```

[Senate Hearing 114-269]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 114-269

 ZERO STARS: HOW GAGGING HONEST REVIEWS HARMS CONSUMERS AND THE ECONOMY

=======================================================================

                                HEARING

                               BEFORE THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 4, 2015

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation
                             
                             
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                              U.S. GOVERNMENT PUBLISHING OFFICE
20-128 PDF                         WASHINGTON : 2016                              

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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                   JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
MARCO RUBIO, Florida                 CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire          AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas                      RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska                BRIAN SCHATZ, Hawaii
JERRY MORAN, Kansas                  EDWARD MARKEY, Massachusetts
DAN SULLIVAN, Alaska                 CORY BOOKER, New Jersey
RON JOHNSON, Wisconsin               TOM UDALL, New Mexico
DEAN HELLER, Nevada                  JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado               GARY PETERS, Michigan
STEVE DAINES, Montana
                    David Schwietert, Staff Director
                   Nick Rossi, Deputy Staff Director
                    Rebecca Seidel, General Counsel
                 Jason Van Beek, Deputy General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
       Clint Odom, Democratic General Counsel and Policy Director
                           
                           
                           
                     
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 4, 2015.................................     1
Statement of Senator Thune.......................................     1
Statement of Senator Nelson......................................     3
Statement of Senator McCaskill...................................    44
Statement of Senator Fischer.....................................    46
Statement of Senator Moran.......................................    48
Statement of Senator Schatz......................................    50
Statement of Senator Daines......................................    51
Statement of Senator Klobuchar...................................    54
Statement of Senator Blumenthal..................................    56
Statement of Senator Markey......................................    57

                               Witnesses

Adam Medros, Senior Vice President, Head of Global Product, 
  TripAdvisor LLC................................................     5
    Prepared statement...........................................     7
Robert Atkinson, President, Information Technology and Innovation 
  Foundation.....................................................     9
    Prepared statement of Daniel Castro, Vice President, 
      Information Technology and Innovation Foundation...........    10
Jennifer Kulas Palmer, Plaintiff, Palmer v. KlearGear............    14
    Prepared statement...........................................    16
Eric Goldman, Professor, Santa Clara University School of Law....    18
    Prepared statement...........................................    20
    Article dated November 2, 2015 entitled ``How Congress Can 
      Protect Online Consumer Reviews ''.........................    21
    Article dated March 27, 2015 entitled ``Court Might Enforce A 
      Contract Ban On Consumer Reviews''.........................    23
    Article dated September 10, 2014 entitled ``California Tells 
      Businesses: Stop Trying To Ban Consumer Reviews''..........    23
    Article dated August 7, 2014 entitled ``Fining Customers For 
      Negative Online Reviews Isn't New...Or Smart...............    24
    Article from The Next Digital Decade:Essays on the Future of 
      the Internet entitled ``The Regulation of Reputational 
      Information''..............................................    28
    Article from Medical Ethics entitled ``Patients' Online 
      Reviews of Physicians''....................................    34
Ira Rheingold, Executive Director, National Association of 
  Consumer Advocates.............................................    35
    Prepared statement...........................................    37

                                Appendix

Scott Michelman, Staff Attorney, Public Citizen, prepared 
  statement......................................................    63
Angie Hicks, Founder and Chief Marketing Officer, Angie's List, 
  prepared statement.............................................    67
Letter dated November 3, 2015 to Hon. John Thune and Hon. Bill 
  Nelson from George P. Slover, Senior Policy Counsel, Consumers 
  Union..........................................................    68
Letter dated November 4, 2015 to Hon. John Thune and Hon. Bill 
  Nelson from Mike Godwin, R Street Institute; Mytheos Holt, 
  Institute for Liberty; and Steve Pociask, American Consumer 
  Institute......................................................    69
Letter dated November 4, 2015 to Hon. John Thune and Hon. Bill 
  Nelson from Michael Beckerman, President and CEO, The Internet 
  Association....................................................    70
Letter dated November 3, 2015 to Chairman Thune and Ranking 
  Member Nelson from the companies: Demand Progress, Engine, 
  Electronic Frontier Foundation, Fight for the Future, 
  Glassdoor, Information Technology & Innovation Foundation 
  (ITIF), Public Knowledge, Public Participation Project, 
  RealSelf, R Street and Yelp....................................    71
Letter dated November 3, 2015 from Chi Chi Wu, National Consumer 
  Law Center (on behalf of its low-income clients)...............    72

 
                    ZERO STARS: HOW GAGGING.HONEST REVIEWS 
                       HARMS CONSUMERS AND THE ECONOMY

                              ----------                              

                      WEDNESDAY, NOVEMBER 4, 2015

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:02 a.m., in 
room SR-253, Russell Senate Office Building, Hon. John Thune, 
Chairman of the Committee, presiding.
    Present: Senators Thune [presiding], Blunt, Ayotte, 
Fischer, Moran, Gardner, Daines, Nelson, Cantwell, McCaskill, 
Klobuchar, Blumenthal, Schatz, Markey, and Manchin.

             OPENING STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    The Chairman. Good morning. This hearing will come to 
order.
    Today, we convene to examine a growing and disturbing trend 
affecting consumers in the United States.
    Imagine you are a consumer who purchases an item online, 
but the product isn't what you bargained for. Because you don't 
want other consumers to waste their time or money, you take to 
social media to post an honest account of your experience. You 
are then aggressively approached by the company that sold you 
the substandard product and threatened with a stiff penalty 
unless you immediately take down the critical review.
    Little did you know that buried in the fine print of the 
website's terms and conditions was an anti-consumer clause 
forbidding you from posting a negative review about the 
company, even if it is true. This scenario sounds farfetched, 
but the sad reality is that it is happening every day across 
the country.
    So-called non-disparagement or gag clauses are being forced 
on consumers and then being used to intimidate them. These gag 
provisions are egregious from a consumer protection standpoint, 
but they are also doing harm to our Internet ecosystem.
    Our committee spends a significant amount of time focusing 
on how we can increase broadband adoption and create policies 
that unlock the true potential of the Internet, but speech-
stifling contract terms undermine what we are trying to 
accomplish in Internet policy.
    A core tenet of the Internet is the ability to freely share 
information with whomever you like. What good is information if 
it has been sanitized to remove truthful criticism?
    Simply put, imposing consumer gag clauses can result in 
unfair bullying. The practice is frequently about a larger 
entity abusing its power and insulating itself from legitimate 
and constructive criticism.
    Often, consumers don't believe they have any power against 
companies that treat them poorly, but online review sites and 
social media have given American consumers a tremendous amount 
of power. Consumers rightfully place high value on the 
experiences of other consumers and therefore frequently rely on 
the wisdom of the crowd when deciding where to spend their 
money.
    Do some consumers sometimes abuse the Internet with false 
reviews? Sure, they do. But businesses that face unfair reviews 
have existing remedies available to them, including the ability 
to sue for defamation. In addition, businesses should be able 
to offset phony reviews with positive assessments from 
satisfied customers.
    Regrettably, there are a growing number of businesses in 
the marketplace that are blocking honest consumer speech 
through gag clauses rather than responding to negative 
criticism by providing a better product or service.
    Today, we are joined by Jen Palmer, who will share her 
personal experience fighting against an unscrupulous company 
that sought a $3,500 penalty simply because she told the truth 
about poor customer service. Fortunately for the Palmers, they 
were able to challenge this abuse in court and persevered.
    The Palmers are far from alone in their experience. In one 
case, a dentist included a non-disparagement clause in her 
contract, as well as a clause that purported to grant the 
dentist the copyright to anything the patient may later write 
about the dentist. When a patient posted an online review 
complaining about being overcharged, the dentist sent a take-
down notice to the review site. The dentist also sent the 
patient a series of invoices demanding payment of $100 for each 
day the complaints continued to appear online. The patient sued 
the dentist, and a court found the clause to be unconscionable 
and void, awarding the patient nearly $5,000.
    In another case, a consumer who did not receive her order 
from an online retailer informed the company she would report 
the matter to her credit card company. In response, the company 
demanded the consumer pay $250 for violation of its fine-print 
terms of sale, which prohibited a customer from even 
threatening to make a negative public statement about the 
retailer. The consumer filed suit against the retailer, 
alleging its actions were unfair, deceptive, and contrary to 
public policy, and the court ultimately found in the consumer's 
favor.
    Going even a step further, in a wedding contract, one hotel 
went so far as to inform prospective newlyweds they could be 
fined if they or any of their guests violated a gag clause by 
leaving a negative review. After this clause was reported 
widely in the press, the business changed its terms.
    Keep in mind, the vast majority of non-disparagement 
clauses never see public light. This is because consumers often 
succumb to pressure and remove the negative review. 
Understandably, they would rather avoid the fight than face the 
threat of excessive penalties, costly litigation, or damage to 
their credit scores.
    The proliferation of this problem led Senators Moran, 
Schatz, Blumenthal, McCaskill, and me to introduce the 
bipartisan and bicameral Consumer Review Freedom Act that would 
ban non-disparagement clauses in form contracts while still 
permitting companies to pursue good faith defamation claims.
    Our bill empowers the Federal Trade Commission and State 
Attorneys General to enforce against these anti-consumer 
provisions. The FTC recently filed suit against one company 
over a consumer gag clause, and the Consumer Review Freedom Act 
would guarantee the Commission's ability to fight against these 
provisions.
    Since introduction, we have worked with stakeholders and 
plan to make a few changes prior to marking up the bill. I am 
looking forward to moving this pro-consumer legislation through 
our committee and the Senate so Americans can continue to help 
each other make informed decisions.
    We have an excellent panel here today with diverse 
experiences on this issue. You each bring a unique perspective, 
and I look forward to hearing about your experiences and 
thoughts on our legislation. So I want to thank you for 
agreeing to testify and to be with us today.
    Senator Nelson?

                STATEMENT OF HON. BILL NELSON, 
                   U.S. SENATOR FROM FLORIDA

    Senator Nelson. Thank you, Mr. Chairman.
    So companies want to muzzle consumers, and these companies 
are using their size and unequal bargaining power to force 
consumers to sign these take-it-or-leave-it agreements or 
contracts.
    In some cases, these agreements are just online pop-up 
items that a consumer clicks on, usually without reading all 
the small print, to purchase a good or service on the Internet. 
Almost no one reads them, but they can have major consequences.
    Now, when I was in law school, they called these 
``contracts of adhesion.'' They are called ``adhesion'' because 
you are stuck with them. You can't modify the contract in any 
way. You are bound by the fine print that lawyers are so good 
at drafting.
    And the idea that some companies are suing or threatening 
to sue their customers for truthfully reviewing their consumer 
experiences because of these so-called non-disparagement 
clauses in contracts in the fine print, I think it is 
appalling.
    So we need to do something about it. And, thankfully, Mr. 
Chairman, you are.
    In a state like mine, Florida that is so dependent on 
tourism, we want visitors to share their experiences. 
Businesses that do a good job should be rewarded with good 
comments, and those who do not, they ought to be punished by 
telling the truth.
    So, Mr. Chairman, I am glad that your bill would stop this 
practice by voiding contracts of adhesion that punish consumers 
for sharing their experiences and their opinions with other 
consumers.
    Now, I think this hearing is timely, Mr. Chairman, because 
this issue and your bill brings up, in my mind, a related issue 
that needs to be discussed. Just a few weeks ago, the Los 
Angeles Times reported that Fiat Chrysler was requiring 
consumers who wanted to receive a family discount on a car to 
sign a mandatory arbitration clause as part of the sales 
contract.
    So if the car is defective and kills or injures that 
consumer, as was the case with Toyota's sudden acceleration or 
GM's faulty ignition switches or Takata's exploding airbags, 
then you are potentially barred from seeking redress because of 
that take-it-or-leave-it arbitration clause. This type of 
provision is obviously outrageous.
    And beyond the automakers themselves, many dealers are also 
trying to use these arbitration provisions to shield 
themselves.
    This committee has seen too many examples lately of 
companies getting away scot-free for killing and injuring and 
hiding the truth. And these non-disparagement and arbitration 
clauses are just another way for companies to avoid 
accountability by silencing consumers.
    So, yes, consumers ought to be able to write a negative 
review about their business experience, but consumers should 
also have the ability to seek justice in a court of law when 
businesses fail to hold up their end of the bargain, especially 
if that failure ends up in injury or death. We just simply 
can't let people continue to get off scot-free.
    So thank you, Mr. Chairman. Thank you for the hearing.
    The Chairman. Thank you, Senator Nelson, for those 
comments.
    And I want to, for the record, just add a couple of letters 
of support for the legislation.
    This one is from Angie Hicks of Angie's List, in which she 
says, ``The bipartisan Consumer Review Freedom Act would 
prohibit the use of these clauses, agreements, and waivers, 
which are blatant though often cleverly disguised efforts to 
strip Americans of their right to honestly discuss their 
service experience.''
    The Internet Association says, ``We applaud today's hearing 
on the bill,'' a bipartisan bill introduced, as I mentioned, by 
several of our colleagues.
    American Consumer Institute: Center for Citizen Research, R 
Street, and the Institute for Liberty, also a letter of 
support.
    And then one, as well, from another coalition that includes 
Yelp, Public Knowledge, Public Participation Project, RealSelf, 
among many others.
    So I want to enter those for the record.
    [Please see Appendix for these letters.]
    The Chairman. And I now want to open it up, and look 
forward to hearing from our panel today.
    We have with us, beginning on my left, Mr. Adam Medros, who 
is the Senior Vice President for Global Product at TripAdvisor; 
Mr. Robert Atkinson, who is the President of the Information 
Technology and Innovation Foundation; Ms. Jennifer Palmer, who 
I mentioned earlier is one of the named plaintiffs in Palmer v. 
KlearGear; Mr. Eric Goldman is a Professor at Santa Clara 
University of Law and is also the Director of the school's High 
Tech Law Institute; and then, finally, Mr. Ira Rheingold, who 
is the Executive Director of the National Association of 
Consumer Advocates.
    So welcome to all of you. Great to have you here today.
    And we will start on my left and your right with Mr. 
Medros, and please proceed with your statement. If you could, 
confine it as close to 5 minutes as possible, and then we will 
get into some questions here from the panel.

STATEMENT OF ADAM MEDROS, SENIOR VICE PRESIDENT, HEAD OF GLOBAL 
                    PRODUCT, TRIPADVISOR LLC

    Mr. Medros. Good morning, Chairman Thune, Ranking Member 
Nelson, and members of the Commerce Committee. Thank you for 
inviting me to testify in today's hearing on what we believe is 
a very important topic. I am encouraged by the Committee's 
attention to this issue and very much appreciate your recent 
introduction of the Consumer Review Freedom Act.
    My name is Adam Medros. I am the Head of Global Product for 
TripAdvisor, the world's largest travel website. I lead the 
team within TripAdvisor that is responsible for all customer-
facing aspects of the TripAdvisor site, including the 
collection, moderation, and display of travelers' reviews.
    For those who don't recall what it was like to plan and 
book a trip prior to the advent of the Internet, let's rewind 
15 years.
    Making travel purchases, because of their significant 
costs, the infrequent nature of travel, and the importance that 
we place on vacations, was a risky proposition. You either had 
to research and plan the trip on your own, calling multiple 
hotels and airlines to check availability and pricing, or rely 
on a travel agent looking up brochures filled with marketing 
language and staged photographs. If you were really lucky, 
maybe a friend had visited that city or country before. But to 
put it simply, you were buying blind.
    The Internet and platforms like TripAdvisor drastically 
improved that experience for consumers. With access to millions 
of customer reviews, our ability to make informed purchasing 
decisions is no longer constrained to what products our friends 
and family purchased or where one's local travel agent thinks 
you should stay on vacation.
    As a result, American consumers can make significantly more 
informed decisions about how to spend their hard-earned money.
    Although most businesses have come to embrace this shift in 
consumers' knowledge, a minority of holdouts refuse to let 
consumers share their experiences. A popular tactic among such 
businesses is to try and use their contractual leverage to 
silence their critics. This underhanded practice harms those 
writing reviews, those seeking transparency through other 
consumers' experiences, and those businesses that are playing 
by the rules.
    TripAdvisor hosts more than 250 million reviews and 
opinions from our community, covering more than 5 million 
businesses all over the world. TripAdvisor encourages our 
members to share their reviews and opinions, good or bad, of 
their experiences at hotels, restaurants, and attractions, and 
we strongly believe in their right to do so.
    We also give all businesses the right to respond to those 
reviews in order to ensure that consumers are presented with 
both sides of the story.
    As you know, TripAdvisor is far from the only source of 
consumer reviews. Americans are ever-increasingly turning to 
websites like Amazon, Yelp, ZocDoc, and Angie's List to educate 
themselves in their purchasing decisions on everything from 
what doctor to visit to whom they should hire to remodel their 
kitchens. In fact, a recent study revealed that approximately 
70 percent of all American shoppers rely on online reviews 
before making a purchase.
    Just this year, the United Kingdom's Competition and 
Markets Authority found that 54 percent of U.K. adults rely 
upon online reviews and that nearly 70 percent of hotel 
shoppers consider online reviews to be more important than 
other sources of information.
    No matter what population is being researched, it is clear 
that consumer reviews have become a critical part of today's 
marketplace.
    While consumer reviews have become so ubiquitous that many 
Americans won't make a significant buying decision without 
first researching those opinions, we know that some businesses 
don't like the transparency that online reviews have brought to 
the world.
    Some bully or intimidate consumers as a means to get 
critical reviews removed or to stop them from even being 
submitted. Others seek the same result by hiding small print in 
contracts stipulating that any negative review will incur a 
hefty fine or assigning the intellectual property in any review 
to the business.
    Consumers usually have no idea that they are signing up for 
such agreements, which are usually only provided in small print 
at the moment of check-in or purchase. And even those who 
actually read these types of clauses lack the leverage to have 
the non-negotiable clauses removed while standing at the check-
in desk with their family in tow and their well-earned vacation 
hanging in the balance.
    While the intention behind such clauses is always the 
same--namely, to gag any negative opinions--the exact language 
can vary. Examples of language that TripAdvisor has received 
from travelers include: ``Since bad reviews are detrimental to 
our business, we place a fine for unwarranted reviews under the 
terms of property. If the hotel receives a poor review and is 
out of context and or control of the hotel management, then a 
fine of $300 will be charged on the credit card on file.''
    Dealing with companies and individuals that try to include 
these types of clauses in their customer agreements can be 
tricky for a platform like TripAdvisor. While the easiest 
solution would be to simply remove the business's listing from 
our website, that is often exactly what the company wants: to 
eliminate the ability for consumers to comment on them. Doing 
so would chill speech and be a disservice to all travelers.
    So TripAdvisor has instead taken the approach of posting a 
red text box on the business's listing warning travelers of 
this unscrupulous behavior. This is an imperfect solution and 
one which would be improved upon by passage of Chairman Thune's 
Consumer Review Freedom Act.
    Placing a muzzle on one's customers with contractual 
boilerplate goes against everything we stand for at 
TripAdvisor. Just as a consumer can tell her family and friends 
about her experience with a business in the ``offline world,'' 
she also has a right to share that experience and opinion 
online, allowing businesses and other customers to learn and 
benefit therefrom.
    When a business includes a ``gag order'' in its agreements 
with its customers, everyone is harmed. The consumer is 
improperly censored. The consuming public at large is less 
informed than it otherwise would be about quality of service, 
or lack thereof, at a given business. Even the business doing 
the silencing is harmed, as it loses the opportunity to learn 
from the experiences of its customers.
    These types of clauses serve no positive role in the 
American marketplace and stand in the way of consumer 
transparency.
    In conclusion, Mr. Chairman, TripAdvisor looks forward to 
working with you and the entire committee to ensure that 
American consumers are not prevented from openly sharing their 
opinions and experiences with other potential customers, 
whether it is done in person or via the Internet.
    I welcome your questions on this important topic.
    [The prepared statement of Mr. Medros follows:]

       Prepared Statement of Adam Medros, Senior Vice President, 
                Head of Global Product, TripAdvisor LLC
    Good morning Chairman Thune, Ranking Member Nelson, and members of 
the Commerce Committee. Thank you for inviting me to testify in today's 
hearing on what we believe is a very important topic. I am encouraged 
by the Committee's attention on this issue, and very much appreciate 
your recent introduction of the Consumer Review Freedom Act.
I. Introduction
    My name is Adam Medros, and I am the Head of Global Product for 
TripAdvisor, the world's largest travel website. I lead the team within 
TripAdvisor that is responsible for all customer-facing aspects of the 
TripAdvisor site, including the collection, moderation and display of 
travelers' reviews.
    For those who don't recall what it was like to plan and book travel 
prior to the advent of the Internet, let's pause and rewind fifteen 
years. Making travel purchases--because of their significant cost, the 
infrequent nature of travel and the importance that we place on 
vacations--was a risky proposition. You either had to research and plan 
the trip on your own, calling multiple hotels and airlines to check 
availability and pricing, or rely on a travel agent discussing 
destinations they chose to promote and looking at brochures filled with 
marketing language and staged photographs. If you were really lucky, 
maybe a friend or family member had visited that city or country 
before, and could give you an opinion based on their limited 
experiences. But to put it simply, you were ``buying blind.''
    The Internet--and platforms like TripAdvisor--drastically improved 
that experience for consumers. With access to millions of consumer 
reviews in seconds, our ability to make informed purchasing decisions 
is no longer constrained to what products our friends and family 
previously purchased, or where one's local travel agent thinks you 
should stay on vacation. As a result, American consumers can make 
significantly more informed decisions about how to spend their hard-
earned money. Platforms like ours democratized purchasing and access to 
information by crowdsourcing the experiences of others.
    However, although most businesses have come to accept--and even 
embrace--this shift in consumers' knowledge, a minority of hold-outs 
refuse to let consumers share their experiences. A popular tactic among 
such businesses is to try and use their contractual leverage to silence 
their critics. This underhanded practice harms those writing reviews, 
those seeking transparency through other consumers' experiences, and 
those businesses that are playing by the rules, and, ultimately, the 
American economy suffers.
II. TripAdvisor and The Importance of Consumer Reviews
    TripAdvisor is visited by more than 375 million travelers a month 
in order to help them research, plan and book the perfect trip. We host 
more than 250 million reviews and opinions from our community covering 
more than 5 million businesses all over the world. TripAdvisor 
encourages our members to share their reviews and opinions, good or 
bad, of their experiences at hotels, restaurants, and attractions--and 
we strongly believe in their right to do so. We also give all 
businesses the right to respond to those reviews, in order to ensure 
that consumers are presented with both sides of the story.
