On September 9, 2014, California’s Governor, Jerry Brown, signed into law a bill aimed at protecting Californians who review products and services online. Unofficially dubbed the “Yelp Bill,” A.B. 2365 prohibits businesses from forcing California consumers into contracts which waive the consumer’s right to review products or services they receive. The law also prohibits businesses from penalizing consumers who write negative reviews.
Fines for violating California’s law can be stiff. A.B. 2365 imposes a fine of $2,500 for the first violation and $5,000 for each subsequent violation. If a violation is found to be willful, intentional or reckless, the fine increases to $10,000.
Online review services such as Yelp celebrated California’s new law. However, many businesses across the country cling to so-called “non-disparagement” clauses in their contracts with consumers. In many instances, these clauses are buried in form contracts set up as “click through” agreements on a business’ website where consumers have no realistic opportunity to negotiate the contract terms.
Examples of cases where businesses have pressed “non-disparagement” clauses on consumers are numerous. You can read more about some of the examples in this article from the Electronic Frontier Foundation.
Following on the heels of California’s “first-in-the-nation” legislation, the U.S. Senate appears poised to debate federal legislation that would extend California-style protections to all U.S. consumers. Introduced in the Senate on September 16, 2015, following an unsuccessful introduction in the House, the Consumer Review Freedom Act of 2015 (CRFA) would prohibit several ways that businesses try to prevent consumers from posting negative online reviews. The CRFA would, in cases where a consumer does not have the ability to negotiate or change the terms of a contract with a business, void:
- Clauses in the contracts that restrict a consumer’s ability to post a review of the business;
- Clauses that impose fees on consumers who post negative reviews; or
- Clauses that attempt to transfer intellectual property rights in a review to the business.
Under the CRFA, businesses would be prohibited from presenting contracts with such clauses to consumers.
The CRFA is not perfect. The Electronic Frontier Foundation has expressed concern about some loopholes and other problems with the bill that should be remedied before it is enacted. Still, the CRFA is a significant step in the right direction for consumer protection.
Statistically, the importance of online reviews for businesses cannot be overstated. Recent studies confirm the growing popularity of online reviews with consumers who rely on them when choosing a business with which to work. In 2013, for example, a Local Consumer Review Survey of over 3,500 people in the U.S. and Canada was conducted by BrightLocal, an SEO company. That survey found that 85% of consumers regularly or occasionally read online reviews when selecting a business, up from 76% in 2012.
When the same survey was completed in 2014, 88% of consumers reported that they regularly or occasionally read online reviews when selecting a business. Only 12% of consumers surveyed responded that they did not read online customer reviews to determine whether a business was good or bad.
There is an old saying, “If you don’t have anything good to say, don’t say anything at all.” With legislative reforms like the CRFA on the horizon, and the reality of statistics such as those listed above, businesses that wish to impress that adage on consumers with “non-disparagement” clauses are engaging in nothing more than wishful thinking. Those days are over. Whether they are good or bad, online reviews are here to stay, and smart businesses will take advantage of them by providing excellent products and services to consumers.