Company Demands Thousands Of Dollars Over Negative Yelp Reviews, Despite Federal Law

In December, after an inexplicably long trip through the legislative process, President Obama signed the Consumer Review Fairness Act, making it illegal for companies to demand that consumers sign away their right to speak honestly. However, not everyone seems to have gotten this message.

The Fairness Act (also referred to as the Consumer Review Freedom Act, an identical version originally passed by the Senate) effectively voids any retail customer agreement clause that seeks to penalize the customer for publishing — or speaking — honest feedback. It also 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 law came about after a growing number of businesses — particularly smaller operations — attempted to use so-called “non-disparagement” clauses in their contracts and customer agreements. These clauses generally barred the customer from saying anything negative about their experience with the company, even if it was true.

We brought you a number of extreme examples, like the sketchy website with terms that imposed a financial penalty for customers who merely threatened to share their experience online, or to seek a chargeback from their credit card company. Then there was the wedding contractor who prohibited customers from encouraging others to say negative things about the company.

These were supposed to end with the Fairness Act, but some folks either don’t know about this law or are ignoring it.

We point you to this story from the Public Citizen Consumer Law & Policy Blog, about a Texas tech service company that has been going after some of its customers for thousands of dollars for violating a clause that appears to violate the new law.

The company’s “Customer Satisfaction Policies” include something dubbed a “Social Media & Arbitration Addendum” that declares, “Customers agree not to attack/criticize/disparage/defame” the company or any of its employees publicly, which it describes as “on public forums, blogs, social networks etc.”

Additionally, this lengthy addendum forbids customers from seeking advice on search engine optimization (SEO), “in a way which brings bad name to [the company] or any of its employees, associates or partners.”

That one is a first for us. Not only are you allowed to not say something negative about the company, but you can’t even research how to effectively spread that forbidden message online.

Violating this clause will result in a “flat fee of $2500.00 per instance,” which the company claims will cover the cost associated with restoring its good name, reputation, and “any and all business losses as directly related to your actions or actions of those directly or indirectly influenced by your prohibited action.”

Public Citizen’s Paul Alan Levy — who has been heavily involved in a number of high-profile gag clause cases, including the recent Texas petsitter debacle — tried to find out why this company was still sending out invoices for thousands of dollars after that law was in place.

Levy points to two invoices, both sent out on Dec. 19, seeking huge payouts for violations of this Social Media Addendum. One invoice is for $2,500, because a customer dared to write something on Yelp. The other is for $5,250 — one charge of $2,500 for a Yelp review; another $2,500 for a Google review; and then $250 for “attorneys fees”.

A third invoice — sent a full two weeks after the Fairness Act was in effect — tries to charge the customer $2,975: the $2,500 for the violation of the clause; $250 for the lawyer; a $150 “Chargeback Research Fee” (whatever that is); and then another $75 fee related to the chargeback attempt.

After these invoices, a lawyer representing the company sent retraction demands to the customers, alleging defamation, but without providing concrete examples of defamatory statements, notes Levy.

“Generally speaking when lawyers send demand letters that throw around the word ‘false’ but give no examples, that tends to suggest that they have no sound claims of falsity,” writes Levy. “And besides, having been in touch with three recipients of the letters, and having looked at some of the consumers’ documentation, it appeared to me that there is some justification for a complaint common to many of the Yelp reviews, that the company does not respond promptly to inquiries from customers.”

Even if what the customers had written were defamatory, some of the customers being hit with these invoices and demand letters had published their allegedly offending reviews as far back as 2013. As Levy notes, under the state defamation laws on both California (where these former customers live) and Texas (where the company is based), the statute of limitations had already lapsed.

Neither Levy nor Consumerist has had any luck getting a response from this company about its non-disparagement clause. However, Levy did speak to the lawyer representing the business.

According to Levy, the attorney could not say if this clause was on the company’s website in 2013, or even 2015.

That’s when Levy brought up the question of the Consumer Review Fairness Act, noting that the attorney’s demand letters had been sent out weeks after the law went into effect.

“When I asked him whether he knew about this federal law, he politely terminated the conversation,” says Levy.

This example demonstrates that companies — and perhaps some of their attorneys — are either unaware of the Fairness Act or they are choosing to ignore it.

The law allows both the Federal Trade Commission and state attorneys general to bring claims against companies that continue to try to shut customers up with punitive non-disparagement clauses. The FTC accepts a variety of complaints directly through its website. Check with your state’s attorney general’s office to find out how to make them aware of businesses that are trying to prevent consumers from speaking freely.

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