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Two Stars?! What can my Business do in Response to Negative Reviews?

Businesses are understandably concerned about negative reviews posted on popular websites such as Yelp, Facebook, and TripAdvisor.

A Harvard Business School study found that a one-star increase on Yelp will lead to a 5-9% increase in a restaurant's revenue. Additionally, a consumer review study found that 84% of people trust online reviews as much as personal recommendations, and 60% of people state that a negative review will make them not want to use a business. Considering these statistics, it is understandable when we receive questions from concerned business owners about how to protect and cultivate their online reputation.

In March of 2017, the Consumer Review Fairness Act ("CRFA") went into effect. The CRFA changed how and when businesses can control and protect against negative customer reviews. For example, the CRFA prohibits a business from including a "gag clause" or copyright release in its user agreements with customers to allow the businesses to take down bad reviews or fine the customers that leave them.

What can businesses do in response to a negative review?

Businesses can take action against reviews that:

  • Are libelous, harassing, or obscene
  • Contain trade secrets, commercial or financial information
  • Are unrelated to the content of services that the business offers
  • Contain viruses or systems that may damage computer code

What can't businesses do in response to a negative review?

Businesses can not engage in any of the following activities in response to online reviews:

  • Use "gag clauses" to prevent customers from reviewing
  • Restrict the ability of a person to review the company's products or services
  • Impose financial penalties for bad reviews
  • Require people to give up their intellectual property rights in their review

Business owners should update customer contracts to comply with the above rules and avoid financial penalties imposed by the Federal Trade Commission. Businesses that have included contractual clauses or enforced rules that violate the CRFA should consider new strategies in connection with online reviews and reputation management. If you have any questions about how to protect your company's image, please contact a Foster Swift business & corporate attorney.

Categories: Did you Know?, Digital Assets, News, Social Media

Photo of Taylor A. Gast

Taylor helps businesses and business owners solve and prevent problems as a member of Foster Swift's Business and Tax practice group. He handles business formation and transactions, tax controversies, employee benefits, and technology related issues.

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