    As you know, TripAdvisor is far from the only source of consumer 
reviews. Americans are ever-increasingly turning to websites like Yelp, 
Amazon, ZocDoc and Angie's List to educate themselves and their 
purchasing decisions on everything from what doctor to visit, to what 
book or baby stroller to purchase, or even to whom they should hire to 
remodel their kitchens. In fact, a recent study revealed that 
approximately 70 percent of all American shoppers rely on online 
reviews before making a purchase.\1\ Just this year, the United 
Kingdom's Competition and Markets Authority found that 54 percent of UK 
adults rely upon online reviews, and that nearly 70 percent of hotel 
shoppers consider online reviews to be more important than other 
sources of information. Further, in research commissioned by 
TripAdvisor in 2015, PhoCusWright determined that 96 percent of 
TripAdvisor users consider it important to read consumer reviews when 
planning a vacation, and 82 percent agreed that reading those reviews 
helped them plan better trips than they could without reviews. No 
matter what population is being researched, it is clear that consumer 
reviews have become a critical part of today's marketplace.
---------------------------------------------------------------------------
    \1\ The Consumerist (Jun. 3, 2015), http://consumerist.com/2015/06/
03/nearly-70-of-consu
mers-rely-on-online-reviews-before-making-a-purchase/; Ashlee Kieler, 
Nearly 70% Of Consumers Rely On Online Reviews Before Making A 
Purchase.
---------------------------------------------------------------------------
III. Businesses' Use of Contracts to Silence Critics
    While consumer reviews have become so ubiquitous that many 
Americans won't make a significant buying decision without first 
researching those opinions, we know that some businesses don't like the 
transparency that online reviews have brought to the world. Some bully 
or intimidate consumers as a means to get critical reviews removed or 
to stop them from even being submitted. Others seek the same result by 
hiding small print in contracts stipulating that any negative reviews 
will incur a hefty fine, or assigning the intellectual property in any 
review to the business.
    Consumers usually have no idea that they are signing-up for such 
agreements, which are usually only provided in small print at the 
moment of check-in or purchase, and even those who actually read these 
types of clauses lack the leverage to have the non-negotiable clauses 
removed while standing at the check-in desk with their family in tow 
and their well-earned vacation hanging in the balance. While the intent 
behind such clauses is always the same (namely, to gag any negative 
opinions), the exact language can vary. Examples of language that 
TripAdvisor has received from travelers include:

        ``Guest agrees that no negative comment will ever be initiated 
        . . . on any site on the Internet . . . that damages the 
        reputation of the hotel and staff . . .''

        ``Since bad reviews are detrimental to our business, we place a 
        fine for unwarranted reviews under the terms of property . . . 
        [I]f the hotel receives a poor review and is out of context and 
        or control of the hotel management, then a fine of $300 will be 
        charged on the credit card on file.''

        ``[I] any actual opinions and/or publications are created 
        which, at the sole opinion of [business owner], tends directly 
        to injure him in respect to his trade or business . . . then 
        those remarks will entitle [business owner] . . . damages from 
        me in the amount of $5,000,000 (five million dollars) plus a 
        $50,000 (fifty-thousand dollar) daily penalty for each day for 
        each posting of the derogatory publication appears or is 
        available in any format.''

    Dealing with companies and individuals that try to include these 
types of clauses in their customer agreements can be tricky for a 
platform like TripAdvisor. While the easiest solution would be to 
simply remove the business's listing from our website, that is often 
exactly what that company wants--to eliminate the ability for consumers 
to comment on them. Doing so would chill speech and be a disservice to 
all travelers, so TripAdvisor has instead taken the approach of posting 
a red text box on the business's listing warning travelers of this 
unscrupulous practice. This is an imperfect solution--and one which 
would be improved upon by passage of Chairman Thune's Consumer Review 
Freedom Act.
IV. The Effects Chilled Speech Has on Industry and Consumers
    Placing a muzzle on one's customers with contractual boilerplate 
goes against everything we stand for at TripAdvisor. Just as a consumer 
can tell her friends and family about her experience with a business in 
the ``offline world,'' she also has a right to share that experience 
and opinion online, allowing businesses and other customers to learn 
and benefit therefrom.
    When a business includes a ``gag order'' in its agreements with its 
customers, everyone is harmed. The consumer is improperly censored. The 
consuming public at-large is less informed than it otherwise would be 
about the quality of service--or lack thereof--at a given business. 
Even the business doing the silencing is harmed, as it loses the 
opportunity to learn from the experiences of its customers. These types 
of clauses serve no positive role in the American marketplace and stand 
in the way of consumer transparency.
V. Conclusion
    In conclusion, Mr. Chairman, TripAdvisor looks forward to working 
with you and the entire Committee to ensure that American consumers are 
not prevented from openly sharing their opinions and experiences with 
other potential customers, whether it is done in-person or via the 
Internet.
    I welcome your questions on this important topic.

    The Chairman. Thank you, Mr. Medros.
    Mr. Atkinson?

STATEMENT OF ROBERT ATKINSON, PRESIDENT, INFORMATION TECHNOLOGY 
                   AND INNOVATION FOUNDATION

    Mr. Atkinson. Thank you, Chairman Thune, Ranking Member 
Nelson, and members of the Committee. I appreciate the 
opportunity to come before you today to talk about the impact 
of non-disparagement clauses on consumers and the economy.
    The Information Technology and Innovation Foundation has 
long focused on policies to enable the Internet economy to 
thrive, and this particular area that you are addressing with 
the Consumer Review Freedom Act is a critical one if that is 
going to be our goal.
    I want to raise three issues today, the first one really 
being about economy theory and economics behind this.
    There has long been a view in economics that the effective 
functioning of markets depends upon information. In fact, 
George Akerlof, Michael Spence, and Joe Stiglitz received the 
Nobel Prize in economics in 2001 for their research related to 
what they called ``asymmetric information,'' and this is 
exactly what is going on here. When you go to a hotel, you 
don't know anything about the hotel other than maybe what you 
see; the hotel knows everything. This is a market with 
asymmetric information.
    And they won that prize because they showed that markets 
with asymmetric information underperform what would be 
otherwise economic welfare for everyone--consumers and the 
overall economy.
    And, in particular, this and other economics research has 
found that markets don't perform effectively if, number one, 
buyers can't accurately assess the value of the product or 
service before they buy it. If you go to a hotel and you have 
no idea what is going on there, you can't make an informed 
decision.
    Second, if an incentive exists for the seller to pass off a 
low-quality product or service as a high-quality one, well, 
clearly, as the examples have shown, that incentive exists 
certainly for some sellers.
    Third, where the sellers of good products and services have 
a hard time proving their quality.
    And, fourth, where there is a deficiency of public quality 
assurances--in others words, where it is hard for a consumer to 
find some independent assessments of quality.
    That is why the emergence of online rating tools are so 
important. They essentially are the tool to solve this long, 
age-old problem that has bedeviled economic markets. And online 
rating systems help solve the problem because they provide a 
public quality assurance of that, and they let people know why 
and when there is poor quality.
    The second point is the issue about preemption. I know that 
some argue that the Federal Government shouldn't be involved in 
some of these questions and we should just let the states deal 
with these questions and they are better positioned for that.
    And, certainly, on many, many issues, in many cases, states 
are best-positioned. But, in general, when it comes to the 
Internet economy, we can't rely on states to set policies for 
two big reasons.
    One is that you end up with a cacophony of different and 
conflicting policies between states. And the second reason is 
that, in many of these cases--TripAdvisor hotel reviews in 
Florida, many of those are non-Florida residents. So a state 
might say, well, we want to protect our businesses by not 
allowing this, but they are hurting consumers all around the 
country because consumers everywhere use these and contribute 
to these.
    So I think it really is a very clear justification for 
Federal action.
    The third would be, well, what about the possible harms to 
businesses where there is a bad review? And I think it has been 
pointed out already that this bill would not prohibit companies 
from already using existing legal tools for defamation.
    But, more importantly, there has been a lot of evidence now 
that we cite in our testimony that, even when a company 
receives a bad review, if the company manager, whoever that 
might be, affirmatively responds to that review and says, ``We 
are sorry,'' or, ``Thanks for the review; we are going to try 
to fix that problem,'' it actually turns out that that gets 
them better results with consumers because consumers believe 
that the manager or the company is taking consumer complaints 
seriously and so they are more likely to trust them.
    This was a study, for example, recently about hotels, and 
found that, regardless of whether reviews are good, neutral, or 
negative, they began to receive higher ratings from guests 
after hotel managers started to respond to feedback. And I have 
heard that from hotel managers when we have done some study on 
hotels. They actively go out now and tell the managers that 
they should respond online because it brings back trust.
    So I don't think we should worry too much about the impact 
on companies. If companies are smart, what they will do will be 
they will affirmatively monitor these ratings platforms and 
then respond appropriately. Where there are clear cases of 
defamation and outright lies, again, they have other legal 
means.
    So, in summary, that is why ITF supports this legislation 
and believes it is very important for the online marketplace.
    Thank you.
    [The prepared statement of Mr. Daniel Castro, submitted by 
Mr. Atkinson, follows:]

   Prepared Statement of Daniel Castro, Vice President, Information 
                  Technology and Innovation Foundation
    Chairman Thune, Ranking Member Nelson, and members of the 
Committee, I appreciate the opportunity to appear before you to discuss 
the impact of non-disparagement clauses on consumers and businesses. My 
name is Daniel Castro. I am the Vice President of the Information 
Technology and Innovation Foundation (ITIF) and Director of ITIF's 
Center for Data Innovation. ITIF is a nonpartisan, non-profit think 
tank whose mission is to formulate and promote policy solutions that 
accelerate innovation and boost productivity to spur growth, 
opportunity, and progress.
    In my testimony today, I would like to discuss how the non-
disparagement clauses that many businesses include in consumer 
contracts discourage consumers from providing honest feedback about 
products and services; why that harms consumers and businesses alike; 
and what Congress can do to address the problem.
Some Businesses Use Non-Disparagement Clauses to Unfairly Silence 
        Critics
    Imagine that a patient has endured a terrible visit to the dentist. 
Disturbed by the ordeal, she goes online and posts a review, providing 
a factual account of her experience as a warning to future patients. 
Soon after, the patient receives a letter from the dentist's lawyer 
stating that she is in violation of a contract she signed during her 
visit and threatening legal action if she does not immediately take 
down the post. Shockingly, she discovers that buried in the paperwork 
she filled out was a clause prohibiting her from making any negative 
statements about the dentist. Scared that she may have done something 
wrong, and worried about the cost of going to court, the patient 
quickly deletes her review. Not only has this patient had her voice 
unfairly silenced, but many other potential patients will not be able 
to benefit from her experience by choosing a better dentist.
    This scenario is one that an untold number of consumers have faced. 
A company will insert a clause into a standard contract that prohibits 
consumers from making any negative statements about the company and its 
products or services. Most consumers sign these agreements without 
noticing the non-disparagement clauses. Only later, if at all, do they 
ever realize what they have agreed to. For example, health care 
providers may ask patients to sign ``mutual privacy agreements'' that 
are less about protecting patient privacy (since Federal laws already 
provide these protections), but instead are designed to prohibit 
patients from making negative comments about the health care 
provider.\1\ Alternatively, a company may demand that an unhappy 
customer sign a non-disparagement agreement before the company will 
provide a refund or exchange.\2\ In both cases, companies may sue 
consumers for monetary damages if they subsequently make negative 
public comments about their products or services.
    While there are no good estimates of how many consumers have been 
silenced by these non-disparagement clauses or how many companies 
regularly insert these clauses into their contracts, there are many 
well-documented cases of this problem arising in a variety of 
industries, including health care, retail, and hospitality. For 
example, one party rental company included the following terms in its 
standard contract: ``By signing this contract, you are agreeing that 
you will not make or encourage any disparaging comments about [the 
vendor] ever in any form verbal or written.'' \3\
    These non-disparagement clauses are particularly problematic 
because they are appearing in non-negotiated consumer contracts and 
even website terms of service without giving consumers a reasonable 
opportunity to negotiate or refuse to accept the conditions.\4\ For 
example, if a consumer orders a coffee cup from a website, receives a 
broken cup, and is not satisfied with the company's response to his 
inquiries, he may decide to post a negative review of the website 
online. If the company has written a non-disparagement clause into the 
terms and conditions of either the sales contract or the website 
itself, mandating that customers do nothing to damage the reputation or 
services of the company, it may elect to sue its customer for breach of 
contract due to his negative review, even if the review is accurate. 
Indeed, the consumer may not even be allowed to post a photo of the 
broken cup.
    The owners of the website KlearGear.com were brought to Utah's 
Federal district court over a non-disparagement clause the website 
placed in its terms of sale ``in an effort to ensure fair and honest 
public feedback.'' \5\ A couple who never received their order and left 
a negative review on the website Ripoff Report was contacted several 
years later by KlearGear with a demand for $3,500 for violating the 
non-disparagement clause.\6\ The Utah court found in favor of the 
reviewers, awarding over $300,000 in compensatory and punitive damages, 
but other consumers elsewhere may not be so fortunate. As a result of 
this highly publicized case, some states have begun enacting 
legislation to protect their citizens from non-negotiated non-
disparagement clauses. For example, California recently passed a law 
prohibiting non-disparagement clauses in consumer goods or services 
contracts--unless they are knowingly and voluntarily negotiated.\7\
Non-Disparagement Clauses Undermine the Functioning of Digital 
        Markets, Hurting Consumers and Businesses
    One of the defining features of the digital economy is that 
customers can provide ratings of companies, products, and services--a 
phenomenon frequently referred to as the ``wisdom of the crowd.'' 
Pioneering online services like Amazon, TripAdvisor, and Yelp, as well 
as many other websites, empower consumers to make more-informed 
decisions by presenting this crowd-sourced information alongside 
merchants' own descriptions of their products and services. This 
feedback is especially important when consumers are making purchases 
online, since they will not always have had the opportunity to evaluate 
products or sellers in person. Indeed, multiple empirical studies have 
found that customers rely on consumer reviews to make purchasing 
decisions and that better reviews lead to greater sales.\8\ For 
example, one study found that a one-star increase in a restaurant's 
rating on Yelp led to a 5 percent to 9 percent increase in revenue.\9\ 
Not surprisingly, many of the newest, rapidly growing Internet-based 
businesses, such as Uber, Airbnb, and Etsy, have integrated user-
feedback as a key feature of their digital platforms.
    A major purpose of reviews is to create an effective feedback loop: 
Consumers buy a product or service, and then review it online or 
elsewhere, so that other consumers can take those reviews into 
consideration before making purchases. Companies can change their 
products or services in response to compliments and complaints--and 
then, when they improve poorly reviewed features or add new ones, 
consumers can provide new reviews. Or other consumers, now empowered 
with more accurate information in the marketplace, can choose to buy 
from another company. Limiting these reviews to only positive feedback 
(i.e., comments that would not damage the company's reputation), 
significantly reduces the benefit of these processes for consumers, 
because they lose access to accurate information and may make 
suboptimal purchasing decisions.
    Companies gain important insights about how best to meet the needs 
of their customers by data mining customer reviews. These tools depend 
on accurate and complete information. For example, L.L. Bean 
purportedly investigates products that continually receive ratings of 
less than three stars. After a certain variety of fitted sheets 
received a large volume of negative online reviews, the company found a 
manufacturing defect, took the sheets off the market, and offered 6,300 
new sets to customers who had purchased the faulty variety.\10\
    If companies are not receiving negative feedback, then they are not 
using this feedback to improve their offerings, and consumers are 
receiving lower-quality goods and services.\11\ Indeed, one recent 
study found that after hotels begin responding to online user reviews, 
regardless of whether the reviews are good, neutral, or negative, they 
begin to receive higher ratings from guests--presumably because hotel 
managers are incorporating customer feedback.\12\ Another e-commerce 
solutions provider found that customers who saw a company response to a 
negative review were almost twice as likely to make a purchase as those 
who saw negative reviews without a company response; and overall 
opinion of the product became twice as positive.\13\ Thus, the 
opportunity to share honest reviews can benefit companies and service 
providers by offering a quality-control platform, and it can benefit 
consumers by offering an opportunity to air grievances and have them 
addressed.
    Accurate reviews improve the functioning of markets. Indeed, it has 
long been an axiom in economics that markets work best when both 
parties--the buyer and the seller--have more information. In 
particular, better information enables consumers to make better 
choices. Some of those choices may result in some companies or service 
providers going out of business or losing business as potential 
customers learn of the poor quality of their products and services and 
opt to buy elsewhere. But by definition, this means that the market 
share of more efficient or higher-quality sellers increases, thereby 
maximizing overall economic welfare.
    Some companies may be concerned about how false reviews can 
unfairly hurt their businesses, and this is a legitimate concern as 
their employees' jobs and welfare also are at stake. Competing 
businesses may try to manipulate consumer opinion by posting fake 
reviews--either positive ones for their own products and services or 
negative ones for a rival's.\14\ The answer to this problem is not to 
limit all negative reviews, but rather to minimize those that are false 
or misleading.
    Online platforms recognize the importance of accurate reviews for 
their users, and so they have invested in technology to detect 
fraudulent reviews.\15\ For example, Yelp automatically filters out 
reviews that it suspects are fraudulent, and the site even issues pop-
up alerts to consumers who visit the profile page of a business that it 
has caught buying fake reviews.\16\ Some state attorneys general have 
also fined businesses for posting fake reviews as this violated their 
truth-in-advertising laws.\17\ While digital platforms have taken many 
steps to limit bias in online reviews, if some businesses are using 
anti-disparagement clauses to silence their critics, then online 
reviews for these industries will be misleading and consumers will be 
worse off.
Congress Should Protect Consumers' Right to Review
    Using non-disparagement clauses to silence negative public feedback 
undermines a key part of the digital economy and makes many consumers 
and business worse off. Given the clear negative impact of biased 
reviews for both consumers and businesses, Congress should intervene to 
prohibit these clauses in consumer contracts. Specifically, Congress 
should pass the bipartisan Consumer Review Freedom Act of 2015, 
introduced by Sens. John Thune (R-SD), Brian Schatz (D-HI), and Jerry 
Moran (R-KS), which would take two important steps to address this 
problem. First, the legislation would void anti-disparagement clauses 
in consumer contracts if they restrict consumers from publicly 
reviewing products or businesses in good faith. Second, the legislation 
would authorize the Federal Trade Commission to take action against 
businesses that insert these provisions into their contracts for 
engaging in unfair and deceptive practices.
    Moreover, this legislation would still allow companies to take 
action against individuals who post false and defamatory reviews. In 
addition to bringing defamation cases against individuals who post 
patently false statements about their products and services, companies 
also can work with platforms to remove false statements. Virtually 
every online platform includes terms of service prohibiting unlawful 
statements and provides a mechanism to help business owners have 
untruthful statements removed. For example, business owners can flag 
potentially fake reviews on Yelp with a single click.\18\
    Notably, this legislation takes a narrow approach to address a very 
specific consumer harm. The legislation would not apply to non-
disparagement clauses found in voluntarily negotiated agreements, such 
as employment agreements or divorce settlements, where parties may have 
a legitimate interest in agreeing to certain terms.
Conclusion
    Protecting people's speech is important first and foremost as a 
First Amendment issue. Protections, such as those offered in the 
Consumer Review Freedom Act, would help ensure that individuals have 
the right to engage in lawful forms of speech and that others can 
benefit from the information conveyed in this protected speech. In 
addition, protecting online speech, especially complaints or 
criticisms, is necessary to ensure that online markets function 
efficiently by giving consumers access to unbiased feedback about the 
products and services they research. While states have made some 
progress in laying the foundation for legislation prohibiting non-
disparagement clauses, the U.S. Congress should step in to create a 
baseline of protection for all citizens' basic rights to freedom of 
expression in the digital marketplace.
References
    \1\ Lucille M. Ponte, ``Protecting Band Image or Gaming the System? 
Consumer `Gag' Contracts in an Age of Crowdsourced Ratings and 
Review,'' William & Mary Business Law Review (forthcoming), March 16, 
2015, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2579172.
    \2\ Ibid.
    \3\ Chris Morran, ``Wedding Company Contract Tries To Ban Bride & 
Groom From `Encouraging' Negative Feedback,'' Consumerist, April 20, 
2015, http://consumerist.com/2015/04/20/wedding-company-contract-tries-
to-ban-bride-groom-from-encouraging-negative-feedback/.
    \4\ Noah Davis, ``The Yelper and the Negative Review: the 
Developing Battle Over Nondisparagement Clauses,'' American Bar 
Association, Vol. 3, No. 10, May 2014, http://www.american
bar.org/publications/gpsolo_ereport/2014/may_2014/
yelper_negative_review_developing_
battle_nondisparagement_clauses.html.
    \5\ Chris Morran, ``KlearGear.com Ordered To Pay $306K To Couple 
Who Wrote Negative Review,'' Consumerist, June 26, 2014, http://
consumerist.com/2014/06/26/kleargear-com-ordered-to-pay-306k-to-couple-
who-wrote-negative-review/.
    \6\ Ibid.
    \7\ California Assembly Bill No. 2365, Unlawful contracts, 
Sec. 1670.8 (2014), http://leginfo
.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB2365.
    \8\ Judith Chevalier and Dina Mayzil, ``The Effect of Word of Mouth 
on Sales: Online Book Reviews,'' Journal of Marketing Research (August 
2006), 345-354, https://msbfile03.usc.edu/digitalmeasures/mayzlin/
intellcont/chevalier_mayzlin06-1.pdf.
    \9\ Michael Luca, ``Reviews, Reputation, and Revenue: The Case of 
Yelp.com,'' Harvard Business School (2011), http://www.hbs.edu/faculty/
Publication%20Files/12-016_0464f20e-35b2-492e-a328-fb14a325f718.pdf.
    \10\ Shelly Banjo, ``Firms Take Online Reviews to Heart,'' Wall 
Street Journal, July 29, 2012, http://www.wsj.com/articles/
SB10001424052702303292204577517394043189230.
    \11\ Erin Mulligan Nelson, ``Why Terrible Online Reviews Are 
Actually Good For You,'' Advertising Age, September 15, 2011, http://
adage.com/article/digitalnext/terrible-online-reviews-good/229790/; 
Shelly Banjo, ``Firms Take Online Reviews to Heart.''
