Customer Bites Retailer? That’s the Argument

Joel Reidenberg in New York Times, February 13, 2011

Media Source

By David Segal

The idea for this week’s episode comes from Scott Wainner, the founder and chief executive of ResellerRatings, a Web site that allows consumers to rate products and retailers. Mr. Wainner wrote to the Haggler to recount the tale of a shopper who posted a negative review of a company called Full House Appliances, an online appliance seller in Washington State.

Soon after the review was posted, the customer received an e-mail from Full House. Did it contain an apology? Nah. A variation of “How can we make you a satisfied customer?”? Nope.

The e-mail threatened a lawsuit for libel.

“Libel is a prosecutable felony in the state of Washington,” the e-mail began.

And good morning to you! After a bit of huffing and puffing, the e-mail closed with: “This notice is NOT to ask you to remove the review. Rather, it is to tell you that we intend to pursue legal action against you, due to your violation of our agreement, unless we reach a mutually agreeable settlement before 2 p.m. P.S.T., 1/14/2011.”

“Our agreement” turns out to be the amazingly draconian terms and conditions that consumers need to agree to in order to buy anything from Full House. Here’s an excerpt: “I understand that libel is a prosecutable felony in the state where FHA operates. I agree that if I intend to provide negative feedback, the only legitimate one is based solely on verifiable and documented facts, i.e., the e-mail, live chat transcript and all the terms and conditions in the ‘About Us’ section of FHA’s Web site.”

There are further rules about how “legitimate” negative feedback may be posted: “Only a non-response from FHA after 72 business hours from the time it is read can be used as a basis of negative feedback in the lack of response category, unless there is a specific time requirement for response in my e-mail due to the time sensitivity.”

It goes on. The Haggler called the consumer who was sent the e-mail and never heard back. Not surprising, under the circumstances. Next, the Haggler wrote to Full House and asked for a phone call. Soon after, a man who identified himself as “Richard” — an alias, he explained — got in touch. Richard would not provide a real first or last name, nor would he say where in Washington his company is located. This seemed pointlessly mysterious, but Richard said he’d prefer to keep that information out of the newspaper for privacy reasons.

Whatever. The Haggler was less interested in Richard’s identity than in his motives, and on this topic the man was expansive.

“The retailer has become the punching bag,” he said.

To Richard, Internet review sites are a disaster because they allow consumers to essentially drop bombs on a business, anonymously. Unless somebody checks the claims’ veracity, he said, a seller can earn black marks without doing anything wrong. Worse, because consumers know they can denigrate a seller with impunity, they regard the very threat of negative feedback as leverage — meet my insane demands or I’ll write horrible things about you.

“It happens,” Richard says. “People threaten me. ‘I’m going to complain on the Internet!’ I’m like, ‘Dude, chill out.’ ”

Full House has been around for about a decade, but the libel warning is just six months old, Richard says. The goal, he explained, is not to make it easy to sue his customers but rather to minimize the number of customers who post negative reviews, which Richard described as a hugely distracting and time-consuming pain.

If customers don’t like the terms, Richard added, they can buy from someone else.

So, first question: Would the retailer’s terms and conditions actually hold up in court? It’s certainly possible to libel someone online, said Joel Reidenberg, a professor at Fordham Law School, but it would be very hard to find examples where libel is prosecuted as a crime. It would be particularly hard in Washington State, whose courts held that its criminal libel laws were unconstitutional. If you want to sue for libel in that state now, it has to be a civil action.

But let’s say Full House ditched any reference to a “felony.” Could the company actually sue a customer, accusing him of breaching a contract in which he agrees not to libel it?

“If a customer actually libels FHA, the company doesn’t need to allege a breach of contract to file a libel suit,” Professor Reidenberg said. "The contract is unnecessary, and it seems as though it’s designed to dissuade potential customers from commenting on poor quality or poor service, and to threaten customers to force them to take down negative reviews.”

Full House’s superaggressive terms and conditions are interesting, though not because they will establish any legal precedents. They won’t. The document is fascinating as evidence of the profound vulnerability that retailers now feel with the proliferation of consumer ratings sites — not just ResellerRatings, but also Yelp, TripAdvisor, Google user reviews and more.

Richard and his partners have gone to an extreme, and they have done so, it’s worth noting, while maintaining excellent marks on ResellerRatings. But the fear and anxiety that is the subtext of all of this libel talk is something you will hear from many online sellers.

Mr. Wainner says that ResellerRatings is always on the lookout for fake reviews — businesses panning their competitors, for instance — and that he doubts consumers exploit the power and high profile of ResellerRatings for unfair advantage.

“We only hear this argument from either poorly rated merchants or those that are highly out of touch with customer service and consumer rights in general,” he wrote in an e-mail, “and we’ve never seen it backed up by evidence.”

It would be easier to sympathize with Richard’s plight if he offered a few examples of blatant consumer abuse on ResellerRatings. He did not. But that hardly means that abuse isn’t possible. It will be up to managers of these review sites to keep consumers honest, and that will take vigilance and a merciless eye for the fake or unfair review.

As for the negative review that brought Full House’s terms to the attention of the Haggler, it has been removed from ResellerRatings by the customer who posted it. Part of a quid pro quo, it turns out, when Full House provided the customer with a refund. Grudgingly.

“We explained to the customer,” Richard said, “that this is a one-time courtesy.”


Contact: Joel Reidenberg
Email: jreidenberg@law.fordham.edu