The Freedom to Yelp: Congress Curbs ToS Overreach

Worried about a company retaliating against you when you post a negative review on Yelp or TripAdvisor? Worry no longer because Congress has your back. Last week, Congress passed a law that will make it illegal for companies to retaliate against U.S. consumers who post negative reviews online.

Specifically, the new Consumer Review Fairness Act of 2016 enables the Federal Trade Commission (FTC) to impose penalties and prevent companies from issuing lawsuits or fines over honest reviews of a consumer experience. The bill also protects reviews of all types, not just those posted on the internet or apps. (A similar law was introduced in Congress in 2014 but died without ever being considered.)

The Consumer Review Fairness Act was introduced by Rep. Leonard Lance (R-NJ) and is modeled after similar laws from Massachusetts and California which prohibit non-disparagement clauses that are often hidden in form contracts. The bill was created to protect customers who were victimized by non-disparagement or gag clauses in the terms of services in websites or mobile apps. The hearing highlighted a 2013 lawsuit in which a consumer was victimized by such a clause—one of a number of lawsuits that were filed against online retailers for charging customers large penalty fees for violating non-disparagement clauses and which motivated the enactment of the California law. These clauses were often buried deep in the fine print of the Terms of Service or other similar contract on the website entered into by the customer with a simple click of the “I Accept” button. In Palmer vs. KlearGear, KlearGear demanded plaintiff Jen Palmer remove a negative online review or face a $3,500 fine based on a gag clause on the company’s Terms of Service. When Palmer refused, the company reported the unpaid debt to a credit reporting agency, which hurt the plaintiff’s credit rating. The new law would prevent cases like Palmer’s in the future. Any company that attempts to enforce a similar non-disparagement or gag order would be charged under the Act.

Not only does the Bill protect consumers by invalidating non-disparagement or gag clauses, but the Act specifically prohibits anyone from offering contracts that include such terms. More specifically, the Act voids, from inception, any clauses in form contracts that: (1) prohibit or restrict the ability of an individual from providing an online review; or (2) impose a penalty or fee against an individual for submitting an online review. The Consumer Review Fairness Act gives enforcement authority to the FTC and the states’ attorneys general. The FTC would be expected to provide businesses with nonbinding best practices for compliance within 60 days of the enactment. Because of this, companies should review their terms of service to ensure that similar clauses are removed.

However, companies can still take legal action against online reviewers who post fake or false online reviews. The application of the law is limited specifically to the identified contractual clauses and would not prevent parties from enforcing clauses regarding defamation, libel or slander. The law also will not affect any party’s right to remove, or refuse to display, content that: “(1) contains the personal information or likeness of another person or is libelous, harassing, abusive, obscene, vulgar, sexually explicit, inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristic; (2) is unrelated to the goods or services offered by or available at such party’s website; or (3) is clearly false or misleading.”

Sponsors of the legislation state that the ability to freely share information on the internet, including truthful criticism, is critical to a healthy online ecosystem. A further rationale for the legislation is that, because companies (which generally have greater financial resources than individual consumers) already have ways to deal with defamation through the court system, there is no justifiable reason for businesses to use such non-disparagement clauses to gag honest speech from consumers.

“Reviews on where to shop, eat, or stay on websites like Yelp or TripAdvisor help consumers make informed choices about where to spend their money,” internet subcommittee ranking member Brian Schatz (D-HI) said. “Every consumer has the right to share their honest experiences and opinions of any business without the fear of legal retaliation, and the passage of our bill brings us one step closer to protecting that right.”

The new law has already been approved by the House of Representatives and awaits President Obama’s signature.