On Wednesday, December 14, 2016, President Obama signed the Consumer Review Fairness Act of 2016 (the “Act”) into law. The Act makes void certain clauses of a form contract that prohibit or restrict an individual from engaging in a review of a seller’s goods, services, or conduct. The Act follows California’s enactment of Assembly Bill 2365 in September 2014 (codified at Civil Code section 1670.8) which similarly bars consumer contract provisions that purport to waive consumers’ right to make disparaging comments about goods or services.
Subject to enumerated exceptions, the Act 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.
Enforcement authority is provided to the Federal Trade Commission (FTC) and states, and the Act requires the FTC to provide businesses with nonbinding best practices for compliance.
A link to the legislation may be found here.