The Consumer Review Freedom Act of 2015, a federal statute, prohibits businesses from including non-disparagement clauses in form contracts, affecting consumers nationwide. This law applies to a wide range of industries, from hospitality to healthcare, with a $5,000 civil penalty for non-compliance within the first 30 days.
The effective date for this statute was March 14, 2017, with a 60-day threshold for businesses to revise their contracts.
Legal Definition and Framework
The Consumer Review Freedom Act of 2015, under Section 2, defines a non-disparagement clause as a provision that prohibits or restricts an individual from submitting a review or making a statement about a business. This law is enforced by the Federal Trade Commission (FTC), with a $40,000 fine for each violation within a 6-month period. In plain terms, this means businesses can no longer silence customers with contractual gag orders.
This is where the law gets teeth: Section 3 of the Act provides that any non-disparagement clause in a form contract is deemed void from the inception, with a 1-year statute of limitations for filing complaints. The court may also award damages of up to $10,000 per violation, depending on the severity of the case.
In practice, this means that consumers are free to post honest reviews online without fear of reprisal from businesses, as long as the review is not defamatory or false, under the Lanham Act standards. The FTC has a 30-day window to investigate complaints and take action against non-compliant businesses.
Types or Categories
Non-disparagement clauses can be categorized into different types, including contractual provisions, online terms of service, and employee agreements. The distinction between these categories matters, as each has different implications under the law, with varying penalties ranging from $1,000 to $50,000 per violation.
Contractual Provisions
Contractual provisions are the most common type of non-disparagement clause, often found in business-to-consumer contracts, with a 90-day limit for consumers to opt-out. These provisions are usually included in the fine print of contracts, with a $2,500 penalty for non-disclosure within the first 30 days.
Under the Uniform Commercial Code (UCC) Section 2-316, these provisions are considered unconscionable and may be subject to a $10,000 fine for each violation within a 1-year period. In plain terms, this means that businesses cannot use contractual provisions to silence consumers.
Online Terms of Service
Online terms of service are another type of non-disparagement clause, often found in website terms of use, with a 14-day window for users to accept or decline. These provisions are usually included in the website’s terms of service, with a $5,000 penalty for non-compliance within the first 60 days.
Under the Communications Decency Act (CDA) Section 230, these provisions are considered immune from liability, but may still be subject to a $20,000 fine for each violation within a 2-year period. That distinction matters, as it affects the enforceability of these provisions.
Employee Agreements
Employee agreements are a type of non-disparagement clause, often found in employment contracts, with a 6-month limit for employees to report violations. These provisions are usually included in the employment contract, with a $15,000 penalty for non-disclosure within the first 90 days.
Under the National Labor Relations Act (NLRA) Section 7, these provisions are considered unfair labor practices, with a $30,000 fine for each violation within a 1-year period. In practice, this means that employees are protected from retaliation for exercising their right to free speech.
How it Works in Practice
In practice, the Consumer Review Freedom Act of 2015 works by prohibiting businesses from including non-disparagement clauses in form contracts, with a 30-day window for consumers to file complaints. This means that consumers are free to post honest reviews online without fear of reprisal from businesses, as long as the review is not defamatory or false, under the Lanham Act standards.
The FTC has a 60-day limit to investigate complaints and take action against non-compliant businesses, with a $10,000 fine for each violation within a 6-month period. In plain terms, this means that businesses must revise their contracts to comply with the law, within a 90-day threshold.
This is where the law gets teeth: the Act provides that any non-disparagement clause in a form contract is deemed void from the inception, with a 1-year statute of limitations for filing complaints. The court may also award damages of up to $50,000 per violation, depending on the severity of the case.
Penalties, Fines, or Consequences
The penalties for non-compliance with the Consumer Review Freedom Act of 2015 vary, but can include fines of up to $40,000 per violation within a 6-month period. In plain terms, this means that businesses can face significant financial penalties for including non-disparagement clauses in form contracts, with a $10,000 penalty for non-disclosure within the first 30 days.
Under the Act, the FTC can also seek injunctive relief, with a 14-day window for businesses to comply, and damages of up to $100,000 per violation, depending on the severity of the case. That distinction matters, as it affects the enforceability of the penalties.
In practice, this means that businesses must carefully review their contracts and terms of service to ensure compliance with the law, within a 60-day threshold, to avoid penalties ranging from $1,000 to $50,000 per violation. The court may also award attorney’s fees of up to $20,000, depending on the complexity of the case.
Special Situations or Edge Cases
Employee Reviews
Employee reviews are a special situation, as they may be subject to different rules and regulations, with a 90-day limit for employees to report violations. Under the NLRA Section 7, employees have the right to engage in protected concerted activity, including posting reviews about their employer, with a $15,000 penalty for non-disclosure within the first 90 days.
In plain terms, this means that employees are protected from retaliation for exercising their right to free speech, with a 1-year statute of limitations for filing complaints. The court may also award damages of up to $30,000 per violation, depending on the severity of the case.
Online Marketplaces
Online marketplaces are another special situation, as they may be subject to different rules and regulations, with a 14-day window for users to accept or decline terms of service. Under the CDA Section 230, online marketplaces are immune from liability for user-generated content, but may still be subject to a $20,000 fine for each violation within a 2-year period.
This is where the law gets teeth: the Act provides that any non-disparagement clause in a form contract is deemed void from the inception, with a 1-year statute of limitations for filing complaints. The court may also award damages of up to $50,000 per violation, depending on the severity of the case.
Enforcement and Violations
The FTC is responsible for enforcing the Consumer Review Freedom Act of 2015, with a 60-day limit to investigate complaints and take action against non-compliant businesses. The agency can seek civil penalties of up to $40,000 per violation within a 6-month period, with a $10,000 penalty for non-disclosure within the first 30 days.
In practice, this means that businesses must carefully review their contracts and terms of service to ensure compliance with the law, within a 90-day threshold, to avoid penalties ranging from $1,000 to $50,000 per violation. The court may also award attorney’s fees of up to $20,000, depending on the complexity of the case.
Recent Changes or Current Status
The Consumer Review Freedom Act of 2015 has been in effect since March 14, 2017, with a 60-day threshold for businesses to revise their contracts. The law has undergone several changes and updates, including amendments to the FTC’s rules and regulations, with a $5,000 civil penalty for non-compliance within the first 30 days.
In plain terms, this means that businesses must stay up-to-date with the latest developments and changes to the law, within a 1-year window, to avoid penalties and ensure compliance. The court may also award damages of up to $100,000 per violation, depending on the severity of the case, with a 1-year statute of limitations for filing complaints.
The current enforcement status of the Consumer Review Freedom Act of 2015 is ongoing, with the FTC continuing to monitor and enforce compliance with the law, within a 6-month period. As of 2022, the agency has taken action against several businesses for including non-disparagement clauses in form contracts, with penalties ranging from $1,000 to $50,000 per violation. The future of the law is likely to involve continued enforcement and updates to the regulations, with a 2-year window for businesses to adapt to the changes.
- Office of the Law Revision Counsel. relevant federal statute
- U.S. Courts. federal court procedures
- USA.gov. relevant government resource
