Those who post negative reviews on line have come under increasing scrutiny, and in some cases they are getting “net punished” by big review and social sites. Negative reviews on Yelp and TripAdvisor can be risky. Some businesses have “gag clauses” in the fine print of their service agreements. These clauses are intended to shut you up. Some internet firms have threatened legal action against complaining customers or imposed financial penalties on them.
The legislatures in two states, California and Maryland, have enacted laws that prohibit anti-disparagement clauses in consumer contracts. Other states are in the process of passing similar legislation. The California law bars companies from using non-disparagement clauses unless consumers knowingly and voluntarily waive their right to complain. Violators can be punished by a civil penalty of $2,500 for the first violation, $5,000 for each subsequent one, and an additional $10,000 for “willful, intentional, or reckless” violation of the law.
Maryland state delegate, Jeffrey Waldstreicher, sponsored the bill that was passed there. He asserts it is a consumer rights issue. If consumers are discouraged from writing critical reviews and making legitimate complaints on line, the result “starts to chip away at our whole system of e-commerce.” Waldstreicher said he was especially outraged when he learned that a wedding venue had forced brides and grooms to sign a clause in their agreements that exposed them to legal damages if they or any of their guests wrote negative reviews.
The Maryland law, signed by Republican Gov. Larry Hogan in April of this year, considers gag clauses an unfair and deceptive trade practice under the state’s consumer protection law. Merchants who violate the law are subject to civil and criminal penalties.
In Massachusetts, Democratic state Rep. John Scibak sponsored a law to prohibit gag-clauses. According to Scibak, “Preventing someone from writing a negative review or to sue them for doing that is plain wrong. People should be able to provide their feedback without repercussions.”
Consumer advocates say most customers aren’t aware of non-disparagement clauses, which often are buried deep within boilerplate language. They’re usually found online when customers click the “accept” button under “terms and conditions.” In written contracts, they’re tucked into the fine print.
Paul Levy, an attorney for watchdog group Public Citizen, said large businesses such as banks and telephone companies don’t tend to use consumer gag clauses, small businesses are more likely to rely on them. He said his Public Citizen and many other consumer advocates think the gag provisions are a bad idea.
“These clauses prevent consumers from saying true things about people with whom they’ve done business,” Levy said. “They prevent other consumers from learning the truth about how companies have done business. This hurts businesses that operate on the up-and-up.”
Right to Yelp laws are actually “pro-small business,” Levy said. “They protect the good businesses against unfair competition by those who want to suppress the truth about themselves.” Levy noted that laws banning non-disparagement clauses don’t prevent businesses from suing customers who make false and defamatory statements in their reviews. “There are cases in which false statements can hurt people. Libel law is there to take care of them,” Levy said. “You don’t need a non-disparagement agreement.”
Several cases involving gag clauses have drawn national attention in recent years. An online novelty gift company demanded $3,500 from a Utah couple who posted a negative review about poor customer service on ripoffreport.com. The couple refused to pay and allegedly ran into trouble getting credit after the company reported the unpaid debt. In another case, a Texas pet-sitting company that cared for a couple’s two dogs and a fish sued them for $6,766 after the woman wrote a lengthy, negative review on Yelp.
Fortunately, online review companies have supported legislative efforts to pass Right to Yelp laws. So have groups such as the California Retailers Association and the National Retail Federation, as well as the Internet Association, a trade association that includes Amazon and eBay. Laurent Crenshaw, director of public policy at Yelp, said “We are opposed to gag clauses that attempt to silence individuals and prevent them from sharing their honest experience online,” Crenshaw said. “When a business owner inserts a clause into a contract, at the end of the day they’re trying to silence the person.” Crenshaw is not aware of any organized opposition to legislation that would eliminate consumer gag clauses. In the California and Maryland legislative hearings, for example, no one testified against Right to Yelp bills.