    \12\ Davide Proserpio and Georgios Zervas, ``Online Reputational 
Management: Estimating the Impact of Management Responses on Consumer 
Reviews,'' Boston University School of Management Research Paper 
(2014), September 27, 2015, http://papers.ssrn.com/sol3/Papers.cfm?
abstract_id=2521190.
    \13\ ``The Conversation Index,'' Bazaar Voice, Vol. 6, accessed 
April 2, 2015, 11, http://media2
.bazaarvoice.com/documents/Bazaarvoice_Conversation_Index_Volume6.pdf.
    \14\ Dina Mayzlin, Yaniv Dover, and Judy Chevalier, ``Promotional 
Reviews: An Empirical Investigation of Online Review Manipulation,'' 
American Economic Review 104 (2014), 2421-55.
    \15\ Michael Luca and Georgios Zervas, ``Fake it Till You Make It: 
Reputation, Competition, and Yelp Review Fraud,'' Harvard Business 
School, May 1, 2015, http://papers.ssrn.com/sol3/
papers.cfm?abstract_id=2293164.
    \16\ Eric Singley, ``Consumer alerts: because you might like to 
know . . .'' Yelp Official Blog, October 18, 2012, http://
officialblog.yelp.com/2012/10/consumer-alerts-because-you-might-like-
to-know.html.
    \17\ Julie Bort, ``New York Attorney General Busts 19 Companies For 
Writing Fake Yelp Reviews'', Business Insider, September 23, 2013, 
http://www.businessinsider.com/new-york-cracks-down-on-fake-yelp-
reviews-2013-9.
    \18\ See Yelp, ``Terms of Service,'' October 13, 2015, http://
www.yelp.com/static?country
=US&p=tos.

    The Chairman. Thank you, Mr. Atkinson.
    Next up is Ms. Palmer. Please share your story.

   STATEMENT OF JENNIFER KULAS PALMER, PLAINTIFF, PALMER V. 
                           KLEARGEAR

    Ms. Palmer. Chairman Thune, Ranking Member Nelson, and 
members of the Committee, thank you for inviting me to testify 
today. My name is Jen Palmer, and my family's ordeal with a 
bullying company that tried to fine us for a negative review 
demonstrates why non-disparagement clauses should be 
prohibited.
    In December 2008, my husband, John Palmer, placed an order 
from the online merchant KlearGear for a couple of small desk 
trinkets that came to less than $20. When the items failed to 
arrive, we both attempted to contact the company through phone 
and e-mail. Though we never got a human being on the phone, the 
e-mail responses claimed that the order was never paid for and 
was thus canceled.
    Frustrated at the shoddy customer service, I posted a 
review of KlearGear on RipoffReport.com, and we moved on with 
our lives.
    Then, in May 2012, John got an e-mail from KlearGear 
demanding that my review be removed within 72 hours or we would 
be fined $3,500 for violating the non-disparagement clause in 
their terms of sale and use.
    This clause, which barred customers from, ``taking any 
action that negatively impacts KlearGear.com, its reputation, 
products, services, management, or employees,'' didn't exist 
when John ordered the items, and the fact that John didn't 
write the review didn't matter to them. Researching via the 
Internet archives confirmed that the clause didn't appear until 
February 2012, 3 years after my review had been posted.
    We were shocked and scared. I spent hours researching how 
to remove the review, only to find that RipoffReport.com has a 
policy of not removing reviews. John tried explaining to 
KlearGear that the review could not be removed, that the non-
disparagement clause didn't exist at the time he tried to place 
the order, and that he didn't write the review, I did.
    KlearGear responded by threatening to report the $3,500 
fine as a debt to the credit bureaus. This frightened us so 
much that we purchased a credit-monitoring service for John. 
Three months later, the negative report for $3,500, with 
KlearGear as the creditor, appeared on his credit report.
    We immediately disputed the debt with the credit bureaus, 
with no success. KlearGear again e-mailed us and repeated their 
position, admitting they had confirmed the debt as valid. But 
we couldn't afford to hire an attorney and didn't know how to 
fix our credit report without legal help. It would be more than 
18 months before John's credit would be clean again.
    We have been very careful to live within our means, using 
financing only for large purchases like our cars in 2008 and 
2011, our house in 2009, and medical bills that weren't covered 
by insurance. We had no problems getting financing for any of 
those. But for a year and a half, KlearGear's black mark on 
John's credit caused us constant anxiety, fear, and humiliation 
when people would ask us, ``Who is KlearGear, and why do you 
owe them $3,500?''
    Because of the credit problems, we were denied a credit 
card, delayed on a car loan, and deterred from trying to buy a 
new home that would move us closer to our workplaces. The worst 
came when we were denied emergency financing to replace a 
broken furnace in October 2013.
    We were desperate, wrapping our then-3-year-old son Damien 
in blankets every night as temperatures dropped near freezing. 
I was terrified, too scared to tell anyone for fear that social 
services would take Damien away from us because we had no heat. 
We had to cut every expense that month, and, between both our 
paychecks that month, we were able to buy a basic furnace with 
cash.
    By that point, we were tired of living in constant anxiety 
and fear. I contacted a reporter at KUTV in Salt Lake City, who 
did a segment on our plight and got us in contact with the 
nonprofit organization Public Citizen, which represented us in 
suing KlearGear.
    They helped us to clear up John's credit, and we won a 
default judgment against KlearGear. After bullying us for so 
long, KlearGear never even bothered to show up to defend 
themselves in court.
    Throughout our entire ordeal, we only wanted two things: 
that all traces of KlearGear's actions against us be cleared 
from John's credit and to do everything we could to ensure 
nobody else ever had to experience the nightmare we endured.
    We want Congress to ban non-disparagement clauses, and we 
applaud the Committee for proposing to address the problem by 
giving the Federal Trade Commission and State authorities the 
power to go after unscrupulous companies that use them.
    We aren't the only victims of this type of conduct, as 
Public Citizen has reported several times on their website and 
blog. Companies should not have the power to restrict consumer 
speech or punish people who criticize them. It needs to stop. 
Companies should earn their reputations honestly with good 
products and services and fair dealing.
    We think states should be free to enforce this law in every 
way they can. I was glad to hear that a restriction barring 
States' Attorneys General's offices from hiring outside 
attorneys is being removed.
    I am grateful for the opportunity to share my experience 
with you. On behalf of my husband, John, my son, Damien, and 
all the consumers out there who are being bullied and silenced 
by companies wielding non-disparagement clauses, I urge you to 
pass a bill that prohibits these clauses and provides for 
robust enforcement of the law.
    Thank you.
    [The prepared statement of Ms. Palmer follows:]

Prepared Statement of Jennifer Kulas Palmer, Plaintiff, Palmer v. Klear
    Thank you for inviting me to testify today. My name is Jen Palmer, 
and I live with my husband and son in Hillsboro, Oregon. I'm here to 
tell you about my experiences with a non-disparagement clause and the 
company that tried to make my family pay $3,500 because I wrote a 
critical review online, and how they ruined my husband's credit when we 
refused to pay. My story shows what can happen when companies are 
allowed to use non-disparagement clauses in their contracts to bully 
consumers. And it shows why Congress should take action to prohibit the 
use of these clauses in consumer contracts.
    Just before Christmas 2008, when we lived in Utah, my husband John 
Palmer placed an order from an online merchant called KlearGear. He 
ordered a desk toy and a keychain as Christmas gifts, and he paid for 
them when he ordered. The whole order cost less than $20 including 
shipping.
    The items never arrived. John and I both tried to call the company, 
but calling the numbers on the company's website only got us automated 
responses, never a human being. We tried e-mailing, and the customer 
service person claimed that the order was never paid for and they had 
ultimately cancelled the order.
    We were incredibly frustrated by the shoddy service and the 
impossibility of reaching anyone. In Feburary 2009, I posted a review 
expressing my opinions on the site RipoffReport.com. We went on with 
our lives and considered it a lesson learned never to deal with them 
again.
    More than three years later, in May 2012, out of the blue, John 
received an e-mail from KlearGear demanding that John have the review 
on RipoffReport.com removed within 72 hours, or pay KlearGear $3,500 
for violations of their Terms of Sale and Use. We were shocked and 
scared by the demand. It seemed this could not be legal. KlearGear 
claimed that my review violated a ``non-disparagement clause'' in 
KlearGear's Terms of Sale and Use, the text of which barred the 
customer--who was John, not me, but that didn't matter to them--from 
``taking any action that negatively impacts KlearGear.com, its 
reputation, products, services, management or employees.'' John did 
some research via the Internet Archive and was able to discover that 
the clause wasn't even present in the Terms of Sale when he placed his 
order back in December 2008. He found that the clause did not appear 
until February 2012.
    I spent hours researching how to remove the report from 
RipoffReport.com, because we were scared and didn't know what else to 
do. But RipoffReport has a policy of not removing reviews, so we were 
stuck. John tried explaining to KlearGear that the ``non-disparagement 
clause'' was not in the Terms of Sale and Use at the time of John's 
order from KlearGear; that it was I, not John, who wrote the review; 
and RipoffReport.com's policy of not removing reviews meant we had no 
control over whether the review remained online. The person claiming to 
be KlearGear's legal representative just reiterated to us that ``this 
matter will remain open until the published content is removed,'' and 
threatened to report the $3500 as a debt to the credit reporting 
agencies. We didn't think they could do something so outrageous, but 
those e-mails had disturbed us enough that we purchased a credit 
monitoring service for John's credit.
    About three months later, our fears were realized. In August 2012, 
a negative report appeared on John's credit reports from two of the 
three major credit reporting agencies, reflecting a $3,500 debt with 
KlearGear as creditor. We immediately called Experian and Equifax to 
dispute the debt. Then KlearGear e-mailed John again and said we owed 
yet another $50 under its ``Chargeback/Dispute Policy,'' which said 
that we had to give KlearGear 30 days to resolve any billing dispute 
before going to a third party. We tried to tell KlearGear they couldn't 
charge us any of this money, but they just repeated their position and 
even admitted that they confirmed to Experian that the debt was valid. 
I spent hours on the phone with the credit bureaus, contacting local 
law firms to help us, and even doing some legal research myself. 
Despite all the information I found, we couldn't afford to hire an 
attorney and we didn't know how to fix the credit report without legal 
help.
    It took more than 18 months to remove the blemish from John's 
credit, and not until after the non-profit organization Public Citizen 
filed a lawsuit on our behalf. In the meantime, that bad credit report 
caused us all kinds of problems. We have been very careful to live 
within our means, using financing only for large purchases like the 
house, cars, and medical bills that weren't covered by insurance. We'd 
had no trouble getting loans to buy a car in 2008, our house in 2009, 
or another car in 2011.
    But now for the times we needed credit, we couldn't get it. For 
instance, we were held up for a month on a car loan in late 2012. Even 
worse than the delay was the humiliation of having to explain 
everything and the anxiety of whether or not this was going to go 
through, especially because at that point, we really needed a second 
car. I specifically remember the Finance Manager at the dealership 
saying to us ``Who is KlearGear and why do you owe them $3,500?'' John 
was also denied a credit card around the same time, and we began to 
fear we'd never get a loan for anything again.
    We were also hoping to sell our house and buy another one in the 
winter of 2013, because both of us were commuting more than 30 miles 
each, which was a particular hardship since our son, Damien, was just 
3. We were scared to even try to get the credit we'd need to make 
necessary repairs on our home and to buy a new one. We didn't want to 
go through that humiliation again. Having the initial denials on the 
car froze us in our financial tracks and gave us a serious case of 
``once bitten, 17 times shy.''
    The worst consequence of KlearGear's retaliation against us 
occurred in October 2013, more than a year after KlearGear reported the 
supposed ``debt.'' In July and September we had needed two major 
plumbing repairs on our home which had depleted our savings, and then 
our furnace broke at the beginning of October. We couldn't afford to 
buy a new one with cash and the weather was turning cold. I contacted 
several companies for financing, but no one could approve us. At that 
point we were desperate, wrapping Damien in blankets every night, when 
the weather was regularly dropping to around freezing. I was 
terrified--I had no idea how long this would go on. I was scared social 
services would come and take Damien, saying we were bad parents because 
we couldn't even keep the heat on. We cut as many expenses as we could 
that month. I dreaded each weather forecast. Between both our 
paychecks, after a few weeks we had saved enough money to buy the most 
basic furnace with cash.
    By that point, we were tired of living in fear and not being able 
to get emergency credit for basic needs. We spoke to a reporter at KUTV 
in Salt Lake City who did a segment on our plight, and eventually got 
us in contact with Public Citizen, which represented us in suing 
KlearGear. Public Citizen helped us clear up John's credit, finally, 
and we won a default judgment against KlearGear, who after bullying us 
for years never even bothered to show up to defend itself in court.
    Now that part of our lives is behind us. We were able to sell the 
house and move to Oregon for a work opportunity. Damien is a healthy 
and happy 5 year old.
    Throughout our entire ordeal, we only wanted two things: that all 
traces of KlearGear's actions against us be cleared from John's credit, 
and to do everything we could to ensure nobody else ever had to 
experience the nightmare we endured.
    We want Congress to ban non-disparagement clauses, which lead to 
the silencing of ordinary people and to bullying tactics like those 
KlearGear used to make us feel anxious, terrified, humiliated and 
helpless for more than a year. And we aren't the only victims of this 
type of conduct. If you read Public Citizen's website and its blog, 
you'll see that a Wisconsin woman was threatened with round-the-clock 
harassment by debt collectors for just telling an online retailer that 
she wanted to call her credit card company, a New Jersey woman was told 
she'd have to pay thousands of dollars in legal fees just to be able to 
post a critical online review of a website, and a New York hotel 
threatened couples holding weddings there that they'd be fined for 
negative reviews by their guests. The bullying and silencing of 
consumers needs to stop.
    We applaud the Committee for proposing to address the problem of 
non-disparagement clauses. We like the idea of giving the Federal Trade 
Commission and state authorities the power to go after unscrupulous 
companies that use non-disparagement clauses. Companies should not have 
the power to restrict consumer speech or punish people who criticize 
them. Companies should have to earn their reputations honestly with 
good products and services, and fair dealing.
    But we also believe that the bill as currently proposed must be 
strengthened. Specifically, one section prohibits state attorney 
general's offices from hiring outside attorneys to help enforce the 
prohibition on non-disparagement clauses. We don't think there ought to 
be restrictions on state enforcement powers, particularly because some 
smaller states might not have the resources to enforce every law with 
their own attorneys. We think states should be free to enforce this law 
however they can. There's no reason to limit the ways states can 
enforce it, particularly when states can hire outside lawyers for other 
purposes. Therefore I have been pleased to learn that the Committee 
intends to amend the bill to eliminate this restriction.
    I'm grateful for the opportunity to share my experience with you. 
On behalf of my husband John, my son Damien, and all the consumers out 
there who are being bullied and silenced by companies wielding non-
disparagement clauses, I urge you to pass a bill that both prohibits 
these clauses and provides for robust enforcement of the law.
    Thank you.

    The Chairman. Thank you, Ms. Palmer, for your willingness 
to share that story and be with us today.
    Professor Goldman?

 STATEMENT OF ERIC GOLDMAN, PROFESSOR, SANTA CLARA UNIVERSITY 
                         SCHOOL OF LAW

    Mr. Goldman. Mr. Chairman Thune, Ranking Member Nelson, and 
members of the Committee, I appreciate the opportunity to 
discuss the Consumer Review Freedom Act of 2015 and how 
Congress can help protect consumer reviews. I commend the 
Committee and the bill's sponsors for their leadership on this 
topic.
    Consumer reviews are vitally important to our modern 
economy. Markets become stronger and more efficient when 
consumers share their marketplace experiences and guide other 
consumers toward the best vendors and away from poor ones.
    Despite the social benefits generated by consumer reviews, 
some businesses try to distort their public reputation by 
contractually suppressing reviews from their customers. These 
efforts are categorically illegitimate. The Consumer Review 
Freedom Act will ensure every consumer has the opportunity to 
add their voice to the discourse so that other consumers can 
benefit from their experiences.
    Because contractual restrictions on consumer reviews are 
such a terrible idea, it seems like existing law should already 
prohibit such practices. Although there are some precedents to 
support that position, I will explore two reasons why I think 
we still need the Consumer Review Freedom Act.
    First, it is not clear if courts will enforce anti-review 
clauses. And I use the term ``anti-review clauses'' to describe 
what other people are calling gag contracts or clauses or non-
disparagement clauses. We do have a nomenclature problem, and I 
am sorry for compounding that.
    Many judges will refuse to enforce anti-review clauses for 
unconscionability, public policy, or other reasons, but judges 
also don't like to override contractual provisions, and so 
anti-review clauses are not guaranteed to fail in court.
    I would like to call your attention, in particular, to a 
case, Galland v. Johnston, which involved a vacation rental 
contract that required tenants to agree that they would not, 
quote, ``use blogs or websites for complaints, anonymously or 
not.''
    We don't have any idea how many consumers were deterred by 
this clause from sharing their experiences, but we do know that 
two tenants did post public reviews of the vacation rental 
online in defiance of the ban. The landlord then sued these 
tenants in Federal court.
    The court held that the reviews weren't defamatory but the 
tenants, nevertheless, may have breached the rental contract. 
In other words, this ruling means that anti-review clauses 
expose the tenants to potential liability for sharing what was 
a non-defamatory review.
    The Consumer Review Freedom Act will eliminate any 
ambiguity over the enforceability of anti-review clauses. It 
will mean that vacation tenants and all other customers will 
enjoy legal certainty about their rights to speak up.
    The second reason why we need the Consumer Review Freedom 
Act is that businesses are always seeking ways to shape and 
manage their online reputations. As they offer the illusion of 
control, anti-review clauses will keep proliferating unless 
they are banned.
    The experience of the healthcare industry illustrates how 
that might happen. In the late 2000s, a company called Medical 
Justice sold form contracts to doctors and other health-care 
professionals that contained anti-review clauses. Medical 
Justice's sales pitch to the doctors and healthcare 
professionals was elegant and tempting. It implied that, by 
using its form contracts, doctors and healthcare professionals 
would seemingly obtain a magic wand to scrub unwanted patient 
reviews from the Internet.
    Over the years, I estimate that over a thousand doctors and 
other healthcare professionals deployed such anti-review 
clauses and that over a million Americans signed such 
provisions.
    The long-term marketplace damages attributable to Medical 
Justice's misguided campaign is incalculable. Although Medical 
Justice changed its position in 2011 and told consumers to stop 
using its form, even today in 2015 it can be hard to find 
robust numbers of patient reviews for many healthcare 
providers.
    Although the healthcare industry's adoption of anti-review 
contracts may seem to be an extreme case, we are likely to see 
similar effects in other industries dominated by small 
businesses and professional service providers. Why these 
categories of businesses? In many cases, these proprietors' 
self-identities are closely linked to their professional 
reputations. Negative feedback about their business feels like 
it reflects upon them as an individual.
    If a vacation tenant says she didn't like the rental's 
decor, the landlord might take that as a criticism of her 
aesthetic tastes. Or if a patient says she didn't like her 
doctor's bedside manner, the doctor may feel like her 
personality is being criticized. Small-business owners and 
professional service providers will be attracted to anti-review 
clauses to prevent these public ego blows.
    Therefore, without the Consumer Review Freedom Act, I 
expect other industries will embrace anti-review clauses like 
the healthcare industry did, and we as consumers will all be 
poorer for it.
    Consumer reviews are worth fighting for, and I am thrilled 
to see Congress taking on that fight. I want to thank you for 
your work on the bill and for the opportunity to share my 
views.
    [The prepared statement of Mr. Goldman follows:]

 Prepared Statement of Eric Goldman, Professor, Santa Clara University 
                             School of Law
    Members of the Committee:

    I appreciate this opportunity to discuss the Consumer Review 
Freedom Act of 2015 and how Congress can help protect consumer reviews. 
I commend the Committee, and the bill sponsors, for their leadership on 
this topic.
    Consumer reviews are vitally important to our modern economy. 
Markets become stronger and more efficient when consumers share their 
marketplace experiences and guide other consumers toward the best 
vendors and away from poor ones.
    Despite the social benefits generated by consumer reviews, some 
businesses try to distort their public reputation by contractually 
suppressing reviews from their customers. These efforts are 
categorically illegitimate. The Consumer Review Freedom Act will ensure 
every consumer has the opportunity to add their voice to the discourse 
so that other consumers can benefit from their experiences.
    Because contractual restrictions on consumer reviews are such a 
terrible idea, it seems like existing law should already prohibit such 
practices. Although there is some precedent to support that conclusion, 
I'll explore two reasons why we still need the Consumer Review Freedom 
Act.
    First, it's not clear if courts will enforce anti-review 
clauses.\1\ Many judges will refuse to do so for unconscionability, 
public policy or other reasons. However, judges don't like to override 
contracts, so anti-review contracts aren't guaranteed to fail in court.
---------------------------------------------------------------------------
    \1\ Unfortunately, there is no widely accepted term to describe the 
types of contract clauses at issue here. I use the term ``anti-review 
clauses,'' but the terms ``gag clauses'' and ``non-disparagement 
clauses'' are also used. I don't prefer the latter because businesses 
sometimes attempt to restrict all reviews, positive and negative.
---------------------------------------------------------------------------
    For example, in Galland v. Johnston,\2\ a vacation rental contract 
required tenants to agree that they would not ``use blogs or websites 
for complaints, anonymously or not.'' We have no idea how many tenants 
self-censored due to this contract clause, but we know two tenants 
defied the ban and criticized the vacation rental online. The landlord 
sued the tenants in Federal court. The court held that the reviews 
weren't defamatory but the tenants nevertheless may have breached the 
rental contract. This ruling means the anti-review clause exposed the 
tenants to liability for sharing non-defamatory reviews.
---------------------------------------------------------------------------
    \2\ Galland v. Johnston, 2015 WL 1290775 (S.D.N.Y. Mar. 19, 2015), 
http://law.justia.com/cases/federal/district-courts/new-york/nysdce/
1:2014cv04411/428591/32/.
---------------------------------------------------------------------------
    The Consumer Review Freedom Act will eliminate any ambiguity over 
the enforceability of anti-review clauses. It will mean that vacation 
tenants--and all other customers--will enjoy legal certainty about 
their rights to speak up.
