On Tuesday, lawmakers introduced a bill that would make it illegal for companies to penalize customers who post negative reviews online. 

The Consumer Review Freedom Act, introduced in the House by California Democrats Eric Swalwell and Brad Sherman, follows legislation signed by Governor Jerry Brown in California last week which bans so-called anti-disparagement clauses.

The legislation is a response to businesses that seek to prevent people from leaving negative feedback on sites like Yelp and TripAdvisor, which allow anyone to publicly proclaim their opinions about a company's products and services. Some businesses have sought to do some damage control by inserting anti-disparagement clauses deep within the legalese of their customer agreements, laying out penalties for public airing of grievances.

Here's the skinny: anti-disparagement clauses are a bad idea, and they're probably unenforceable. In California they are now illegal, and that may soon be the national standard. 

Not fans of fine print, most consumers are unaware that they have essentially waived their rights to free speech related to the company, and that's led to a number of significant lawsuits over the past few years. More than a few companies have attempted to collect damages from vocal customers. 

In one particularly well-known case, called Palmer v. Kleargear, a U.S. District Court Judge in Utah ruled against Kleargear, an online retailer, which had tried to slap a customer with a $3,500 fee when his wife posted complaints about the company's customer service online. The customer assumed the fee was frivolous and didn't pay it, and Kleargear eventually reported him to a credit agency, which damaged his credit. The judge ruled against the company and ordered it to pay $300,000 in damages.  

California's law imposes a fine of up to $10,000 on businesses that seek to squash bad consumer reviews by inserting such clauses into contacts and requiring customers to sign them.  

Nineteen other states have what's known as anti-Strategic Lawsuit Against Public Participation laws on their books, according to the Digital Media Law Project. While most of these laws don't appear to be nearly as comprehensive as California's law, federal legislation could be. Swalwell and Sherman's bill would definitively make anti-disparagement clauses unenforceable, although it would reportedly allow them between businesses and their employees. 

Legal experts said legislation protecting consumers against the clauses is critical.

"California’s new law is an important recognition that corporations should not be allowed to use the law’s coercive power to suppress valuable speech about how businesses serve consumers," says David Gans, civil rights director for the Constitutional Accountability Center. And "our legal system should not permit corporations to retaliate against speech that criticizes their performance."

 

Published on: Sep 17, 2014