Instead of prohibiting bad reviews, firms should improve service

California law that goes into effect Jan. 1 fines firms that prohibit customers from giving reviews

Nobody likes to be criticized — especially online, where negative opinions can proliferate like cockroaches.

Some companies are trying to head off bad comments and reviews. They're placing provisions in their contracts that impose hefty penalties on customers if they say anything negative about them online.

Arguing that this is unfair, a pair of congressmen from California introduced legislation last week that would put a stop to so-called non-disparagement clauses nationwide.

California, for its part, has already lowered the boom on such opinion-crushing contracts.

Earlier this month, Gov. Jerry Brown signed into law a similar bill from former Assembly Speaker John A. Pérez (D-Los Angeles) that levies fines of as much as $10,000 for any California business that attempts to block criticism from customers.

"No country that values free speech would allow customers to be penalized for writing an honest review," said Rep. Eric Swalwell (D-Dublin), who cooked up the proposed federal Consumer Review Freedom Act in conjunction with Rep. Brad Sherman (D-Sherman Oaks).

"I introduced this legislation to put a stop to this egregious behavior so people can share honest reviews without fear of litigation," Swalwell said.

He cited the example of a Utah couple, John and Jen Palmer, who had criticized the online retailer KlearGear.com for failing to deliver an order in 2008.

The company subsequently told the pair that they had to remove their negative post from the website RipoffReport.com or face a fine of $3,500, as per the so-called non-disparagement clause included in its terms of service.

The Palmers refused to pay and sued the company last year. In April, a federal judge issued a judgment in favor of the Palmers after KlearGear.com failed to respond to the suit.

Vic Mathieu, a KlearGear.com spokesman, said after the ruling that the company considers the decision "invalid."

"Non-disparagement agreements are not new among employees, partners and customers across the globe," he said. "Consumers are free to shop elsewhere."

I sympathize with businesses being saddled with negative reviews they feel are unwarranted. Things like this can live forever online — right or wrong — influencing the opinions of potential customers.

Not coincidentally, a cottage industry of cyber-reputation fixers has emerged to help businesses and individuals deal with the fallout from negative comments and reviews.

Douglas Mirell, an L.A. lawyer who specializes in 1st Amendment cases, said that until California became the first state in the country to crack down on the use of non-disparagement clauses, there was nothing illegal about asking consumers to waive their free-speech rights.

"You can waive your 1st Amendment rights any day of the week," he said. "There's no issue with contracting away your 1st Amendment rights.

"The issue here is making sure people are doing so in a knowing, intelligent and fully informed way. The ordinary consumer wouldn't think they were doing so simply by buying something."

The reality, Mirell said, is that people don't read the often-voluminous contracts that can accompany online transactions. They just click the "accept" button.

Pérez, the state bill's author, said he too was motivated to act after learning of the Palmers' situation with KlearGear.com.

"No consumer should ever face penalties for voicing their opinions on the services or products they have purchased, and California law is now clear that no company has the ability to silence consumers," he said.

California's law takes effect Jan. 1. It states that "a contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer's right to make any statement" concerning the business.

It imposes a civil penalty of up to $2,500 for the first violation, $5,000 for each subsequent violation, and up to an additional $10,000 if the violation is deemed "willful, intentional or reckless."

Jean-Paul Jassy, another L.A. lawyer focusing on 1st Amendment cases, said it's not surprising that lawmakers at the state and federal level have chosen to act.

"There have been a proliferation of lawsuits from companies about violating non-disparagement clauses," he said. "Consumers are stuck because they may not have the resources to deal with them."

The federal bill introduced last week says businesses can't enforce contract provisions that prevent customers from posting a "written, verbal or pictorial review, performance assessment of, or other similar analysis of, the products, services or conduct of a business."

The bill wouldn't apply to trade secrets, which businesses can reasonably expect to keep under wraps, and wouldn't prevent an employer from having an employee sign a non-disparagement agreement.

Nor would the bill prevent a company from filing a lawsuit for defamation if it believes an online review or comment is untrue.

The federal legislation is supported by leading consumer groups, along with two of the biggest names in the online-review game, Yelp and Trip Advisor.

Yelp said on its blog after California enacted its go-ahead-and-gripe law that "these types of laws are good public policy and will help to protect Yelp users and consumers worldwide."

"We urge other states around the country to follow the example that California has set and adopt similar laws to clarify that non-disparagement clauses in consumer contracts are void and unenforceable," it said.

Such laws shouldn't be necessary. It should be a given that consumers have a right to express their feelings about the companies with which they do business.

Obviously not all companies agree. If they feel they've been unfairly tarnished, they can take such beefs before a judge.

Here's another tip for businesses: Don't skimp on the customer service. Treat people fairly and you won't have much to worry about.

David Lazarus' column runs Tuesdays and Fridays. he also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

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