Posted on 2/8/2017 1:41:17 AM By Mark V.B. Partridge

Consumer Review Fairness Act of 2016 - Public Law No: 114-258 (Signed into law - 12/14/2016)

There is a new federal law on the books that concerns customer reviews. Signed into law by former President Obama in December 2016 will require companies to review and possibly amend their standard-form contracts or website terms of use as they relate to customers purchasing goods or services. The Consumer Review Fairness Act (the “Act”), now forbids non-disparagement or “gag” clauses, as well as transfer of intellectual property clauses, from standard-form consumer contracts. The prohibition on non-disparagement clauses applies to contracts in effect on or after March 14, 2017. It also provides the FTC and state authorities the power to enforce the Act. The FTC has been directed to provide businesses with nonbinding best practices for compliance by mid-February.

The actual text of the law itself is about three pages long.

This is the official summary –

(Sec. 2) This bill makes a provision of a form contract void from the inception if it:

  1. prohibits or restricts an individual who is a party to such a contract from engaging in written, oral, or pictorial reviews, or other similar performance assessments or analyses of, including by electronic means, the goods, services, or conduct of a person that is also a party to the contract;
  2. imposes penalties or fees against individuals who engage in such communications; or
  3. transfers or requires the individual to transfer intellectual property rights in review or feedback content (with the exception of a nonexclusive license to use the content) in any otherwise lawful communications about such person or the goods or services provided by such person.

A "form contract" is a contract with 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 to negotiate the standardized terms. The definition excludes an employer-employee or independent contractor contract.

The standards under which provisions of a form contract are considered void under this bill shall not be construed to affect:

  1. legal duties of confidentiality;
  2. civil actions for defamation, libel, or slander; or
  3. a party's right to establish terms and conditions for the creation of photographs or video of such party's property when those photographs or video are created by an employee or independent contractor of a commercial entity and are solely intended to be used for commercial purposes by that entity.

Such standards also shall not be construed to affect any party's right to remove or refuse to display publicly on an Internet website or webpage owned, operated, or controlled by such party content that:

  1. contains the personal information or likeness of another person or is libelous, harassing, abusive, obscene, vulgar, sexually explicit, inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristic;
  2. is unrelated to the goods or services offered by or available at such party's website; or
  3. is clearly false or misleading.

A provision shall not be considered void under this bill to the extent that it prohibits disclosure or submission of, or reserves the right of a person or business that hosts online consumer reviews or comments to remove, certain:

  1. trade secrets or commercial or financial information;
  2. personnel and medical files;  
  3. law enforcement records;
  4. content that is unlawful or that a party has a right to remove or refuse to display; or
  5. computer viruses or other potentially damaging computer code, processes, applications, or files.

A person is prohibited from offering form contracts containing a provision that is considered void under this bill.

Enforcement authority is provided to the Federal Trade Commission (FTC) and states. The FTC must provide businesses with nonbinding best practices for compliance.

"Intellectual Property"