FTC Issues First Enforcement Actions Under New Online Review Rule
Three unrelated companies violated federal law by using contractual gag clauses to bar customers from writing honest, negative reviews about their products or services, the FTC alleged Wednesday. Waldron Electric Heating and Cooling; National Floors Direct and Las Vegas Trail…
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Riding violated the law, the FTC said in its first enforcement action under the Consumer Review Fairness Act. Commissioners voted 5-0 on three separate settlement orders, which dictate that future violations carry penalties of about $42,000 each. “Many online shoppers use customer reviews and ratings to get information, but these companies used gag clauses in their form contracts to stop customers from posting honest but negative feedback,” said Consumer Protection Bureau Director Andrew Smith. National Floors Direct included non-disparagement language in its purchase order agreement before the law was in effect, and removed it thereafter, an attorney for the company said, citing no admission of liability. Attorneys for the other defendants didn't comment.