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David H. Lipman

FTC Announces Two Actions Enforcing the Consumer Review Fairness Act

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FTC Announces Two Actions Enforcing the Consumer Review Fairness Act

" The Federal Trade Commission has issued two administrative complaints and proposed orders enforcing the Consumer Review Fairness Act (CRFA), which prohibits businesses from using form contract terms that bar consumers from writing or posting negative reviews online, or that impose financial penalties for doing so.

In settling the Commission’s complaints, two companies, one that rented vacation properties in Florida and one that manages rental homes in Maryland, have agreed not to use these or similar provisions in the future. The companies and their owners also must notify affected consumers that the non-disparagement clauses are void.

The CRFA prohibits non-disparagement provisions in consumer form contracts. It defines such contracts as those with standardized terms used in selling or leasing goods or services, and that are imposed on an individual without a meaningful opportunity for the individual to negotiate the contracts’ standardized terms. The statute became effective on March 14, 2017.

The FTC’s Complaints

The FTC’s administrative complaints against Shore to Please Vacations LLC and Staffordshire Property Management, LLC allege that the companies and their owners illegally used non-disparagement provisions in consumer form contracts in the course of selling their respective services, in violation of the CRFA.

Shore to Please Vacations LLC. The FTC alleges that from June 2017 through at least August 2017, the Shore to Please respondents included a “Disclaimers” paragraph in form contracts offered to consumers for online vacation house rentals. According to the complaint, the disclaimer contained prohibited language, including, “y signing below, you agree not to defame or leave negative reviews (includes any review or comment deemed to be negative by a Shore to Please Vacations LLC officer or member, as well as any review less than a “5 star” or “absolute best” rating) about this property and/or business in any print form or on any website….” In addition, the contract stated that, “[d]ue to the difficulty in ascertaining an actual amount of damages in situations like this, breaching this clause … will immediately result in minimum liquidated damages of $25,000 paid by you to Shore to Please Vacations LLC.”

Staffordshire Property Management, LLC. The FTC alleges that between approximately February 2016 and October 2018, the Staffordshire respondents used form contracts in the course of processing the rental applications of hundreds of consumers. Each contract contained an “Authorization, Agreement & Release Consent Form” that included prohibited language such as, “[t]he Applicant … specifically agrees not to disparage [Staffordshire], and any of its employees, managers, or agents in any way, and also agrees not to communicate, publish, characterize, publicize or disseminate, in any manner, any terms, conditions, opinions and communications related to [Staffordshire], this application, or the application process….” It further stated that prospective renters specifically agree that “[a]ny breach of such confidentiality will support a cause of action and will entitle [Staffordshire] to recover any and all damages from such a breach.” "

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What a world we live in where online reviews can make or break a company and where companies (as well as individuals seeking profit, i.e. YouTubers, ebay sellers, bloggers, media review sites (i.e. movies, video games etc.) depend on and often try to manipulate and control online feedback, ratings and reviews to trump up business and make themselves look good (or hire marketing firms to do the same, or even to disparage competitors).  I guess the saying is true, believe half of what you see, and none of what you hear, and perhaps it should be added: and very little of what you read, especially on the internet :P.

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