    The second reason we need the Consumer Review Freedom Act is that 
businesses are always seeking ways to shape and manage their online 
reputations. As they offer the illusion of such control, anti-review 
clauses will keep proliferating unless they are banned.
    The experiences of the healthcare industry illustrate how this 
might happen. In the late 2000s, a company called Medical Justice sold 
form contracts to doctors and other healthcare professionals that 
contained anti-review clauses.\3\ Medical Justice's sale pitch was 
elegant and tempting: by using its form contract, doctors and 
healthcare professionals would seemingly get a magic wand to scrub 
unwanted patient reviews from the Internet. Over the years, I estimate 
that over 1,000 healthcare professionals adopted Medical Justice's form 
contract and over 1 million Americans signed an anti-review contract.
---------------------------------------------------------------------------
    \3\ The exact terms of the anti-review clause varied over the 
years. At some points, the contract banned reviews; other times, the 
contract assigned the IP rights to the patients' reviews.
---------------------------------------------------------------------------
    The long-term marketplace damage attributable to Medical Justice's 
misguided campaign is incalculable. Although Medical Justice changed 
its position in 2011 and told its customers to stop using its forms, 
even today in 2015 it can be hard to find robust numbers of patient 
reviews for many healthcare providers.
    Although the healthcare industry's adoption of anti-review 
contracts may be an extreme case, we're likely to see similar effects 
in other industries dominated by small businesses and professional 
service providers.
    Why small businesses and professional service providers? In many 
cases, these proprietors' self-identities are closely linked to their 
professional reputations. Negative feedback about their business feels 
like it reflects on them as an individual. If a vacation tenant says 
she didn't like the rental's decor, the landlord might take that as 
criticism of her aesthetic tastes. Or if a patient says that she didn't 
like her doctor's bedside manner, the doctor may feel like her 
personality is being criticized. Small business owners and professional 
service providers will be attracted to anti-review clauses to prevent 
these public ego blows. Therefore, without the Consumer Review Freedom 
Act, I expect other industries will embrace anti-review clauses like 
the healthcare industry did--and we as consumers will be poorer for 
those efforts.
    Consumer reviews are worth fighting for, and I'm thrilled to see 
Congress taking on that fight. I thank you for your work on the bill 
and for the opportunity to share my views.
Attachments

   Eric Goldman, How Congress Can Protect Online Consumer 
        Reviews, Forbes Tertium Quid, Nov. 2, 2015, http://
        www.forbes.com/sites/ericgoldman/2015/11/02/how-congress-can-
        protect-online-consumer-reviews/.

   Eric Goldman, Court Might Enforce A Contract Ban On Consumer 
        Reviews, Forbes Tertium Quid, Mar. 27, 2015, http://
        www.forbes.com/sites/ericgoldman
        /2015/03/27/court-might-enforce-a-contract-ban-on-consumer-
        reviews/.

   Eric Goldman, California Tells Businesses: Stop Trying To 
        Ban Consumer Reviews, Forbes Tertium Quid, Sept. 10, 2014, 
        http://www.forbes.com/sites/eric
        goldman/2014/09/10/california-tells-businesses-stop-trying-to-
        ban-consumer-reviews/.

   Eric Goldman, Fining Customers For Negative Online Reviews 
        Isn't New . . . Or Smart, Forbes Tertium Quid, Aug. 7, 2014, 
        http://www.forbes.com/sites/ericgoldman/2014/08/07/fining-
        customers-for-negative-online-reviews-isnt-new-or-smart/.

   Eric Goldman, The Regulation of Reputational Information in 
        The Next Digital Decade: Essays on the Future of the Internet 
        193 (Berin Szoka & Adam Marcus eds.) (2010), http://ssrn.com/
        abstract=1754628.

   Eric Goldman, Patients' Online Reviews of Physicians, 
        Medical Ethics (a journal published by Lahey Health), Fall 
        2013, at 6, http://ssrn.com/abstract
        =2367092.
                                 ______
                                 

            How Congress Can Protect Online Consumer Reviews

Nov 2, 2015 @ 11:52 AM

    For many Americans, the First Amendment is the alpha and omega of 
free speech protection. However, the First Amendment just sets a 
minimum level of free speech in our society. Legislatures, including 
Congress, may freely enact laws that go beyond the First Amendment to 
protect free speech. If done properly, those laws can help free speech 
more than the First Amendment.
    The Consumer Review Freedom Act of 2015 (S. 2044 and H.R. 2110) is 
an example of a law that would helpfully supplement the First 
Amendment's protection of free speech. The Act would prevent businesses 
from contractually restricting their customers from reviewing them 
online (what I call ``anti-review clauses''). Although it may be hard 
to believe any business would ever ask its customers to do something so 
anti-consumer, it's likely that millions of Americans have agreed to 
such clauses. The Consumer Review Freedom Act would benefit them-and 
all of us.
About The Act
    (Note: I'll critique and quote the Senate bill's language, but the 
House and Senate versions are pretty similar).
    The Act defines ``covered communications'' to include written, 
verbal or photographic consumer reviews. The Act says that any form 
contracts that ban, impose fines for, or attempt to obtain the 
intellectual property rights to, covered communications are void. The 
Act also declares such contracts unlawful and authorizes the Federal 
government and state attorneys' general to bring enforcement actions 
for imposing such contracts (the House bill designates the U.S. 
Department of Justice as the principal Federal enforcement entity; the 
Senate bill, the Federal Trade Commission).
What's Good
    Some of the best aspects of the Act:

   Broad Definition. Consumers can critique businesses in lots 
        of ways. The Act's multi-media definition of ``covered 
        communications'' should be broad enough to cover all of those 
        possibilities.

   Broad Prohibitions. Businesses seeking to gag their 
        consumers have tried many different contract tricks. The Act 
        prohibits all of the known tricks (bans, fines and IP 
        assignments), so it will not be easy for a business to skirt 
        around this law.

    Recommended by Forbes

   Remedies. The Act makes anti-review clauses both void and 
        unlawful. Void means that no court will enforce them, and 
        unlawful means that it's illegal for businesses to include an 
        anti-review clause in its form, even if the business never 
        plans to enforce it.
Possible Tweaks
    While I support the Act in its current form, a few tweaks are worth 
considering:

   Restriction to Form Contracts. The Act applies only when the 
        anti-review clause is in a ``form contract,'' defined as ``a 
        standardized contract used by a person and imposed on an 
        individual without a meaningful opportunity for such individual 
        to negotiate the standardized terms.'' This definition excludes 
        individually negotiated non-disparagement clauses, which are 
        sometimes found in settlement agreements. (A non-disparagement 
        clause says that a person won't publicly say negative things-
        even if true-about someone else). Still, the statutory language 
        leaves room for debate over whether a contract qualifies as a 
        ``form contract.'' Because I am skeptical that non-
        disparagement clauses are legitimate in any situation, I would 
        favor extending the restrictions to all contracts, form or 
        negotiated.

   Trade Secret Exception. The Act does not apply to ``trade 
        secret'' protections, which makes sense because businesses 
        should have the ability to protect their trade secrets. 
        Unfortunately, businesses sometimes have ridiculously 
        overexpansive views about what constitutes their trade secrets-
        including asserting that information disclosures to customers 
        in ordinary buying-and-selling interactions constitute the 
        business' trade secrets. To preserve trade secret protection 
        but curb abusive overreaching, the Act could specify that 
        ordinary business-consumer interactions can't qualify as trade 
        secret disclosures.

   No Consumer Redress. The Act doesn't give consumers any 
        affirmative recourse if a business attempts to impose or 
        enforce an anti-review clause. This could be fixed in two ways. 
        First, if a business makes the unwise decision to bring a 
        lawsuit based on an anti-review clause, the court should award 
        attorneys' fees and other defense costs to the consumer. 
        Second, the statute should impose statutory damages on any 
        businesses that includes anti-review clauses in their 
        contracts.

   State Law Preemption. The Act doesn't preempt state laws 
        (the Act says ``Nothing in this section shall be construed to 
        affect any cause of action brought by a person that exists or 
        may exist under State law''). This might be a good thing 
        because it increases the range of legal tools to combat anti-
        review clauses. On the other hand, one of the principal 
        benefits of Federal law is that it can establish uniform rules 
        across the country. Although I favor a multi-fronted effort to 
        extinguish anti-review clauses, I probably favor legal 
        uniformity a little more.
Aren't Anti-Review Clauses Already Illegal?
    Because anti-review clauses are such an obviously terrible idea, 
such clauses are already running into legal trouble. For example, a 
2003 New York case struck down an anti-review clause; the Department of 
Health and Human Service's Office for Civil Rights has told doctors 
they can't use anti-review clauses; in 2014, California enacted a law 
against businesses banning consumer reviews; and last month, the 
Federal Trade Commission obtained a preliminary injunction prohibiting 
Roca Labs from using anti-review clauses. With all of this precedent 
indicating that anti-review clauses aren't permissible, do we need a 
Federal law too?
    Yes, we do. Anti-review clauses keep proliferating through 
different industries, so not every business has gotten the message. 
California's law is a helpful start, but that still leaves 49 states 
without comparable statutes. Plus, at least one case suggested that 
anti-review clauses may be enforceable. We need to put a decisive and 
unambiguous end t these anti-consumer, anti-competitive practices, and 
the Consumer Review Freedom Act would do just that.
A Final Thought
    In addition to the Consumer Review Freedom Act, Congress should 
enact a Federal anti-SLAPP law-another example of how Congress can 
extend the First Amendment's free speech protections. Anti-SLAPP laws 
help protect consumers from businesses making spurious legal claims 
that negative consumer reviews are defamatory. Businesses often 
intimidate consumers into removing reviews by threatening costly legal 
action (even if the review is completely legitimate), so the procedural 
and financial protections in a Federal anti-SLAPP law would curb such 
abusive threats. The combination of the Consumer Review Freedom Act and 
Federal anti-SLAPP protection would provide a solid legal foundation 
for the continued growth and success of online consumer reviews.

forbes.com--http://www.forbes.com/sites/ericgoldman/2015/11/02/how-
congress-can-protect-online-consumer-reviews/
                                 ______
                                 

         Court Might Enforce A Contract Ban On Consumer Reviews

Mar 27, 2015 @ 11:04 AM

    Claude and Violaine Galland own an apartment in Paris, France. They 
offer it for rental through VRBO, an online service for vacation 
rentals. The Gallands' rental agreement include the following language: 
``The tenants agree not to use blogs or websites for complaints, 
anonymously or not.'' Though clumsily worded, this clause is similar to 
prior attempts to restrict consumer reviews, such as the provisions 
used by doctors and dentists, hotels, apartment owners and other 
vacation rental services. As far as I know, no court has ever enforced 
any of these clauses purporting to suppress consumer reviews.
    Two different renters, the Johnstons and Bowdens, rented the 
Gallands' apartment and subsequently posted critical reviews on VRBO. 
Mr. Galland allegedly offered $300-unsuccessfully-to the Bowdens to 
remove their post. Instead, the Gallands sued the Johnstons and Bowdens 
for defamation, breach of contract and other claims.
    The judge dismissed the defamation claims-but refused to dismiss 
the breach of contract claim because:

        It is plausible that Defendants made the posts in violation of 
        the contract. Moreover, it is plausible that such negative 
        reviews could cause injuries to the Gallands' business. 
        Nevertheless, these are questions for a trier of fact to 
        decide. . .

    Thus, the breach of contract claim will go to a trial to decide if 
the reviews violated the contract.
    Surprisingly, the judge didn't discuss the illegality of the 
contract clause. In 2003, a New York court instructed a software vendor 
to stop banning consumer reviews in its contract (the exact 
restriction: ``The customer will not publish reviews of this product 
without prior consent from Network Associates, Inc.''). The court held 
that using such a clause may be a deceptive practice under New York's 
consumer protection law. I can't see any reason why the Gallands' 
clause wouldn't violate the same law. (The Gallands' case is being 
litigated in a New York Federal court applying New York law). 
Irrespective of the New York law, the contract restriction should be 
void as a matter of public policy. I'm hoping the court will come to 
its senses and realize that no trial is needed because the clause 
should be condemned, not enforced.
    It's remarkable that anyone had the confidence to litigate such a 
clause at all. We have seen relatively few courtroom battles over 
contractual bans on consumer reviews, and we aren't likely to see many 
such disputes in the future. The Gallands' contract provision clearly 
violates California's new law against consumer review bans, and I 
believe a new Federal bill will be introduced to make such bans 
nationwide. Eventually vendors will get the message and stop trying. 
Until they do, we need more tools to discourage such clauses in the 
future-and to discourage wasteful litigation intended to suppress 
renters' rights to express themselves.
    For more on this topic, see my article, The Regulation of 
Reputational Information.
    Case citation: Galland v. Johnston, 2015 WL 1290775 (SDNY March 19, 
2015)

forbes.com--http://www.forbes.com/sites/ericgoldman/2015/03/27/court-
might-enforce-a-contract-ban-on-consumer-reviews/
                                 ______
                                 

    California Tells Businesses: Stop Trying To Ban Consumer Reviews

Sep 10, 2014 @ 12:46 PM

    Increasingly, businesses are looking for ways to suppress or erase 
consumers' negative online reviews of them. In particular, we've 
recently seen a proliferation of contract clauses purporting to stop 
consumers from reviewing businesses online. Those overreaching contract 
clauses have never been a good idea, but yesterday, the idea got worse. 
Gov. Jerry Brown signed AB 2365 into law, to be codified as California 
Civil Code Sec. 1670.8. The law is a first-in-the-nation statute to 
stop businesses from contractually gagging their consumers.
    The new law says that 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.'' Any contract terms violating this provision are 
void. Simply including a prohibited clause in a contract, even if the 
business never enforces it, or threatening to enforce such a clause can 
lead to a penalty of up to $2,500 (up to $10,000 if the violation is 
willful). The penalties may be financially modest, but any California 
business foolish enough to take an anti-review contract to court will 
end up writing a check to their customers.
    Instead of telling consumers they can't review the businesses, some 
businesses are imposing financial penalties on consumers for writing 
negative reviews. I recently wrote about a New York hotel's contract 
that fined customers $500 if they, or their wedding guests, posted 
negative online reviews. Disputes over fines will rarely end up in 
court because the hotel simply deducted the fine from the customer's 
security deposit. Or other businesses, such as KlearGear, have filed 
negative credit reports against consumers who didn't pay the fine. A 
consumer could challenge the security deposit deduction or negative 
credit report in court, but few will.
    The statute tries to address the fining tactic by saying it's 
unlawful to ``penalize a consumer for making any statement protected 
under this section.'' The statute doesn't define what statements are 
``protected under this section,'' so I'm not sure how courts will 
interpret the provision. The legislative history expressly references 
the KlearGear situation, so I anticipate the statute will cover fines 
against customers for writing negative online reviews.
    We've also seen businesses use intellectual property claims to 
inhibit or discourage consumer reviews. The most notorious was the 
scheme by Medical Justice that helped doctors get their patients to 
assign the copyright in unwritten reviews. Unfortunately, the statute 
doesn't directly address this situation, and arguably these IP-based 
tactics don't constitute ``waivers'' prohibited by the statute. Perhaps 
courts will nevertheless interpret the statute to ban these abusive 
practices; otherwise, I fear we'll see more IP-based anti-review 
shenanigans following this law.
    If you're responsible for your business' contract with consumers, 
today's a good day to review the contract and confirm that you don't 
have any language that might be interpreted as a restriction on your 
customers' ability to review your business. There are so many better 
ways to handle consumer reviews.

forbes.com--http://www.forbes.com/sites/ericgoldman/2014/09/10/
california-tells-businesses-stop-trying-to-ban-consumer-reviews/
                                 ______
                                 

  Fining Customers For Negative Online Reviews Isn't New. . .Or Smart

Aug 7, 2014 @ 10:47 AM

    This week, we learned that a New York hotel, the Union Street Guest 
House, was fining guests $500 for posting negative online reviews. The 
story received considerable media attention because the restriction 
violates our social norms and is almost certainly unlawful. 
Unfortunately, this is not the first time businesses have tried to 
control negative reviews online, a goal that some businesses apparently 
find irresistible. We shouldn't be surprised the next time we see 
businesses try to gag their customers, but it should make us mad. . 
.mad enough to demand new statutor punishments for businesses who 
disrespect their customers and the marketplace.
The Union Street Guest House Contract
    Until recently, the Union Street Guest House included the following 
provision in its policies:

        If you stay here to attend a wedding and leave us a negative 
        review on any Internet site you agree to a $500. fine for each 
        negative review.

        If you have booked the Inn for a wedding or other type of event 
        anywhere in the region and given us a deposit of any kind for 
        guests to stay at USGH there will be a $500 fine that will be 
        deducted from your deposit for every negative review of USGH 
        placed on any Internet site by anyone in your party and/or 
        attending your wedding or event (this is due to the fact that 
        your guests may not understand what we offer and we expect you 
        to explain that to them).

    Allegedly, the guest house would refund the full deposit if the 
author removed the negative review.
    We don't know how often the guest house actually fined its 
customers. Slate reported on one e-mail exchange where the policy was 
invoked. I imagine other guests simply removed negative reviews in 
response to threats by the guest house.
    The guest house's provision stands out for two reasons. First, it 
purports to hold the bride or groom accountable for posts made by their 
wedding guests. However, newlyweds can't really control what their 
guests feel or say. Second, the guest house could self-implement the 
remedy by deducting money from the customer's deposit, rather than 
bringing a lawsuit in court-which would almost certainly fail.
Past Attempts To Suppress Negative Consumer Reviews
    The Business Insider article said the guest house's provision was 
``a novel way to keep negative reviews off Yelp and other sites,'' but 
that's wrong. Although we've seen a range of ways businesses have tried 
to suppress online reviews, we've also seen this story before. Here's a 
short survey of some prior efforts to gag customers:
    Late 1990s. Software vendor Network Associates obligated its end 
users to ``not publish reviews of this product without prior consent 
from Network Associates, Inc.'' In 2003, a New York court enjoined 
Network Associates from using that clause.
    2007-2011. A small company, Medical Justice, provided doctors and 
dentists with form contracts designed to veto any negative online 
reviews. The contracts initially banned online reviews outright. A 
division of the Federal Department of Health & Human Services held that 
it was unethical for doctors to suppress patients' reviews. Medical 
Justice eventually changed its form so that patients assigned the 
copyright in their unwritten online reviews of the doctor or dentist. 
Armed with the purported copyright, doctors and dentists could threaten 
review websites with copyright infringement for continuing to publish 
any reviews the doctor/dentist wanted gone (presumably, only negative 
reviews). I believe that over 1 million Americans signed some variation 
of Medical Justice's form contract. In 2011, Medical Justice 
``retired'' its form and advised doctors and dentists to stop using it. 
Meanwhile, there remains a pending lawsuit by a patient against a 
dentist who tried to invoke the form to demand the removal of a 
negative review. That lawsuit is going poorly for the dentist. For more 
information on Medical Justice's anti-review efforts, see 
DoctoredReviews.com.
    2012. We learned that some vacation rental companies were pulling 
the same basic stunt as the Union Street Guest House. Some contracts 
contained a clause restricting online reviews, styled as a non-
disclosure agreement. For example, one provision said the customer may 
not ``discuss or disclose the occupancy of the subject property with 
any entity not bound by the terms of this agreement without the 
expressed written authorization of the homeowner and the property agent 
representing the homeowner.'' Furthermore, the rental company retained 
the customer's security deposit and could deduct fines from there. I'm 
not aware of any legal tests of these contracts.
    2013. Online retailer KlearGear attempted to restrict negative 
consumer reviews by imposing a fine, but the customer says that 
KlearGear's contract didn't actually contain the restriction at the 
time of purchase. When the customer failed to pay the fine, KlearGear 
reported the non-payment to the credit agencies, damaging the 
customer's credit. The customer is suing KlearGear for its behavior, 
and that lawsuit isn't going well for KlearGear.
    In response to the KlearGear incident, a bill was introduced in 
California (AB2365) to ban surreptitious attempts to restrict 
customers' reviews. The bill has some obvious deficiencies, including 
the fact that the bill's language might no restrict the guest house's 
provision. Still, I think the bill is a sign of things to come. It 
hurts the marketplace when businesses keep customers from sharing their 
experiences with other prospective customers, so we simply cannot 
tolerate such efforts. If businesses can't resist their impulses to 
hide their failings, the legislatures will have to step in.

forbes.com--http://www.forbes.com/sites/ericgoldman/2014/08/07/fining-
customers-for-negative-online-reviews-isnt-new-or-smart/
                                 ______
                                 
                                 
                                 
     The Next Digital Decade: Essays on the Future of the Internet

               The Regulation of Reputational Information

                      By Eric Goldman*
---------------------------------------------------------------------------
    \*\ Associate Professor and Director, High Tech Law Institute, 
Santa Clara University School of Law. E-mail: egoldman@gmail.com. 
Website: http://www.ericgoldman.org. In addition to a stint as General 
Counsel of Epinions.com, a consumer review website now part of the eBay 
enterprise, I have provided legal or consulting advice to some of the 
other companies mentioned in this essay. I prepared this essay in 
connection with a talk at the Third Annual Conference on the Law and 
Economics of Innovation at George Mason University, May 2009.
---------------------------------------------------------------------------
Introduction
    This essay considers the role of reputational information in our 
marketplace. It explains how well-functioning marketplaces depend on 
the vibrant flow of accurate reputational information, and how 
misdirected regulation of reputational information could harm 
marketplace mechanisms. It then explores some challenges created by the 
existing regulation of reputational information and identifies some 
regulatory options for the future.
Reputational Information Defined
    Typical definitions of ``reputation'' focus on third-party 
cognitive perceptions of a person.\1\ For example, Black's Law 
Dictionary defines reputation as the ``esteem in which a person is held 
by others.'' \2\ Bryan Garner's A Dictionary of Modern Legal Usage 
defines reputation as ``what one is thought by others to be.'' \3\ The 
Federal Rules of Evidence also reflect this perception-centric view of 
``reputation.'' \4\
---------------------------------------------------------------------------
    \1\ As one commentator explained:

    Through one's actions, one relates to others and makes impressions 
on them. These impressions, taken as a whole, constitute an 
individual's reputation--that is, what other people think of you, to 
the extent that their thoughts arise from what they know about you, or 
think they know about you.

    Elizabeth D. De Armond, Frothy Chaos: Modern Data Warehousing and 
Old-Fashioned Defamation, 41 Val. U.L. Rev. 1061, 1065 (2007).
