FTC Has Negative Review for Rental Companies’ CRFA Violations

Advertising Law

The Federal Trade Commission (FTC) doubled down on actions based on Consumer Review Fairness Act (CRFA) violations and issued administrative complaints alleging that two vacation rental companies and their owners used illegal nondisparagement clauses in their contracts.

In the case of Nevada-based Shore to Please Vacations, the company included a provision in its form contract for online vacation house rentals that stated, “By signing below, you agree not to defame or leave negative reviews (includes any review or comment deemed to be negative by a Shore to Please Vacations officer or member, as well as any review less than a ‘5 star’ or ‘absolute best’ rating) about this property and/or business in any print form or on any website.” Violations of the clause would result in “minimum liquidated damages of $25,000,” per the provision.

Not only did Shore to Please use this clause from June 2017 through at least August 2017, the company attempted to enforce it by filing multiple lawsuits against renters who allegedly breached it, the FTC said.

Similarly, Staffordshire Property Management in Maryland used a provision in its form contracts with prospective renters between February 2016 and October 2018 featuring language stating that the renter “specifically agrees not to disparage Staffordshire Property Management, and any of its employees, managers or agents in any way, and also agrees not to communicate, publish, characterize, publicize or disseminate, in any manner, any terms, conditions, opinions and communications related to Staffordshire Property Management ….”

The FTC alleged that both companies and their owners ran afoul of the CRFA, which bans contract provisions that prohibit or restrict consumers’ ability to communicate reviews and performance assessments about a seller’s goods, services or conduct.

To settle the charges, the defendants agreed to consent orders prohibiting their use of review-limiting contract terms and requiring them to notify all customers who entered into a contract that included one of the banned provisions.

The notice—via either email or regular mail—may not include any other materials or messages about the companies and must include the following statement: “We are contacting our customers to tell you that [the provision] is void and we cannot enforce the provision against you. You can publish your honest review even if you say something negative about us or our services.”

Shore to Please must also dismiss with prejudice its pending lawsuits based on alleged breach of the prohibited contract provision.

To read the complaint and consent order in In the Matter of Shore to Please Vacations, click here.

To read the complaint and consent order in In the Matter of Staffordshire Property Management, click here.

Why it matters: The two cases are the latest CRFA enforcement efforts by the FTC, which announced similar settlement agreements in May with a flooring company in Massachusetts, a Nevada-based horseback trail riding operation, and an HVAC and electrical provider in Pennsylvania. The rash of agency actions puts companies on notice that the FTC is keeping a close eye on CRFA compliance.