Senate Passes Bill Banning Non-Disparagement Clauses

from the silencing-the-silencers dept

Despite it being transparently obvious that non-disparagement clauses hidden in fine print serve the singular purpose of deterring complaints about bad products and services, companies still deploy them with little fear of retribution. To date, only one state has actually banned the use of non-disparagement clauses: California.

The issue appears to have finally reached the critical mass needed to propel it onto the national legislative radar. Back in May, multiple representatives started pushing for a federal ban on these clauses, prompted in part by the high-profile KlearGear debacle, in which a couple had their credit rating ruined by the online retailer in its pursuit of a BS $3,500 fee tied to its (nonexistent at the time of the negative review) non-disparagement clause.

The Senate’s version of this bill — which also forbids companies from requiring customers to sign over IP rights to their reviews (so they can be targeted with bogus DMCA takedown notices) — has cleared another significant hurdle, as The Consumerist reports.

A nationwide ban on the use of tricky “non-disparagement” or “gag” clauses — which prevent consumers from providing their honest opinions in public forums — cleared the Senate today, bringing it one major step closer to becoming law.

If passed by the full Congress, the Consumer Review Freedom Act [PDF] would give the Federal Trade Commission and state attorneys general the authority to take enforcement action against businesses that attempt to these ethically questionable clauses to quiet consumers.

The House version hasn’t moved forward since May. The Senate’s passage of a nearly identical bill should prompt some action from this side of Congress. Both bills would seem to have enough support to make this a reality.

If passed, the new law would authorize the Federal Trade Commission to take action against companies deploying non-disparagement clauses. Unfortunately, the Senate version does not authorize $16,000/day fines for violating the law like the House version does, instead limiting the FTC’s actions to civil proceedings. But either way, a ban at the federal level would give shady American companies no place to hide.

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Comments on “Senate Passes Bill Banning Non-Disparagement Clauses”

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Anonymous Coward says:

is posting benchmarking results considered "disparagement"?

Nuance software, which sells Dragon NaturallySpeaking — sold here in the Techdirt shopping store — has a clause in its EULA that prohibits users from benchmarking the software and ‘publishing’ the results. Would this kind of ban on benchmarking be considered an “non-disparagement clause”? Has Nuance sued or threatened anyone for posting benchmark results? And is this sort of draconian restriction of a user’s free-speech rights common in the software industry?

Anonymous Coward says:

Re: is posting benchmarking results considered "disparagement"?

From the bill:

The term “covered communication” means a written, oral, or pictoral review, performance assessment of, or other similar analysis of, including by electronic means, the goods, services, or conduct of a person by an individual who is party to a form contract with respect to which such person is also a party.

So, I think a term prohibiting benchmarking would be be prohibited by this. What is benchmarking if not a performance assessment?

And by the way…

It shall be unlawful for a person to offer or enter into a form contract containing a provision described as void in subsection (b).

Yikes. Better read those terms and conditions, because it’s not just unlawful for them to offer such a term, it’s unlawful for you to accept it!

G Thompson (profile) says:

Well this is a start to Consumer laws that the rest of the Planet (EU, Aust/NZ, etc) has had for over 30yrs or more [1975 was when Australia got our first major consumer laws].

Soon if you are all mature enough you might get to the stage where things like:

* Reasonable for life of product warranties are statutory (ie: Washing machines/Refrigerators have 10yrs or more life)
* If something is not fit for use or as advertised the consumer (not the seller) gets the choice of Refund, Repair, or Replacement [ and for serious faults this extends to life of statutory warranties]
* everything goods and services are covered. That includes cars, Houses, and other MAJOR purchases.
* Corporations can not in any way shape or form be defamed.
* Mandatory and Binding arbitration is an instantly voidable term in any contract for goods and/or services [though Business to business contracts ONLY have some binding arbitration ability still]
* Anyone can compare one product to another no matter what a EULA can state.

It will take time, but maybe in the far distant future (probably another 30yrs) you too will have all the above.

That One Guy (profile) says:

Re: Prediction

While I don’t doubt for a second that you’re right and it will be challenged, that would take some insane twisting, and/or a string of particularly stupid judges to buy the idea that this is a First Amendment violation, given gag-clauses are aimed at stopping other people from speaking, rather than enabling any speech.

Wendy Cockcroft says:

Re: Economic theory

As does the Golden Rule: he who has the gold makes the rules. As in, it’s hard to get your money back once you’ve paid it out so how are you supposed to vote with your wallet?

In an actually free market neither side would have an advantage over the other, you’d just have people trading on an open, voluntary basis.

In practice we are forever being told by free market advocates to either accept the situation or vote with our wallets by taking our business elsewhere if we’re not happy. “Screw consumers” is not a philosophy I’ll ever agree with.

annonymouse (profile) says:

The simple but impossible for most

When it comes to major purchases you have to sign a contract.
Most do not either know or are too afraid to remove clauses from such documents before signing.
I still remember the almost apoplectic look on the car salesmans face as I boxed, crossed, intialled and dated every section I was unhappy with. He insisted that I could not do that and I insisted that I could go to another dealership and forward the contract to the manufacturer. … the second statement made him very amiable.

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