In Roca Labs, the FTC filed a complaint against marketers of purported weight loss products who “spent millions of dollars … to serve online advertisements.” Consumers who went online to complain about their experiences faced threats and lawsuits for violating “a Gag Clause purporting to prohibit purchasers from disparaging Roca Labs, its products, and its employees, regardless of the purchasers’ outcomes.” That Gag Clause, part of the terms and conditions that could only be accessed via hyperlink, was also mentioned in a summary sheet that accompanied orders shipped to consumers. The marketers told consumers that violating the Gag Clause would trigger damages, including payment of the “full purchase price” rather than the supposedly discounted purchase price that customers had received for agreeing to the Gag Clause and other terms and conditions. Noting that the Gag Clause “deprived prospective purchasers of  truthful, negative information” and led to “consumers buying Roca Labs products they would not otherwise have bought,” the FTC asserted an unfairness count based on the “contractual provisions that prohibit purchasers from speaking or publishing truthful or nondefamatory negative comments or reviews about the Defendants, their products, or their employees.” The Defendants have agreed to entry of a temporary restraining order that, among many other things, prevents them from invoking or enforcing the Gag Clause.
An apartment complex in Florida narrowly escaped the same fate as Roca Labs and emerged with an FTC closing letter. Tenants at Windermere Cay entered into lease agreements that included a one-page “Social Media Addendum” that “prohibited tenants from providing any negative commentary” regarding the complex or its management company and imposed “damages of $10,000 for the first violation and $5,000 for each additional violation.” Despite their concern that the Addendum was an unfair practice, FTC staff took no action because the Addendum had been discontinued for new tenants shortly before the FTC investigation began, and the apartment complex and management company had notified all existing tenants in writing that the Addendum was void.
Businesses that use social media and online tools to market their products and services and to monitor, react, and respond to what’s being said about them should keep in mind that, from the FTC’s perspective, systematic attempts to suppress or discredit negative information are potentially actionable. Image courtesy of Flickr by Rachel Johnson.