President Obama Signs Prohibition on Form Contract “Non-Disparagement Clauses”

Ulmer Client Alert
Michael A. Marrero and Thomas M. Williams

On December 14, 2016, President Obama signed the Consumer Review Fairness Act of 2016. This Act voids “non-disparagement clauses” in form contracts that are designed to prevent individuals from posting genuine negative reviews or comments of goods and services on line. There is a 90-day grace period, so the Act takes effect on March 14, 2017.

Blanket prohibitions in form contracts that prevent individuals from leaving genuine negative reviews will violate the Act, although the Act does not affect a legal duty of confidentiality. Specifically, the following types of clauses will violate the Act: 1) prohibitions against or restrictions on an individual’s ability to leave a genuine negative review; 2) penalties or fees against an individual for leaving a genuine negative review; and 3) clauses that transfer intellectual property rights in review or feedback content.

Companies can still bring civil causes of action for defamation, libel, slander, or any other similar cause of action. Also, websites are still able to remove, or refuse to publicly display, content that is harassing, abusive, obscene, vulgar, or otherwise inappropriate. Finally, the Act does not apply to contracts that have terms the parties were able to meaningfully negotiate.

The Federal Trade Commission will enforce the Act in the same way it enforces violations of unfair or deceptive trade practices. State Attorneys General may also enforce the Act by bringing a civil action on behalf of residents of the State. Enforcement will begin on December 14, 2017.