'Gag Clauses' Illegal, FTC Reminds Marketers

The Federal Trade Commission is reminding businesses that they aren't allowed to prohibit consumers from posting reviews online.

In guidance issued this week, the agency recommends that companies review their standardized contracts and remove any clauses that may violate the Consumer Review Fairness Act -- a bill outlawing "gag clauses" signed last December by former President Barack Obama.

The new law prohibits companies from using form contracts to restrict consumers' ability to post reviews. The measure also prevents companies from shutting down criticism by asserting a copyright interest in reviews -- a technique used by some health care professionals earlier this decade.

The FTC suggests that companies delete any standard clauses in their contracts that restrict or penalize people who share honest views, or claim a copyright interest in a review. The agency adds that companies should remove those provisions even if they have never enforced them in the past and have no plans to do so in the future.

Terri Seligman, an advertising lawyer with Frankfurt Kurnit Klein & Selz in New York, says that even if terms prohibiting bad reviews aren't enforced, they may still be problematic. She says the agency could bring cases against companies that include that type of clause, if the FTC believes the clause has "acted to stifle reaction."

The agency says that businesses can still prohibit or remove reviews in some circumstances, including if they're defamatory, or are "clearly false or misleading."

But the FTC warns businesses against interpreting "clearly false or misleading" too broadly. "It's unlikely that a consumer’s assessment or opinion with which you disagree meets the 'clearly false or misleading' standard," the guidance states.

Even before lawmakers passed the Consumer Review Fairness Act, the FTC took the position that non-disparagement clauses could be illegal. In September 2015, the FTC sued the Sarasota, Florida-based Roca Labs, which sells weight-loss products, for allegedly engaging in an unfair practice by attempting to stop consumers from posting bad reviews.

Some judges, also, have ruled that gag clauses run contrary to public policy. As far back as 2003, a state court judge in New York required Network Associates (now McAfee) to remove a terms of service clause that required consumers to obtain permission from the company to publish reviews.

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