    \2\ Black's Law Dictionary (8th ed. 2004).
    \3\ Bryan A. Garner, A Dictionary of Modern Legal Usage (1990).
    \4\ See, e.g., Fed. R. Evid. 803(19), 803(21).
---------------------------------------------------------------------------
    Although this definition is useful so far as it goes, I am more 
interested in how information affects prospective decision-making.\5\ 
Accordingly, I define ``reputational information'' as follows:
---------------------------------------------------------------------------
    \5\ Luis M.B. Cabral, The Economics of Trust and Reputation: A 
Primer (June 2005 draft), http://pages.stern.nyu.edu/lcabral/
reputation/Reputation_June05.pdf (treating information about reputation 
as inputs into Bayesian calculations).

        information about an actor's past performance that helps 
        predict the actor's future ability to perform or to satisfy the 
---------------------------------------------------------------------------
        decision-maker's preferences.

    This definition contemplates that actors create a pool of data 
(both subjective and objective) through their conduct. This pool of 
data--the reputational information--can provide insights into the 
actor's likely future behavior.
Reputation Systems
    ``Reputation systems'' aggregate and disseminate reputational 
information to consumers of that information. Reputation systems can be 
mediated or unmediated.
    In unmediated reputation systems, the producers and consumers of 
reputational information communicate directly. Examples of unmediated 
reputation systems include word of mouth, letters of recommendation and 
job references.
    In mediated reputation systems, a third-party publisher gathers, 
organizes and publishes reputational information. Examples of mediated 
reputation systems include the Better Business Bureau's ratings, credit 
reports/scores, investment ratings (such as Morningstar mutual fund 
ratings and Moody bond ratings), and consumer review sites.
    The Internet has led to a proliferation of mediated reputation 
systems, and in particular consumer review sites.\6\ Consumers can 
review just about anything online; examples include:
---------------------------------------------------------------------------
    \6\ Indeed, this has spurred the formation of an industry 
association, the Rating and Review Professional Association. http://
www.rarpa.org.

   eBay's feedback forum,\7\ which allows eBay's buyers and 
        sellers to rate each other.
---------------------------------------------------------------------------
    \7\ http://pages.ebay.com/services/forum/feedback.html.

   Amazon's product reviews, which allows consumers to rate and 
---------------------------------------------------------------------------
        review millions of marketplace products.

   Yelp.com, which allows consumers to review local businesses.

   TripAdvisor.com, which allows consumers to review hotels and 
        other travel attractions.

   RealSelf.com, which allows consumers to review cosmetic 
        surgery procedures.

   Avvo.com, which allows consumers to rate and review 
        attorneys.

   Glassdoor.com, which allows employees to share salary 
        information and critique the working conditions at their 
        employers.

   Honestly.com,\8\ which allows co-workers to review each 
        other.
---------------------------------------------------------------------------
    \8\ Honestly.com was previously called Unvarnished. See Evelyn 
Rusli, Unvarnished: A Clean, Well-Lighted Place For Defamation, 
TechCrunch, Mar. 30, 2010, http://techcrunch.com/2010/03/30/
unvarnished-a-clean-well-lighted-place-for-defamation/.

   RateMyProfessors.com, which allows students to publicly rate 
---------------------------------------------------------------------------
        and review their professors.

   DontDateHimGirl.com, which allows people to create and 
        ``find profiles of men who are alleged cheaters.'' \9\
---------------------------------------------------------------------------
    \9\ PlayerBlock is a similar service, tracking undesirable dating 
prospects by their cellphone number. See Leslie Katz, Is Your Date a 
Player? Send a Text and Find Out, CNET News.com, Oct. 22, 2007, http://
news.cnet.com/8301-10784_3-9802025-7.html.

   TheEroticReview.com, which allows johns to rank 
        prostitutes.\10\
---------------------------------------------------------------------------
    \10\ See Matt Richtel, Sex Trade Monitors a Key Figure's Woes, N.Y. 
Times, June 17, 2008. PunterNet is another website in this category, 
providing reviews of British sex workers. John Omizek, PunterNet Thanks 
Harriet for Massive Upswing, The Register, Oct. 5, 2009, http://
www.theregister.co.uk/2009/10/05/punternet_harman/.
---------------------------------------------------------------------------
Why Reputational Information Matters
    In theory, the marketplace works through an ``invisible hand'': 
consumers and producers make individual and autonomous decisions that, 
without any centralized coordination, collectively determine the price 
and quantity of goods and services. When it works properly, the 
invisible hand maximizes social welfare by allocating goods and 
services to those consumers who value them the most.
    A properly functioning invisible hand also should reward good 
producers and punish poor ones. Consumers allocating their scarce 
dollars in a competitive market will transact with producers who 
provide the best cost or quality options. Over time, uncompetitive 
producers should be drummed out of the industry by the aggregate but 
uncoordinated choices of rational and informed consumers.
    However, given the transaction costs inherent in the real world, 
the invisible hand can be subject to distortions. In particular, to the 
extent information about producers is costly to obtain or use, 
consumers may lack crucial information to make accurate decisions. To 
that extent, consumers may not be able to easily compare producers or 
their price/quality offerings, in which case good producers may not be 
rewarded and bad producers may not be punished.
    When information is costly, reputational information can improve 
the operation of the invisible hand by helping consumers make better 
decisions about vendors. In this sense, reputational information acts 
like an invisible hand guiding the invisible hand (an effect I call the 
``secondary invisible hand''), because reputational information can 
guide consumers to make marketplace choices that, in aggregate, 
effectuate the invisible hand. Thus, in an information economy with 
transaction costs, reputational information can play an essential role 
in rewarding good producers and punishing poor ones.
    Given this crucial role in marketplace mechanisms, any distortions 
in reputational information may effectively distort the marketplace 
itself. In effect, it may cause the secondary invisible hand to push 
the invisible hand in the wrong direction, allowing bad producers to 
escape punishment and failing to reward good producers. To avoid this 
unwanted consequence, any regulation of reputational information needs 
to be carefully considered to ensure it is improving, not harming, 
marketplace mechanisms.
    Note that the secondary invisible hand is, itself, subject to 
transaction costs. It is costly for consumers to find and assess the 
credibility of reputational information. Therefore, reputation systems 
themselves typically seek to establish their own reputation. I describe 
the reputation of reputation systems as a ``tertiary'' invisible hand--
it is the invisible hand that guides reputational information (the 
secondary invisible hand) to guide the invisible hand of individual 
uncoordinated decisions by marketplace actors (the primary invisible 
hand). Thus, the tertiary invisible hand allows the reputation system 
to earn consumer trust as a credible source (such as the Wall Street 
Journal, the New York Times or Consumer Reports) or to be drummed out 
of the market for lack of credibility (such as the now-defunct 
anonymous gossip website JuicyCampus).\11\
---------------------------------------------------------------------------
    \11\ Matt Ivester, A Juicy Shutdown, JuicyCampus Blog, Feb. 4, 
2009, http://juicycam
pus.blogspot.com/2009/02/juicy-shutdown.html.
---------------------------------------------------------------------------
Thinking About Reputation Regulation
    This part explores some ways that the regulatory system interacts 
with reputation systems and some issues caused by those interactions.
Regulatory Heterogeneity
    Regulators have taken divergent approaches to reputation systems. 
For example, consider the three different regulatory schemes governing 
job references, credit reporting databases and consumer review 
websites:

   Job references are subject to a mix of statutory (primarily 
        state law) and common law tort regulation.

   Credit reporting databases are statutorily micromanaged 
        through the voluminous and detailed Fair Credit Reporting 
        Act.\12\
---------------------------------------------------------------------------
    \12\ 15 U.S.C. Sec. Sec. 1681-81x.

   Consumer review websites are virtually unregulated, and many 
        potential regulations of consumer review websites (such as 
---------------------------------------------------------------------------
        defamation) are statutorily preempted.

    These different regulatory structures raise some related questions. 
Are there meaningful distinctions between reputation systems that 
support heterogeneous regulation? Are there ``best practices'' we can 
observe from these heterogeneous regulatory approaches that can be used 
to improve other regulatory systems? These questions are important 
because regulatory schemes can significantly affect the efficacy of 
reputation systems. As an example, consider the differences between the 
job reference and online consumer review markets.
    A former employer giving a job reference can face significant 
liability whether the reference is positive or negative.\13\ Giving 
unfavorable references of former employees can lead to defamation or 
related claims;\14\ and there may be liability for a former employee 
giving an incomplete positive reference.\15\
---------------------------------------------------------------------------
    \13\ See Tresa Baldas, A Rash of Problems over Job References, 
Nat'l L.J., Mar. 10, 2008 (``Employers are finding that they are being 
sued no matter what course they take; whether they give a bad 
reference, a good reference or stay entirely silent.'').
    \14\ 1-2 Employment Screening Sec. 2.05 (Matthew Bender & Co. 2008) 
(hereinafter ``Employment Screening'').
    \15\ Randi W. v. Muroc Joint Unified Sch. Dist., 14 Cal. 4th 1066 
(1997).
---------------------------------------------------------------------------
    Employers may be statutorily required to provide certain objective 
information about former employees.\16\ Otherwise, given the 
potentially no-win liability regime for communicating job references, 
most knowledgeable employers refuse to provide any subjective 
recommendations of former employees, positive or negative.\17\
---------------------------------------------------------------------------
    \16\ These laws are called ``service letter statutes.'' See 
Employment Screening, supra note 14. Germany has a mandatory reference 
law requiring employers to furnish job references, but in response 
German employers have developed an elaborate system for coding the 
references. Matthew W. Finkin & Kenneth G. Dau-Schmidt, Solving the 
Employee Reference Problem, 57 AM. J. Comp. L. 387 (2009).
    \17\ See Baldas, supra note 13.
---------------------------------------------------------------------------
    To curb employers' tendency towards silence, many states enacted 
statutory immunities to protect employers from lawsuits over job 
references.\18\ However, the immunities have not changed employer 
reticence, which has led to a virtual collapse of the job reference 
market.\19\ As a result, due to mis-calibrated regulation, the job 
reference market fails to provide reliable reputational information.
---------------------------------------------------------------------------
    \18\ The immunizations protect employer statements made in good 
faith. Employment Screening, supra note 14.
    \19\ See Finkin & Dau-Schmidt, supra note 16.
---------------------------------------------------------------------------
    In contrast, the online consumer review system is one of the most 
robust reputation systems ever. Millions of consumers freely share 
their subjective opinions about marketplace goods and services, and 
consumer review websites keep proliferating.
    There are several possible reasons why consumer review websites 
might succeed where offline reputation systems might fail. My 
hypothesis, discussed in a companion essay in this collection, is that 
the difference is partially explained by 47 U.S.C. Sec. 230, passed in 
1996--at the height of Internet exceptionalism--to protect online 
publishers from liability for third party content. Section 230 lets 
websites collect and organize individual consumer reviews without 
worrying about crippling legal liability for those reviews. As a 
result, consumer review websites can motivate consumers to share their 
opinions and then publish those opinions widely--as determined by 
marketplace mechanisms (i.e., the tertiary invisible hand), not 
concerns about legal liability.
    The success of consumer review websites is especially noteworthy 
given that individual reviewers face the same legal risks that former 
employers face when providing job references, such as the risk of 
personal liability for publishing negative reputational information. 
Indeed, numerous individuals have been sued for posting negative online 
reviews.\20\ As a result, rational actors should find it imprudent to 
submit negative reviews; yet, millions of such reviews are published 
online. A number of theories might explain this discrepancy, but one 
theory is especially intriguing: Mediating websites, privileged by 
their own liability immunity, find innovative ways to get consumers 
over their fears of legal liability.
---------------------------------------------------------------------------
    \20\ See, e.g., Wendy Davis, Yelp Reviews Spawn At Least Five 
Lawsuits, MediaPost Online Media Daily, Jan. 21, 2009, http://
www.mediapost.com/publications/?fa=Articles.printFriendly
&art_aid=9877 8; Agard v. Hill, 2010 U.S. Dist. LEXIS 35014 (E.D. Cal. 
2010).
---------------------------------------------------------------------------
    What lessons can we draw from this comparison? One possible lesson 
is that reputation systems are too important to be left to the market. 
In other words, the tertiary invisible hand may not ensure accurate and 
useful information, or the costs of inaccurate information (such as 
denying a job to a qualified candidate) may be too excessive. If so, 
extensive regulatory intervention of reputation systems may improve the 
marketplace.
    An alternative conclusion--and a more convincing one to me--is that 
the tertiary invisible hand, aided by a powerful statutory immunity 
like Section 230, works better than regulatory intervention. If so, we 
may get better results by deregulating reputation systems.
System Configurations
    Given the regulatory heterogeneity, I wonder if there is an 
``ideal'' regulatory configuration for reputation systems, especially 
given the tertiary invisible hand and its salutary effect on publisher 
behavior. Two brief examples illustrate the choices available to 
regulators, including the option of letting the marketplace operate 
unimpeded:
    Anti-Gaming. A vendor may have financial incentives to distort the 
flow of reputational information about it. This reputational gaming can 
take many forms, including disseminating false positive reports about 
the vendor,\21\ disseminating false negative reports about the vendor's 
competitors, or manipulating an intermediary's sorting or weighting 
algorithm to get more credit for positive reports or reduce credit for 
negative reports. Another sort of gaming can occur when users 
intentionally flood a reputation system with inaccurate negative 
reports as a form of protest.\22\
---------------------------------------------------------------------------
    \21\ Lifestyle Lift Holding, Inc. v. RealSelf Inc., 2:08-cv-10089-
PJD-RSW (answer/counterclaims filed March 3, 2008), http://
www.realself.com/files/Answer.pdf (alleging that Lifestyle Lift posted 
fake positive reviews about its own business to an online review 
website).
    \22\ For example, consumers protesting the digital rights 
management (DRM) in EA's Spore game flooded Amazon's review site with 
one-star reviews, even though many of them actually enjoyed the game. 
See Austin Modine, Amazon Flash Mob Mauls Spore DRM, The Register, 
Sept. 10, 2008, http://www.theregister.co.uk/2008/09/10/
spore_drm_amazon_effect/. A similar protest hit Intuit's TurboTax 2008 
over its increased prices. See Steven Musil, Amazon Reviewers Slam 
TurboTax Fee Changes, CNET News.Com, Dec. 7, 2008, http://
news.cnet.com/8301-1001_3-10117323-92.html.
---------------------------------------------------------------------------
    Do regulators need to curb this gaming behavior, or will other 
forces be adequate? There are several marketplace pressures that curb 
gaming, including competitors policing each other,\23\ just as they do 
in false advertising cases.\24\ In addition, the tertiary invisible 
hand may encourage reputation systems to provide adequate ``policing'' 
against gaming. However, when the tertiary invisible hand is weak, such 
as with fake blog posts where search engines are the only 
mediators,\25\ government intervention might be worth considering.
---------------------------------------------------------------------------
    \23\ See Cornelius v. DeLuca, 2010 WL 1709928 (D. Idaho Apr. 26, 
2010) (a marketplace vendor sued over alleged shill online reviews 
posted by competitors).
    \24\ See, e.g., Lillian R. BeVier, A Puzzle in the Law of 
Deception, 78 VA. L. REV. 1 (1992).
    \25\ See Press Release, New York Office of the Attorney General, 
Attorney General Cuomo Secures Settlement With Plastic Surgery 
Franchise That Flooded Internet With False Positive Reviews, July 14, 
2009, http://www.ag.ny.gov/media_center/2009/july/july14b_09.html.
---------------------------------------------------------------------------
    Right of Reply. A vendor may wish to publicly respond to 
reputational information published about it in an immediately adjacent 
fashion. Many consumer review websites allow vendors to comment or 
otherwise reply to user-supplied reviews, but not all do. For example, 
Yelp initially drew significant criticism from business owners who 
could not effectively reply to negative Yelp reviews because of Yelp's 
architecture,\26\ but Yelp eventually relented and voluntarily changed 
its policy.\27\ As another example, Google permitted quoted sources to 
reply to news articles appearing in Google News as a way to ``correct 
the record.'' \28\
---------------------------------------------------------------------------
    \26\ See Claire Cain Miller, The Review Site Yelp Draws Some 
Outcries of Its Own, N.Y. Times, Mar. 3, 2009.
    \27\ See Claire Cain Miller, Yelp Will Let Businesses Respond to 
Web Reviews, N.Y. Times, Apr. 10, 2009.
    \28\ See Dan Meredith & Andy Golding, Perspectives About the News 
from People in the News, Google News Blog, Aug. 7, 2007, http://
googlenewsblog.blogspot.com/2007/08/perspectives-about-news-from-
people-in.html.
---------------------------------------------------------------------------
    Regulators could require consumer review websites and other 
reputation systems to permit an adjacent response from the vendor.\29\ 
But such intervention may not be necessary; the tertiary invisible hand 
can prompt reputation systems to voluntarily provide a reply option (as 
Yelp and Google did) when they think the additional information helps 
consumers.
---------------------------------------------------------------------------
    \29\ See Frank A. Pasquale, Rankings, Reductionism, and 
Responsibility, 54 Clev. St. L. Rev. 115 (2006); Frank A. Pasquale, 
Asterisk Revisited: Debating a Right of Reply on Search Results, 3 J. 
Bus. & Tech. L. 61 (2008).
---------------------------------------------------------------------------
Undersupply of Reputational Information
    There are three primary categories of reasons why reputational 
information may be undersupplied.
Inadequate Production Incentives
    Much reputational information starts out as non-public (i.e., 
``private'') information in the form of a customer's subjective mental 
impressions about his/her interactions with the vendor. To the extent 
this information remains non-public, it does not help other consumers 
make marketplace decisions. These collective mental impressions 
represent a vital but potentially underutilized social resource.
    The fact that non-public information remains locked in consumers' 
heads could represent a marketplace failure. If the social benefit from 
public reputational information exceeds the private benefit from making 
it public, then presumptively there will be an undersupply of public 
reputational information. If so, the government may need to correct 
this failure by encouraging the disclosure of reputational 
information--such as by creating a tort immunity for sites that host 
that disclosure, as Section 230 does, or perhaps by going further. But 
there already may be market solutions to this problem, as evidenced by 
the proliferation of online review websites eliciting lots of formerly 
non-public reputational information.
    Further, relatively small amounts of publicly disclosed 
reputational information might be enough to properly steer the 
invisible hand. For example, the first consumer review of a product in 
a reputation system creates a lot of value for subsequent consumers, 
but the 1,000th consumer review of the same product may add very little 
incrementally. So even if most consumer impressions remain non-public, 
perhaps mass-market products and vendors still have enough information 
produced to keep them honest. At the same time, vendors and products in 
the ``long tail'' \30\ may have inadequate non-public impressions put 
into the public discourse, creating a valuable opportunity for 
comprehensive reputation systems to fix the omission. However, 
reputation systems will tackle these obscure marketplace options only 
when they can keep their costs low (given that consumer interest and 
traffic will, by definition, be low), and reputation system 
deregulation helps reduce both the costs of litigation as well as 
responding to takedown demands.
---------------------------------------------------------------------------
    \30\ Chris Anderson, The Long Tail, Wired, Oct. 2004, http://
www.wired.com/wired/archive/12.10/tail.html.
---------------------------------------------------------------------------
Vendor Suppression of Reputational Information
    Vendors are not shy about trying to suppress unwanted consumer 
reviews ex post,\31\ but vendors might try to suppress such reviews ex 
ante. For example, one cafe owner grew so tired of negative Yelp 
reviews that he put a ``No Yelpers'' sign in his cafe's windows.\32\
---------------------------------------------------------------------------
    \31\ See Eric Goldman, Online Word of Mouth and Its Implications 
for Trademark Law, in Trademark Law and Theory: A Handbook of 
Contemporary Research 404 (Graeme B. Dinwoodie and Mark D. Janis eds.) 
(2008) (discussing lopsided databases where all negative reviews are 
removed, leaving only positive reviews).
    \32\ Stefanie Olsen, No Dogs, Yelpers Allowed, CNET News.com, Aug. 
14, 2007, http://news.cnet.com/8301-10784_3-9759933-7.html.
---------------------------------------------------------------------------
    That sign probably had no legal effect, but Medical Justice offers 
an ex ante system to help doctors use preemptive contracts to suppress 
reviews by their patients. Medical Justice provides doctors with a form 
agreement that has patients waive their rights to post online reviews 
of the doctor.\33\ Further, to bypass 47 U.S.C. Sec. 230s protective 
immunity for online reputation systems that might republish such 
patient reviews, the Medical Justice form prospectively takes copyright 
ownership of any patient-authored reviews.\34\ (Section 230 does not 
immunize against copyright infringement). This approach effectively 
allows doctors--or Medical Justice as their designee--to get reputation 
systems to remove any unwanted patient reviews simply by sending a DMCA 
takedown notice.\35\
---------------------------------------------------------------------------
    \33\ Lindsey Tanner, Doctors Seek Gag Orders to Stop Patients' 
Online Reviews, Associated Press, Mar. 3, 2009, http://
www.usatoday.com/news/health/2009-03-05-doctor-reviews_N
.htm.
    \34\ Michael E. Carbine, Physicians Use Copyright Infringement 
Threat to Block Patient Ratings on the Web, AIS'S Health Business 
Daily, Mar. 30, 2009, http://www.aishealth.com/Bnow/hbd033009.html.
    \35\ 17 U.S.C. Sec. 512(c)(3).
---------------------------------------------------------------------------
    Ex ante customer gag orders may be illegal. In the early 2000s, the 
New York Attorney General challenged software manufacturer Network 
Associates' end user license agreement, which said the ``customer will 
not publish reviews of this product without prior consent from Network 
Associates, Inc.'' In response, the New York Supreme Court enjoined 
Network Associates from restricting user reviews in its end user 
license agreement.\36\ Medical Justice's scheme may be equally legally 
problematic.
---------------------------------------------------------------------------
    \36\ People v. Network Associates, Inc., 758 N.Y.S.2d 466 (N.Y. 
Sup. Ct. 2003).
---------------------------------------------------------------------------
    From a policy standpoint, ex ante customer gag orders pose serious 
threats to the invisible hand. If they work as intended, they starve 
reputation systems of the public information necessary to facilitate 
the marketplace. Therefore, regulatory efforts might be required to 
prevent ex ante customer gag orders from wreaking havoc on marketplace 
mechanisms.
