predecessor’s affair. The legal concept of “relevance” is a very broad one and may help to clarify this standard at some point. What about the “clearly false or misleading” exception? See 15 U.S.C. § 45b(b)(2)(C)(iii). That could be interesting too. For instance, suppose a consumer reviews a new housecleaning service and states that it “fails to perform complete criminal background checks on its employees,” which could be damaging to the company. But the company is really quite diligent in the screening process and follows all accepted practices. In this consumer’s mind, maybe “complete” means the company should interview former employers, family, and neighbors for the past ten years. Is this review “misleading”? Perhaps. But if so, can it surmount the additional hurdle of being “clearly misleading” such that the review can be validly removed by contract? Probably not, but it’s a heavily fact-dependent question and easy to see where problems could arise. And then there’s this very nebulous exception: a review may be “inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristic.” See 15 U.S.C. § 45b(B)(2)(C)(i). This is quite vague and purposely so. Congress could have used stronger language if it chose to, but the exception was meant to be broad and discretionary. What’s “inappropriate” to one person may not be to another. Explicit racial slurs would surely qualify, but what about a review that just happens to mention someone’s race? For example, if a consumer leaves a review like: “I love this Boston hotel. It’s top-notch. The mostly Haitian staff here is very friendly and accommodating, which is what I love about the Haitian people. Boston needs more hotels like this.” Is this review “inappropriate”? Does even mentioning the staff’s race—and then (unfairly?) stereotyping Haitian people as “friendly and accommodating”—constitute an improper review that can be contractually banned or removed? It’s hard to say at the moment. Or what about a review from a LGBT customer that a wedding venue discriminates against gay people? Is the review “inappropriate”? And who is it “inappropriate” for? Even if it’s true, the venue may regard it as inappropriate since it could impact business by scaring away gay-friendly straight couples from marrying there. But the consumer could regard its removal as equally inappropriate since he wants to inform others about the venue’s discriminatory practices. So could the venue ban the review if there’s an anti-review provision in its standardized contract? Maybe. I wouldn’t be surprised if this part of the CRFA was challenged on constitutional overbreadth or vagueness grounds, if the right case came along. BUT CAN I SUE (AND MAKE MY LAWYER SMILE)? The CRFA doesn’t give consumers the ability to sue companies which violate the law, so they would not be able to take legal action against the company directly. Rather, a state’s Attorney General (“AG”) or the Federal Trade Commission (“FTC”) has the responsibility of enforcing it; either agency can sue potential violators. A consumer’s recourse would be to file a complaint or grievance with these agencies. The statute also doesn’t preempt any applicable state laws or remedies which address consumer reviews, so a state is free to pass its own laws (although an action by the FTC does preempt concurrent enforcement by a state’s AG). CAN THE CRFA AFFECT OTHER CONTRACT PROVISIONS? Since the statute is new, let’s engage in some creative lawyering for a moment and consider how the CRFA could have a broader impact on a contract. Suppose an anti-review provision is tied to other “form contract” terms. Could it potentially affect or void those terms too? For example, if it’s linked directly to a standard “Limitation of Liability” clause that limits the company’s financial exposure, could the entire clause be invalidated and increase the company’s liability even in totally unrelated areas? For instance, suppose you enter into an online contract with XYZ cloud services provider to backup all your valuable personal data for $60 per month. That agreement will almost certainly have a limitation of liability provision limiting XYZ’s financial exposure to just your monthly fee should anything happen. You upload your data and XYZ then gets hacked. As a result, your personal information gets exposed and you become a victim of identity theft, which costs you thousands of dollars. How much would XYZ be on the hook for? Only $60. That’s it. It sounds grossly unfair to you, but not to the company (and perhaps it’s just an odd coincidence the acronym for these clauses is “LOL”). Nevertheless, this type of limitation is pervasive in online contracts and is typically valid. However, suppose XYZ had an anti-review provision in its contract that penalized you somehow for leaving a bad review of its services. And suppose this provision is incorporated into the company’s limitation of liability clause, i.e., XYZ’s liability is limited to $60 even if the anti-review penalty has other consequences (like if XYZ reports you to credit agencies for not paying a fee). Could you get around the limitation and sue XYZ for significantly more than $60? Although your identity theft lawsuit has nothing to do with the anti-review clause, it’s still an illegal and void provision in a standard form contract, courtesy of the CRFA. Could the limitation of liability clause be voided as well? That would be immensely helpful to your position. Consider what the CRFA states: “[A] provision of a form contract is void from the inception of such contract if such provision… imposes a penalty or fee against an individual who is a party to the form contract for engaging in a covered communication.” 