Understanding the Consumer Review Fairness Act of 2016
17 Pages Posted: 24 Feb 2017 Last revised: 19 Sep 2017
Date Written: February 1, 2017
Consumer reviews are vitally important to our modern economy. Markets become stronger and more efficient when consumers share their marketplace experiences and guide other consumers toward the best vendors and away from poor ones.
Businesses recognize the importance of consumer reviews, and many businesses take numerous steps to manage how consumer reviews affect their public image. Unfortunately, in a misguided effort to control consumer reviews, some businesses have deployed contract provisions that ban or inhibit their consumers from reviewing them. I call those provisions “anti-review clauses.”
Anti-review clauses distort the marketplace benefits society gets from consumer reviews by suppressing peer feedback from prospective consumers, which in turn helps poor vendors stay in business and diminishes the returns that good vendors get from investments in quality (thus degrading their willingness to make those investments).
Recognizing the threats posed by anti-review clauses, Congress banned them in the Consumer Review Fairness Act of 2016 (the CRFA). As the House Report explains, the law seeks “to preserve the credibility and value of online consumer reviews by prohibiting non-disparagement clauses restricting negative, yet truthful, reviews of products and services by consumers.” By doing so, the CRFA helps advance the effective functioning of marketplaces.
This essay helps readers understand the CRFA. Part I provides some background about anti-review clauses. Part II describes the new law and how it relates to existing law. Part III considers if the law goes far enough to protect consumer reviews. The article then has a short conclusion.
Keywords: Consumer Reviews, Consumer Review Fairness Act, Consumer Review Freedom Act, Gag Clause, Non-Disparagement Clause, Anti-Review Clause
JEL Classification: L15, L81, K2, K12
Suggested Citation: Suggested Citation