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How to Handle Online Criticism - Part 2

Readers of last week's ETT about handling online criticism have asked whether they can rely on non-disparagement clauses to address a negative Facebook post or Yelp review.
 
The short answer is yes. 
 
However, if a customer pushes back, the clause will likely be found unenforceable by a judge and, if the Consumer Review Freedom Act of 2015 becomes law, your business could face significant penalties for using a non-disparagement clause.
 
Non-disparagement clauses, as the name implies, require a customer to agree not to make any disparaging or negative comments about a company.  These clauses are often found online in a Terms of Service or Terms of Use agreement.  Since most consumers usually click-through these agreements without actually reading them, they don't realize that they are agreeing to be bound by this requirement.
 
Businesses use non-disparagement clauses primarily to prevent online criticism.  If a customer makes a disparaging remark via social media or a consumer reporting website, the company will inform the customer that he/she is in violation of the agreement.  The business will then demand that the person remove the comment, threatening legal action if the person does not acquiesce. 
 
As the Los Angeles Times reported, KlearGear.com told a couple, who complained online about not receiving an order, that they had violated the company's non-disparagement clause and, as a result, they had to pay a fine of $3,500.00.  In a rare move, the couple actually sued the business and won after KlearGear.com failed to respond to the lawsuit.  Although most courts will decline to enforce non-disparagement clauses, this has not stopped businesses from incorporating these clauses into Terms of Service agreements.
 
If your company is one of these businesses, you need to be aware of the Consumer Review Freedom Act of 2015.  The legislation, which was recently introduced in the House, would void any contract clause that prohibits or restricts a person from engaging in written, verbal, or pictorial reviews.  More importantly, the statute authorizes a civil penalty of not more than $16,000.00 for each day that the business requires the use of such a form contract.
 
The Act does allow for certain exemptions to protect items such as trade secrets, personnel files, medical information, and law enforcement records.  This means that you may be able to effectively and legally utilize such a provision to help minimize any unlawful online disclosures.  If your business has information that it does not want posted online, contact a member of MacDonald Illig's Emerging Technologies Practice Group to learn whether you might fall under one of these exemptions and whether you can rely on a legal non-disparagement clause.
 
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