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Gov. Brown Signs 'Yelp Bill' to Bar Non-Disparagement Agreements

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By Mark Wilson, Esq. on September 22, 2014 12:39 PM

You've heard the horror stories before. Businesses getting offensive with bad reviews on Yelp have been requiring customers to sign non-disparagement agreements. Those customers purportedly can't write negative reviews (though they're more than free to write stellar reviews).

In another case, a dentist's office required a potential patient to sign over to them the copyrights to any future reviews she might write about the dentist.

California has had enough.

The Rundown on AB 2365

Governor Jerry Brown signed AB 2365 into law on September 9. Dubbed by some as the "Yelp bill," it adds a new section to the Civil Code preventing contracts from containing clauses that limit a customer's right to make statements about the business.

The bill also makes it unlawful to threaten to enforce such provisions, makes waivers of this provision void, and allows for civil penalties ranging from $2,500 to $10,000. It allows review websites to remove reviews that are otherwise unlawful.

Cracking Down on Waivers

Businesses have been trying a variety of tactics to get rid of negative reviews, from stopping them at their inception through waivers to filing defamation lawsuits after the fact. The defamation suits usually don't go anywhere and result in the business getting hit by California's anti-SLAPP statute.

Most egregiously, the online retailer KlearGear levied a $3,500 "penalty" on Utah resident John Palmer for leaving a negative review in violation of KlearGear's terms of service, which prohibited disparagement. Palmer refused to pay the penalty, which was then sent to collections, damaging his credit. In May, a federal judge in Utah awarded Palmer and his wife over $300,000 in compensatory and punitive damages, plus attorneys' fees.

Whither Businesses?

There is a case to be made that businesses have no recourse against consumers leaving bad reviews. The smarmy response to that is, "Don't provide crappy service," but in truth, consumers -- or anyone else (like a competitor) -- could leave bad reviews for any number of reasons. How many reviews have you read where unsophisticated diners complained that the waiters at a European-style restaurant didn't check on them often enough? A simple five-star metric doesn't tell you whether the reviewers know what they're talking about.

To make matters worse, the Ninth Circuit recently held that it was perfectly fine for Yelp to demand that businesses pay for Yelp-provided marketing, or else Yelp would hide positive reviews. Some people might call this "extortion," but the Ninth Circuit didn't.

At least one business is fighting back. To prove a point about the unreliability of Yelp reviews, Botto Bistro in Richmond (in Contra Costa County) is proving a point about Yelp's unreliability by offering discounts to customers who post negative reviews of the place on Yelp.

Truthfully, both sides have little more than anecdotes to prove either that businesses are restricting consumers' right to write bad reviews or that businesses have no way to fight back. The silent partner in both transactions in Yelp, which makes money no matter who wins.

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