Clause allows businesses to ‘bully dissatisfied customers into silence’

Increasingly threatened by the prospect of bad reviews on Yelp and similar websites, some companies have a message for customers:

Shut up – or else.

You might not know it, but you could be giving up your right to criticize a business publicly if it has a so-called non-disparagement clause in its terms of service.

Clicking “accept” or signing your name on the bottom line means you could be hit with thousands of dollars in penalties if you bad-mouth the company online or in any other venue.

“Companies use these unjust terms to bully dissatisfied customers into silence,” said Scott Michelman, a lawyer with the consumer watchdog Public Citizen.

Now a bipartisan group in Congress – mostly from California – is proposing a federal law that would end such blatant corporate harassment nationwide and restore to consumers their right to free speech.

The Consumer Review Freedom Act was recently introduced by Reps. Eric Swalwell, D-Calif., Darrell Issa, R-Calif., Brad Sherman, D-Calif., and Blake Farenthold, R-Texas. It takes its cue from a law adopted by California last year.

The state law prohibits any contract that involves “waiving the consumer’s right to make any statement regarding the seller or concerning the goods or services.”

It also makes it “unlawful to threaten or to seek to enforce” such a provision or to “otherwise penalize” consumers for making negative statements.

The federal bill would “prohibit the use of certain clauses in form contracts that restrict the ability of a consumer to communicate regarding the goods or services that were the subject of the contract.”

Swalwell told me non-disparagement clauses are showing up in more and more terms and conditions as a growing number of businesses recognize – and fear – the lasting influence of online reviews.

Their response, he said, isn’t to improve their products or services but to slap a gag order on customers.

“This bill preserves the freedom to give an honest, candid review of any business,” Swalwell said.

Let’s pause for a moment to appreciate the irony of companies denying people their right to gripe.

The Supreme Court’s ruling in the 2010 Citizens United case allowed for nearly unlimited amounts of corporate money to be spent on political campaigns in the name of free speech.

The nation’s largest business group, the U.S. Chamber of Commerce, strongly supported the court ruling and has fought subsequent legislative attempts to limit companies’ political spending.

“We are a country founded on the right of individuals to express themselves,” the chamber says on its website. “We believe in the fundamental right to share thoughts, views, facts and ideas.”

Apparently, however, the sharing of thoughts, views, facts and ideas isn’t so fundamental a right when it comes to consumers talking about how they were treated by a business.

Lauren Willis, a professor at Loyola Law School, Los Angeles, said she’s surprised free-market conservatives aren’t more troubled by non-disparagement clauses. “These provisions aren’t just unfair, they’re bad for the economy,” she said. “One way that markets become more efficient is by information getting out there, consumer to consumer.”

A prominent case involving non-disparagement provisions concerned a Utah couple who said the online retailer KlearGear.com had failed to deliver an order in 2008.

The couple criticized the company on the website RipoffReport and were subsequently told by KlearGear that they’d violated their contract and had to pay a fine of $3,500.

The couple sued the company in 2013. A federal judge issued a judgment in favor of the pair last year after KlearGear failed to respond to the suit.

“These clauses would probably be seen as unconscionable and unenforceable if litigated more often,” said Gary Neustadter, a law professor at Santa Clara University. “But very, very few consumers would litigate something like this.”

Businesses enjoy added leverage in the implicit threat that any unpaid non-disparagement fines will be turned over to debt collectors, which could trash a consumer’s credit score.

Many people conclude, therefore, that all they can do is delete any negative reviews or comments that ran afoul of a company’s sensitive nature.

“Surely that’s true,” said Eugene Volokh, a professor at UCLA School of Law who focuses on free-speech cases. “But if they promised not to post a bad Yelp review, they should take it down.”

It all turns on disclosure, he said. If a company sneaks a non-disparagement clause into its terms and conditions, the consumer may not reasonably be expected to know that he or she couldn’t dis the business.

But if the provision was clearly and prominently disclosed, he said, “that may well make it legal under existing law.”

“You can waive your free-speech rights, just as you can waive other rights,” Volokh said.