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Tech & Sourcing @ Morgan Lewis

TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

In January 2015, we wrote about California’s ban on nondisparagement clauses in consumer contracts under the “Yelp” Bill. A new law, the Consumer Review Fairness Act, covers nondisparagement clauses in a similar vein at the federal level, making any provision of a consumer contract void if it

  • 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;
  • imposes penalties or fees against individuals who engage in such communications; or
  • 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.

The Consumer Review Fairness Act gives the Federal Trade Commission and state attorneys general the authority to enforce the act.

How Companies Can Comply

Companies that use nondisparagement clauses in their consumer contracts should remove such clauses to ensure that their organizations are in compliance with the act. Consumer contracts should not restrict or prohibit customers from writing negative reviews of company products or services, and also should not impose any fees or penalties on customers who write or publish negative comments or reviews.

Consumer contracts may contain a nonexclusive license for the company to use and publish the customer’s comments and feedback, however, the contract cannot require or transfer the customer’s intellectual property rights in review or feedback content.

Note that the Consumer Review Fairness Act contains certain exceptions. The act does not affect any duty of confidentiality, or any civil cause of action for defamation, libel, slander, or any similar cause of action. The act also does not affect a company’s right to remove or refuse to display content that contains personal information of another person; is obscene, vulgar, harassing, or otherwise inappropriate; is unrelated to the goods or services at issue; or is clearly false or misleading.