Congress May Crack Down On Businesses' Efforts To Ban Consumer Reviews (Forbes Cross-Post)

Congress May Crack Down On Businesses’ Efforts To Ban Consumer Reviews (Forbes Cross-Post)

Imagine a dentist telling her patients that they can’t write online reviews about her. Or a hotel deducting money from a newly married couple’s security deposit if any member of the wedding party blasts the hotel on Yelp. These types of stories might sound fanciful, but they are true–and stories like these are becoming increasingly common as some businesses panic about the growing importance of consumer reviews.

Recently, Reps. Swalwell and Sherman introduced H.R. 5499, the Consumer Review Freedom Act of 2014. The law targets businesses’ efforts to suppress consumer reviews or “performance assessments” of businesses. It says that businesses could not prohibit such reviews, impose a fine for posting a review, or require consumers to provide the business with exclusive rights to such reviews. Any such provision in a form contract automatically would be void and also would constitute an “unlawful” practice. The Federal Trade Commission and state attorneys’ general would have enforcement authority.

This bill proposal addresses the same concerns as the newly enacted California law, AB 2365, which also stops businesses from banning consumer reviews. There are some differences, but they are relatively inconsequential. For example, the California law doesn’t clearly cover the intellectual property trick popularized by Medical Justice, while the federal law doesn’t clearly provide for any consumer recourse or any financial penalties for businesses that violate the restrictions.

The federal bill has some drafting ambiguities that I hope will be addressed as it moves forward, including:

* preemption. The federal bill doesn’t have an express preemption clause but does say that the act doesn’t “affect any cause of action brought by a person that exists or may exist under State law.” Presumably, this means California’s existing anti-review ban law would survive, but by limiting its non-preemptive effect only to “causes of action,” there are other aspects of state law that may be impliedly preempted.
* what’s a “form contract”? The law defines it as a “standardized” contract “without a meaningful opportunity” to negotiate the terms. I imagine most online “terms of use” and similar documents would meet this standard, but terms of use are implemented in a wide variety of ways that might stretch the statutory definition. The bill also confusingly excludes “independent contractor” agreements, even though almost every online agreement declares that the parties are independent contractors. Indeed, there are many vendor-customer agreements which are fairly characterized as independent contractor agreements–including, ironically, most member agreements used by consumer review websites themselves.
* can consumers sue businesses for impermissible contract clauses? The bill contemplates that the FTC and state AGs will have primary enforcement authority. However, by declaring certain practices as “unlawful,” it sets up the possibility that consumers could sue offending businesses directly. For example, California’s unfair competition law (Business & Professions Code Sec. 17200) allows consumers to sue for “any unlawful, unfair or fraudulent business act or practice,” so violations of the federal bill seemingly would qualify. However, California’s unfair competition law also has strict standing requirements that may prevent any consumer enforcement effort. If the federal bill wants to enable consumers to sue, it could say so explicitly. There are good reasons not to spur consumer lawsuits against businesses for offending contracts–the class action lawyers almost always get the best of those situations–but we should otherwise anticipate lightly episodic enforcement crackdowns by the FTC or state AGs.

Let’s put my quibbles aside. A bill like this is such an obviously good idea, it’s tempting to believe the bill will pass easily. Certainly I would be surprised if any coordinated opposition emerges. But let’s not forget: we’re talking about Congress, a legislative graveyard where policy innovations go to die. If you think this law is a good idea, let Reps. Swalwell and Sherman know and thank them for their leadership. Or, better yet, contact your Congressmember and encourage him/her to co-sponsor the bill. Ideally this initiative will garner critical mass so we put a definitive end to ridiculous efforts to suppress consumers’ views.