Such agreements usually provide that if you do say or write anything negative about the company, then you agree to a fine that you will be required to pay to the company. The legal term for this fine is “liquidated damages”. These terms are purposely used by businesses in order to prevent “unjust embarrassment” of a company, and to compensate that business for “immeasurable damages” suffered by the company because of the negative reviews. What they actually do is prevent all of us from providing and receiving information useful to consumers. People are discouraged from calling-out bad businesses.
A quick internet search of “non-disparagement clauses” and other related search terms, reveals a number of interesting, real-life cases involving these clauses. There is the published account of a law professor who refused to sign a non-disparagement clause for her doctor, and so, was refused service by that doctor. One of the most interesting ones that I found is the Utah federal case of Palmer vs. Kleargear.com, in which a couple’s negative online review of a business, about the couple’s negative experience of trying to purchase a desk ornament and keychain from the company (at a price under $20), ultimately lead to the parties spending years in litigation against one another.
In another indication of just how big a deal these agreements have become, my Google search revealed a piece put-out by “Lexolology in cooperation with the Association of Corporate Counsel” which advises companies how to draft enforceable non-disparagement clauses. And, there is an article written by “Optimizesmart” which states that although “In reality it is not easy to prove defamation…even threats of ‘defamation’ lawsuit give (people the) creeps and we can take advantage of that fear by including ‘anti defamation clause’ in the service contract,” so that you can “avert the client to not defame you publicly.” It seems that these attempts to muzzle consumers have become quite popular.
As in the Palmer case discussed above, an unpaid fine might lead to negative credit reporting and even a lawsuit. Besides being a royal pain in the neck, these activities may affect your ability to obtain credit or to refinance an existing loan.
In attempting to address these concerns, the California Assembly recently approved a new law (Assembly Bill 2365) which prohibits California businesses from punishing consumers for posting negative reviews. Assuming that the California Senate and Governor also approve of this law, then it will take effect in 2015. And, more encouraging for the rest of us who do not reside in California, two Democratic members of the U.S. House of Representatives (Rep. Eric Swalwell and Rep. Brad Sherman) introduced into Congress the “United States Consumer Review Freedom Act” last week. If passed, that law would invalidate non-disparagement clauses and would make their enforcement illegal, even leading to potential fines of the companies who violate that law.
This is great news for a country that honors the Freedom of Speech, and which values the rights of consumers to have the information necessary for them to make informed decisions about their purchases. It is unthinkable that consumers should not be able to call a lemon “a lemon,” as well as praise superior businesses. It is hard to find a loser, if this legislation passes, except for those businesses which are offering inferior goods or services. We all have a right to know about them and their sub-par performances. These laws protect those rights.