California Outlaws Consumer-Silencing Non-Disparagement Clauses

from the seeking-redress-in-form-of-head-punching-tabled dept

In one state, at least, non-disparagement clauses like the one KlearGear tried to use to extract $3,500 from unhappy customers, will be illegal. California governor Jerry Brown has just signed a bill that will prevent companies from silencing customers with non-disparagement clauses buried in Terms and Conditions pages.

Here’s the relevant text of the bill:

(a) (1) 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.

(2) It shall be 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.

(b) Any waiver of the provisions of this section is contrary to public policy, and is void and unenforceable.

Violating this could result in a fine of $2,500 for a first violation (up to $10,000 for “flagrant” violations), which unfortunately means KlearGear (which is specifically referenced in the discussion of the bill) would still net $1,000 — at least the first time it gets away with it. (Which it hasn’t, and apparently never will — that clause has been removed from its website. Also, no one can seem to find an actual human being connected to the company selling so much stuff it can barely be described in a ridiculous press release.) Since most companies aren’t willing to charge the equivalent of a low-end used car for negative reviews, this bill pretty much ensures no one will be seeking to enforce non-disparagement clauses in California. Simply having the clause — even if it’s never enforced — could result in a fine.

This is a win for consumers, at least as far as it can be enforced. As has been noted here, there’s more than a few companies combining crappy service with hefty fines that don’t seem to actually exist outside of a Mailboxes, Etc. addresses. Laws are tough to enforce when you can’t find anyone to hold accountable. The worst part is that by the time most consumers discover they’re dealing with a company that will charge them for negative reviews, these companies already have their credit card information and can start adding these charges to their balances.

The good news is that it’s illegal in this state. Preemptive action can be taken to uncover these illegal terms and conditions in order to either push the companies towards complying with the state law or (better) getting them to drop these clauses altogether.

A law preventing these is good, and there needs to be more of them, but the best steps are still preventive. Plenty of sites keep an eye out for consumers and are usually the first to call out this behavior. Enough public outcry and these sites are either blackballed or shuttered completely. The threat of enforcement may be enough to deter some behavior, but when it comes down to it, the entity that best serves the public’s interests is still the public.

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Companies: kleargear

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Comments on “California Outlaws Consumer-Silencing Non-Disparagement Clauses”

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21 Comments
Gothenemsays:

Re: Re: NDAs

(a) (1) 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.

Is the relevent text. It COULD seem to apply to NDA’s, but there may be a techincal loophole in there somewhere. I am not good enough at legalese to know it though.

Anonymoussays:

It should read:

A contract or proposed contract for the sale of consumer goods is stupid bullshit and anyone attempting to foist such bullshit upon the unsuspecting public will be forced to read aloud, in the town square, multitudes of terms of service bullshit for eight hours a day over a period of three years come rain or shine.

Oh yeah … and the first-sale doctrine will prevail over any and all of the aforementioned bullshit.

jilocasinsays:

Outlaw _all_ such terms on consumer sales.

The whole license agreement/contract scam is a mess. The entire ‘click-wrap’ agreement where the company ‘reserves the right to change the terms at their discretion’ is so transparently unfair it should have been outlawed ages ago.

Sure, two companies with their teams of on retainer lawyers should have the freedom to negotiate contracts between themselves (within limits of course, no slavery, murder for hire, etc.). The problems occur when it’s a company with it’s team of on retainer lawyers writing a take it or leave it contract where they get all the rights and the consumer gets all the limitations.

There are some people who will always try to excuse this by claiming that if you don’t like the terms you don’t have to do business with them. That’s an unproductive cop out on many levels.

First, in many cases the consumer isn’t even aware of the terms at the time of sale (licenses buried in the box anyone?). Next it’s couched in nearly impenetrable legalese that requires a law degree to correctly reinterpret how they have twisted the english language to the extent that words you thought you knew mean the exact opposite. Then there’s the ever popular right to rewrite the agreement at any later point in time so that the agreement that you agreed to isn’t anything like the one that’s being enforced against you. Finally there’s the fact that when one group of over achieving lawyers finds a new way to take advantage of the consumer, everyone else rushes to do the same thing (just look at how fast AT&T’s ‘you can’t file a class action suit’ language has spread).

Consumers should have certain rights in the market place (such as resale, warranty, returnability, no retroactive license changes, ability to sue for damages, etc.). In general no click-wrap or other point of sale licenses should be allowed. If there ever turns out to be an exception (and I can’t think of one at the moment) in no case should they be allowed to abridge any of the guarantied rights, no matter what a piece of lawyeresse claims to say. No contract, regardless of the parties should grant one party the unilateral right to change the terms and still be binding.

These non-disparagement clauses are just the latest in a long list of wrongs our current system allows companies to foist on the public.

The California law making disparagement clauses illegal is like the ‘Unlocking Consumer Choice and Wireless Competition Act’. In both cases government is outlawing a symptom of a larger disease. In the cell phone case the disease is the overreach of the anti-circumvention portion of the DMCA. It shouldn’t apply to cases where there isn’t a breach of the copyright act (fair use, coffee DRM, etc.) Congress has decided to make an attempt to fix a symptom of the problem (cell phone unlocking) as opposed to addressing the larger problems with the DMCA. In a similar vein, instead of addressing the problems of applying business to business contract law to the general public, they have passed a law to address one symptom, clauses that penalize people who write or say negative things about a company.

In both cases the people who are supposed to be representing the public are unwilling to tackle the larger problem. Most likely to avoid upsetting the interests they actually do represent, businesses that contribute large amounts of money to them.

Anonymoussays:

Re: Re: Outlaw _all_ such terms on consumer sales.

The problems occur when it’s a company with it’s team of on retainer lawyers writing a take it or leave it contract where they get all the rights and the consumer gets all the limitations.

Amen to this. A solution would be to outlaw take-it-or-leave-it contracts and require each side in a negotiated contract to have a contract lawyer involved in the negotiations. Since it would not be feasible for the average person to hire a lawyer for every business transaction, you should see unnecessary use of contracts dropped by businesses.

jilocasinsays:

Re: Re: Good start - Libel already illegal

Last time I checked, making legally libelous statements was already illegal under the laws that… you know… made libel a crime.

No need to include exceptions into a law that outlaws egregious contract terms concerning complaints to restate that libeling someone is still illegal. Otherwise you would need to include terms to state that murder, theft, extortion, etc. are also still illegal under their respective laws.

Anonymoussays:

Re: Re: Re: Re: Good start - Libel already illegal

Statutory analysis is obviously not your main line of work, or else you would realize the person’s original comment was not off the mark as your comment suggests. Read subpara (2) a couple of times, and then take a quick trip to the Volokh Conspiracy where this statute is analyzed is more detail. The statute does have merit, but is much too broad as presently drafted.

Mason Wheelersays:

This is very interesting. Does anyone know if California has any similar provisions about anti-competitive contracts? Recently I ran across a software development tool whose EULA specifically forbids using this product to create software that competes with this product or any of the company’s other products. The company in question is based out of California, so It would be interesting to see if someone can say “no, sorry, you really can’t do that.”

John Fendersonsays:

Re: Re:

“Recently I ran across a software development tool whose EULA specifically forbids using this product to create software that competes with this product or any of the company’s other products.”

I’ve encountered this term for development tools a few times. Twice, I contacted the company and negotiated the term away. The other times, I simply used a different tool.

I’m guessing that this California law wouldn’t address that clause, though, since development tools aren’t consumer goods.

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