‘Non-disparagement’ clauses are quietly being slipped into contracts to prevent negative reviews.

Customers may unknowingly sign away their right to free speech by accepting the terms of service without reading the fine print. To prevent consumers from posting negative reviews, some companies are slipping non-disparagement clauses into contracts. If users post bad reviews online, even accounts that are completely truthful, they could be sued for violating the terms of these so-called agreements.

Companies do have the right to sue people for disparaging reviews if they are false. The issue at hand is whether a company can sue a client for posting a negative review that is true. As of now, litigation is largely determined on a case-by-case and state-by-state basis.

Recent Cases in the News

Kendra McConnell, a resident of Arizona, posted a review on Yelp after having her car repaired at Premier Coach Works in El Mirage. She stated that she was unhappy with the repair job as well as Premier’s customer service. Shortly afterwards, McConnell received a letter from Premier Coach stating that she must remove her review from Yelp because it wasn’t truthful. Instead of taking it down, McConnell posted the letter along with a rebuttal in her existing review. According to McConnell, Premier Coach sued her 10 days later.

“I was very upset that I would have to take time off, research, and find a lawyer to represent me because I was acting out my freedom of speech,” McConnell told KPHO. When she finally agreed to remove her post from Yelp, Premier Coach Works dropped their lawsuit.

In 2012, online retailer KlearGear slapped John and Jen Palmer with a $3,500 fine for a review they had posted on Ripoff Report four years earlier. The Palmers turned to non-profit consumer group Public Citizen for help. Public Citizen sued KlearGear on behalf of the Palmers. Paul Alan Levy, a lawyer at Public Citizen Litigation Group, said that the Palmers’ debt is now null and void because KlearGear failed to show up in court.

Mediabridge, a company based in New Jersey, threatened to sue a Florida man for a negative review he posted on Amazon. Although the review involved an Internet router he had purchased, he went on to accuse Mediabridge of posting fake reviews online and selling a product that was identical to one manufactured by a company in China. In a statement later redacted, Mediabridge claimed it was not going to sue over a bad review per se. Rather, it was challenging the false and misleading claims contained in the review itself.

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The man was never actually sued, but he did remove his original review on Amazon and all related posts on other forums. He had documented the case to the public via Reddit and drew a media buzz. As a result of Mediabridge’s actions toward this user, Amazon decided to revoke Mediabridge’s selling license and ban it from the site. 

However, the law doesn’t always stand on the side of the consumer; particularly when a reviewer posts libelous and slanderous content that is impossible to prove. In 2011, a plastic surgeon and a physician in Arizona were awarded $12 million in damages after suing a former patient who created a website defaming the doctors’ credentials and accusing them of botching her surgery.

In 2012, a Virginia contractor took a former client to court after she posted a review on Yelp, in which she accused him of trespassing and stealing jewelry from her home. The contractor, Christopher Dietz, sued homeowner Jane Perez for defamation and sought $750,000 in damages. Although Perez’s reviews were deemed defamatory, the jury ruled that Dietz was also guilty of defamation because he responded to her negative reviews with his own libelous accusations. After a tit-for-tat litigation strategy, neither party received damages.

In response to the Virginia trial, Yelp’s senior litigation director Aaron Schur said, “Litigation isn’t a very good substitute for customer service, and businesses considering using the courts as a weapon against their customers should think twice. Overreacting to a bad review can often make things worse, as most courts are quick to protect online reviewers in the face of intimidation.”

New Legislation Aims to Protect Consumer

Last month, California Gov. Jerry Brown signed what’s known as the “Yelp Bill” into law. This law prohibits California businesses from incorporating non-disparagement into contracts and penalizing customers for posting negative reviews.

Several weeks later, the Consumer Review Freedom Act was proposed in Congress by California representatives Eric Swalwell and Rep. Brad Sherman. This national act would also prohibit businesses from including non-disparagement clauses in their contracts. The law will go into effect in 2015; any company that attempts to penalize a client for posting an honest negative review will be fined $2,500 for the first offense and $5,000 for each additional offense.

“It’s un-American that any consumer would be penalized for writing an honest review,” Swalwell said in a statement. “I’m introducing this legislation to put a stop to this egregious behavior so people can share honest reviews without fear of litigation.”

How Consumers Can Protect Themselves

When signing a contract, always read the fine print. Look for key phrases such as “agree not to disparage,” “non-disparagement,” and “a no-review policy.” The wording isn’t always straightforward, so note anything that implies legal action or a fine for reviews and/or disparagement.

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Paul Alan Levy of Public Citizen advises consumers to “be leery of any company that attempts to dissuade its customers from writing honest reviews. A respectable business builds a positive reputation through word of mouth. Any sort of no-review or non-disparagement policy should be regarded as a red flag, indicating that a company may have something to hide.”

For those who are facing fines and litigation, First Amendment advocacy groups like Electronic Frontier Foundation and Public Citizen are dedicated to protecting consumers. They often give legal help, but these services can be costly.

Some homeowners and renters insurance policies cover libel suits. Defamation, slander and libel often fall under personal injury coverage or umbrella liability.

These recent legal battles shouldn’t discourage customers from posting honest reviews online. Many businesses thrive thanks to consumer review sites. Amazon and Yelp encourage users to share their opinions, whether they’re good or bad, as long as they are truthful and accurate. Both Amazon and Yelp provide guidelines for unbiased content that won’t land users in hot water.

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