National Floors Decision and Order

182-3085

UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

COMMISSIONERS: Joseph J. Simons, Chairman

Noah Joshua Phillips

Rohit Chopra

Rebecca Kelly Slaughter

Christine S. Wilson

In the Matter of

NATIONAL FLOORS DIRECT, INC., a corporation.

DECISION AND ORDER

DOCKET NO. C-

DECISION

The Federal Trade Commission (“Commission”) initiated an investigation of certain acts and

practices of the Respondent named in the caption. The Commission’s Bureau of Consumer

Protection (“BCP”) prepared and furnished to Respondent a draft Complaint. BCP proposed to

present the draft Complaint to the Commission for its consideration. If issued by the

Commission, the draft Complaint would charge Respondent with violations of the Consumer

Review Fairness Act of 2016.

Respondent and BCP thereafter executed an Agreement Containing Consent Order (“Consent

Agreement”). The Consent Agreement includes: 1) statements by Respondent that it neither

admits nor denies any of the allegations in the Complaint, except as specifically stated in this

Decision and Order, and that only for purposes of this action, it admits the facts necessary to

establish jurisdiction; and 2) waivers and other provisions as required by the Commission’s

Rules.

The Commission considered the matter and determined that it had reason to believe that

Respondent has violated the Consumer Review Fairness Act, and that a Complaint should issue

stating its charges in that respect. The Commission accepted the executed Consent Agreement

and placed it on the public record for a period of 30 days for the receipt and consideration of

public comments. The Commission duly considered any comments received from interested

persons pursuant to Section 2.34 of its Rules, 16 C.F.R. § 2.34. Now, in further conformity with

the procedure prescribed in Rule 2.34, the Commission issues its Complaint, makes the

following Findings, and issues the following Order:

Findings

1. Respondent is National Floor Direct, Inc., a Massachusetts corporation with its principal

office or place of business at 100 Messina Drive, Braintree, Massachusetts 02184.

2. The Commission has jurisdiction over the subject matter of this proceeding and over the

Respondent, and the proceeding is in the public interest.

ORDER

Definitions

For purposes of this Order, the following definitions apply:

A. “Covered Communication” means a written, oral, or Pictorial review, performance

assessment, or other similar analysis of goods or services, including conduct related to

the goods or services.

B. “Review-Limiting Contract Term” means a standardized contract term that:

1. prohibits or restricts the ability of a person who is a party to the contract to engage in

a Covered Communication;

2. imposes a penalty or fee against a person who is a party to the contract for engaging

in a Covered Communication; or

3. transfers, or requires a person who is a party to the contract to transfer, to any other

person any intellectual property rights in a Covered Communication, with the

exception of a non-exclusive license to lawfully use a Covered Communication about

Respondent’s goods or services.

C. “Pictorial” includes pictures, photographs, video, illustrations, and symbols.

D. “Respondent” means National Floors Direct, Inc., a corporation, and its successors and

assigns.

Provisions

I. Prohibited Use of Review-Limiting Contract Terms

IT IS ORDERED that Respondent, and Respondent’s officers, agents, employees, and

attorneys, and all other persons in active concert or participation with any of them, who receive

actual notice of this Order, whether acting directly or indirectly, in connection with the sale or

leasing of any good or service, must not:

A. offer to any prospective customer a contract, or offer to any customer a renewal contract,

that includes a Review-Limiting Contract Term;

B. require that a customer accept a Review-Limiting Contract Term as a condition of

Respondent’s fulfillment of its obligations under a customer contract that Respondent

entered into before the effective date of this Order; or

C. attempt to enforce or assert the validity of any Review-Limiting Contract Term in any

customer contract that Respondent entered into before the effective date of this Order.

Nothing in this Provision shall require Respondent to publish or host the content of any person,

affect any other legal duty of a party to a contract, or affect any cause of action arising from the

breach of such duty.

