So-called “non-disparagement clauses,” buried in terms and conditions or consumer purchase agreements, would probably be voided under the First Amendment. However, that issue won’t need to go to the Supreme Court — at least for California consumers.
A new law, just signed this week by California Governor Jerry Brown, makes these contractual waivers, aimed at inhibiting or creating liability for negative online reviews (on sites such as Yelp), illegal.
They can still exist and be enforced in some cases where the wavier was “knowing, voluntary and intelligent.” The retailer or other party seeking to enforce such a contractual clause has the burden of proving those facts.
Here’s an excerpt of the text of the bill, which was just signed into law:
A contract or proposed contract for the sale or lease of consumer goods or services is unlawful if it includes a provision requiring the consumer to waive his or her right to make any statement regarding the consumer’s experience with the business, or to threaten or seek to enforce such a provision or to otherwise penalize a consumer for making such a statement, unless the waiver of this right was knowing, voluntary, and intelligent. A provision in violation of this section is unconscionable and against public policy.
To work around the new law it’s possible that we may see future scenarios in which those seeking to stifle consumer reviews (retailers or others) offer some discount or other reward in exchange for an agreement not to post negative reviews online. However this agreement would need to be very clear and explicit and it’s still not clear that would succeed.
Any company or brand trying to do that would probably face negative PR and some sort of consumer backlash accordingly.
Postscript: Above I quoted the bill/draft version of the law. Eric Goldman pointed me to the official language of law as passed by the CA legislature (including monetary penalties):
(a) (1) A contract or proposed contract for the sale or lease of consumer goods or services may not include 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.
(2) It shall be unlawful to threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.
(b) Any waiver of the provisions of this section is contrary to public policy, and is void and unenforceable.
(c) Any person who violates this section shall be subject to a civil penalty not to exceed two thousand five hundred dollars ($2,500) for the first violation, and five thousand dollars ($5,000) for the second and for each subsequent violation, to be assessed and collected in a civil action brought by the consumer, by the Attorney General, or by the district attorney or city attorney of the county or city in which the violation occurred. When collected, the civil penalty shall be payable, as appropriate, to the consumer or to the general fund of whichever governmental entity brought the action to assess the civil penalty.
(d) In addition, for a willful, intentional, or reckless violation of this section, a consumer or public prosecutor may recover a civil penalty not to exceed ten thousand dollars ($10,000).
(e) The penalty provided by this section is not an exclusive remedy, and does not affect any other relief or remedy provided by law. This section shall not be construed to prohibit or limit a person or business that hosts online consumer reviews or comments from removing a statement that is otherwise lawful to remove.
Interestingly, the “knowing, voluntary, and intelligent” exception is entirely omitted in the statute quoted above vs. the draft version cited above.
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