Federal law now guarantees the right to leave a bad Yelp review, after President Obama signed the Consumer Review Fairness Act on Wednesday.
The law, which passed the Senate in November with bipartisan support, comes after years of legal efforts to overturn so-called "gag clauses" in contracts, which consumer advocates say are used by businesses to stifle free speech. The clauses, which have been included in the fine print of sign-up forms and purchase agreements, forbid public criticism of companies by their customers.
Such clauses are banned under the new law, which also prohibits businesses from imposing a penalty or fee on a client if they write a bad review. Consumer advocacy groups and other supporters of the law are celebrating its passing.
Yelp, whose users have been sued by companies over negative reviews, said the Act "gives Americans nationwide new guaranteed legal protections when it comes to sharing these honest, first-hand experiences."
Paul Levy, an attorney with Public Citizen who has represented a number of consumers who have been sued over gag clauses, said businesses have used the legal fine print to "suppress truthful criticism and skew the marketplace of ideas by allowing only positive reviews and suppressing negative ones."
"Non-disparagement clauses not only prevent consumers from expressing themselves but also deprive prospective customers of balanced and truthful information on which they can base their decisions about where to do business," he said. "What’s worse, most consumers are unaware when they have agreed to a non-disparagement clause curtailing their First Amendment rights."
Levy represented one of the first consumers to be sued by a company over a negative review. A company called KlearGear claimed a couple in Utah owed a debt for violating its terms of service by writing the review. The couple sued KlearGear in 2012 arguing they didn't owe any debt to the company and received a default judgement including over $300,000 in damages when the company never appeared in court.
In another case in 2014, a Wisconsin woman filed a lawsuit against Accessory Outlet, an online mobile retailer, after they demanded she pay $250 for violating its terms of sale. The company never appeared in court to defend its claims and the court granted the woman a default judgment in 2015, including triple the damages and attorneys fees.
California made gag clauses in contracts illegal in in 2015. Any business that violates the law will be fined up to $2,500 on its first violation and $5,000 for following violations. Consumers can receive up to $10,000 if they can prove the business acted recklessly in violating the law.