How to deal with negative customer reviews


Posted By on 7/06/18 at 10:10 AM

As your mum used to say, ‘sticks and stones may break your bones, but negative customer reviews might break your business’ (or something along those lines, anyway).

The ACCC recently announced that Wisdom Properties Group Pty Ltd received a firm slap on the wrist – and a court-enforceable undertaking – requiring it to remove certain ‘unfair contract terms’ from its standard form home building contracts.  The offending term was a non-disparagement clause allowing Wisdom (perhaps, in this case, not so wisely) to control what its customers said about its services in public, including via online review forums.

Unfair contract terms – you can’t worm your way out of this one

While non-disparagement or publicity-control clauses are fairly common in contracts for goods or services, especially where that clause has mutual effect and potentially mutual benefit, what tripped Wisdom up here was the inclusion of such a clause in a standard form contract. Unfair contract terms are regulated under the Australian Consumer Law – but those provisions only apply to “standard form contracts” for the supply of goods or services or an interest in land where the upfront price is no more than $300,000 (or $1m if for more than 12 months).  A standard form contract is one that isn’t negotiated (or, generally negotiable), and it is a tool used by many – if not most – businesses that supply non-bespoke goods or services.

What makes any given term ‘unfair’ is a little more open to interpretation, but generally includes any term that creates a significant imbalance in rights and obligations of the parties that isn’t in the best interests of the consumer or otherwise reasonable in the circumstances.  The big hitters are contractual provisions about rights of termination, indemnities, rights to vary terms unilaterally and – as we now know – restrictions on fair comment.

In November 2016, rules against unfair contract terms were extended to cover B2B contracts where either party falls within the definition of “small business” (ie employs less than 20 people), and the ACCC has had this issue in its sights ever since.  Wisdom isn’t the first business to find itself wriggling at the end of the regulator’s hook, and it won’t be the last.  So what can you do about negative customer reviews if contractual gags are out?

They said/you said – getting to the truth of the matter

Negative customer reviews might be mean and might be rude, but what really matters is this: are they true?

If a customer is a genuine customer giving an honest and reasonably accurate review of your goods or services, then you may just have to take the feedback on board and do better (with the aim of balancing-out that one stinker with the wave of glowing reviews you are sure to generate in future).  Practically, though your legal remedies are limited, you can still use your best commercial wiles to negotiate with the customer to voluntarily remove or update their review.  This does not mean simply paying them off (where you risk trespassing into misleading/deceptive territory), but means showing the customer a little love and genuinely trying to address their concerns – potentially through a replacement, repair, or refund (which you may be obligated to provide by law anyway) or through value-added services.  If you have a whole slew of negative nellies out there saying nasty things about your products, you might want to engage a PR or marketing expert to investigate and help you turn things around.

But, I hear you wail, they’re being unfair, they’re being unkind – but is the customer review actually incorrect or misleading?  If you believe that the review is not from a genuine customer (a troll or competitor in disguise?), omits key details or is just not true, or has been incentivised or motivated by an aim to hurt your business (it’s not paranoia if they’re actually out to get you!), then ding! ding! ding! you’re a winner and you may have legal rights to have the review removed or retracted.  At a minimum, you could have a genuine basis for writing a nasty strongly-worded letter.

When it comes to a customer review that isn’t just bad, but wrong, your three pillars of protection are:

  • Misleading/deceptive conduct or representations: this has to be conduct in trade or commerce, and won’t help you much if you’re dealing with a genuine customer, but is the golden ticket where your reviewer might actually be a competitor, or have been paid-off by one.
  • Defamation: yes, it’s not only individuals who can be defamed! Companies with fewer than 10 full-time equivalent employees (this can get a bit tricky – seek advice if you’re unsure) that are not public bodies also generally have the ability to bring an action for defamation.  The principal defences to defamation are truth or fair comment, so you want to be sure of the facts before you cry foul.
  • Injurious falsehood: this one is the ace up your sleeve where the numbers aren’t in your favour for a defamation claim, but it can be pretty tricky to make-out. To have a case for injurious falsehood, the statements must have been made in public, must be (funnily enough) false, and must have caused you actual damage (lost sales, etc).  The tripping-point for most people, however, is that you also need to prove malice on the part of the reviewer – again, this is where any evidence of competitor meddling is going to be a big plus.

The take-away – the pen is mightier than the sword, but the law can be your shield

We like platitudes, but we also like helping our clients work through their problems towards creative solutions (even if we don’t get to sue anyone).  All businesses get bad customer reviews sometimes, and there are practical, commercial ways to deal with that, but if you get a review that is substantially incorrect, improperly motivated, or just plain made-up, you might have some legal rights of action and lawyers like us in your corner as back-up.

Despite what your mum always said, you may not always have to take the bad with the good. Give us a call today to talk about your options.

Amelia Edwards

Amelia Edwards Special Counsel

Since joining us in 2014, Amelia has developed broad commercial experience and interests working across the firm’s practice areas and on secondment. She holds a Bachelor of Arts (Anthropology)... Read More