Speak Freely America: New Federal Law Outlaws Gag Clauses That Punish You For Negative Reviews

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A new federal law will be born today. If it is signed by President Obama, one of his final acts in office will be to enshrine into law one of the core principles on which Consumerist — now in its eleventh year — was founded: That honest consumers have the right to complain.

Seven years ago, we first told you about businesses using gag orders — call them “customer waivers” or “non-disparagement clauses,” it’s all the same — to prevent their customers from exercising their legally protected rights to voice their honest opinions.

In the years since, we’ve brought you stories about companies abusing the fine print on their customer agreements — and about the achingly slow process of outlawing that abuse. So it’s good news to report that, after today, these gag clauses will be against the law nationwide.

The bill has the effect of voiding any retail customer agreement clause that seeks to penalize the customer for publishing — or speaking — honest feedback. It allows the Federal Trade Commission and state attorneys general to go after companies that continue to try to quiet or punish customers with these sorts of clauses.

The story of the Consumer Review Fairness Act is the story of a struggle between ordinary consumers who embraced new technologies that amplified their voices, and the businesses that tried to use the legal system to quiet those voices. It’s a law that grew out of a pattern of news stories –featuring companies you’ve never heard of — that eventually worked its way through the halls of Congress, finally landing on the President’s desk.

How Did We Get Here?

More than 10 years ago, blogs and social media opened up a new — and low-cost — platform for consumers to share their feedback (good and bad, but more frequently bad) on the products and services they purchase.

“Word of mouth” no longer referred only to the comments you make to friends or family, but also to those things you could share, instantly, with millions of people around the world.

This turned the entire business model for advertising and customer service on its ear. A company could spend truckloads of cash buying ads, but their customers could undo that bought-and-paid-for goodwill with an angry Tweet, reddit post — or even a Consumerist story — that went viral.

Larger companies generally learned to adapt, turning their social media channels into de facto customer service operations — responding  to outrage at the source, rather than finding out about it on the news.

But a number of smaller, independent businesses didn’t know how to respond to these new public — and often anonymous — forums. Some lashed out, like the store owner who called a customer a drug-addicted prostitute because of her Yelp review.

If You Don’t Have Anything Nice To Say…

“Competition is tough, and [companies] want a way to fight back against criticism that they regard as unfair,” says attorney Paul Alan Levy of Public Citizen, noting that small business often rely on Yelp and other review sites for promotion — the very same sites where many of these businesses try to suppress customer feedback.

“There are false positive reviews and false negative reviews, but no one sues to suppress a false positive review,” Levy, who has been involved in a number of high-profile gag order cases, tells Consumerist. “So if you have a system of non-disparagement clauses which prevent consumers from making negative statements about businesses it skews the marketplace of ideas.”

Levy first noticed non-disparagement clauses about eight years ago when he heard of Medical Justice, a company — referenced in this 2009 Consumerist story — that provided physicians and other medical professionals with non-disparagement agreements to use in their patients’ paperwork.

These clauses, explains Levy, “assigned the copyright in whatever reviews somebody wrote so that if the dentist or doctor didn’t like the review they could say, ‘Well I own the copyright, I insist it be taken down because it’s my copyright.'”

We’ve seen examples of these sort of claims from Medical Justice clients, like the dentist who tried to assert a copyright claim over a patient’s Yelp review — and tried to charge the patient $100 a day for each day the review remained online. The dentist ended up being sued by the patient, and was ordered to pay nearly $5,000 in damages .

“Eventually, when the dentist failed to get our claim dismissed and we were ready to start discovery, we learned she had moved to France and we were awarded a judgment,” recalls Levy, who was involved in that dispute. “As soon as we brought the case, of course, Medical Justice announced they were no longer recommending that their clients use it.”

Kleargear: The Review Heard ‘Round The World

The story that first drew national attention to the abuse of gag clauses began as a short piece on a local TV station in Utah about a local woman — Jen Palmer — who had been told she must pay $3,500 to an online retailer called Kleargear.com for violating the company’s non-disparagement agreement.

Three years earlier, Palmer tried to make a small purchase (less than $20) from Kleargear, but the order never arrived. Palmer canceled it, and voiced her opinion of the failed transaction online.

Kleargear eventually learned of that writeup and, years after the fact, slapped Palmer and her husband with a demand for $3,500, claiming she had violated the company’s gag clause. The “clause” turned out to be just a few sentences that were buried two levels deep on the Kleargear site, on a page that Consumerist subsequently confirmed was separate from the information that came up when the shopper clicked on the “Terms of Sale” button.

When Palmer refused to pay, Kleargear reported the debt to the credit bureaus, damaging her credit score.

Once again, Public Citizen got involved, representing Palmer in her efforts to fight off the $3,500 penalty and clear up her credit.

“When we heard about the Palmers’ story, we reached out to them to see if we could help,” Scott Michelman — formerly of Public Citizen, and now with the ACLU — tells Consumerist.

Ultimately, Kleargear never showed up to defend their case in court and the judge awarded Palmer nearly $307,000 in damages — though Kleargear’s European owners have not yet stepped up to pay what they owe.

“Ultimately, the credit card companies agreed to take the report out of their credit card statement,” says Levy about the result. “But Kleargear said, ‘Oh we’re really abroad; come and get us.’”

“It was a particularly outrageous example of a company bullying consumers,” says Michelman. “After we brought the Palmers’ case against Kleargear we began hearing much more about the use of non-disparagement clauses.”

A Gaggle Of Gags

We too began to hear more frequently of cases that involved a variety of non-disparagement agreements:

• Aug. 2014: Readers tip us off to an online cellphone accessory retailer — which we ultimately learn is apparently one of several similar stores all operated by the same owners — with a non-disparagement clause that not only prevents customers from giving their honest feedback, but punishes the customer for even threatening to write a review, or file a complaint or chargeback with their credit card company.

