The Impact of The Consumer Review Fairness Act
Kennyhertz Perry partner Braden Perry was contacted by NCRSilver.com to discuss the Consumer Review Fairness Act of 2016 (the “Act”), also known as the “Yelp Law.” Perry commented that “the FTC will be the main watchdog in this area and will likely draft guidance and rules on the details regarding these prohibitions and the extent companies can protect themselves from a negative review. A blanket prohibition will be violative of the Act, but it leaves a company’s right to sue for defamation intact on a case-by-case basis.” And added, this leaves intact a business owner’s right to sue for defamation.
The Act was generally a bipartisan measure designed to eliminate the “gag” clauses in companies’ terms of service that prohibit negative reviews. Under the Act, small business cannot have a blanket contract provision prohibiting or restricting 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 goods, services, or conduct of a person that is also a party to the contract; imposing penalties or fees against individuals who engage in such communications; or requiring an individual to transfer intellectual property rights in review or feedback content.
The Act does not affect the legal duties of confidentiality; civil actions for defamation, libel, or slander; or 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.
It also doesn’t affect the company’s right to remove or refuse to display publicly on an Internet website content that 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; is unrelated to the goods or services offered by or available at such party’s website; or is clearly false or misleading.
Companies can also still can prohibit 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.
Overall, the impact is likely minimal. A company may still sue a customer for defamation, but the company will have to prove its case. No longer can they completely prohibit negative reviews, they must determine on case by case to take action or not. Like most consumer protection statutes, the FTC will provide companies with nonbinding best practices and guidance on how to be compliant. Companies’ policies and procedures should be reviewed, as well as standard form contracts to ensure they are compliant with the new rules.
About Braden Perry
Braden Perry is a litigation, regulatory and government investigations attorney with Kennyhertz Perry, LLC. Mr. Perry has the unique tripartite experience of a white collar criminal defense and government compliance, investigations, and litigation attorney at a national law firm; a senior enforcement attorney at a federal regulatory agency; and the Chief Compliance Officer/Chief Regulatory Attorney of a global financial institution. Mr. Perry has extensive experience advising clients in government inquiries and investigations, particularly in enforcement matters involving emerging or novel issues. He couples his technical knowledge and experience defending clients in front of federal agencies with a broad-based understanding of compliance from an institutional and regulatory perspective.
About Kennyhertz Perry, LLC
Kennyhertz Perry, LLC is a business and litigation law firm representing clients in highly regulated industries. The firm was founded by two veteran Kansas City attorneys, John Kennyhertz and Braden Perry. To learn more about the firm, visit kennyhertzperry.com.