Proposed Bill To Prevent The Silencing Of Negative Online Reviews

Yelp and other online review sites are very controversial for dealerships and other businesses, and there have been many lawsuits based on claims that negative reviews are posted on these websites that are not actually from legitimate consumers, but are instead written by competitors. Considering the growing number of consumers who use websites such as Yelp to make decisions about where to purchase products and services, negative statements on review websites can be extremely detrimental to the success of a business.

On the other side, there have also been many claims that businesses coerce consumers to agree to contracts that will penalize them for posting negative reviews, thereby taking away their right to voice their true opinion of a business for other consumers to view online. Many people don’t realize that it is legally possible for consumers to waive their free speech rights to post negative reviews, and some companies choose to include non-disparagement clauses in their online terms to protect themselves from receiving critical comments on review websites. Although these clauses became illegal in California this year, they are not currently illegal across the country.

In an attempt to change this, a bipartisan group of legislators in the House of Representatives have now introduced the Consumer Review Freedom Act, a bill that would make it illegal for a business to penalize customers for posting critical comments on online review websites. The bill would give authority to the U.S. Department of Justice to take action against businesses that include non-disparagement clauses in their contracts.

“The Internet is a critical economic engine, increasingly used for all types of commerce and communication, including for consumer reviews. Some organizations have sought to stifle customers’ abilities to express their opinions online by threatening punitive action if a customer leaves a negative review,” said Rep. Darrell Issa, one of the bill’s sponsors. “The mere threat of monetary penalties or fines for writing honest reviews would chill the free exchange of opinions we expect to find on the Internet. The Consumer Review Freedom Act would put a stop to these outrageous attempts to silence free speech online.”

Enforceable non-disparagement clauses often include financial penalties for consumers who violate their terms by posting negative reviews, and in many circumstances, customers don’t realize that they have agreed to such terms in the details of a lengthy contract that most don’t actually read.

The proposed federal bill is modeled on the existing California law, which prohibits any “contract or proposed contract for the sale or lease of consumer goods or services from including 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.” Additionally, it makes it illegal “to threaten or to seek to enforce, a provision made unlawful under the bill, or to otherwise penalize a consumer for making any statement protected under the bill.”

Although there are certainly some businesses that focus solely on providing good customer service as their method for retaining a positive online reputation, there are clearly others who either post fake reviews about other companies, or block negative reviews about their own business, or both. In one extreme example from a few years ago, e-commerce site KlearGear fined a Utah couple $3,500 for posting a negative review of their transaction online. When the couple refused to pay, the company reported them to credit agencies and destroyed their rating. However, a Utah judge declared the contract clause to be unenforceable, saying that KlearGear was liable for defamation and for violating the Fair Credit Reporting Act by reporting what was basically a “fake debt.” The couple was awarded a default judgment for $306,750.

The KlearGear example is certainly extreme, but it’s also only one of many situations where businesses take an underhanded approach to either improving their own online reputation, or to hurting the online reputation of a competitor.

Interestingly, the proposed bill comes along at the same time as reports that Yelp is exploring the possibility of a sale of the company.

There’s no question that reputation management is a very important consideration for dealerships and other businesses, and although the proposed bill seeks to prevent companies from silencing negative reviews, non-disparagement clauses will remain legal outside of California unless the bill becomes law.