Distorted Decision-Making from Reputational Information
    Reputational information generally improves decision-making, but 
not always. Most obviously, reputational information relies on the 
accuracy of past information in predicting future behavior, but this 
predictive power is not perfect.
    First, marketplace actors are constantly changing and evolving, so 
past behavior may not predict future performance. For example, a person 
with historically bad credit may obtain a well-paying job that puts him 
or her on good financial footing. Or, in the corporate world, a 
business may be sold to a new owner with different management 
practices. In these situations, the predictive accuracy of past 
information is reduced.\37\
---------------------------------------------------------------------------
    \37\ Cf. Note, Badwill, 116 Harv. L. Rev. 1845 (2003) (describing 
how companies can mask a track record of bad performance through 
corporate renaming).
---------------------------------------------------------------------------
    Second, some past behavior may be so distracting that information 
consumers might overlook other information that has more accurate 
predictive power. For example, a past crime or bankruptcy can overwhelm 
the predictive information in an otherwise-unblemished track record of 
good performance.
    Ultimately, a consumer of information must make smart choices about 
what information to consult and how much predictive weight to assign to 
that information. Perhaps regulation can improve the marketplace's 
operation by shaping the information that consumers consider. For 
example, if some information is so highly prejudicial that it is likely 
to distort consumer decision-making, the marketplace might work better 
if we suppress that information from the decision-maker.\38\
---------------------------------------------------------------------------
    \38\ Cf. Fed. R. Evid. 403 (``Although relevant, evidence may be 
excluded if its probative value is substantially outweighed by the 
danger of unfair prejudice, confusion of the issues, or misleading the 
jury . . .''). This fear underlies a French proposal to enact a ``right 
to forget'' statute. See David Reid, France Ponders Right-to-Forget 
Law, BBC Click, Jan. 8, 2010, http://news.bbc.co.uk/2/hi/programmes/
click_online/8447742.stm.
---------------------------------------------------------------------------
    At the same time, taking useful information out of the marketplace 
could create its own adverse distortions of the invisible hand. 
Therefore, we should tread cautiously in suppressing certain categories 
of information.
Conclusion
    Although ``reputation'' has been extensively studied in a variety 
of social science disciplines, there has been comparatively little 
attention paid to how regulation affects the flow of reputational 
information in our economy. Understanding these dynamics would be 
especially valuable in light of the proliferation of Internet-mediated 
reputation systems and the irresistible temptation to regulate novel 
and innovative reputation systems based on emotion, not necessarily 
sound policy considerations.
                                 ______
                                 

                 Patients' Online Reviews of Physicians

                      By Eric Goldman*
---------------------------------------------------------------------------
    \*\ Professor and Director of High Tech Law Institute, Santa Clara 
University School of Law. egoldman@gmail.com. http://
www.ericgoldman.org.
---------------------------------------------------------------------------
 Medical Ethics, a journal published by Lahey Health Fall 2013, page 6
    Online patient reviews are becoming a major force in the healthcare 
industry, but some healthcare providers lament this development. In 
fact, an opportunistic vendor, Medical Justice, preyed on healthcare 
provider fears and sold healthcare providers a form contract that asked 
patients to waive their rights to post reviews. Medical Justice 
eventually recognized the errors of that approach and did a complete 
reversal; it is now selling healthcare providers a service, eMerit, 
that monitors search engines and doctor rating sites.
    Medical Justice's contracts prohibiting online reviews have not 
been definitively tested in court, but attempts to restrict patient 
reviews are problematic. Anti-review contracts prevent consumers from 
expressing their views, and they deprive other consumers of information 
that can help them make better marketplace choices. The provisions also 
create serious legal risks for the businesses imposing them, as 
illustrated by the following three incidents:

   In the late 1990s, software company Network Associates 
        restricted buyers from publishing reviews of its software. In 
        2003, a New York court enjoined Network Associates from 
        continuing to use that restriction.\1\
---------------------------------------------------------------------------
    \1\ New York v. Network Associates, Inc., 758 N.Y.S.2d 466 (N.Y. 
Sup. Ct. 2003).

   The U.S. Department of Health and Human Service's Office of 
        Civil Rights required a doctor to stop using Medical Justice's 
        anti-review form.\2\ The agreement prohibited the patient from 
        ``directly or indirectly publishing or airing commentary about 
        the physician, his expertise, and/or treatment in exchange for 
        the physician's compliance with the Privacy Rule.''
---------------------------------------------------------------------------
    \2\ Health Information Privacy: Private Practice Ceases 
Conditioning of Compliance with the Privacy Rule, US Dept of Health & 
Human Services, Office of Civil Rights, Health Information Privacy: 
Private Practice Ceases Conditioning of Compliance with the Privacy 
Rule, http://www.hhs.gov/ocr/privacy/hipaa/enforcement/examples/
allcases.html#case29.

   New York dentist Stacey Makhnevich and her practice Aster 
        Dental required that patients sign a Medical Justice-based 
        confidentiality agreement as a precondition to treatment. This 
        version of the agreement tried to silence patients by assigning 
        to the dentists a copyright over any comments related to their 
        treatment. The patient, Robert Lee, had a dental emergency and 
        signed the agreement to get treatment. He later sued to 
        invalidate the agreement. The court's initial opinion signaled 
        serious skepticism about the legitimacy of the dentist's 
        conduct.\3\
---------------------------------------------------------------------------
    \3\ Lee v. Makhnevich, 2013 WL 1234829 (S.D.N.Y. March 27, 2013).

    Even more important than the legal risks, asking patients to 
restrict their rights to review a healthcare provider sends a terrible 
message to patients and sets the stage for distrust.
    While contractually restricting patients' reviews is not the right 
answer, some healthcare providers are frustrated by their perceived 
inability to publicly defend themselves from negative patient reviews. 
Providers have ethical and legal obligations to maintain patient 
confidentiality, with severe penalties for noncompliance. These 
restrictions seemingly impose a gag order on doctors to rebut patient 
misstatements.
    If a patient's review misstates facts, healthcare providers 
actually have several options:

   A patient may consent to discussing the matter publicly. 
        Angie's List prospectively requires this consent from patients 
        who review doctors.\4\
---------------------------------------------------------------------------
    \4\ Angie's List Membership Agreement, April 25, 2012, Sec. 13, 
http://my.angieslist.com/angieslist/aluseragreement.aspx (``You also 
acknowledge that the healthcare or wellness provider about whom you 
submit Content may submit Service Provider Content that contain your 
private or confidential health information in response to Content you 
submit'').

   Most patients' criticisms of their healthcare provider don't 
        relate to individualized medical advice. As one recent study 
        found, ``Unhappy patients who post negative online reviews of 
        their doctors complain about poor customer service and bedside 
        manner four times more often than misdiagnoses and inadequate 
        medical skills.'' \5\ If a healthcare provider feels the need 
        to publicly respond, he or she can rebut most of these issues 
        without discussing confidential patient information.
---------------------------------------------------------------------------
    \5\ Press Release: Online Doctor Reviews: Four Times More Patients 
Peeved About Service & Bedside Manner Than Medical Skills, April 30, 
2013, http://www.reuters.com/article/2013/04/30/
idUSnGNX736vBG+1c3+GNW20130430.

   If patients discuss their specific medical situations, the 
        healthcare provider may discuss its general philosophies and 
        standard protocols without disclosing confidential patient 
---------------------------------------------------------------------------
        information.

    Doctors also can bring lawsuits to redress negative patient 
reviews, but litigation isn't a great option. There is no point in 
suing online review websites for patient reviews. Review websites are 
categorically protected from liability for third-party content except 
in cases involving intellectual property (see 47 U.S.C. Sec. 230). No 
doctor has ever successfully won in court against an online review 
website for publishing patient reviews.
    Suing patients is only marginally more attractive than suing review 
websites, even if a patient has lied. Inevitably the patient will 
respond with a malpractice claim or a complaint against a provider's 
license; a lawsuit calls more attention to the patient's assertions; 
doctors suing patients often look like they have something to hide; 
and, perhaps most importantly, doctors are not likely to win in court.
    Over the past decade, I've identified about two dozen doctor vs. 
patient lawsuits over online reviews. Doctors have rarely won against 
their patients in court and, even worse, some doctors have been ordered 
to pay their patients' attorneys' fees.\6\
---------------------------------------------------------------------------
    \6\ See the complete chart at http://digitalcommons.law.scu.edu/
cgi/viewcontent.cgi?article
=1289&context=historical.
---------------------------------------------------------------------------
    The legal analysis is more complicated if it can be proven that a 
competitor or vindictive party is posting fake reviews. Those lawsuits 
are more winnable than lawsuits against patients, but often the time 
and costs required to win simply aren't worth it.
    Online patient reviews remain a work-in-progress; more work needs 
to be done, especially on the part of review websites, to improve the 
credibility of patient reviews. Still, online patient reviews are good 
news to the healthcare industry, not bad news. Patient reviews will 
improve the industry's service levels, providing valuable customer 
feedback to healthcare providers and help them improve their service. 
Good healthcare providers will be recognized for the quality services 
they provide.

    The Chairman. Thank you very much, Professor Goldman.
    Mr. Rheingold?

   STATEMENT OF IRA RHEINGOLD, EXECUTIVE DIRECTOR, NATIONAL 
               ASSOCIATION OF CONSUMER ADVOCATES

    Mr. Rheingold. Thank you, Mr. Chairman Thune, Ranking 
Member Nelson, and members of the Committee.
    This morning, I would like to make three points:
    One, no one who has been paying attention over the past 
decades, as consumer rights have been slowly stripped away 
through often unseen form contracts, should be surprised by the 
presence and growth of non-disparagement or ``gag'' clauses.
    Two, the idea behind the legislation crafted to solve this 
problem is a good one and fits into the long history of 
legislative action designed to not only protect consumers but 
also our market economy.
    And, three, as of now, we are unable to support this bill 
because it seeks to limit the enforcement rights of State and 
Federal officials.
    When I see non-disparagement clauses, I unfortunately see 
the logical conclusion of a decades-long corporate effort to 
strip consumers of yet another fundamental right. Buried in 
fine print, consumers today are typically required to waive all 
sorts of rights, including the right to seek relief in our 
public justice system and now, with these ``gag clauses,'' the 
right to even speak.
    What is happening is obvious. Through the use of 
indecipherable language and non-negotiable form contracts, 
corporations have first successfully stripped consumers of 
their Seventh Amendment right to a jury trial. Why should we be 
surprised when corporations want to do the same to the 
consumers' First Amendment right of free speech?
    In my early years as an attorney, I would have believed 
that these clauses that waive fundamental constitutional rights 
would have been deemed unconscionable and unenforceable. 
Surely, there was no consent by the consumer. Surely, it was 
unconscionable for powerful businesses to deny consumers the 
right to tell their story in our public courts. Surely, if we 
proved that these clauses prevent consumers from getting legal 
help, from getting proper redress, they would be unenforceable. 
Surely, I would be wrong.
    While I was wrong in expecting courts, particularly the 
Supreme Court, from stopping businesses from stripping a 
fundamental right from consumers, I--we--should not repeat that 
mistake. Therefore, Congress should pass a bill that prohibits 
``gag clauses,'' as well as pass the Arbitration Fairness Act.
    Simply, these ``gag clauses'' attack the very heart of a 
fair and functioning American marketplace by prohibiting 
consumers from exercising the freedom of sharing their thoughts 
and opinions with other consumers.
    Consumer protection laws in a free economy protect the 
market itself and all of its participants. Congress and State 
legislatures have recognized this fact on countless occasions 
and have passed a wide variety of laws on these very grounds.
    The FTC Act and its progeny, State UDAP laws, were created 
with the understanding that our market economy would not 
function properly if unscrupulous businesses were allowed to 
profit from unfair and deceptive trade practices and inevitably 
gain competitive advantages over honest businesses.
    Federal and State disclosure regimes, like the Truth in 
Lending Act, exist in large part because of our understanding 
that a fair and functioning marketplace is dependent on 
consumers making informed and knowledgeable decisions.
    The Fair Credit Reporting Act, a law that this committee is 
intimately familiar with, was passed with the full recognition 
that credit decisions made on the basis of faulty information, 
whether by credit grantors or consumers, undermine the vitality 
of the consumer economy.
    The idea of S. 2044 to ban non-disparagement clauses stands 
in the long line of these fundamental consumer market 
protection statutes. Our market economy only functions properly 
when unfair practices are exposed and consumers do not make 
decisions based on faulty information but, instead, when all 
information, whether disclosed by law or shared by others, is 
made available for consumers to use and/or ignore in their 
decisionmaking process.
    While protections as proposed in S. 2044 are essential for 
our consumer marketplace to function fairly and efficiently, 
its mere passage is not nearly enough to ensure that the rule 
of law is complied with. Strong enforcement of these statutes 
by public regulators or by private consumers is essential for 
laws to have their full effect.
    Attorneys General across this country have done yeoman's 
work in enforcing State and Federal consumer protections. With 
limited and ever-shrinking budgets and small and ever-shrinking 
staffs, these important public servants have sought ways to 
maximize their ability to protect their state's citizens and 
their state's economy.
    Their efforts, including collectively working across state 
lines in a bipartisan manner, have been essential in obtaining 
justice for consumers far beyond what might be possible if 
their work was limited to what was achievable by their own 
limited staff and advocacy tools.
    Similarly, the partnership that some Attorneys General have 
formed with experienced and capable private attorneys, 
particularly in instances when they are attempting to enforce 
the law against big and deep-pocketed corporations, has led to 
a measure of justice and consumer relief otherwise completely 
unattainable.
    Simply, if we want Attorneys General to enforce the law, 
Congress should not limit these state officials from choosing 
how they best can protect consumers in their own state.
    We fully support the idea behind S. 2044. There is no place 
in the American economy for denying consumers like Jen Palmer 
the right to speak freely about their experiences in the 
consumer marketplace. However, for a consumer market protection 
statute to be fully effective, it must be fully enforceable.
    Because this bill limits the ability of public regulators 
from using all of their necessary enforcement tools, we cannot 
currently support it. If this provision is removed from the 
bill, we would be pleased in offering our full support for this 
important legislative effort.
    Thank you.
    [The prepared statement of Mr. Rheingold follows:]

       Prepared Statement of Ira Rheingold, Executive Director, 
               National Association of Consumer Advocates
    Mr. Chairman Thune, Ranking Member Nelson, and Members of the 
Committee, thank you for inviting me to testify today about ``non-
disparagement clauses,'' and why these contract terms do great harm, 
not only to consumers, but to honest and ethical businesses attempting 
to compete in the consumer marketplace.
    I offer my testimony today as the Executive Director of the 
National Association of Consumer Advocates (NACA). NACA is a non-profit 
organization whose members are private and public sector attorneys, 
legal services attorneys, law professors, and law students, whose 
primary focus involves the protection and representation of consumers.
    In my testimony, I will first talk about the importance of consumer 
protection laws, not just as a means to shield consumers from bad 
business behavior, but as market protection statutes that allow honest 
businesses to compete on a level playing field. Next, I'll look at the 
consumer ``gag'' clauses that are a focus of this hearing, in the 
context of a decades-long effort by corporations to hide their conduct 
from public scrutiny through the fine print of form contracts. Finally, 
I'll explain that while we are very pleased that the Senate is taking 
up this very issue, we are unable to support S. 2044 in its present 
form because it seeks to limit the enforcement rights of state and 
Federal officials.
1. Consumer Protection is Marketplace Protection
    As someone who has been a consumer advocate for almost thirty 
years, I am often dismayed at the misperception, as well as the battles 
fought over the need for both creation and enforcement of strong 
consumer protection laws. Simply, consumer protection laws are market 
protection laws. They do not merely protect consumers, they also 
protect honest businesses.
    Consumer protection laws in a free market economy by definition 
protect the market itself and all of its participants. The Supreme 
Court stated the guiding principle of this philosophy nearly 40 years 
ago: ``[B]lind economic activity is inconsistent with the efficient 
functioning of a free economic system such as ours.'' Mourning v. 
Family Publication Serv., Inc., 411 U.S. 356, 364 (1973). Congress and 
state legislatures have recognized this fact on countless occasions and 
have passed a wide variety of laws on these very grounds. The FTC Act 
and its progeny, state Unfair and Deceptive Acts and Practices laws 
were created with the understanding that our market economy would not 
function properly if unscrupulous businesses were allowed to profit 
from unfair and deceptive trade practices and inevitably gain 
competitive advantages over honest businesses. Federal and state 
disclosure regimes, like the Truth in Lending Act, exist in large part 
because of our understanding that a fair and functioning marketplace is 
dependent on consumers making informed and knowledgeable decisions. The 
Fair Credit Reporting Act, a statute that this committee is intimately 
familiar, was passed with the full recognition that credit decisions 
made on the basis of faulty information, whether by credit grantors or 
consumers, undermine the vitality of the consumer economy.
    S. 2044--looking past its serious flaw of limiting enforcement of 
the very protections it hopes to create (which I will address below)--
stands in the long line of these fundamental consumer/market place 
protection statutes. Simply, our market economy only functions 
properly, when unfair practices are exposed and consumers do not make 
decisions based on faulty information, but instead all information--
whether disclosed by law or shared by others--is made available for 
consumers to use and/or ignore in their decision making process.
2. Non-Disparagement Clauses--just another attempt to strip consumers 
        of a fundamental right
    When I look at non-disparagement clauses--a contract term designed 
to prevent consumers from freely expressing a negative opinion about a 
business--being imposed on consumers by a ``form'' contract, by the 
click of a button, or by the mere notice on a web page, I simply see 
the logical conclusion of a decades long corporate effort to strip 
consumers of yet another fundamental right.
    Buried in the fine print of everything from consumer ``contracts,'' 
including credit cards, cell phones, car purchase, student loans, and 
new homes, to employee handbooks and nursing home admissions contracts, 
consumers are typically required to waive all sorts of rights, 
including the right to hold businesses liable for their bad acts, to 
enforce consumer protection statutes, to gain access to our public 
justice system, and now even the right to speak. The trend is obvious. 
Through the use of indecipherable language in non-negotiable form 
contracts and in unnoticed disclaimers, corporations have successfully 
stripped consumers of their 7th Amendment right to a jury trial. Why 
should we be surprised when corporations want to do the same to 
consumers' 1st Amendment right of free speech?
    The parallel between denying consumers a public day in court to 
denying their right to speak out is undeniable. Like non-disparagement 
clauses, pre-dispute binding mandatory arbitration clauses force 
consumers to surrender a fundamental right. Forced arbitration terms, 
like non-disparagement clauses, are designed to keep complaints 
private, out of view of the public and the press. In the same way both 
types of clauses limit the ability of consumers to hold corporate 
wrongdoers accountable and does damage to both honest businesses and 
our market economy by limiting the information available to consumers 
attempting to make informed choices.
    During the first half of my professional life, I represented 
clients in some of the poorest communities in our country and for the 
last 14 years, I have been the executive director of NACA, spending 
each of my days working with and talking to private and public 
attorneys deeply committed to seeking justice for the least powerful 
consumers. In my early years as an attorney, I would have believed that 
these ``contract'' clauses--that waive fundamental constitutional 
rights--would have been deemed unconscionable and unenforceable.
    Unfortunately, my early naivete has been worn away by having borne 
witness to the relentless--and all too often successful effort--of 
powerful corporations to strip away fundamental consumer rights from 
those far less powerful. Whether it's been through deregulation, 
preemption, defunding or ultimately through unconscionable contract 
terms, the goal and the result has been the same. Avoid corporate 
accountability by taking power away from anyone who might have the 
ability to actually hold them accountable for misconduct.
    Years ago, when I saw my first arbitration clause in a consumer 
contract, I gave it little thought.

        Surely there was no consent by my client;

        Surely it was unconscionable for powerful businesses to deny my 
        clients the right to tell their story in our public courts;

        Surely my clients right to join with others in a class action--
        a right established by state law and Federal rule--could not be 
        taken away by an indecipherable form contract, a mere click of 
        a button, or an unread bill stuffer;

        Surely, if we proved--as we have--that forced arbitration 
        prevents consumers from getting legal help, from getting proper 
        redress, the clause would be unenforceable;

        Surely I would be wrong . . .

    While I was wrong in expecting the courts--particularly the Supreme 
Court--from stopping corporations from stripping a fundamental right 
from consumers, I/we should not repeat that mistake. Therefore, 
Congress should pass a bill that prohibits ``non-disparagement'' 
clauses, as well as pass the Arbitration Fairness Act \1\. These 
proposals would restore critical rights and help level the playing 
field for both consumers and businesses.
---------------------------------------------------------------------------
    \1\ For a full exploration of the damage done by Forced Arbitration 
clauses, see the New York Times series, ``Beware the Fine Print,'' 
published November 1-3.
---------------------------------------------------------------------------
3. Why Non Disparagement Clauses should be banned
    As I discussed earlier, a fair and functioning marketplace is 
dependent on consumers making informed and knowledgeable decisions, and 
using their right to speak publicly to share their views and assist 
other consumers. Their ability to speak out publicly and to seek 
accountability facilitates an open and thriving marketplace. Non-
disparagement clauses go to the heart of this fundamental principle by 
prohibiting consumers from exercising the freedom of sharing their 
thoughts and opinions with other consumers in the American marketplace. 
Today, in our modern and interconnected economy, this information 
sharing is even more essential than ever before.
    I know for myself, I can no longer decide to go to a restaurant 
with my family without one of my sons searching Yelp for the latest 
consumer reviews and ratings. Other family decisions, whether it's 
buying a car (Consumer Reports), a bathroom vanity (Costco), taking a 
vacation (TripAdvisor) or booking a hotel (too many to name) are all 
informed by reading reviews provided by previous customers. Simply, the 
presence and growth of non-disparagement clauses would prevent the 
marketplace from working as it should for most American consumers.
    This limitation on the fundamental right of free speech as well as 
the impact it would have on the American market as we know it should be 
grounds enough from banning the imposition of non-disparagement 
clauses. Yet, these clauses should also be banned because companies 
should not have the power to threaten and punish consumers who want to 
express their criticism of a product; and companies should not have the 
power to retaliate against consumers who don't act as a company 
demands. Further, a law barring non-disparagement clauses would 
publicly declare that non-negotiated form contracts cannot and should 
not be used to take away fundamental American rights.
