Businesses should not be able to restrict customers’ speech
Are there limits to what a company can put in a standard form contract, like a click-through agreement? Can a company take away its customers’ freedom of speech?
The first route vendors take is adding clauses to their form contracts that say that customers can’t write negative reviews of them online. Every few months, stories about these clauses go through the news cycle. Perhaps you heard last year about Union Street Guest House, a hotel whose standard contract for weddings included a $500 fine for every negative review left by any member of the wedding party. After what sounds like a disastrous weekend, the hotel threatened to keep several thousands of dollars from the couple’s deposit on account of their guests’ reviews.
The other way that a company might use form contracts to silence its customers is a little more complicated. The company uses a clause that assigns the copyright for any review customers might write to the company. Then, when the company finds a review it doesn’t like, it files a DMCA notice to take the content down. A few years ago, we wrote about Medical Justice, a company that advised doctors to use that tactic. We thought then—and still think now—that it’s an offensive practice: not only does it unfairly seek to restrict patients’ freedom of speech; it does it through a gross misuse of copyright law. (There’s a great resource called Doctored Reviews with more information on these contracts, and advice for doctors on how to respond to negative reviews ethically.)
For any customer-vendor agreement that one party can’t realistically negotiate or make changes to, the CRFA would void any clause that:
- Restricts the customer’s ability to post a review of the vendor,
- Imposes a fee against customers for leaving negative reviews, or
- Transfers any intellectual property rights in a review to the vendor.
It would also make it illegal for businesses to extend contracts like that to their customers. The CRFA was originally introduced in the House last year, but it went nowhere. The Senate Committee on Commerce, Science, and Transportation will hold a hearing on it tomorrow.
Is the CRFA necessary?
Here’s the thing about these anti-review clauses: they’re probably already unenforceable. When the clauses are challenged, courts have reliably sided with the customer.
Here’s the other thing about them: for some reason, vendors keep using them.
Earlier this year, the U.S. District Court in New York City forced dentist Stacy Makhenevich to pay back the $110,000 she’d billed patients under the Medical Justice contract. In 2013, the U.S. Department of Health and Human Services ordered a doctor’s office to quit using a “mutual agreement to maintain privacy.” Stunningly, the office had told patients that it would comply with its own confidentiality policies only if they signed an agreement not to post negative reviews.
In another high-profile case, a couple in Utah sued Internet retailer KlearGear over the $3,500 fine it had charged them for writing a negative review. The judge awarded them over $300,000. (Californians used the case as a call to arms to pass a state law similar to the CRFA.)
As for the Union Street Guest House, that case didn’t even need to go to court. The Internet’s attention was enough to get the hotel owners to back down. As you’d expect, whenever one of these stories blows up in the media, it provides for ample schadenfreude on the vendor’s Yelp profile.
The specifics of these cases vary, but they all turn on the legal concept of unconscionability. Under this doctrine, if you and I enter an agreement in which I have all of the control over the terms of the agreement—and the terms are overwhelmingly stacked against you or conceal an unfair surprise via fine print or legal jargon—those terms might not be enforceable.
So why do vendors keep using these agreements? Because they work, apparently. When presented with a legal-sounding threat from legitimate-seeming company, a lot of people give up. There are many stories that never make it to a courtroom or show up on the front page of Consumerist, stories of customers that hurried to pay that fine or delete that review. Because legal gray areas are fertile ground for legal bullying, the law should make it very clear that customers have every right to speak their mind, even if a company’s form contract says otherwise.
Does the CRFA go far enough?
We’re glad to see the CRFA back in Congress, but it’s really just the tip of the iceberg. Think of how many times you’re asked to click “I agree” every day.
Those agreements certainly don’t offer consumers any meaningful way to negotiate. And they often intend to restrict all sorts of freedoms that many of us would not intentionally give up: the right to take a product apart and fix it yourself, for example; or the right to share your passwords with your family; or even the right to give a product away after you buy it or lend it to a friend.
Given that those click-through “agreements” offer users no opportunity to negotiate (and, let’s be honest, they almost always go unread), their more egregious anti-user terms shouldn’t pass the unconscionability test. But, like the no-bad-reviews clauses, they’ll keep showing up until courts and legislatures shut them down.
A good bill with a few bugs to fix
It’s great to see Congress addressing skeezy non-disparagement clauses. We think that with a few changes, the CRFA could be an excellent reform.
The greatest problem with the CRFA is a carveout that allows abusive form contracts to transfer ownership of the customer’s copyright in certain conditions. Both bills make an exception for “unlawful” speech. So under the law, a business could use a contract that transfers copyright of reviews if it asserts that those reviews are unlawful.
Businesses could effectively use this loophole to bypass the traditional protections that cover speech offenses, such as defamation, by using the more powerful censorship tools available to copyright owners. For example, the DMCA’s notice-and-takedown regime provides an easy way for a copyright owner to demand that an online platform remove user content, and the platform must comply if it wishes to maintain its safe harbor against potential copyright liability based on that user content. Plaintiffs alleging that speech is defamatory or otherwise harmful ordinarily have no such tool for censorship. If censorship is available as a remedy, it will come only after a judge hears the arguments.
Copyright law also comes with the potential for astronomical statutory damages that have no relation to any harm caused by infringement. The language about unlawful speech in the bills would seriously upset established law regarding speech offenses. We suspect this was unintentional, but it certainly should be removed before the bill moves forward.
Reading the House and Senate bills closely, we also found some potentially troubling language in the Senate version: “It shall be unlawful for a person to offer or enter into a form contract containing a provision described as void…” (emphasis added) That language could seemingly be used to penalize the individual consumer who entered into one of these contracts unknowingly. The House version is superior in that it makes it clear that individuals would not be punished for accepting a form contract, but it should clarify that someone who accepts a form contract on behalf of a business does not create liability for the business.
It’s time to kill unfair contracts
This is the second time the CRFA has been introduced in Congress. We’re glad to see it back: despite the problems with the bill, it’s great to see lawmakers addressing some of the most overtly unfair contract clauses.
The law should make it clear that user freedoms—like the ability to criticize a business—trump the words in a click-through “agreement.” We hope the CRFA is only the beginning of a broader effort to protect user freedoms from these one-sided contracts.