YELP ON!
Federal and State Laws Protect On-line Reviews.
On-line reviews can damage your business. Federal and state law has removed one tool businesses have tried to prevent bad reviews: Businesses can no longer utilize contracts to prevent reviews.
Questions: Have you heard the one about the couple in Texas who was unhappy with their petsitter? Two dogs and a fish got less than stellar service so the couple took to that great American tradition, Yelp. The petsitter sued the couple for a bunch of money for the negative review, arguing that it violated a non-disparagement clause in the petsitter’s customer agreement. (Read those petsitter contracts carefully!)
Non-disparagement clauses are questionably legal conditions inserted into contracts and agreements that try to prohibit consumers from freely expressing their opinion on a transaction.
Even though the judge dismissed the action (finding the clauses unlawful) recent Federal law and California law protects Yelpers and other on-line reviews.
California Statute
California Civil Code section 1670.8 prohibits a contract for the sale or lease of consumer goods or services from including a provision waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.
In California, it’s unlawful to threaten or to seek to enforce such a provision or to otherwise penalize a consumer for making any protected statement. The law imposes civil penalties of $2,500 for the initial violation and $5,000 for each subsequent violation, as well as an additional penalty of $10,000 if the violation was willful, intentional, or reckless. The consumer, the Attorney General, or a district attorney or city attorney may bring a civil action for a violation of the provisions of the bill.
Federal Law
The Consumer Review Fairness Act (“CRFA”) is intended to protect individuals who write unflattering online reviews of businesses. CRFA voids contractual provisions in form contracts that: (1) prohibit non-disparagement; (2) impose liquidated damages or fines for posting disparaging reviews; or (3) exert control over the review through an assignment of intellectual property rights. Importantly, it also prohibits companies from offering form contracts with these provisions.
Other than a lawsuit for defamation, which is always difficult to win, there is little recourse for businesses who disagree with on-line reviews. Neither the Federal or California Law prevents websites from removing statements that are inappropriate, so concerned businesses should work with the on-line service if they find review that concerns them.
Good advice for businesses subject to bad reviews is to also create mechanisms to deal directly with the consumer. Business can offfer a complimentary service so the consumer can see the businesses true qualities. They can then invite them to provide a positive review.
Contracts businesses present to consumers should be reviewed by qualified attorneys. Both the Federal and the California statutes provide substantial fines for not knowing and following the law. At least businesses should be aware of the risks they face in doing business with consumers.
By Matt Kinley, Esq., principal of Kinley Law Practice