FTC Challenges Consumer Gag Clauses As Unfair Practices

In two recent matters, the Federal Trade Commission ("FTC") challenged so-called gag clauses or non-disparagement provisions incorporated in contracts between marketers and consumers, alleging that prohibiting consumers from publishing negative reviews about the marketer is an unfair practice in violation of Section 5 of the FTC Act.

Details of the FTC Actions.

This summer, the FTC concluded its investigation of Greystar Real Estate Partners for a possible violation of Section 5 of the FTC Act based on a social media addendum included in residential leases with tenants at one of its Florida apartment complexes. The addendum prohibited tenants from making negative comments about the apartment complex on the internet. The addendum also provided that any breach of its terms would result in damages of $10,000 for the first violation and $5,000 for each additional violation. In a closing letter, the FTC said that it did not pursue an enforcement action against Greystar,