November 18, 2021

Specifically Regulating Standardized Contractingquick thoughts on the Consumer Review Fairness Act of 2016

The Consumer Review Fairness Act of 2016 makes specific kinds of contract terms illegal and unenforceable, but only if they appear in “form contracts” for the sale or lease of goods or services. As defined, that means contracts “imposed on an individual without a meaningful opportunity for such individual to negotiate the standardized terms”. The crux of the law is to stop vendors restricting customers’ rights to publish reviews of what they buy.

Working in software, this brought to mind the infamous DeWitt Clause—prohibitions in software license agreements against publishing competitive performance benchmarks. DeWitt is a computer science professor. Oracle is a database vendor. Oracle did not enjoy reading about its paltry performance against competitors in DeWitt’s benchmarks. A new clause was born. And, rumor has it, attempts were made to have DeWitt fired, and to punish his program by forswearing new graduates from Oracle’s employ.

I don’t read the Consumer Review Fairness Act to make DeWitt clauses illegal in negotiated licensing deals. That is nearly all “enterprise”-level deals. The language on terms being imposed “on an individual” might even exempt business-to-business deals, as opposed to business-to-consumer deals, as a class. I’m not sure. But I’ve seen DeWitt language trickle down into self-serve and consumer-grade end user license agreements, and I suspect the law might make offering such terms illegal. The law’s definition of “covered communication”, the thing a “form contract” can’t restrict, includes “performance assessment”.

But the larger, more interesting theme is Congress’ choice to regulate standardized contracting specifically. They haven’t said you can’t restrict customers’ abilities to review products and services. I read the law to make it perfectly possible to negotiate a deal that does just that, and to enforce it. Rather, Congress only set new rules for what can and cannot be done in fixed terms that customers don’t get to try to change. If you want to sell at that low level of transaction cost, you can’t sell this way.

I struggle to think of other examples of where Congress has banned particular terms specifically in standardized contracting. It’s one of those free-associative, pattern-matching trivia questions that make law so challenging.

Your thoughts and feedback are always welcome by e-mail.

back to topedit on GitHubrevision history