• Sept. 2014: Dietary supplement maker Roca Labs tries to sue an online complaint site, not for writing anything libelous about Roca’s products, but for allowing Roca customers to allegedly violate their gag clause by posting reviews. Roca itself is later sued by the FTC for allegedly using fines and threats of legal action to pre-empt negative reviews.

• March 2015: An apartment complex in Florida tries to make its residents sign away copyright of anything they write about — and any photos they take of — the property.

• April 2015: A wedding contractor in Orlando includes a curious non-disparagement clause that both forbids the customers from writing anything negative, and also bars them from encouraging others to say anything negative.

Outlawing The Gag

In 2014, California became the first state to outlaw gag clauses in consumer contracts, but it would take more than two years — and multiple stymied attempts — for a federal bill to become law.

Rep. Eric Swalwell of California introduced the first go at the Consumer Review Freedom Act in Sept. 2014, only days after his home state passed its version of the law.

The congressman recently told Consumerist that he was inspired to introduce the legislation after hearing of a case similar to the last one in the timeline above, involving a bride and groom whose wedding contract came loaded with a gag clause.

“I was starting to read about people who had made honest, but negative, reviews of their consumer experiences and then finding out that in the contract that they had with the vendor that they could be sued or fined for doing that,” said Swalwell. “We started to dig deeper and found there were cases all over the country. I feared that for the people that I represented and for people across the country, that as more and more people went online to share their experiences, that some businesses — some bad actors — would try to suppress honest, negative reviews.”

The congressman acknowledged that some business owners did tell him that “It’s not fair sometimes, it’s only the bad experience that comes forward, and that’s not fair to us,” but that his response was that so long as businesses are still protected by libel and defamation law, “then they shouldn’t fear the honest reviews taking place.”

The best businesses, said Swalwell, “are the ones that follow up with somebody online who has a bad experience and try to make it right… turn a bad experience into a good experience.”

“You want the consumer voice in the marketplace to be heard,” explains George Slover, Senior Policy Counsel for our colleagues at Consumers Union, who have supported this legislation since its earliest form. “You want, particularly in the internet age, consumers to have a vastly expanded ability to hear from each other and to make decisions in the marketplace based on the experience of others… honest reviews are a part of that.”

Let’s Try This Again… And Again

Like most bills introduced in Congress, Swalwell’s first attempt at the Review Freedom Act didn’t go anywhere, and died quietly without even being considered by a committee.

He tried again in 2015, this time with the help of a bigger Congressional heavyweight, his fellow Californian, Rep. Darrell Issa. But again — no dice.

The movement finally began to pick up momentum in the fall of 2015, but not on the House bill. Instead, it was an identical version introduced in the Senate in Sept. 2015 by Sen. John Thune of South Dakota.

That bill — given its support by not only the majority party, but by the Chair of the Senate Commerce Committee — quickly demonstrated that this was an issue that had legs.

A Glimmer Of Hope

In Nov. 2015, Thune and the Senate Commerce Committee held a hearing on gag clauses. Jen Palmer — the customer in the Kleargear dispute — was on hand to talk about her experience, and we’re proud to say that at least four Consumerist stories were cited in the prepared testimony before the Committee.

The next month, the Senate unanimously passed — without even the need for a roll call vote — its version of the Consumer Review Freedom Act. So why did it take a full year for it to end up on the President’s desk?

“This is a place that just saw a woman’s bathroom put on the House floor in 2011,” noted Swalwell about the extended timeline for this legislation. “So Congress has never moved as fast as I’d like to to move or others would like. Sometimes there are reasons, other times it’s just a slow deliberative institution.”

The Slow Wheels Of Government

Rather than take up the version of the bill that the Senate had passed without so much as a hiccup, the House opted to consider its own version of the bill, which was effectively different from Thune’s bill in name only: The Consumer Review Fairness Act.

Beltway insiders initially told us they expected the bill to cruise through the House, giving lawmakers something they could point to during the final days of the election season. Instead, it lingered until just before the pre-election recess before being passed without any objection.

The bill eventually landed on the President’s inbox on Dec. 2, giving him until today, Dec. 14, to sign it, veto it, or let it quietly become law without signing. A veto is profoundly unlikely.

Worth The Wait

While a number of the higher-profile gag clause disputes have been thrown out of court or won by default judgments when the company fails to show up in court, Public Citizen’s Levy explains that — without a law on the books — it’s still a bit of a crap shoot for consumers just looking to speak their mind.

“You can never count on winning one of these cases,” says Levy.

He points out that the disputes he’s been involved with — the ones that make headlines — are often cases where the facts already weigh in favor of the customer and where state laws against nuisance lawsuits can offer certain protections for consumers. “That’s not much of an assurance for consumers who are faced with possibility of litigation over these cases where the facts aren’t so striking and the laws aren’t as good.”

With the Review Freedom Act in place, Levy notes that consumers won’t have to choose between hiring a lawyer or shutting up.

“By ending gag clauses, this legislation supports consumer rights and the integrity of critical feedback about products and services sold online,” said Sen. Thune in a statement to Consumerist. “I appreciate the bipartisan efforts of my Senate and House colleagues to get this legislation over the finish line.”

Even though it’s not technically the bill he authored back in 2014, Rep. Swalwell doesn’t seem to have any grudge now that the legislation has become a reality.

“We were able to take this from being something partisan — introduced by one party — to get other committees involved,” he explained. “It shows that if we are patient enough and determined that you can see something all the way to the end and make a difference in the lives of people you serve.”

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