Your business booked a large charity event. However, the customer contact turns out to be a nightmare. She complains (during and after the event) that the service was slow, the food looked and tasted like a frozen meal, and the drinks were watered down. She even claims she was overcharged. You reviewed the situation and, while you disagree, you offer her a credit. She declines and instead decides to post scathing reviews on Yelp, TripAdvisor, and several other review sites. She also gets her friends to post similar reviews. You remember, however, that the booking contract this irate customer signed barred her from posting negative reviews and imposes a $200 per negative review penalty. You ring up your attorney and ask her to send Ms. Nasty Customer a demand. Your lawyer tells you there may be a problem with this approach – under a new law signed by President Obama in December, the Consumer Review Fairness Act of 2016 – form contracts restricting reviews or imposing penalties are void.
Exceptions and Carve-Outs
There are several significant exceptions to the new law, offering some protections to organizations. First, individually-negotiated agreements are not covered by the new legislation. Second, Congress carved out employer-employee and independent contractor agreements from the “form contract” definition. Thus, under the new Act, employment provisions barring negative online reviews of an employer are not void. However, the National Labor Relations Board strongly disfavors restrictions on employees’ rights to discuss wages and working conditions in public forum. Further, some states may also seek to bar restrictions on online reviews. California and Maryland already have enacted laws barring non-disparagement clauses in consumer contracts.
Third, the Act does not bar an organization or individual from suing for defamation, libel, or slander. Thus, companies may still file suit for reviews containing false statements (and presumably include a clause in a form agreement or terms and conditions addressing such statements). Fourth, the law preserves any confidentiality required by law – such as HIPPA. Fifth, the Act expressly allows a party to remove or to refuse to display on a website/webpage operated by that party the content of a “covered communication” : (1) that contains personal information or the likeness of another person; (2) is libelous, harassing, abusive, obscene, vulgar, sexually explicit “or is inappropriate with respect to race, gender, sexuality, ethnicity or other “intrinsic characteristic”; or (3) that is false or misleading. Thus, companies that host their own webpages for customer comments and interactions may remove customer reviews meeting these standards. It would also appear lawful to advise customers in company terms and conditions or form contracts that such content may be reviewed.
Congress further created a carve-out from the Act’s consumer review protections for trade secrets or commercial or financial information considered privileged or confidential, personnel and medical files where disclosure would result in an invasion of personal privacy, records compiled for law enforcement purposes, content that is unlawful, and content containing computer viruses, worms, or other damaging code.
Federal Trade Commission Enforcement
The Federal Trade Commission (“FTC”) will enforce the Consumer Review Fairness Act of 2016. State Attorney Generals may also bring a civil action in federal court to obtain relief for their residents. The new law requires the FTC (within 60 days) to conduct education and outreach to businesses, including non-binding “best practices” for complying with the Act. Companies get 90 days (until March 14, 2017) before their contracts containing the now-proscribed practices are considered void.
The FTC may target a few “brand name” organizations in early enforcement actions to garner industry attention. Companies should be aware, however, that they retain the right to object to assessments that are exempted, including those that disclose confidential or personal information, or that are defamatory, misleading, obscene, vulgar, or unrelated to the products and services offered on the company’s webpage. So, while consumers cannot be penalized through a form contract by posting reviews, their rights to post are not unfettered. Contrary to the popular adage, as the Union Street Guest House learned, not all press is good press – and companies may still address false or defamatory reviews and those reviews containing other exempted content.
In 2015, Amazon filed suit against over 1,000 unnamed individuals for allegedly offering to sell fake online reviews (positive or negative) on Fiverr.com (“Fiverr”). The unnamed defendants offer to provide 5-star reviews and some defendants even encourage sellers to provide their own text to use in the review. In order to avoid detection, defendants offer to submit reviews from multiple IP addresses, utilize multiple Amazon accounts, and to complete a Verified Review (which means the reviewed has purchased the product, even though they don’t always require the actual product to be shipped for review). In short, the allegations are that these reviews for sale violate Amazon’s Customer Review Guidelines (which prohibit paid reviews), Fiverr’s own Terms of Service (which requires compliance with third party guidelines), and deceptively provides false reviews to consumers (which violates consumer protection laws).
Interestingly, Amazon did not name Fiverr as a party to the complaint. Instead, Amazon went after the individual sellers and indeed explicitly stated in the complaint that “Amazon will amend this complaint to allege their true names and capacities when ascertained.”
In contrast to Amazon’s approach, the Metallica Plaintiffs in a previously filed case against Napster, sued Napster directly and not the individual users (and eventually obtained their desired result). Indeed, Amazon has not always omitted operators from its case captions. Last April, Amazon filed a similar lawsuit against a number of companies that operated websites to promote the sale of Amazon reviews. That lawsuit contained very similar allegations to this recent suit against individuals and alleged selling positive reviews, offering a Verified Review, a slow posting of reviews to avoid detection by Amazon, etc. Similar as well to the Napster case, the first Amazon lawsuit also yielded a successful result because the websites targeted in that case were all closed down.
So why is Amazon now going after the individual sellers? And why did Amazon omit Fiverr in this lawsuit?
One possible explanation is that Amazon, like Napster, first attempted to take down the providers (i.e. the website owners) that enabled the fraudulent review process. While that was successful, Amazon likely realized that it was insufficient because the individual reviewers would easily migrate to sites like Fiverr to continue their activities. So, Amazon was forced to file suit against the individual users.
At the same time, Amazon did not include Fiverr as a named defendant because it is more likely to get Fiverr’s cooperation in providing the identities of the unnamed defendants, and, because Fiverr is a legitimate global online marketplace offering tasks and services- in sharp contrast to the defendants in the prior Amazon lawsuit that operated sites and companies for the sole purpose of providing fraudulent Amazon reviews (and further antagonized Amazon by utilizing the Amazon logo on their sites). Additionally, as noted in the current Amazon complaint, Fiverr itself prohibits paid reviews and has tried to prevent them- again in sharp contrast to the companies in the first Amazon lawsuit, whose entire business was selling Amazon reviews.
Or it may be that Amazon has embarked on a process to stop paid reviews and these are the first steps in that ongoing process. As noted in this complaint against the Fiverr sellers, the lawsuit is “the next step in a long-term effort to ensure these providers of fraudulent reviews do not offer their illicit services through other channels.” Thus, Amazon may have simply first pursued the enablers (i.e. the company websites dedicated to fraudulent reviews) and then it pursued the individual reviewers on Fiverr.
The extent to which Amazon will continue to pursue questionable reviews remains to be seen. In 2015, Amazon limited its lawsuits regarding fraudulent reviewers to paid reviewers. In 2016, we may see an assault on the groups of independent people who exchange positive reviews on Amazon (i.e. each party agrees to submit a positive review of the other’s product). This type of arrangement also violates Amazon terms and poses similar concerns to the reliance of consumers on Amazon reviews. Amazon may also question whether this prohibited practice merits attention.