How Congress Can Protect Online Consumer Reviews (An Assessment of the Consumer Review Freedom Act) (Forbes Cross-Post)

[Note: last Wednesday, I testified on the Consumer Review Freedom Act before the Senate Commerce Committee. My testimony. My complete written submission.]

For many Americans, the First Amendment is the alpha and omega of free speech protection. However, the First Amendment just sets a minimum level of free speech in our society. Legislatures, including Congress, may freely enact laws that go beyond the First Amendment to protect free speech. If done properly, those laws can help free speech more than the First Amendment.

The Consumer Review Freedom Act of 2015 (S. 2044 and H.R. 2110) is an example of a law that would helpfully supplement the First Amendment’s protection of free speech. The Act would prevent businesses from contractually restricting their customers from reviewing them online (what I call “anti-review clauses”). Although it may be hard to believe any business would ever ask its customers to do something so anti-consumer, it’s likely that millions of Americans have agreed to such clauses. The Consumer Review Freedom Act would benefit them–and all of us.

About The Act

(Note: I’ll critique and quote the Senate bill’s language, but the House and Senate versions are pretty similar).

The Act defines “covered communications” to include written, verbal or photographic consumer reviews. The Act says that any form contracts that ban, impose fines for, or attempt to obtain the intellectual property rights to, covered communications are void. The Act also declares such contracts unlawful and authorizes the federal government and state attorneys’ general to bring enforcement actions for imposing such contracts (the House bill designates the U.S. Department of Justice as the principal federal enforcement entity; the Senate bill, the Federal Trade Commission).

What’s Good

Some of the best aspects of the Act:

* Broad Definition. Consumers can critique businesses in lots of ways. The Act’s multi-media definition of “covered communications” should be broad enough to cover all of those possibilities.

* Broad Prohibitions. Businesses seeking to gag their consumers have tried many different contract tricks. The Act prohibits all of the known tricks (bans, fines and IP assignments), so it will not be easy for a business to skirt around this law.

* Remedies. The Act makes anti-review clauses both void and unlawful. Void means that no court will enforce them, and unlawful means that it’s illegal for businesses to include an anti-review clause in its form, even if the business never plans to enforce it.

Possible Tweaks

While I support the Act in its current form, a few tweaks are worth considering:

* Restriction to Form Contracts. The Act applies only when the anti-review clause is in a “form contract,” defined as “a standardized contract used by a person and imposed on an individual without a meaningful opportunity for such individual to negotiate the standardized terms.” This definition excludes individually negotiated non-disparagement clauses, which are sometimes found in settlement agreements. (A non-disparagement clause says that a person won’t publicly say negative things–even if true–about someone else). Still, the statutory language leaves room for debate over whether a contract qualifies as a “form contract.” Because I am skeptical that non-disparagement clauses are legitimate in any situation, I would favor extending the restrictions to all contracts, form or negotiated.

* Trade Secret Exception. The Act does not apply to “trade secret” protections, which makes sense because businesses should have the ability to protect their trade secrets. Unfortunately, businesses sometimes have ridiculously overexpansive views about what constitutes their trade secrets–including asserting that information disclosures to customers in ordinary buying-and-selling interactions constitute the business’ trade secrets. To preserve trade secret protection but curb abusive overreaching, the Act could specify that ordinary business-consumer interactions can’t qualify as trade secret disclosures.

* No Consumer Redress. The Act doesn’t give consumers any affirmative recourse if a business attempts to impose or enforce an anti-review clause. This could be fixed in two ways. First, if a business makes the unwise decision to bring a lawsuit based on an anti-review clause, the court should award attorneys’ fees and other defense costs to the consumer. Second, the statute should impose statutory damages on any businesses that includes anti-review clauses in their contracts.

* State Law Preemption. The Act doesn’t preempt state laws (the Act says “Nothing in this section shall be construed to affect any cause of action brought by a person that exists or may exist under State law”). This might be a good thing because it increases the range of legal tools to combat anti-review clauses. On the other hand, one of the principal benefits of federal law is that it can establish uniform rules across the country. Although I favor a multi-fronted effort to extinguish anti-review clauses, I probably favor legal uniformity a little more.

Aren’t Anti-Review Clauses Already Illegal?

Because anti-review clauses are such an obviously terrible idea, such clauses are already running into legal trouble. For example, a 2003 New York case struck down an anti-review clause; the Department of Health and Human Service’s Office for Civil Rights has told doctors they can’t use anti-review clauses; in 2014, California enacted a law against businesses banning consumer reviews; and last month, the Federal Trade Commission obtained a preliminary injunction prohibiting Roca Labs from using anti-review clauses. With all of this precedent indicating that anti-review clauses aren’t permissible, do we need a federal law too?

Yes, we do. Anti-review clauses keep proliferating through different industries, so not every business has gotten the message. California’s law is a helpful start, but that still leaves 49 states without comparable statutes. Plus, at least one case suggested that anti-review clauses may be enforceable. We need to put a decisive and unambiguous end to these anti-consumer, anti-competitive practices, and the Consumer Review Freedom Act would do just that.

A Final Thought

In addition to the Consumer Review Freedom Act, Congress should enact a federal anti-SLAPP law–another example of how Congress can extend the First Amendment’s free speech protections. Anti-SLAPP laws help protect consumers from businesses making spurious legal claims that negative consumer reviews are defamatory. Businesses often intimidate consumers into removing reviews by threatening costly legal action (even if the review is completely legitimate), so the procedural and financial protections in a federal anti-SLAPP law would curb such abusive threats. The combination of the Consumer Review Freedom Act and federal anti-SLAPP protection would provide a solid legal foundation for the continued growth and success of online consumer reviews.

More Discussion of This Topic

* My written submission to the U.S. Senate Committee on Commerce, Science, and Transportation
* EFF: Consumer Review Freedom Act Would Protect Customers’ Right to Post Reviews
* Angie Hicks letter to US Senate Committee on Commerce, Science & Transportation re: Consumer Review Freedom Act