Sep 15 2014

Fines for Trying to Stop Bad Online Reviews — California’s New “Yelp Law”

In July, I wrote a post about the challenges faced by small business owners when a disgruntled customer or competitor posts a negative review on websites like Yelp. As I discussed, much of what is written in even the most scathing negative review will likely not constitute actionable defamation, and lawsuits or other punitive actions in response to a negative post can open up the business owner to further scorn, ridicule, and bad publicity in the fickle social media world.

Now, under a new California law signed by Governor Brown on September 9th, business owners can also be slapped with fines of up to $10,000 if they retaliate against a reviewer or attempt to get a customer to waive their right to post a negative review.

No Waiver of Right to Post Reviews

AB 2365, the so-called “Yelp law,” takes effect on January 1, 2015. It is designed to stop businesses from including clauses in their consumer contracts or terms of service agreements prohibiting the consumer from posting negative comments or reviews online. Such non-disparagement provisions have been increasingly used by businesses who are acutely aware of the effect negative reviews can have on their bottom line.

Under the new law (California Civil Code Sec. 1670.8), a consumer contract “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.”

No Retaliation for Posting Negative Reviews

Not only does the law prohibit the waiver of the right to comment online, it 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.” This part of the law was inspired by a Utah case in which a company “fined” a consumer for violating its “non-disparagement” clause by posting a negative review. When the consumer refused to pay the charge, the business reported the non-payment to a credit agency, damaging the consumer’s credit. A jury awarded the consumer over $300,000 in damages.

Any company who violates the provisions of the new law is subject to penalties of up to $2,500 for the first violation, up to $5,000 for a second and subsequent violations, and up to $10,000 for a “willful, intentional, or reckless violation” of the law.

If you are a California business owner who has included or was considering including a provision in your customer contracts regarding online reviews or “non-disparagement,” in light of the new Yelp law, you should reconsider that part of your strategy to deal with disgruntled customers who decide to share their views on the Internet. Otherwise, you could face significant penalties, even if the negative comment or review is factually untrue.

If you would like to make an appointment to discuss your legal issue, please call the Cohen Law Firm today at (805) 267-7147 or send an e-mail to Randall Cohen at racohen@racohenlawfirm.com.

This article has been prepared by the Cohen Law Firm for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

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