Antitrust Law Daily Bill outlawing 'gag clauses' will head to President
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Wednesday, November 30, 2016

Bill outlawing 'gag clauses' will head to President

By Linda O’Brien, J.D., LL.M.

The Senate this week approved by unanimous consent legislation (H.R. 5111) to ban the use of "gag clauses" in non-negotiable form contracts. The "Consumer Review Fairness Act of 2016," introduced by Representatives Leonard Lance (D.—N.J.) and Joseph Kennedy III (D., Mass.) in April of this year, passed the House on September 12. The bill now goes to President Obama, who is expected to sign the measure.

The legislation would prohibit the use of certain non-disparagement clauses in form contracts that restrict the ability of a consumer to publicly review the goods or services offered in interstate commerce that were the subject of the contract.

The bill comes as a response to businesses seeking to avoid negative reviews, even when those reviews are truthful, through provisions of form contracts with consumers restricting online reviews. Businesses have imposed gag clauses and non-disparagement provisions imposing monetary or other penalties for publishing negative comments.

A violation of the legislation would be treated as a violation of a rule defining an unfair or deceptive act or practice prescribed under the FTC Act. The proposed law would not limit the ability of a person or business that hosts online reviews to remove comments, including comments that contain personal information, comments that contain the likeness of a person, libelous, harassing, or abusive comments, trade secrets, personnel and medical files, or content that contains computer viruses.

"This law is about protecting consumers who post honest feedback online. Online reviews and ratings are critical in the 21st century and consumers should be able to post, comment and tweet their honest and accurate feedback without fear of retribution," said Lance. "Too many companies are burying non-disparagement clauses in fine print and going after consumers when they post negative feedback online. This will now end."

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