Bill Outlawing “Gag Clauses” That Punish Customers For Writing Negative Reviews Goes To President

Image courtesy of Jennifer Moo

After more than a year of waiting, Congress has finally okayed a piece of legislation that, if signed by the president, will stop companies from using so-called “non-disparagement” or “gag” clauses to prevent or discourage customers from writing honest reviews.

The Consumer Review Freedom Act gives the Federal Trade Commission and state attorneys general the authority to take enforcement actions against businesses that attempt to step on customers’ First Amendment rights by requiring that they sign a non-disparagement agreement.

These gag clauses generally threaten to punish the customer with financial penalties if they say anything negative about their experience with the company — even if it’s completely honest. Some companies have gone even further, fining customers for merely saying they intend to write something negative, or even encouraging others to give negative feedback.

Perhaps the most famous of these instances involves online retailer Kleargear, which tried — unsuccessfully — to slap a $3,500 penalty on a customer for complaining online about a transaction gone wrong; a transaction that she says occurred long before Kleargear even had a non-disparagement clause in its user agreement.

More recently, a Texas petsitter sued a couple for $1 million over an unfavorable Yelp review, using a gag clause that was strikingly similar to the one in the Kleargear agreement. That case was dismissed in August.

The Consumer Review Freedom Act was initially passed by the Senate in late 2015, with support from both parties and no need for roll call vote.

An identical bill in the House — the Consumer Review Fairness Act — took a little longer. That bill, in spite of bipartisan support, did not pass until Sept. 2016.

Even though both the House and Senate had passed virtually identical bills, they hadn’t technically signed off on the same bill yet, so lawmakers needed to figure out who would get credit for the bill that eventually ended up on the desk in the Oval Office.

Of course, that process was delayed by the whole election thing, but now that the Senate is back in session they unanimously voted yesterday to send the Consumer Review Freedom Act on to the White House, where President Obama is expected to sign it into law.

“By ending gag clauses, this legislation supports consumer rights and the integrity of critical feedback about products and services sold online,” said Sen. John Thune (SD), sponsor of the Senate version of the bill and Chair of the Senate Commerce Committee. “I appreciate the bipartisan efforts of my Senate and House colleagues to get this legislation over the finish line.”