New Law Would Void “Non-Disparagement” Clauses that Silence Online Reviews

Peter Roesler, President - Web Marketing Pros

By Peter Roesler

President, Web Marketing Pros

internet-lawOnline reviews are a powerful tool for consumers and business owners. With so many businesses to choose from in the modern marketplace, online reviews can help business owners showcase their good side or warn consumers about potentially shady businesses. According to one study, 91 percent of consumers regularly or occasionally read online reviews and 84 percent of people trust online reviews as much as a personal recommendation.

Unfortunately, online reviews can be used by angry customers to leave illegitimate complaints in order to defame a business. While there are some remedies for business owners when people leave false reviews, some business owners have tried to prevent negative reviews by including “non-disparagement” clauses in their terms of service. While this may seem like a clever idea, a new law that has passed the House and Senate would void these clauses.

To illustrate the issue, in the case of Palmer v. KlearGear, a company demanded the removal of a negative online review or payment of $3,500 in fines because the online merchant’s terms of service included a non-disparagement clause. According to testimony given to the Senate Commerce Committee, “when the review was not taken down, the company reported the unpaid $3,500 to a credit reporting agency as an outstanding debt, which negatively impacted the Palmers’ credit.”

The Consumer Review Fairness Act, which recently passed Congress, would make it illegal to use this kind of clause. According to a statement from Congressman Lance, the bill’s sponsor, “In the 21st century economy it is easier than ever for consumers to make informed choices on which business or service to use by consulting websites and apps that publish crowdsourced reviews of local businesses and restaurants. Consumer reviews are a powerful informational tool because consumers place a high value on the truthful reviews of other consumers. Some businesses have become frustrated by online criticism and some have employed a questionable legal remedy known as a “non-disparagement” clause to retaliate against consumers. These [clauses] are often buried in fine print. The Consumer Review Fairness Act would void any non-disparagement clauses in consumer contracts. It also would ensure companies are still able to remove false and defamatory reviews.”

The Consumer Review Fairness Act is part of a broader trend to remove provisions of  business-friendly terms of service agreements that most consumers agree to without their knowledge. The issue is that these agreements often amount to consumers having to sign away their legal rights. In this case, these “non-disparagement” clauses meant consumers were giving up their Freedom of Speech, since they could be sued by a company for talking about their consumer experience.

There has been similar pushes for changes to the agreements seniors sign when they move into retirement homes or hospices, as well as for financial institutions. Both have used “mandatory arbitration” clauses to prevent consumers from taking issues to court or from forming class action lawsuits. It’s probably only a matter of time before these clauses are also negated, since they deprive citizens their right to access the legal system.

It took two years for the Consumer Review Fairness Act to pass Congress, but it does send a clear signal to business owners: You can’t legalese your way out of American law. You can’t put a line in the terms of service that exempts a business from outcomes they want to avoid.

If you don’t want people to leave bad reviews, make sure your customers are happy. Trying to silence them with legal threats will backfire in the end. For Kleargear, the company had to pay the Palmers more than $306,000 in damages. And now, if you search for Kleargear on Google, the court case is the No. 2 result, right under the link for Being known as the shady business whose shenanigans led to new laws being passed, can’t be good for building trust with potential new customers.

It’s hard to imagine a situation where the Consumer Review Fairness Act isn’t signed by the President (be it Obama or Trump). So soon, all non-disparagement clauses will be void at the Federal level and most states will likely follow suit. Remember, this doesn’t mean that anyone can post whatever they like. Making false claims about a business would still be grounds for a suit. The Consumer Review Fairness Act just means businesses can’t try to preempt negative reviews by adding that to the terms of service.

For more about consumer reviews, check out this article on a recent consumer study.


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