Senate Passes Bill to Ban Customer Anti-Speech Clauses

The U.S. Senate recently took one major step toward protecting the rights of consumers and the integrity of capitalism in the 21st Century with its passage of the Consumer Review Freedom Act (S. 2044, H.R. 2110). The bill targets so-called “gag clauses” or “non-disparagement agreements,” which some companies use to curb criticism online.enterkey

Although many companies have argued that competitors or others are unfairly using online tools to spread falsehoods or maliciously damaging their reputation without cause, the flip side is that consumers have been penalized thousands of dollars for posting negative – but honest – online reviews. These reviews are widely used by prospective customers to determine whether to buy a service or patronize a location, so there is a lot at stake on both sides.

These dubious non-disparagement clauses are often tucked into the fine print of the purchase agreement, and have been found on even the most seemingly inane purchases, such as cellphone accessories. Others have been found in rental agreements with landlords, wedding contractors or sellers of weight loss products.

In the experience of our Miami consumer rights lawyers, most judges will render these agreements unenforceable. In some cases, consumers who prevail in these actions have succeeded in having their legal costs covered by the company.

California is the only state thus far to explicitly ban the use of gag clauses, but previous pushes to gain traction on the issue nationally have sputtered.

One customer, recently testifying before Congress on the issue, said she wrote a negative – but truthful – review against an office toy and gift company, which in turn fined the customer $3,500 for violating its non-disparagement agreement. She had trouble finding a lawyer who would take her case unless she paid upfront costs In her lawsuit, Palmer v. Kleargear.com, plaintiff alleged she purchased an under-$20 ornament from the company for her husband for Christmas – but it never arrived. PayPal canceled the order, and soon after, plaintiff wrote a negative review online. Almost four years later, the company sent a bill to the Utah woman for $3,500, based on an anti-disparagement clause on the site’s terms and conditions. The site where the review was posted had a policy of not taking them down, and would only do so for an arbitration fee of $2,000 and if an arbitrator deemed the statements false. When plaintiff and her husband refused to pay, defendant reported the fine to collection and their credit score suffered. Plaintiff’s sued under the Fair Credit Reporting Act, among other laws. The U.S. District Court decided the case in their favor with a default judgment for $307,000 in compensatory and punitive damages, plus $48,000 in legal fees. Plaintiffs have had to take the company back to court to collect that judgment.

Cases like this show why the Consumer Review Freedom Act is so critical. The right to free speech and fair markets is at stake. The measure would void clauses that:

  • Restrict consumer’s ability to post a review about the vendor;
  • Imposes a fee against consumers for negative reviews;
  • Transfers intellectual property rights in a review to the vendor.

It would also make it illegal for businesses to impose these kind of contracts on customers, and they could face action from the government for doing so.

Given that the bill is bipartisan and non-controversial, it was able to coast through the Senate without debate where it was passed unanimously. Similar support is expected in the House.

If you’re battling debt collection in Miami or the surrounding areas contact Jacobs|Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.

Additional Resources:

S. 2044, In the Senate of the U.S., 114th Cong., 1st Sess.

More Blog Entries:

Debt Collectors Find New Ways to Circumvent Consumer Protection Laws, Dec. 15, 2015, Miami Debt Defense Lawyer Blog