Many non-lawyers are unaware that it’s legally possible for consumers to waive their free speech rights to negatively review or otherwise criticize companies publicly. Increasingly companies have sought to include so-called non-disparagement clauses in their online terms.
Such clauses or provisions became illegal in California this year (Cal. Civ. Code §1670.8) but they’re not illegal across the US. A new federal bill called the ‘‘Consumer Review Freedom Act of 2015″ seeks to change that.
The federal bill is modeled on the California law (formerly known as the “Yelp bill”), which prohibits any “contract or proposed contract for the sale or lease of consumer goods or services from including a provision waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.” It also makes it illegal “to threaten or to seek to enforce, a provision made unlawful under the bill, or to otherwise penalize a consumer for making any statement protected under the bill.”
Enforceable non-disparagement clauses often come with financial penalties for unwitting consumers who violate their terms — post negative reviews.
In the past some companies and service providers have used defamation suits or their threat to try and intimidate consumers and prevent or remove negative reviews. In addition, some doctors have sought to get consumers to sign over their copyright so that the doctor effectively becomes the “owner” of the consumer review content and can request its removal from the publisher (e.g., Yelp).
At one point General Mills updated its online terms to force consumers to waive most of their legal rights against the company if they downloaded coupons, joined a General Mills online community (e.g., “Liked” on Facebook) entered a company-sponsored contest or interacted online with General Mills in a variety of other ways.
The move was a PR disaster. And after a firestorm of negative publicity the company pulled back and removed the language from its terms.
Similarly non-disparagement clauses, which typically appear in legal settlement agreements, can and are being inserted into lengthy, boilerplate contractual terms that consumers almost never read. Courts maintain the fiction that consumers understand and consent to these terms by clicking “accept” or “agree” because to acknowledge the reality that they do not would introduce instability into the system and open the door for a flood of litigation.
Like the California law, the federal bill would “prohibit the use of certain clauses in form contracts that restrict the ability of a consumer to communicate regarding the goods or services that were the subject of the contract.”
As the above examples indicate, non-disparagement clauses are part of a larger move to try and blunt the growing impact of online reviews and consumer criticism. They’re not just for large corporations. For example, last year a small hotel in Hudson, NY included in its contract for weddings held at the hotel a provision that fined the bride and groom $500 per negative review written by anyone associated with the wedding party.
Needless to say the move backfired.
Despite bipartisan sponsorship the federal Consumer Review Freedom Act could face considerable resistance in the Republican controlled US Congress. My guess is that it will not pass. But the California law still could provide protection for reviews and online free speech where either the individual consumer or the company in question are based in California.
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