4. Attorneys General should have full enforcement authority
    As I discussed above, and as Congress has repeatedly recognized, 
consumer/market protection statutes as proposed in S. 2044 are 
essential for our consumer marketplace to function fairly and 
efficiently. But the mere existence of these statutes is not nearly 
enough to ensure that the rule of law is complied with. Strong 
enforcement of those statutes--by public regulators or by private 
consumers--is essential for laws to have their full effect.
    Attorneys General across this country have, over the past decades, 
done yeoman's work in enforcing state and Federal consumer protections. 
With limited--and ever shrinking budgets--and small--and ever shrinking 
staffs, these important public servants have sought ways to maximize 
their ability to protect their state's citizens and their state's 
economy. Their efforts--including collectively working across state 
lines in a bi-partisan manner-have been essential in obtaining justice 
for consumers far beyond what might be possible if their work was 
limited to what was achievable by their own limited staff and advocacy 
tools.
    Similarly, the partnership that some attorneys general have formed 
with experienced and capable private attorneys--particularly in 
instances when they are attempting to enforce the law against big and 
deep pocketed corporations (like mortgage servicers who break the 
law)--has led to a measure of justice and consumer relief for harm 
caused by wrongdoing otherwise completely unattainable. Simply, if we 
want attorneys general to enforce the law--Congress should not limit 
these state officials from choosing how they best can protect consumers 
in their own state.
5. Conclusion
    We fully support the idea behind S. 2044, the Consumer Review 
Freedom Act of 2015. There is no place in the American economy for 
denying consumers, like Jen Palmer, the right to speak freely about 
their experiences in the consumer marketplace. However, for a consumer/
market protection statute to be fully effective, it must be fully 
enforceable. Because this bill limits the ability of public regulators 
from using all of their necessary enforcement tools we cannot currently 
support it. If this provision is removed from the bill, we would be 
pleased in offering our full support for this important legislative 
effort.

    The Chairman. Thank you, Mr. Rheingold. We appreciate very 
much your comments on the legislation, and, obviously, we will 
take into consideration your thoughts as we continue to shape 
it while it moves through the process.
    I wanted to start with 5-minute rounds of questions, and I 
will start.
    Ms. Palmer, you have been through a harrowing ordeal before 
finally winning in court. Most people would have given up, but 
you persisted and kept fighting. And, even now, to come across 
the country to share your story with us today, the experience 
that you had, speaks volumes about your commitment to this 
issue.
    So why have you continued to stay engaged, as you have, on 
this issue?
    Ms. Palmer. As I said, the only two things we ever wanted 
to have happen was for my husband's credit to be cleaned so 
that we could move on with our lives as we had originally 
planned, and we really did want to make sure that this never 
happened to anybody else ever again.
    When I first contacted the media, I hoped that if our story 
got out there, other people would be inspired to come forward 
and say, hey, these people are doing this to me too; what can I 
do to stop it?
    We never dreamed it would come this far. We really didn't. 
I am so pleased that you are looking at pushing through 
legislation on a Federal level. I am happy to do anything I can 
to assist that.
    The Chairman. Well, we appreciate you. Your story has 
gotten out there.
    You testified today that one of the purposes of these gag 
clauses is to bully and to intimidate consumers into removing 
negative reviews. And, in your testimony, you described how 
KlearGear's demand for $3,500 shocked and scared you.
    I guess I am wondering if your experience with KlearGear 
has given you pause about posting reviews for other products.
    Ms. Palmer. Absolutely not. Absolutely not. I continue to 
post reviews for both companies that have given wonderful 
service and great products to let other consumers know, yes, 
you should definitely buy from this company, they are 
wonderful, and also for companies that maybe fell short of the 
mark and didn't provide such a great product. That information 
is just as important as the good review.
    The Chairman. OK. Good. Well, I guess after what you 
experienced with KlearGear, it couldn't get any worse, right?
    Ms. Palmer. I would hope not.
    The Chairman. Mr. Medros, TripAdvisor has taken steps to 
inform its users when a company employs gag clauses. And, on 
the other side of the equation, I might add, Amazon recently 
sued a number of companies that allegedly facilitate fake 
reviews online.
    Do you see other large Internet companies taking measures 
to clean up online reviews to make sure that consumers are 
getting accurate and authentic information?
    Mr. Medros. Absolutely.
    Before I answer that, let me first, again, thank you for 
inviting us and for pushing this legislation forward. We think 
it is incredibly important legislation.
    Without a doubt, we see businesses in the hospitality 
industry attempt to silence critics of their services, and this 
plays out across a number of other industries. You mentioned 
the Amazon case. We have seen it with Yelp, in trying to bully 
Yelp reviewers or other reviewers to remove their comments, to 
reduce the severity of their comments, or to outright bury 
those comments with other content, more positive comments.
    The Chairman. OK.
    Professor Goldman, I thought you made a great point in your 
testimony when discussing how consumer reviews make markets 
stronger and more efficient because they help guide consumers 
to the best products or services.
    To what degree do you think that gag clauses may be 
distorting the market? And do you think that most consumers are 
aware of that, that it is going on?
    Mr. Goldman. I think that the contract clauses are only a 
small part of a much larger problem. There are so many 
disincentives for consumers to share their opinions and 
perspectives about the businesses that they deal with, and each 
of those becomes a friction point or a wedge in their 
willingness to share.
    Ms. Palmer here said here proudly that she hasn't been 
bullied off of the Internet with her reviews, but most 
consumers don't have the fortitude and confidence that she has. 
Gag clauses are just one way that businesses can threaten 
consumers to get them to not only stifle themselves but to 
remove their legitimate views once they have been posted.
    There are some other tools that companies use, as well--for 
example, threatening defamation and simply saying, ``We are 
going to sue you and take you to court if you don't remove 
it.'' And that is why I would also call your attention to 
things like the Federal anti-SLAPP law that has been 
considered. That would be another tool to protect consumers 
from having their legitimate reviews driven off the Internet.
    The Chairman. OK.
    My time has expired, so I will turn to Senator Nelson.
    Senator Nelson. Ms. Palmer, I am so sorry that you had to 
go through this experience.
    When you went to the TV station and it started getting some 
publicity, is that when you then decided to go into court? 
Because you are listed as the plaintiff in Palmer v. KlearGear.
    Ms. Palmer. We had been seeking legal help before we went 
to the media. I had contacted several lawyers, done a lot of 
legal research online to find out what my options were. For all 
the lawyers I spoke to and said, ``Do we have a case?'' they 
said, ``Yes, you do. Yes, you do.'' I said, ``Great. Can you 
represent us?'' They said, ``Oh, no. We are not touching that 
with a 10-foot pole.'' It was so shady and so big, most didn't 
want to touch it.
    It wasn't until after we spoke to the media--I was hoping 
to find a lawyer that was willing to step forward. And that was 
when Public Citizen came forward and said, ``We can help you. 
We want to help you. We have the means and resources to do 
so.''
    Senator Nelson. Well, that is a good-news story.
    Mr. Medros, I want to look at the other side. Tell us about 
evidence of bad actors trying to take advantage of businesses 
by threatening to post a false negative complaint.
    Mr. Medros. There are certainly some instances where 
consumers threaten a business with a negative review, threaten 
to share their experience online, and that business, rightfully 
so, has concern that that is going to impede their future 
marketing efforts, impede their future business.
    But the reality is, first of all, we encourage businesses 
to proactively communicate those threats to us, and we then 
monitor those properties for the instance of those negative 
reviews. In the vast majority of cases, those negative reviews 
never appear; they are empty threats.
    Second, one of the tenets of TripAdvisor is to allow the 
businesses to respond to any consumer review. So we believe 
that transparency will solve this problem. Consumers write 
their reviews, businesses get to respond, and future consumers 
get to read those responses, the back-and-forth between those 
two parties, and make their own decision, weigh their own 
beliefs about whether or not this is the right business for 
them to visit.
    Senator Nelson. OK.
    Mr. Medros. Overall, this is not a large problem.
    Senator Nelson. So you encourage those businesses, if there 
is a false review, to contact you.
    Would this legislation prevent a business owner who is 
threatened with a false or malicious review from bringing a 
case in court against the consumer for defamation?
    Mr. Medros. I am not probably the best person to answer 
from a legal standpoint.
    What I can tell you is that I don't believe it will prevent 
businesses from interacting with TripAdvisor and asking reviews 
to be reviewed. We do employ an entire staff, and we look at 
every review where an owner or another member of our community 
flags it as inappropriate, against our guidelines, or perhaps 
irrelevant.
    Senator Nelson. At the end of the day, I think what we want 
is the access to the courts for whoever is the aggrieved party, 
the consumer or the business. And, in the case of Ms. Palmer, 
apparently, it was her access to the court that finally brought 
about the redress of her terrible situation.
    Mr. Rheingold, let me ask you, on the arbitration clauses, 
when Fiat Chrysler recently used this friends-and-family 
program to basically trade away the right to go into court in 
exchange for a $200 discount, should we be doing something to 
protect consumers from more than just the non-disparagement 
clauses?
    Mr. Rheingold. Oh, absolutely. I think you have made a very 
good point, Senator. The fact is that the consumers can seek 
redress is through our public courts system.
    A lot of these stories and a lot of the bad damages that 
are done to consumers if they don't have access to the courts--
Ms. Palmer was lucky her story was a very compelling story and 
the press picked it up right away. Sometimes you need to go to 
court and publicize those stories in ways.
    So what Fiat did in that instance is happening across this 
country in every consumer place that you can imagine--
employers, consumers. And it has gotten sanctioned. What is 
interesting about the Fiat case is there is actually a reward 
for signing it away. In most instances, people are signing away 
their right to go to court without ever knowing about it. It 
has been in clauses, it is in shrink wrap, click-on things.
    Arbitration clauses are everywhere in our economy today, 
and there really is a dual justice system happening right now 
where consumers don't have access to our courts whenever they 
reach an agreement or enter into any sort of agreement with any 
type of business.
    Senator Nelson. This committee has seen a proliferation of 
these things just recently. Fiat Chrysler is just one example, 
the GM ignition switches and so forth. And now the Takata 
airbags, that is still in the news, as a matter of fact, today.
    And so thank you for your comments, because these things 
that are subject to mandatory arbitration or adhesion, you 
would really lose a lot of your ability if we cut off the 
access for either the aggrieved or the aggrievor into the 
courts.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Nelson.
    And the bill does, by the way, to your point, specifically 
say that defamation cases, if something said is untrue, those 
cases can proceed. We don't do anything to impinge on that 
right.
    Senator McCaskill, Senator Blunt, and Senator Moran are 
still basking in the glory of the Kansas City Royals World 
Series victory.
    Senator McCaskill. Yes, we had hardly anybody show up for 
the party yesterday.
    The Chairman. I noticed that everybody in Kansas and 
Missouri was there, which begs the question about what you guys 
were doing here.
    Senator McCaskill. Well, there aren't that many people in 
Kansas, so it was basically Missouri, right, Senator Moran?
    Senator Moran. Mr. Chairman, first of all, I would point 
out that I tried to have a bet with the Senator from New York, 
and the offer was I would offer Kansas City barbecue if he 
would agree not to talk for 45 minutes.
    [Laughter.]
    Senator Moran. He accepted your bet, not mine.
    Senator McCaskill. Yes.
    Senator Moran. And, second, every----
    Senator McCaskill. That was a bad move on your part, 
considering who it was.
    Senator Moran.--every Kansan is a Royals fan, and many 
Missourians have another loyalty elsewhere in their state. And, 
finally, Senator Blunt and I are wearing blue, and you are 
wearing red.
    Senator McCaskill. Oh, look at that.
    [Laughter.]
    Senator McCaskill. Oh, my goodness. I won't even go into 
the history of the team in Kansas City, Missouri. But I will be 
glad to acknowledge that we are welcoming all the fans from 
Kansas.
    The Chairman. She is a loyal Cardinal fan, I might add, 
too, which explains----
    Senator McCaskill. I am. Both.
    The Chairman.--the color she is wearing.
    You are up, Senator McCaskill.

              STATEMENT OF HON. CLAIRE McCASKILL, 
                   U.S. SENATOR FROM MISSOURI

    Senator McCaskill. Thank you very much.
    I am pleased that Senator Thune has, in an effort to get a 
bill that we can all agree on, has agreed to take out the 
provision that limits the tools available to Attorney Generals 
as it relates to contingency fees.
    And let me ask you, Ms. Palmer, I am assuming that there 
was a contingency agreement with the lawyers that ultimately 
represented you in this case?
    Ms. Palmer. Fortunately, Public Citizen, as a nonprofit, 
was kind enough to work with us pro bono since we really could 
not afford legal representation on the scale which we needed.
    That was the other thing. Aside from people just saying, 
``We are not touching this,'' when I said, ``Well, what if you 
just wrote a cease-and-desist letter or just helped us with a 
little bit?'' they were offering thousands of dollars in----
    Senator McCaskill. Of course. I mean, it is very hard for 
an individual to get to court----
    Ms. Palmer. Absolutely.
    Senator McCaskill.--unless there is a contingency fee 
agreement.
    Ms. Palmer. Right. And even with the contingencies, they 
said, ``No, we want a retainer.'' And we said, ``If we don't 
have $3,500 to pay KlearGear, we don't have $5,000 to give to 
you.''
    Senator McCaskill. Mr. Rheingold?
    Mr. Rheingold. Sure. Thank you.
    I will admit publicly I am a Chicago Cubs fan, so I am a 
little disappointed today, but that is OK. Congratulations to 
Kansas City.
    One important thing about consumer statutes is that 
consumer statutes that Congress has passed, particularly 
something like the Fair Credit Reporting Act, has fee-shifting 
provisions. So attorneys who take a case like a fair credit 
reporting case, like the damage that was done to Ms. Palmer, 
would not have to charge Ms. Palmer.
    So it is not actually a contingency. In fact, what they do 
is they only get paid if they win that case. And the court will 
award them damages after they successfully win the case. So it 
is a little different from contingency.
    And the way that Congress has drafted consumer protection 
statutes in the past, particularly when it comes to private 
enforcement, is to have those fee-shifting statutes. And that 
provides the access to consumers when they have been damaged 
like Ms. Palmer.
    Senator McCaskill. So did Public Citizen recover the costs, 
even, of their litigation?
    Ms. Palmer. We are still working on tracking KlearGear down 
to recover any costs.
    Senator McCaskill. Oh, so you haven't collected yet?
    Ms. Palmer. No, ma'am.
    Senator McCaskill. Are they still in business?
    Ms. Palmer. As far as I know, yes.
    Senator McCaskill. That just drives me crazy.
    Ms. Palmer. It should be noted that, in the judgment award, 
the judge did award us our settlement and tacked on the 
lawyers' fees for Public Citizen, as well. So if and when 
anything ever is collected, Public Citizen----
    Senator McCaskill. Which is the fee shifting that Mr. 
Rheingold was referring to?
    Ms. Palmer. Right.
    Senator McCaskill. That they have the right to recover 
their costs.
    Ms. Palmer. Right. However, when we were looking----
    Senator McCaskill. But if you had lost, they wouldn't have 
gotten anything.
    Ms. Palmer. True. And that was always an issue----
    Senator McCaskill. Right.
    Ms. Palmer.--a fear. However, with any of the other lawyers 
we contacted, they were not interested in working on a 
contingency basis. They wanted a retainer upfront.
    Senator McCaskill. And that is one of the challenges, is--
--
    Ms. Palmer. Absolutely.
    Senator McCaskill.--trying to figure out how we fund 
lawsuits where there is a legitimate complaint where the 
damages don't appear to be enough to warrant the risk that a 
lawyer takes on when they get into the costly litigation.
    And that is one of the advantages that these big companies 
have, is they know that it is small enough--I mean, there are 
two things a lawyer has to have to bring a lawsuit. One is 
liability, and the second is damages. And how large the damages 
are is relevant to whether or not that lawyer wants to take on 
the costly risk of going forward with a lawsuit, which does 
kind of even the playing field, I think, in some ways, too much 
in favor of the big guys.
    Let me talk to Mr. Medros about use of service.
    Now, I know who drafts this stuff, and they are lawyers. 
But this is just the terms of service, OK? ``Website terms, 
conditions, and notices.'' Then this, another five pages of 
fine print, is privacy.
    How many people do you believe are reading that that go on 
TripAdvisor?
    Mr. Medros. I would imagine very few people read through 
the entire terms of use and privacy statement.
    Senator McCaskill. So what is the point? If we know nobody 
is reading it, why aren't we working at making this--have you 
thought about making a stab at making the terms of service as 
forthcoming and as clear as the rest of your website?
    Mr. Medros. I think we would welcome the opportunity to 
make privacy and terms of service clear. We take privacy 
extremely serious; we take terms of use extremely serious. And 
giving us the ability to moderate our content according to our 
guidelines--I believe that, in the case of a bill like this, 
what you often see is a precedent and a set of standards set 
for how terms of use and privacy are conveyed to consumers.
    Senator McCaskill. Yes. You know, one of the reasons 
adhesion contracts are so successful is because they are buried 
in a way that the average person is never going to understand 
what is being done to them.
    Mr. Medros. Correct.
    Senator McCaskill. I think many of them would run in 
horror. I think Ms. Palmer would have run in horror if she 
would have realized before they ordered those items what that 
company was purporting to do.
    It seems to me that this is something that we really have 
to work on. Because this is a lot of waste, because nobody is 
reading this stuff. So why are we doing it if it is not 
providing the service that it needs to provide to the consumers 
that it is ostensibly designed for? So we have to work on that.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator McCaskill.
    And, in your case, Ms. Palmer, too, they added this long 
after the transaction occurred, correct?
    Ms. Palmer. Yes, they did.
    I had actually read through the terms of service three 
times to make sure there was nothing in there that would have 
prevented me--especially since I didn't purchase the items, my 
husband did, I wanted to make sure that there wasn't anything 
preventing me from posting the review versus my husband posting 
it.
    So I did read through it several times. And when they came 
back at us 3 years later and said, ``You violated this non-
disparagement clause,'' I looked at my husband and said, ``That 
didn't exist. There was no non-disparagement clause.''
    Senator McCaskill. Have you thought about going to law 
school?
    [Laughter.]
    The Chairman. Yes. Since you actually read those 
agreements. That is most impressive, to start with, so yes.
    [Laughter.]
    The Chairman. My neighbor to the south, Senator Fischer.

                STATEMENT OF HON. DEB FISCHER, 
                   U.S. SENATOR FROM NEBRASKA

    Senator Fischer. Thank you, Mr. Chairman.
    Professor Goldman, you have mentioned that small 
businesses, in particular, may make use of these non-
disparagement clauses, as many of them view it as personal when 
they get negative feedback.
    I am on the Small Business Committee here in the Senate, 
and I fully understand how important small businesses are to 
the state of Nebraska and also to the economy here in our 
country. So while I agree that the use of these non-
disparagement clauses are a practice that should be 
discouraged, I would like your views on whether this bill 
contains sufficient, really, protections for small businesses 
that are out there. Do you think it does?
    Mr. Goldman. In the end, the goal is to create a level 
playing field for small businesses. And so any of their 
competitors who are distorting their public persona using these 
anti-review/gag/non-disparagement clauses are actually hurting 
the overall marketplace and the opportunity for small 
businesses to go and win over customers to their side of the 
equation.
    So, in fact, if anything, I think this bill is essential 
for preserving the vitality of the small business community and 
for making sure that the markets are open for them to come and 
enter.
    Senator Fischer. And do you think those protections are in 
this bill?
    Mr. Goldman. I would support this bill as it is currently 
drafted. I did write some thoughts about ways that it could be 
tweaked, but each of those I think deserves some further 
discussions. Even if we don't do that, I think this bill would 
be super-helpful in advancing the interests of small 
businesses.
    Senator Fischer. Thank you.
    And, Mr. Atkinson, do you have any comments about if small 
businesses--do you believe they are protected under this bill 
the way it is drafted, where we are still making sure that we 
allow consumers to be able to express their views without being 
punished?
    Mr. Atkinson. Yes, I would echo Mr. Goldman's comment that 
a lot of the damage from these clauses actually are harming 
some of their small-business competitors who are doing a really 
good job. Consumers don't have a way to weigh who is better. 
And so it might hurt a particular small business, but it helps 
others.
    Second, there are still provisions, there are still legal 
remedies that a company can use if they feel like someone has 
outright lied. The bill doesn't prohibit a company from taking 
action in that way.
    And, as I said before, you know, there really is a lot of 
evidence that if small businesses are active, a small-business 
owner, you know, posts something and says, ``We are concerned 
about that; we don't agree with the review,'' that it really 
can minimize the damage if a company is sincere in what they 
are actually trying to do.
    Senator Fischer. Do you think small businesses, though, 
have the resources where they would be able to respond to those 
negative comments, where they really can take action?
    It is hard for consumers to take action; we have heard 
that. It is difficult. Lawsuits are expensive. But what about 
small businesses on this, as well? How do we reach a balance 
here?
    Mr. Atkinson. Well, I think the way a lot of the online 
rating platforms work is you can monitor what people, your 
customers, are saying about you. And, frankly, in the Internet 
age, that is something that every business needs to do.
    You are not going to search the web every day for 
everything, but there are platforms that you can and should 
monitor, as a small-business owner. And, you know, doing that 
is not, I don't think, overly burdensome, and a quick reply, 
just, you know, a one-minute kind of reply every once in a 
while. You know, you don't get negative reviews every day.
    So I don't think it is a burden for companies to do that. I 
think it is actually just good practice now in the Internet 
age.
    Senator Fischer. OK. Thank you.
    Also, Mr. Atkinson, in the Senate version of this bill, we 
are looking at enforcement of the prohibition on non-
disparagement clauses by the Federal Trade Commission, and in 
the House version, we have the enforcement by the Department of 
Justice.
    Do you have an opinion, one way or the other, on who would 
be the best-positioned to assume that role?
    Mr. Atkinson. I don't have an opinion on that, but the 
person who leads this work for us is Daniel Castro, who was not 
able to be here for flight reasons, and I will talk with him 
and would be happy to get back with you on that.
    Senator Fischer. OK. That would be great.
    Thank you all very much for being here.
    The Chairman. Thank you, Senator Fischer.
    Senator Moran?

                STATEMENT OF HON. JERRY MORAN, 
                    U.S. SENATOR FROM KANSAS

    Senator Moran. Mr. Chairman, thank you very much. Thank you 
for hosting this hearing and pursuing the concepts contained in 
this legislation.
    On the topic of small business, I would assume that small 
business actually uses reviews, as well. They are a consumer. 
