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Congress takes on businesses that fine customers for bad reviews

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The fight over whether companies can stop customers from posting bad reviews is going national. Today, Reps. Eric Swalwell and Brad Sherman (both D-CA) introduced the Consumer Review Freedom Act, which bans businesses from adding "non-disparagement" clauses to contracts that consumers have to sign. That means that they wouldn't be able to reserve the right to fine or otherwise penalize people who posted negative reviews on Yelp or any other site, a phenomenon that started getting more attention earlier this year. "As a country that prides itself on free speech as a tenet of our constitution, I felt this sneaky tactic of limiting it as purely wrong," said Sherman in a statement.

The bill, which has been referred to the House Committee on Energy and Commerce, says that if companies make customers agree to some kind of terms and conditions, they can't enforce clauses that stop someone from posting a "written, verbal, or pictorial review, performance assessment of, or other similar analysis of, the products, services, or conduct of a business." That includes anything that imposes a "penalty or fee" or says that companies hold copyright of reviews, videos, or photographs, and the FTC can enforce the law under existing rules against unfair or deceptive behavior. It doesn't apply to trade secrets, medical information, or law enforcement reports, all of which businesses can reasonably expect to stay confidential. And non-disparagement clauses are fine if they're between an employer and employee, not a business and customer.

It also doesn't close the door to defamation, libel, or slander lawsuits, a few of which are currently going through courts. If a company believes that a review is untrue, not simply negative, it's still within its right to sue. It just can't preempt criticism by telling customers ahead of time that they'll be dinged for leaving bad feedback, as one hotel was found to be doing in August. California enacted a very similar law last week, so it's worth watching for any meaningful results as this passes through committee and (possibly) heads to a larger vote.