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New Senate Bill Protects Online Reviews

Online reviews are often the beginning and end for any number of outings. Your glowing review of the Vietnamese place downtown may just be what helps attract another customer in search of some must-have pho. Of course, what any company fears is the opposite impact that would result from a bad review. Some companies have found a sneaky way to mitigate that risk—contractual clauses, buried deep within terms of service or similar non-negotiable forms, designed specifically to keep you from writing bad reviews.

Fortunately, steps are being taken in Congress to protect consumers from such clauses. Senator John Thune, who chairs the Senate’s Commerce, Science, and Transportation Committee, and Sens. Brian Schatz and Jerry Moran recently introduced the bipartisan Consumer Review Freedom Act, S. 2044. The proposed bill would nullify any clause restricting a customer from posting a negative review or fining the customer for such action. It also prohibits clauses which transfer intellectual property rights over reviews from customers to the business. But of course, some reviews are actually false or disparaging, so the bill smartly ensures that these terms do not prevent businesses from pursuing legitimate defamation cases.

This strong language is welcome. The onus is now on businesses to comply from the outset, rather than on users to interpret sometimes lengthy terms of service. Similar legislation, H.R. 2110, was earlier introduced in the House of Representatives with bipartisan support, which is a hopeful signal that this bill can succeed.

The Importance of Being Honest

Though sometimes used for an easy laugh, online reviews provide a valuable way for customers to make informed decisions and bolster the Internet’s ability to serve as a platform for open expression. The free flow of information which ensures balanced competition in the market is amplified by the input of millions of reviews. Such reviews can provide a way for smaller companies around the world to reach previously inaccessible audiences. Furthermore, online reviews have allowed for the creation of a whole new class of service provider, thus showing once again the considerable economic value of innovation. Yelp alone is worth $3 billion.

But what happens to a company that legitimately deserves bad reviews? Your standard economics textbook would explain this as a chance to improve and become more competitive. As University College Dublin researchers found, average TripAdvisor rankings for Irish hotels increased from 2007 to 2009 in part because hotel managers now knew exactly where they were being criticized. However, not everyone can serve as an exemplary homo economicus. Hence the decision by some companies that silencing or punishing the reviewers is the best course of action.

This was what happened to Jennifer and John Palmer of Utah, who were “fined” $3,500 by an online shopping company, Kleargear, after Jennifer posted a negative review on Ripoff Report. When the Palmers refused to pay up, the company informed several credit agencies, resulting in a hit on the Palmers’ credit.

An even more galling act was the dentist who claimed that she owned the copyrights on bad reviews of her business. She threatened to sue one patient, Robert Lee, for $100 a day for copyright infringement after he posted a negative review on Yelp. This was followed up with a DMCA takedown request sent to Yelp which was declined. This story shows why the provision in the bill banning clauses which transfer IP rights is so important. Indeed, using bogus DMCA claims to try to suppress bad reviews is not a new tactic. This provision would not only protect consumers, but also hopefully close the door on one avenue of DMCA notice & takedown abuse.

These cases show another possible byproduct of the committee’s bill: a way to protect overly litigious companies from themselves. A judge awarded the Palmers just over $300,000 in compensatory damages arising from Kleargear’s suit, which the company had lost. Similarly, a New York federal court awarded Robert Lee nearly $5,000 in damages resulting from his case. This is to say nothing of the possible Streisand Effect of gaining exponentially more bad publicity out of an attempt to censor a bad review which otherwise would have gone unnoticed. Other companies have cleverly co-opted bad or trolling reviews to generate support and good publicity―certainly far cheaper in the long run than a long court case.

A Win-Win Bill

While the Palmers and Lee won their cases, there should be no excuse to tolerate such litigious actions that try to bully customers for sharing genuine reviews about bad service. Nor do their victories justify the reality that the defendants in these stories undertook considerable stress and expense to fight practices that could simply be prohibited in the first place. There is no knowing how many other would-be defendants, less willing or able to respond to lawsuits and fines, have capitulated to avoid the struggles met by Lee and the Palmers.

If enacted, this bill would give heart to all who care about the Internet as a platform for free speech and a way for consumers to contribute to a robust free market. The Consumer Review Freedom Act would be a win for good governance, consumer protection, and smart Internet policy.

Jordan Harriman is a Policy Fellow at CCIA.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.