II. Notice to Consumers

IT IS FURTHER ORDERED that Respondent must, within 45 days after the effective date

of this Order, notify all customers who entered into a contract with Respondent that included any

term concerning a Covered Communication, such as Respondent’s purchase orders or releases,

used on or after March 14, 2017 through the effective date of this Order, by mailing or emailing

each a notice as shown in Attachment A:

A. The heading of the notice, and the subject line for any email, must read “Your Right to

Post Honest Reviews.”

B. Respondent’s name and return address, for any mailing, must appear on the front of the

envelope, the customer’s name and address must be printed on the front of the envelope

or be visible through a window in the envelope, and the words “Your Right to Post

Honest Reviews” must be printed in easily noticed text near the customer’s name and

address.

C. The notice must not include any other materials or message about Respondent, or

otherwise concern its goods or services.

III. Acknowledgments of the Order

IT IS FURTHER ORDERED that Respondent obtain acknowledgments of receipt of this

Order:

A. Respondent, within 10 days after the effective date

of this Order, must submit to the

Commission an acknowledgment of receipt of this Order sworn under penalty of perjury.

B. For 3 years after the issuance date of this Order, Respondent must deliver a copy of this

Order to: (1) all principals, officers, directors, and LLC managers and members; (2) all

employees having managerial responsibilities for drafting, approving, or enforcing

customer contracts, or for responding to Covered Communications, and all agents and

representatives who participate in conduct related to drafting, approving, or enforcing

customer contracts, or responding to Covered Communications; and (3) any business

entity resulting from any change in structure as set forth in the Provision titled

Compliance Report and Notices. Delivery must occur within 10 days after the effective

date of this Order for current personnel. For all others, delivery must occur before they

assume their responsibilities.

C. From each individual or entity to which Respondent delivered a copy of this Order,

Respondent must obtain, within 30 days, a signed and dated acknowledgment of receipt

of this Order.

IV. Compliance Report and Notices

IT IS FURTHER ORDERED that Respondent make timely submissions to the

Commission:

A. 180 days after the issuance date of this Order, Respondent must submit a compliance

report, sworn under penalty of perjury, in which Respondent must: (1) identify the

primary physical, postal, and email address and telephone number, as designated points

of contact, which representatives of the Commission may use to communicate with

Respondent; (2) identify all of Respondent’s businesses by all of their names, telephone

numbers, and physical, postal, email, and Internet addresses; (3) describe the activities of

each business, including the goods and services offered, the means of advertising,

marketing, and sales, and any conduct toward consumers who have engaged in Covered

Communications; (4) describe in detail whether and how Respondent is in compliance

with each Provision of this Order, including a discussion of all of the changes

Respondent made to comply with this Order; and (5) provide a copy of each

Acknowledgment of this Order obtained pursuant to this Order, unless previously

submitted to the Commission.

B. For 3 years after the issuance date of this Order, Respondent must submit a compliance

notice, sworn under penalty of perjury, within 14 days of any change in the following:

(a) any designated point of contact; or (b) the structure of Respondent or any entity that

Respondent has any ownership interest in or controls directly or indirectly that may affect

compliance obligations arising under this Order, including: creation, merger, sale, or

dissolution of the entity or any subsidiary, parent, or affiliate that engages in any acts or

practices subject to this Order.

C. Respondent must submit notice of the filing of any bankruptcy petition, insolvency

proceeding, or similar proceeding by or against Respondent within 14 days of its filing.

D. Any submission to the Commission required by this Order to be sworn under penalty of

perjury must be true and accurate and comply with 28 U.S.C. § 1746, such as by

concluding: “I declare under penalty of perjury under the laws of the United States of

America that the foregoing is true and correct. Executed on: _____” and supplying the

date, signatory’s full name, title (if applicable), and signature.

E. Unless otherwise directed by a Commission representative in writing, all submissions to

the Commission pursuant to this Order must be emailed to [email protected] or sent by

overnight courier (not the U.S. Postal Service) to: Associate Director for Enforcement,

Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue

NW, Washington, DC 20580. The subject line must begin: In re National Floors

Direct, Inc., C-_______.

