What do you do if you order a gift for someone online and it never comes? You call, you email and nothing?
When this happened to one couple, they posted a negative review. But then, trouble started.
The company that failed to deliver sent a $3,500 invoice for violating their terms of service prohibiting thumbs down reviews.
Not only that, when the bill was not paid the company reported the couple to the credit reporting agencies, damaging their credit.
Can Businesses Prohibit Bad Reviews?
These are actually the basic facts of one case that pushed California lawmakers to pass a law called the ‘Yelp Bill’. It goes into effect January 1, 2015.
The Yelp Bill prohibits merchants and service providers from forcing consumers to sign away their right to complain. The law provides for penalties of up to $2,500 for a first violation and $5,000 for subsequent violations. Extreme cases warrant an additional $10,000 fine.
People sometimes say as California goes, so goes the nation. That’s why the unique “Yelp Bill” is being watched across the country.
Dentists and other health care providers have been found using the no-bad-review provision. Before providing treatment, they make you sign a pile of paperwork. Later, you learn that one of the documents prohibits you from ever going on Yelp or any other site and posting a bad review.
Yelp Bill: Effect Beyond California
So what? You operate a website in one of the other 49 states or provide health care services outside California. Who cares? Any web merchant that sells and ships products to California residents, or any health provider who treats a California resident and foists such a prohibition on the patient could face liability in a California state or federal court.
In legal terms the offensive contract provision goes by the name of a non-disparagement clause. Section 1670.8 of the California Civil Code now prohibits any private contract provision waiving a consumer’s right to make any statement about goods or services. The law, likely to gain popularity in other states, also outlaws threatening or seeking to enforce the prohibited provisions.
Doesn’t Prohibiting Bad Reviews Violate the First Amendment?
The practice of prohibiting bad reviews definitely threatens the broader concept of free speech. But First Amendment violations require state action somewhere along the line. The First Amendment only prohibits restraints on free speech by a governmental entity.
However, the non-disparagement prohibitions may be unenforceable on other grounds. They may be void for public policy. Under contract law they may be unenforceable because the consumer’s click-through of a website’s terms of service does not constitute a “knowing, voluntary, intelligent” acceptance of the contract term. Basic contract law requires a knowing acceptance of contract terms.
Business owners worry about their public image. But, when they try to hush up their customers, new ideas like the Yelp Bill and old common law contract concepts won’t necessarily support them.