Senate Passes Bill Banning Non-Disparagement Clauses
Despite it being transparently obvious that non-disparagement clauses hidden in fine print serve the singular purpose of deterring complaints about bad products and services, companies still deploy them with little fear of retribution. To date, only one state has actually banned the use of non-disparagement clauses: California.
The issue appears to have finally reached the critical mass needed to propel it onto the national legislative radar. Back in May, multiple representatives started pushing for a federal ban on these clauses, prompted in part by the high-profile KlearGear debacle, in which a couple had their credit rating ruined by the online retailer in its pursuit of a BS $3,500 fee tied to its (nonexistent at the time of the negative review) non-disparagement clause.
The Senate's version of this bill -- which also forbids companies from requiring customers to sign over IP rights to their reviews (so they can be targeted with bogus DMCA takedown notices) -- has cleared another significant hurdle, as The Consumerist reports.
A nationwide ban on the use of tricky "non-disparagement" or "gag" clauses - which prevent consumers from providing their honest opinions in public forums - cleared the Senate today, bringing it one major step closer to becoming law.The House version hasn't moved forward since May. The Senate's passage of a nearly identical bill should prompt some action from this side of Congress. Both bills would seem to have enough support to make this a reality.
If passed by the full Congress, the Consumer Review Freedom Act [PDF] would give the Federal Trade Commission and state attorneys general the authority to take enforcement action against businesses that attempt to these ethically questionable clauses to quiet consumers.
If passed, the new law would authorize the Federal Trade Commission to take action against companies deploying non-disparagement clauses. Unfortunately, the Senate version does not authorize $16,000/day fines for violating the law like the House version does, instead limiting the FTC's actions to civil proceedings. But either way, a ban at the federal level would give shady American companies no place to hide.
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