New Federal Law Prohibits “Anti-Yelp” Contract Terms

January 20, 2017

Congress recently passed a new law that restricts a company’s ability to include an “anti-Yelp” type of non-disparagement provision in a standardized contract. The new law, called the Consumer Review Fairness Act of 2016,” is designed to protect individuals who post negative online reviews. The CRFA applies to reviews of goods and services made by an individual who is a party to a “form contract.” The CRFA defines a form contract as a contract with standardized terms used in the course of selling or leasing goods or services, and imposed on an individual without meaningful opportunity for that individual to negotiate the standardized terms. Because the act repeatedly refers to “individuals,” it seems directed more at the B2C arena, and will likely not apply to business-to-business contracts. In addition, the act specifically exempts employment agreements and independent contractor agreements.

A covered non-disparagement provision in a form contract will be void from the start if it prohibits or restricts the ability of an individual who is a party to engage in a review of the goods or services. The CRFA also voids any provision in a form contract that would impose a penalty or fee against an individual for engaging in a review of the goods or services.

The CRFA does not affect the right to pursue a claim for defamation, libel, or slander, however. Nor does the CRFA prevent any party’s right to remove or refuse to display on a website owned by such party any content in a review that:

  • Contains the personal information or likeness of another person, or which is libelous, harassing, abusive, obscene, vulgar, sexually explicit, or inappropriate with respect to race, gender, sexuality, ethnicity, or some other intrinsic characteristic;
  • Is unrelated to the goods or services offered by or available at the website; or
  • Is clearly false or misleading.

The CRFA doesn’t just void these provisions, however. It makes it a violation of law to offer a form contract containing a provision that would be void under the law. Such a violation also will be considered an unfair or deceptive act or practice, The CRFA gives the Federal Trade Commission the power to enforce the act, and also grants individual states the power to pursue violations.

Consequently, we recommend that companies that sell goods or services to individuals review all of their standard contracts, including their website terms of service, to ensure compliance with the CRFA.

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