V. Recordkeeping

IT IS FURTHER ORDERED that Respondent must create certain records for 3 years after

the issuance date of this Order, and retain each such records for 5 years, unless otherwise

specified below. Specifically, Respondent, for any business of which Respondent is a majority

owner or controls directly or indirectly, must create and retain the following records:

A. Personnel records showing, for each person providing services in relation to any aspect of

this Order, whether as an employee or otherwise, that person’s: name; addresses;

telephone numbers; job title or position; dates of service; and (if applicable) the reason

for termination;

B. A copy of each unique contract relating to a Covered Communication; each unique

contract used in connection with selling or leasing Respondent’s goods or services; all

communications with consumers threatening any legal action relating to any Covered

Communication; and all parties’ court filings and Respondent’s discovery responses in

any legal action relating to any Covered Communication; and

C. All records necessary to demonstrate full compliance with each provision of this Order,

including all submissions to the Commission.

VI. Compliance Monitoring

IT IS FURTHER ORDERED that, for the purpose of monitoring Respondent’s

compliance with this Order:

A. Within 10 days of receipt of a written request from a representative of the Commission,

Respondent must: submit additional compliance reports or other requested information,

which must be sworn under penalty of perjury, and produce records for inspection and

copying.

B. For matters concerning this Order, representatives of the Commission are authorized to

communicate directly with Respondent. Respondent must permit representatives of the

Commission to interview anyone affiliated with Respondent who has agreed to such an

interview. The interviewee may have counsel present.

C. The Commission may use all other lawful means, including posing through its

representatives as consumers, suppliers, or other individuals or entities, to Respondent or

any individual or entity affiliated with Respondent, without the necessity of identification

or prior notice. Nothing in this Order limits the Commission’s lawful use of compulsory

process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1.

VII. Order Effective Dates

IT IS FURTHER ORDERED that this Order is final and effective upon the date of its

publication on the Commission’s website (ftc.gov) as a final order. This Order will terminate 20

years from the date of its issuance (which date may be stated at the end of this Order, near the

Commission’s seal), or 20 years from the most recent date that the United States or the

Commission files a complaint (with or without an accompanying settlement) in federal court

alleging any violation of this Order, whichever comes later; provided, however, that the filing of

such a complaint will not affect the duration of:

A. Any Provision in this Order that terminates in less than 20 years;

B. This Order’s application to any Respondent that is not named as a defendant in such

complaint; and

C. This Order if such complaint is filed after this Order has terminated pursuant to this

Provision.

Provided, further, that if such complaint is dismissed or a federal court rules that Respondent did

not violate any provision of this Order, and the dismissal or ruling is either not appealed or

upheld on appeal, then this Order will terminate according to this Provision as though the

complaint had never been filed, except that this Order will not terminate between the date such

complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date

such dismissal or ruling is upheld on appeal.

By the Commission.

April J. Tabor

Acting Secretary

SEAL:

ISSUED:

ATTACHMENT A to the Order – Letter and Email Notice Template:

The notice must be in the following form, appearing on Respondent’s letterhead and email, with

the underlined text completed as directed:

Your Right to Post Honest Reviews

Dear <Name of customer>:

Our records show that our company installed carpeting or flooring for you. I am writing

to tell you that the Federal Trade Commission (FTC), the nation’s consumer protection agency,

has alleged that we used contract provisions that violated the Consumer Review Fairness Act

(CRFA). The CRFA protects your ability to share your honest opinions about a business’s

products, services, or conduct, in any forum, including social media. According to the FTC, we

used a provision in our customer contracts that unlawfully restricted our customers (including

you) from sharing truthful information and opinions about their experiences with us.

We are contacting our customers to tell you that this contract provision is void and we

cannot enforce the provision against you. You can publish your honest review about National

Floors Direct, even if you say something negative about us or our products or services.

If you have questions about the FTC’s case, visit [add case page alias URL provided by

FTC staff with embedded hyperlink].

Sincerely,

[identify Respondent’s officer responsible for

signing the notification letter]