'No Negative Reviews' Clauses Could be Banned

John Lister's picture

The House of Representatives has passed a bill banning companies from gagging clauses that stop customers leaving online reviews. But the law doesn't mean customers are exempt from libel and related laws.

The Consumer Review Fairness Act doesn't affect the legality of writing reviews itself. Neither is it anything to do with criminal law.

Instead it's all about the terms and conditions that companies insist customers agree to before placing an order. These documents sometimes include a non-disparagement clause that says customers won't publish negative reviews of the companies and agree to pay a financial penalty as compensation if they do.

The issue came to light with an attempt in 2012 for online company KlearGear to collect a $3,500 "fine" from a customer for such a review. That wound up with KlearGear itself being ordered to pay the customer $306,750 in compensation for damaging her credit record after it attempted to collect the fine as an outstanding debt.

First Amendment In Question

The problem for consumers was that this case had specific circumstances, including the company breaching the contract itself, that meant it didn't set a precedent for whether such clauses are legitimate in principle. In this and several similar cases, lawyers posed the idea that they breach the first amendment by limiting free speech, but no test case got as far as the Supreme Court.

Now the House has passed a bill that explicitly bans such clauses. It voids any consumer-supplier contract that stops the consumer publishing reviews, whether or not it also tries to impose a fine if they do. The bill also bans clauses which say the supplier automatically takes over the copyright of any such review, which is another way some companies try to get such reviews taken offline. (Source: congress.gov)

Smooth Ride Through Senate Expected

The bill doesn't affect employment or business contracts. It doesn't override any defamation, libel or slander claims relating to the review. Nor does it override any legal duty of confidentiality.

The bill now has to pass through the Senate. However, as politicians there have previously supported a similarly worded bill, that's expected not to be hitch. It would also have to be approved by the President, whomever that may be at that point. (Source: consumerist.com)

What's Your Opinion?

Do you support the aims of the bill? Is it right to stop companies using contract terms to stop customers leaving negative reviews? Or is it up to customers to refuse to agree to such conditions in the first place?

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Dennis Faas's picture

To have a company make their customers "agree" to a "terms of service" and to be able to charge customers insane "fines" ($3,500 in the case of KlearGear) is completely ridiculous. I'm glad that their "fine" backfired on them and they were -legally- fined 10 times that amount. Eat that!

spiras's picture

...A lot to eat there!

Couldn't agree more with the long overdue bill. A prime example of how commercial arrogance and manipulation should be dealt with.

gbruce40_3626's picture

According to the article It was $306,750 or 88 times, not 10 times the fine. That amount was much more realistic as companies should not be allowed to impose fines on a customer who honestly gives a poor review. That is surely a direct contravention of free speech. Additionally, attempting to harm a customers credit score is totally back stabbing. It was all about a $20 product that they failed to deliver to a customer.

They apparently still have the non-disparagement clause in their Terms of Sale that must be agreed to before making a purchase. They are probably making more money out of fining customers than selling products to them.

It appears that they are unlikely to pay the $306,750 to the customer. Constitutional laws are of no use if not enforced fully.

rwells78's picture

So the House finally did something to earn their large paychecks. What about the other 364 days?

matt_2058's picture

My dentist had a 'no negative reviews or posts' statement in their paperwork. I just laughed at it, knowing it didn't mean much.

It's ridiculous that a law needs to be passed to stop this practice. As much as I don't like saying it, here it is: I think a better solution would be to let the businesses sue then be whacked for violating free speech, extortion, and whatever else. Really, the laws are on the books, so just enforce what is there already. No better deterrence than a hit to profits.

But, if Congress is going to dip their toes in consumer agreements, then why not do a good job and get into it. Make all agreements (especially physician services) so that the consumer's info is held private as default. Releasing any info to any entity other that the business/location of services requires explicit permission from the consumer. A perfect example is a simple doctor visit. Currently, many service agreements state they can use your info for studies, research, and training. Every doctor or medical facility agreement I've seen in the last 8 years lets the patient know they will use the patient's info without restriction. Some even state marketing studies!