Since the Federal Trade Commission (“FTC”) published its updated 2023 Guides Concerning the Use of Endorsements and Testimonials in Advertising earlier this year, consumer reviews have been front of mind. This guidance covers, in part, the treatment of consumer reviews, and companies have been (or should be) preparing for an uptick in FTC enforcement. But it's not just the FTC to watch out for. A recent wave of class actions arising under California Civil Code § 1670.8 related to a customer's right to make statements about their experience with a seller has raised the bar for retailers to another level.
As online shopping continues to grow, so do consumers' use of and reliance on online reviews. The class actions filed thus far emphasize the prevalence, reach, and power of the internet and social media platforms to publicize a company's products, but even more so to publicize negative consumer reviews, especially in this ‘viral' era. The class action complaints allege that this power incentivizes businesses to minimize negative reviews in any way possible. In vague terms, the complaints filed thus far suggest that the defendants may have prohibited, limited, or created barriers to leaving negative reviews or altered, removed, or made inaccessible published negative reviews. However, the direct claims within the complaints focus on contractual provisions found within the websites' terms of use that allegedly seek to discourage or disallow negative reviews. To combat these alleged practices, the plaintiffs invoke California Civil Code § 1670.8, also known as the “right to gripe” law.
California Civil Code § 1670.8 is titled “Contracts for sale or lease of consumer goods or services; prohibited provisions waiving consumers' rights to make statements regarding seller, lessor, employees or agents, or the goods or services; unlawful acts; waiver” and includes, in part, the following provisions:
- (1) A contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer's right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.
- (2) It shall be unlawful to threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.
(b) Any waiver of the provisions of this section is contrary to public policy, and is void and unenforceable.
Section 1670.8 protects California consumers' right and ability to leave consumer reviews, negative or positive, for products and services by prohibiting contractual provisions that limit or waive that right, and deems any such waiver void. Violations of § 1670.8 are subject to civil penalties not to exceed $2,500 for the first violation, and any willful violations can result in up to $10,000 per violation. Further, the statute explicitly states that civil penalties are not the exclusive remedy for violations, which allows class action plaintiffs to seek other remedies. Notably, § 1670.8 does allow for a company hosting online consumer reviews to remove a review “that is otherwise lawful to remove.” For example, if an anonymous user posted sexually explicit content on a business' consumer review webpage, this type of content could be removed.
The class actions filed thus far are styled to represent all Californians “who have visited and/or completed sales transactions through the website [of defendant corporation.]” The class would include consumers using the company's website, affiliated websites, or any associated mobile application. Thus, in these class actions, any entities that have web or mobile sites that allow for consumer reviews could become targets. Realistically, this could include most consumer products or services companies operating in California. However, the plaintiffs' bar appears to be focused on businesses that have “Terms of Use” for their webpages, specifically terms that prohibit disparaging remarks.
The class action complaints filed thus far argue that the terms of use associated with the defendants' websites include anti‑disparagement clauses that silence consumers, unlawfully suggesting to consumers that their access could be revoked based on negative consumer reviews. The class action complaints further allege that these provisions violate consumers' right to free speech, and also violate California's unfair competition law (Cal. Bus. & Prof. Code § 17200). Plaintiffs argue these anti-disparagement clauses are direct violations of consumers' right to gripe, and specifically § 1670.8.
Given the enormous penalties available per violation, it is not surprising that these plaintiffs have tacked their complaint to this particular statute. Further, given the novelty, it will likely be months before any court has an opportunity to decide any challenges to the use of the statute. Finally, as noted above, the statute is industry agnostic—essentially any consumer service and product company operating online in California should be mindful of this new wave in consumer class actions and should review their consumer review policies and webpage terms of use.
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