15 U.S.C. § 45b(b)(1)(B) (emphases added). Could your lawyer make the creative argument that because the limitation of liability significantly curtails XYZ’s exposure for all sorts of things, including the anti-review provision and its consequences, it too essentially operates as a type of “penalty” for speaking out, so it should be void also? In other words, XYZ retains the right to ruin your credit due to a bad review, for example, and yet their liability for doing so is limited to only $60? That seems punitive (and we won’t delve into unconscionability and public policy but will just stick to the statute). Remember, the CRFA doesn’t state only part of the provision is void—the judge couldn’t just strike out and “blue pencil’ the offending language—but that the entire provision must go. Therefore, could the whole limitation of liability clause be invalidated and leave you free to sue XYZ for all your identity theft damages? Maybe, maybe not. We just don’t know yet. This is just one of many hypotheticals, but the CRFA is so new there’s no legal track record of how a court or agency will construe it. And different judges will issue different rulings, especially if they are in pro-consumer states like California or Massachusetts as opposed to pro-business ones like Texas. Do you really want your company to be the test case though? That could be an expensive lesson. WILL COMPANIES LAUGH MANIACALLY WHILE TWIRLING THEIR MUSTACHES? So what will suppressive companies do now? The CRFA won’t stop creative lawyering but will only redirect the creativity in another direction—at least for a little while until the CRFA’s boundaries are tested and established. For example, businesses may try to allow a consumer some supposed measure of a “meaningful opportunity to negotiate” so they can insert review restrictions into the agreement. I suspect though, attempts like that to circumvent the law won’t meet with much success—at least they shouldn’t (but as always it depends on the judge’s “judicial philosophy”). Given the broad intent and scope of the statute, courts should construe the “meaningful opportunity to negotiate” language narrowly and require that essential terms be truly subject to free choice by the consumer, otherwise such “negotiation” is simply a pretext for what is really a “take-it-or-leave-it” transaction. In reality, giving consumers a meaningful opportunity to negotiate and individualizing each and every deal just to potentially, maybe, possibly muzzle them at a later time would be too costly and time-consuming for most businesses. But then again, the internet is always seeking ways to make frictionless transactions even more frictionless, so with continued advances in artificial intelligence, “smart contracting,” dynamic pricing, customizable delivery, and blockchain technology, this may need to be revisited at some point in our closer-than-you-think future. For now though, the CRFA has some teeth to it and may result in the demise of anti-review provisions altogether. HEY MR. LANDLORD! WE'VE GOT TO TALK… Back to my nephew’s situation. If I was the attorney for his former landlord, I would advise that it remove this blatantly illegal provision immediately and not try to curtail tenants’ reviews. Period. Full stop. The landlord could ignore my imagined counsel and keep the provision in, but that’s risky. It would never survive scrutiny by the FTC or the Georgia AG. And why would those agencies review just one illegal provision of the lease, especially given all those bad online reviews by angry and aggrieved tenants? Some overreach may mean a lot of overreach. Perhaps the authorities will dig a little deeper… After all, the CRFA became effective in March of 2017, but my nephew signed his lease in September and the provision was still there. Some diligent government employee eager to establish a reputation or make a public point could give the whole 39 page lease a thorough read and find all sorts of illegal or problematic terms. At the federal level, the FTC’s mandate to “prohibit unfair or deceptive acts or practices” is quite broad. And once the FTC gets involved with a business and finds wrongdoing, it can be a looong relationship indeed. FTC consent decrees typically impose 20-year terms, which means the agency gets to monitor the company for compliance during that lengthy period. And who doesn’t want two decades of direct government oversight? It sounds, uh.…pleasant. The time-worn adage that “an ounce of prevention is worth a pound of cure” is especially sage advice in the legal business. Prevention is always, always, ALWAYS preferable to the expensive and protracted uncertainty of litigation whenever possible—especially where new laws are concerned. So review your agreements carefully! You just never know what may be lurking in them and how it can harm you. Thank you for taking the time to read this. Feel free to contact me if you have any questions or comments. (And as always, there’s more to the CRFA than I’ve outlined in this posting, which is only meant to be an overview of the statute’s main points. Please don’t consider anything I’ve written here as legal advice—since your situation may differ—but only as legal awareness of a new law.) © 2018 Daniel A. Batterman