Federal Law Would Bar “Gag Clauses” Aimed at Consumer Reviews

Client Alerts · January 27, 2016

“Avoid insane clients and their bad online reviews,” screams a headline on a website advising that wedding photographers include non-disparagement clauses in their contracts with brides-to-be.  “Bridezillas,” the site warns, “can ruin your business if you’re not careful.”

The site is Exhibit A to an op-ed piece in the Huffington Post by two federal lawmakers urging passage of the “Consumer Review Freedom Act of 2015,” legislation passed unanimously by the U.S. Senate and now awaiting House approval.  The bill, according to co-sponsors Sen. John Thune (R-S.D.) and Rep. Darrell Issa (R-Calif.), would “protect the spirit of our Constitution’s First Amendment right to free speech by prohibiting these gag clauses,” while “preserving the right of a business to defend itself against false claims.”

The CRFA is a reaction to a practice, said to be particularly common in the health care, hospitality, and retail sectors, of including gag clauses in form contracts and online terms of service.  The clauses operate by imposing a monetary penalty on consumers who badmouth the site’s product or service—or, more cunningly, by automatically assigning the copyright in any online review to the business reviewed, which can then exercise a copyright holder’s right to have the review taken down from the web.

In one well-publicized case, an online retailer lashed out at a consumer who had complained about the business on RipoffReport.com, insisting that the consumer take down the review or else pay the $3,500 penalty specified in online terms of service.  When the consumer refused to pay, the retailer allegedly referred the debt to a collection agency.   Dentists, too, have been known to present patients with a “mutual privacy agreement” by which the dentist obtains copyright over any online review the patient writes about the dentist’s services.  Such take-it-or-leave-it clauses, if challenged in court, might well be struck as “unconscionable,” but their presence in contracts can nevertheless have a chilling effect on consumer speech.

The CRFA would combat the practice by making gag clauses in form contracts “void from the inception.”  It would apply to any provision that purports to restrict written or oral reviews, to impose a penalty for such reviews, or to require a transfer of intellectual property rights in the review.  One exception is that the business may demand a non-exclusive license to the review so that, for example, it may use a review on its website for marketing purposes.

The bill would also make it unlawful for a business to “offer” a form contract containing one of the prohibited gag clauses.  Enforcement would be vested in the Federal Trade Commission and state attorneys general.

Businesses that believe they have been harmed by unfair negative reviews are not left entirely without a remedy; if the review contains provably false facts, the business may be able to succeed in an action for libel.  Such cases are notoriously hard to win, because statements of opinion are generally protected under the First Amendment.  As a result, a business seeking to counter the complaints of disappointed brides or aching dental patients may do best by responding to the criticism with a forthright explanation or apology – in other words, by fighting speech with speech.

If you would like any assistance or need more information, please contact the author of this alert, Robert A. Bertsche,  at 617 456 8018 or rbertsche@PrinceLobel.com.