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CA Passes Bill Forbidding Businesses to Fine Customers Writing Bad Reviews

CA Passes Bill Forbidding Businesses to Fine Customers Writing Bad Reviews

California consumers posting bad reviews of companies they have patronized can relax; the state has passed a bill, AB 2365, protecting the authors of such reviews from being sued by those companies. 

One typical website posting reviews, Yelp, wrote on Wednesday that it had heard about various businesses that insert clauses into their contracts with consumers preventing the customers from writing bad reviews of their products or services. 

Yelp wrote, “These types of non-disparagement contracts not only seek to intimidate potential reviewers away from sharing their honest experiences online, but also threaten to deprive the public of useful consumer information.”

One example of a business pursuing those who wrote negative reviews was the Union Street Guest House, a high-class hotel in Hudson, New York that was built by the Rockefellers and Vanderbilts. The hotel wrote online: “Please know that despite the fact that wedding couples love Hudson and our inn, your friends and families may not. If you have booked the inn for a wedding or other type of event….and given us a deposit of any kind…there will be a $500 fine that will be deducted from your deposit for every negative review…placed on any internet site by anyone in your party.”

The incident that inspired the California bill involved a Utah couple, John Palmer and Jennifer Kulas. Kulas had ordered a “a perpetual-motion desk toy and a bendable smiley-face keychain” for Palmer from KlearGear and never received it, prompting the couple to write a negative review of the company on the site RipoffReport.com.

 KlearGear emailed the couple that they would have to pay $3,500 unless they removed the negative review. When the couple filed suit in court against KlearGear, they won, as KlearGear never showed up.

Former Speaker John A. Pérez saw what happened in Utah and introduced AB 2365; California Gov. Jerry Brown signed it on Tuesday. According to the bill, which goes into effect in 2015, if a business threatens a customer for a negative review it will incur a fine of $2500 for initial violations and $5000 for subsequent violations. If the action by the business is found to be willful, intentional or reckless, the penalty would be $10,000.

This month, a class action suit filed against Yelp for “extorting” small businesses by connecting positive and negative reviews to advertising contracts was thrown out of court. 

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