How “gag clauses” are used to squash negative reviews and punish reviewers

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No one likes a bad review, especially businesses that can be harmed by negative word-of-mouth.

People increasingly turn to sites like Yelp, Angie’s List, TripAdvisor and Apartment Ratings to seek out reviews for everything from hotels to car repair shops and physicians.

It’s a good practice to check out what other consumers are saying about a business, product or service before buying something or entering a contract like a lease – third-party reviews can help you avoid fraud and scams, even if they can’t guarantee you’ll be satisfied with your purchase.

But some businesses have attempted to squash negative reviews by including “gag clauses” in form contracts, supposedly giving them the right to fine or sue customers who give them the thumbs down online.

These gag clauses, also called non-disparagement agreements, are legal nearly everywhere in the United States, except in California, where the legislature passed a law in 2014 banning the practice.

Nicknamed the Yelp Bill, the California law went into effect last year and imposes fines on businesses that put restrictions on consumer reviews in form contracts.

Now, the House of Delegates in the state of Maryland is considering a similar bill prohibiting the use of contract provisions to waive consumers’ rights to free speech.

Some examples of gag clauses in contracts include one used by a UK hotel to fine guests £100 for bad reviews, and a Florida apartment complex that threatened residents with a $10,000 fine for breaking a “social media addendum” to their lease prohibiting bad online reviews.

Probably the most famous example of a gag clause being used by a business as retaliation against bad reviews involved John and Jennifer Palmer, a couple from Utah who were fined $3,500 by online retailer KlearGear for a comment they posted on the review site RipoffReport.com.

When the Palmers didn’t pay the fine, the company reported them to credit rating agencies, which kept the Palmers from being able to take out a loan to replace a furnace in their home.

The Palmers were able to save enough cash to buy a new furnace, and took their story to local media, and eventually to the US Congress, where Jennifer Palmer told senators about her family’s ordeal.

In December 2015, the Senate approved legislation called the Consumer Review Freedom Act (CRFA), which would prohibit gag clauses anywhere in the US, but the bill still needs to pass the US House of Representatives and be signed by the president to become law.

The good news is that the CRFA has backing from members of both parties – Republicans and Democrats – so gag clauses could one day become illegal and unenforceable.

The Electronic Frontier Foundation (EFF) is supporting the CRFA, and the proposed law in Maryland.

One practice not addressed in the Maryland proposal, the EFF says, is a “disturbing trend” whereby a company uses legal clauses in contracts to assign the copyright for customers’ online reviews to the company.

Then, if the company doesn’t like a particular review, it can file a notice under the Digital Millennium Copyright Act (DMCA) to have the review taken down.

The EFF recommended that the Maryland legislature amend its gag clause bill to ban this tactic as well.