NADA knows how important customer reviews are to your business. Your dealership strives to exceed customer expectations, and you hope to see those efforts manifest themselves in positive reviews. Unfortunately, it is not uncommon to experience an unfair, negative review that dulls the varnish on your dealership’s reputation. While these reviews are unwanted and may be unwarranted, one thing is clear – you cannot restrict a consumer’s ability to post a review.

In 2017, Congress passed the Consumer Review Fairness Act (CRFA) in response to concerns that some businesses were using contracts with provisions intended to prevent or punish consumers for posting negative reviews about their products and services—such as provisions allowing businesses the right to bring a lawsuit or otherwise penalize consumers for posting reviews.

The CRFA voids any provision in a “form contract” that impedes consumer reviews by prohibiting or restricting the ability of an individual from reviewing a business and makes it unlawful for a person to offer such a contract to consumers. A “form contract” is a contract with standardized terms used in the course of selling or leasing goods or services and imposed on a customer without a meaningful opportunity to negotiate the standardized terms. Violations of the CRFA are deemed to be violations of Section 5 of the Federal Trade Commission (FTC) Act, also known as the Unfair or Deceptive Acts or Practices (UDAP) Provision and may be enforced by the FTC or state attorneys general. On June 3, 2019, the FTC announced the second in a series of recent enforcement actions against a variety of small businesses under the CRFA. The announcement outlined two proposed FTC administrative complaints and orders against businesses who allegedly were using form contracts to impede honest customer reviews as well as proposed settlements.

How can you take action to ensure your dealership is compliant?

• Review the FTC guidance on the CRFA as well as NADA’s Consumer Review Fairness Act FAQ document, which provide further details about the rule.
• Review the FTC’s enforcement actions to see what kind of contract terms are prohibited.
• Consult with your attorney to review your own form contracts to be sure that no provisions violate the terms of the CFRA.

Lastly, remember that this is not the only way you can run afoul of federal regulators with respect to consumer reviews. You should understand other FTC restrictions and requirements such as:

• Those on improperly skewing positive reviews.
• The requirement to make certain disclosures about compensation for reviews.
• Those broadly governing endorsements.

Legal Disclaimer: The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only. Information in this blog may not constitute the most up-to-date legal or other information. Furthermore, each dealership should consult an attorney who is familiar with federal and state law applicable and the dealership’s operations to obtain advice with respect to any particular legal matter.