Bipartisan Proposal Put Forward by Thune, Schatz, and Moran Outlaws Abusive “Gag Clauses”
The U.S. Senate today, by unanimous consent, sent bicameral legislation to the White House for the President’s signature that will outlaw the use of “gag clauses” in non-negotiable form contracts. Some businesses have attracted national scrutiny for using gag clauses to punish or silence honest criticism of products and services. The sponsors of the Senate version released the following statements:
“Reviews on where to shop, eat, or stay on websites like Yelp or TripAdvisor help consumers make informed choices about where to spend their money. Every consumer has the right to share their honest experiences and opinions of any business without the fear of legal retaliation, and the passage of our bill brings us one step closer to protecting that right,” said Internet Subcommittee Ranking Member Brian Schatz (D-Hawai‘i).
“By ending gag clauses, this legislation supports consumer rights and the integrity of critical feedback about products and services sold online. I appreciate the bipartisan efforts of my Senate and House colleagues to get this legislation over the finish line,” said Senate Committee on Commerce, Science, and Transportation Chairman John Thune (R-S.D.).
“Just as word of mouth is used by family and friends to share experiences with particular brands or businesses, online reviews have significant benefits to consumers in their purchasing decisions. I’m pleased this legislation will now be sent to the president’s desk. It will help make certain consumers in Kansas and across the country are able to make their voices heard without fear of lawsuits or financial repercussions for honest feedback,” said Consumer Protection, Product Safety, Insurance, and Data Security Subcommittee Chairman Jerry Moran (R-Kan.).
The Commerce Committee held a hearing on gag clauses on November 4, 2015, featuring testimony from Ms. Jen Palmer, a plaintiff in Palmer v. KlearGear, where a company demanded the removal of a negative online review or payment of $3,500 in fines because the online merchant’s terms of service included a non-disparagement clause. When the review was not taken down, the company reported the unpaid $3,500 to a credit reporting agency as an outstanding debt, which negatively impacted the Palmers’ credit.
Thune, Schatz, and Moran introduced S. 2044, the Consumer Review Freedom Act, in September 2015, and the Senate passed the measure unanimously last year. The Senate today approved the companion House version, H.R. 5111, introduced by Rep. Lance Leonard (R-N.J.) and Rep. Joseph Kennedy III (D-Mass.) earlier this year. Rep. Darrell Issa (R-Calif.) and Rep. Eric Swalwell (D-Calif.) also sponsored an earlier House companion version of the legislation, H.R. 2110, to outlaw gag clauses.