Now in Effect: New CA Law Boosts Consumer Free Speech in Online Reviews

California’s new law banning non-disparagement clauses in consumer contracts went into effect January 1, 2015.  The new law should allow online reviewers who write about poor customer service or product experiences to stop looking over their shoulders for shakedowns like the one suffered by a Utah couple back in 2013.  This law, as well as a recent court decision creating more transparency in websites’ terms of use, provide online consumers with expanded legal protections and free speech.

Non-disparagement clauses have become commonplace in the clickwrap and browsewrap agreements online retailers require consumers to agree with in exchange for using their sites. These clauses basically restrict users from making statements or taking any action that negatively affects a company’s reputation, products, services, management, or employees. Unfortunately, most consumers do not even know they are agreeing to censor themselves, and most companies utilizing the clauses do not realize the compounded PR nightmare they are creating for themselves when they try to enforce one (first, you provide bad service or products, and then you attack people for calling you out?).

The new law appears in the California Civil Code at §1670.8  and specifically says that “a contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.” The law also makes it “unlawful to threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.” The law has teeth: a civil penalty not to exceed $2,500 for the first violation and $5,000 for the second and each subsequent violation. Upon proof of willful, intentional, or reckless violations of the law, a plaintiff may recover a civil penalty up to $10,000.

What Should Businesses Do in Response to the Law?

Businesses should have counsel review their online terms of use, shrink-, click-, browse-wrap, and hard copy agreements with customers to see if they contain any non-disparagement clauses, and remove them at once. Businesses should also be aware that the law does not stop at California’s borders-any entity or person doing business with consumers in California is affected.  If your business has updated its terms of use in response to the new law, be sure to notify customers of the new terms by the method of notice used in your agreements.


Photo by PeteBobb (CC BY-SA 3.0  via Wikimedia Commons).

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