Small businesses need information about what business, larger 
or smaller, that they might want to deal with, and online 
reviews might be helpful to a small business in making a 
business decision.
    So, while several of you outlined some ideas of how this 
isn't harmful or perhaps beneficial to small business, one of 
the other ways is a small business cannot make a mistake. It is 
more difficult if they enter into an agreement for purchase 
with another corporation that turns out to be a bad deal. The 
consequences are greater, harder to recover from.
    So I assume that small businesses also utilize the review 
as they make purchases of goods and services?
    I don't know if there is a--everybody is shaking their 
head. Does anyone want to disagree with that?
    OK.
    Then, let me ask about state laws. Perhaps this is to the 
professor. California, I think, in particular, has state laws 
dealing with--a state law or state laws dealing with this 
issue?
    Mr. Goldman. Yes, California is the only state that has 
adopted----
    Senator Moran. Others are pursuing or considering that; is 
that true?
    Mr. Goldman. I haven't done a survey----
    Senator Moran. OK.
    Mr. Goldman.--of who else is looking at it.
    Senator Moran. Is there anything we could learn from what 
has transpired--I hate asking this question--anything we could 
learn from California in the way that----
    [Laughter.]
    Senator Moran.--this law has been written or interpreted or 
enforced?
    Mr. Goldman. I don't believe there have been any 
enforcement actions under the law, so we don't have any data 
points about how it is actually applying in the field. It is 
relatively new, so it is early in the process.
    The only thing I will call attention to is that there is a 
statutory damages provision in the California statute that 
awards consumers who are subjected to these clauses to obtain 
statutory damages. And I think that is a topic that is worth 
discussion at this committee, whether that would be a helpful 
addition to the law.
    Senator Moran. OK.
    In addition to that suggestion, let me ask a broader 
question. While we are focused on non-disparagement clauses, in 
this world of online reviews, are there other or similar issues 
that the Commerce Committee, that Congress ought to be paying 
attention to?
    A couple that I think have been mentioned previously, I 
know have been mentioned previously: fake reviews, false 
reviews.
    Are there issues that surround this new development--
certainly, in my life, particularly as a rural small town 
resident, these reviews occurred. They occurred after church, 
they occurred at the grocery store, they occurred at the cafe. 
And people within our community would talk about what service 
they got or didn't get, how quality the product was or wasn't. 
Today, I suppose the consequences are just magnified because of 
the volume of information that is now available.
    Is there something we are missing as we only look in this 
legislation as to this issue of non-disparagement clauses?
    Professor Goldman?
    Mr. Goldman. If I may, I will reiterate my interest in the 
Federal anti-SLAPP solution. The idea would be that it would 
enable lawsuits that are brought alleging defamation or other 
types of harms like that that are on content that would be of 
social interest to be tossed early and to fee-shift if they are 
illegitimate.
    And so the real way that reviews get scrubbed off the 
Internet isn't through these clauses, though these clauses are 
problematic, but they are because people post them, they are 
threatened to take them offline, like Ms. Palmer explained. In 
Ms. Palmer's case, she couldn't remove them, but that was 
unusual. But in all other cases, when consumers get those 
threats, the content comes down instantly.
    And a Federal anti-SLAPP law would help some consumers 
decide, ``I am not going to be bullied off the Internet, and I 
won't be betting my house on legal fees that I can defend my 
interests in court.''
    Senator Moran. OK.
    Mr. Atkinson?
    Mr. Atkinson. I would just second Mr. Goldman's point on 
that. ITIF released a report last year on the whole issue of 
anti-SLAPP and the impact that it has on the Internet economy 
and commerce. And so we would agree with that. I think that is 
another component. Obviously, both pieces of the legislation, 
in our view, are important.
    Senator Moran. Thank you very much.
    Mr. Chairman, thank you for this hearing. And I apologize 
to you for intruding in your commentary on the Royals. It is 
just nearly impossible not to have the continued Kansas-
Missouri battles in the presence of the Senator from Missouri.
    [Laughter.]
    The Chairman. I wouldn't have it any other way.
    [Laughter.]
    The Chairman. Senator Schatz?

                STATEMENT OF HON. BRIAN SCHATZ, 
                    U.S. SENATOR FROM HAWAII

    Senator Schatz. Thank you, Mr. Chairman.
    Ms. Palmer, thank you for your courage and your clarity. I 
know you have been through a lot, and I imagine it has been a 
difficult several years. We really appreciate everything that 
you are doing.
    Your case perfectly illustrates why we need a law, because 
individual consumers are in no position to fight this 
injustice. And your case also shows why we need a Federal law, 
that a patchwork of individual statutes are not going to work 
in the age of the Internet.
    My first question is for Mr. Atkinson.
    We have been talking a little bit about, well, two things, 
right? One is that consumers don't know what rights they may be 
waiving as they click ``I agree'' or as they sign a contract at 
the hotel desk. And then there is this other question related 
to intimidation and admonishing or warning customers against a 
negative online review.
    But those are difficult tactical approaches. So which is it 
that these companies are really employing? Are they tricking 
customers into signing away their rights, or are they warning 
customers against a negative online review? Because they can't 
be doing both at the same time, it seems to me.
    Mr. Atkinson. I think, first of all, there really haven't 
been enough surveys of this. There are a lot of anecdotes, 
which I think are quite compelling. We have just heard one 
here, but then other folks have talked about that. So I think 
there is a lot there, and we don't know exactly which strategy 
companies are using more of.
    But I think one of the reasons this bill is so important is 
it is not just the fact that--even if there were no law, if 
people think that they may be gone after--and I think we are at 
a point, if we don't solve the problem soon, there could be 
something in most consumers' minds where it gives them a little 
bit of doubt, a little bit of fear, ``Well, I heard about 
somebody getting sued; I am just not going to take the risk.''
    Because if you think about somebody contributing a review, 
they are actually being a public citizen. They are contributing 
to the public good. They are taking their valuable time. It is 
not going to help them. They are trying to help everybody else. 
And so if we have a sort of collective climate of fear, then 
people are going to not be able to do it.
    Senator Schatz. Fair enough. But it does point out that we 
are operating at the beginning of this problem and, therefore, 
we are lacking good decision support on exactly the size and 
scope of the problem.
    Speaking of that, does anybody on the panel know primarily 
whether these clauses are being employed by small or large 
enterprises? Because it seems to me that that is a pretty 
important question too.
    I would imagine that the reputational risk of a big 
national or international brand would probably cause bigger 
companies not to utilize these. But I would like to know 
whether some of the bigger companies are using them. Does 
anybody know?
    Mr. Medros. I don't think TripAdvisor sees any evidence one 
way or the other. Small businesses up to potentially large 
businesses what to, in effect, distort consumer opinions online 
by getting negative reviews withheld in favor of positive 
reviews.
    Senator Schatz. Mr. Medros, let me move on to the way 
TripAdvisor works, in terms of you have essentially a pop-up 
screen that warns consumers if there is a particular hotel or 
travel company that has a non-disparagement clause. Is that 
correct?
    Mr. Medros. That is correct. We put a badge, a red badge, 
on the property warning consumers so that they can make an 
informed decision about whether to stay there knowing that 
there is a non-disparagement clause.
    Senator Schatz. How do you figure out whether the company 
has a non-disparagement clause? Is that based on consumer 
complaints, or do you have a process internally? Because I 
would imagine that it is a resource question for you to have a 
team of lawyers scrubbing all of their individual contracts. So 
is it just based on, if something pops up, then you notify the 
public?
    Mr. Medros. It is based on consumers reporting it to us and 
then us investigating. And I think that speaks to why, more so 
than any other reason, we need this legislation. We only see a 
small percentage of these contracts that may exist. Some 
consumers may not notice a clause, may be too fearful to report 
it. And so widespread banishment of these types of clauses are 
critical for all consumers.
    Senator Schatz. Well, I think that is the most important 
point here with respect to whether or not there is a private 
sector and sort of Internet-based solution. And it seems to me 
that there is not without a statute, because you just can't 
make Yelp or TripAdvisor or anybody else responsible for 
reviewing legal language in any company that may or may not be 
mentioned on your platform.
    Mr. Medros. I would wholeheartedly agree. It would be a 
game of Whac-A-Mole.
    Senator Schatz. Thank you.
    The Chairman. Thank you, Senator Schatz.
    Senator Daines?

                STATEMENT OF HON. STEVE DAINES, 
                   U.S. SENATOR FROM MONTANA

    Senator Daines. Thank you, Mr. Chairman. This is a really 
intriguing subject today.
    I spent a number of years with a cloud-computing customer 
experience solution that we sold. And we were a B2C business, 
selling to organizations that touched hundreds of thousands, 
sometimes millions, of consumers.
    And it is an overused cliche to suggest that, you know, the 
customer is in charge. We all know that now, and now it is a 
cliche in boardrooms because people started to wake up.
    But, also, I think, second, is feedback is a gift. And I 
think it is insecure companies, like bullies on a playground 
who are insecure, that would have these anti-disparagement 
clauses. And, you know, welcome to the free markets and the 
Internet. Let's compete and let the consumer have its voice.
    And I think, frankly, it tends to be a bit condescending to 
consumers to suggest that the consumer--I think consumers can 
wade through it. They kind of see the folks who are a bit 
unhinged, perhaps things that are true and aren't false. Let 
the consumer sort that out is, I guess, my view on it, 
recognizing there still is a problem with some companies 
posting false claims to prop it up and competitors posting 
claims to disparage.
    Having said that, I can tell you from Montana's economy 
viewpoint, tourism is one of our largest businesses. It is $4 
billion; 11 million people visit our state. And they are going 
online, they are booking trips, they are relying on online 
reviews.
    I spoke to a small business owner just a couple weeks ago 
in kind of an obscure place in Montana. I said, ``How was your 
summer?'' He says, ``Best summer ever.'' I said, ``Why?'' And I 
was expecting him to say, ``We had a big marketing campaign.'' 
He said, ``Online reviews. People went and they found us.''
    By the way, Yellowstone National Park has a 4.5 out of 5 
rating on Yelp.
    [Laughter.]
    Senator Daines. Just a little hometown advertisement there.
    Anyway, I guess, though, I am curious about how we ought to 
approach fake online reviews, if there is a thought on best 
practices. Whether it is businesses that are paying for 
positive reviews or competitors who are writing false negative 
reviews, I am curious if you could share, maybe, some best 
practices, policies, procedures that you would recommend that 
should be used to combat fake online reviews.
    Please.
    Mr. Atkinson. So I think a couple things.
    Your first point about consumers becoming more 
sophisticated and this in some ways infantilizes them, 
consumers are becoming more sophisticated, and people know 
there are bad reviews and good reviews. And so I think as 
people get more comfortable with the Internet economy, they 
will be able to sift through that.
    In terms of what companies are doing, there are certainly 
companies, like Yelp and I am sure others, who have very, very 
sophisticated algorithms. They employ software engineers and 
data scientists to really be able to use technology to flag 
these reviews that are at a high risk of being false and then 
taking them off automatically. So there are companies and there 
is technology now that companies are employing that, just 
simply, those reviews don't get posted.
    Senator Daines. Yes, please. Mr. Goldman.
    Mr. Goldman. I would like to first point out that no matter 
how big the problem is with fake reviews, anti-review clauses 
are never the solution. So this particular bill, I think, is 
orthogonal to the concern about fake reviews, although I think 
it is a legitimate concern. But I want to stress how important 
this bill is, irrespective of whatever concerns anyone has 
about fake reviews.
    But I think with fake reviews we should recognize that 
consumer reviews are still a relatively new phenomenon. We can 
take them back maybe as far as 20 years ago, but, really, the 
modern consumer review economy is maybe a dozen years old.
    And if you think about it in those terms, we are seeing the 
evolution of review sites in developing better and more 
aggressive techniques for managing consumer reviews. And, in 
the end, they are the solution. We need to have trustworthy 
platforms for consumer reviews, and I think that we are seeing 
improvement on that front every day.
    Senator Daines. You know, I worked for Procter & Gamble 
before that for 12 years. I mean, this is incredible, valuable 
data. This is what you used to pay a lot of money to focus 
groups for. And now we get it virtually real-time, unedited, 
right at the coalface of the consumer experience.
    And that is why I think, yes, these disparagement clauses, 
I think we are in agreement that we need to deal with that and 
remove the anti-disparagement clauses based on a lot of stories 
and Ms. Palmer's story here as well. But this is part of the 
new economy. This is a gift, I think. If you want to become a 
world-class company, embrace it.
    Mr. Medros?
    Mr. Medros. Senator Daines, we see over and over again 
stories like you told. Businesses in remote places and places 
that consumers wouldn't have thought of traveling to or 
wouldn't have had the courage to travel to pre-Internet.
    And, in fact, the best businesses leverage a platform like 
TripAdvisor to embrace consumer reviews, to use it as a free 
marketing tool, to encourage people to share their opinions and 
set their expectations of what that trip is going to be like so 
that you feel safe to venture to some of these more remote 
places that are amazing experiences all around the world. We 
hear this story over and over again from business owners.
    What makes that possible is the scale of our platforms, the 
free ability for consumers to share those opinions without the 
threat of being sued or bullied by owners who may not like 
every piece of feedback.
    And the best businesses take that feedback on an ongoing 
basis and make their business better. They improve their 
service, they change things about their property, they remodel. 
They use that as a feedback tool that otherwise companies would 
have paid millions of dollars for in the past.
    Senator Daines. Thank you.
    The Chairman. Thank you, Senator Daines.
    And in our line of work, we get plenty of feedback.
    [Laughter.]
    Senator Daines. We do.
    The Chairman. I am really going to embrace the idea that it 
is a gift.
    Senator Daines. I will stay off of your Facebook; you stay 
off of mine, Mr. Chairman.
    [Laughter.]
    The Chairman. Thank you.
    All right. The Senator from Minnesota and noted author, 
Senator Klobuchar.

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you very much, Mr. Chairman.
    I was thinking the exact same thing when he said it was a 
gift. I was thinking of some of the hilarious tweets and 
Facebook posts that I get. I won't go into them right now, but 
I collect them because they are so amusing.
    So this is a very important bill and subject. And I want to 
thank the Chairman and Senator Schatz for the work that they 
have done on this.
    And I guess I would start with you, Ms. Palmer. Your 
experience sounds like quite an ordeal. I read about it. The 
scale of the harm caused by what was initially a $20 purchase 
is astounding. And your persistence in finding a solution is 
extraordinary.
    In response to KlearGear's initial demand to take down the 
review, before they made the negative reports to the credit-
rating agencies, how much time would you estimate that you and 
your husband spent researching and responding to KlearGear's 
demands?
    Ms. Palmer. It was several hours between--I had chosen 
RipoffReport.com seemingly at random. And to find out that they 
don't allow reviews to come down, it took me several hours to 
find out what options I had, I believe to the point of actually 
e-mailing them and saying, ``Here is my problem. I am now being 
bullied. What options do I have?''
    And they had to respond to me and kind of spell out and 
say, ``Well, this is in our policy. And the legal language is a 
little convoluted, but, basically, we don't allow you to take 
them down, but here is why. We want to make sure that people 
are free to post a review without feeling bullied and without 
feeling like they can take it down and without allowing 
businesses to remove it.''
    So it was several hours.
    Senator Klobuchar. OK.
    And, Mr. Rheingold, I think this is kind of one of these 
softball questions, but do you think most consumers are likely 
to be as persistent as the Palmers in response to threats from 
companies seeking to enforce non-disparagement clauses? And 
what will likely happen if they are not as persistent?
    Mr. Rheingold. Ms. Palmer's story is remarkable. I wish all 
consumers acted like she did. It is really quite amazing. I 
wish I heard more stories like that. Most people give up. 
Consumers are not going to pursue their relief. They are going 
to do whatever they can to just move on with their lives, try 
to get the review removed.
    They, one, as she explained, tried to seek legal help; they 
couldn't get it. They would just walk away from the problem and 
probably, unlike Ms. Palmer, stop posting reviews. I think that 
really would have a chilling effect on most consumers from ever 
doing it again.
    I think, again, Ms. Palmer is unique, and we should clone 
her in terms of her behavior here.
    Senator Klobuchar. Very good. Well, thank you.
    I remember I once had a similar thing with a bill, only I 
had found some people that had pursued things, like Ms. Palmer 
did, to talk about it. It was about cramming on phone bills. 
And it was, like, a Lutheran minister and a math teacher had 
gone to the depth to see these tiny little charges that added 
up over time.
    So you are in good company, I guess.
    I understand the concerns of small-business owners who 
worry that unfair or false reviews can hurt their livelihoods.
    Was it you, Mr. Atkinson, who cited a study showing--was it 
you who had the study showing that a one-star increase in a 
restaurant's rating on Yelp can lead to a 5- to 9-percent 
increase in revenue? To put a less rosy spin on it, a one-star 
decrease in a business's rating can have a serious consequence 
on its bottom line.
    Despite non-disparagement clauses, what tools do you think 
small-business owners have to address false reviews?
    Mr. Atkinson. Well, first of all, in the lion's share of 
those ratings, there are accurate reviews. And so the most 
important thing a restaurant in that particular case could do 
would be to improve their service or the quality of their food 
or whatever else they might--why they are getting a bad review. 
And, again--a couple of people said this--that is valuable 
information for a company to be able to continuously improve 
their service.
    Second, as I said, a lot of these platforms, including 
Yelp, TripAdvisor, have mechanisms in place where you can 
challenge reviews that are bad, not in the sense of taking 
someone to court, but just say this is a bad review.
    Third, companies can and do post and say, ``We don't agree 
with this review, and here is why we don't agree with it,'' or, 
``We do agree with this review, and here is why we are sorry, 
and here is how we are going to fix it.''
    Senator Klobuchar. I look at a lot of these trips. I was 
looking at some last night, actually--not in preparation for 
this hearing, but I would like to say it was--and I have seen 
those.
    And, Mr. Medros, what incentives do you think companies 
like TripAdvisor have to limit unfair and false reviews?
    Mr. Medros. We give consumers this ability to share all of 
their experiences, and the incentive, ultimately, when we hear 
about limits to free speech, is to warn and then penalize 
businesses that try to chill that speech.
    Senator Klobuchar. Uh-huh.
    And, Professor Goldman, does your research bear out what 
Mr. Medros just talked about?
    Mr. Goldman. I am sorry, which aspect?
    Senator Klobuchar. Well, he talked about the fact that 
there are incentives for companies to limit unfair and false 
reviews.
    Mr. Goldman. I am sorry, you are talking about review 
sites?
    Senator Klobuchar. Yes.
    Mr. Goldman. Yes. In fact, review sites live and fall on 
their own reputation. So they are the mechanism for providing 
that feedback to the marketplace, but they, themselves, compete 
in the marketplace to be considered to be reputable and 
persuasive.
    And so, in fact, we see fierce competition among review 
sites to convince their consumers that they are trustworthy. 
And that competition, actually, is a great incentive to fight 
against fake reviews.
    Senator Klobuchar. All right.
    Thank you very much to all of you.
    Thank you.
    The Chairman. Thank you, Senator Klobuchar.
    Senator Blumenthal?

             STATEMENT OF HON. RICHARD BLUMENTHAL, 
                 U.S. SENATOR FROM CONNECTICUT

    Senator Blumenthal. Thanks, Mr. Chairman.
    And I want to thank the Chairman for not only having this 
hearing but lending his support to the idea of protecting 
consumers against this new, ingenious wrinkle in the sort of 
age-old practice of burying tricks and traps in the fine print 
of contracts. It kind of gives new meaning to hidden tricks and 
traps that discourage consumers from informing and warning 
other potential consumers about the downsides of particular 
experiences of products.
    These sorts of sneaky sentences or paragraphs essentially 
gag a consumer from giving services or goods a negative review 
when they have paid for it, they are disappointed in it, and 
they want to warn other consumers.
    Usually, they are buried, as you know, in the fine print of 
a sales contract or an invoice. And they are a one-way ratchet; 
they prohibit negative reviews but not positive ones. So, from 
an economic standpoint, they distort the free market and they 
chill speech.
    I am a supporter of the bipartisan bill that has been 
announced. And I want to thank him for engaging with me on this 
bill. My initial objection arose from the original language of 
the bill, which included a provision related to State Attorney 
General enforcement. That was concerning to me, as a former 
Attorney General. I believe that the language will be removed 
when we move to a markup, and so I am proud to add my support 
as a cosponsor of this bill.
    Attorneys General have a vital and vigorous role in 
protecting consumers and adding to the resources and 
intellectual weight of the Federal Government. And so I very 
much appreciate the Chairman's understanding in that regard.
    Some probably are going to raise the question, why do we 
need a Federal law? And the answer is, quite simply, that these 
standardized anti-defamation provisions may be considered void 
under State common law, but there are a number of them 
throughout the country, and they confuse consumers because 
consumers have to go to different State laws to know whether or 
not they are valid in one state or another state.
    And I would like to simply say that making these provisions 
a per se violation of the FTC Act is exactly the right thing to 
do. Prohibiting their use and the chilling effect they create 
in the first place promotes the free market nationally. And 
these products, services are sold and marketed nationally, and 
the information should be available nationally without the 
impediment of a patchwork of different state laws.
    So I would like to ask Mr. Goldman and Mr. Medros, can you 
talk about the virtue of a Federal solution here? Let's say a 
Connecticut consumer gets a hotel through a website located in 
North Dakota for a hotel in Utah. Should a consumer have to 
research the state laws in three different jurisdictions before 
she can exercise her free-speech rights?
    Mr. Medros. Certainly, we would think Ms. Palmer's case is 
a great example of how difficult it is for a consumer to, one, 
understand the limits of these clauses and, two, to get relief 
from them.
    They don't add any value to anybody in the ecosystem. They 
certainly hurt consumers. They probably and certainly hurt 
other businesses that play by the rules. And they depress the 
overall market.
    Senator Blumenthal. Thank you.
    Mr. Goldman?
    Mr. Goldman. Yes, I would simply add that, to the extent 
that we believe that the clauses might already be illegal, that 
might depend on things like states' interpretations of 
unconscionability or public policy. And there are significant 
state and regional variations on those legal doctrines, and, as 
a result, providing a Federal standard would clean up any 
ambiguities.
    Senator Blumenthal. Thank you.
    My time has expired. This subject is one that is extremely 
important, and I thank you all for being here today.
    Thanks, Mr. Chairman.
    The Chairman. Thank you, Senator Blumenthal.
    Senator Markey?

               STATEMENT OF HON. EDWARD MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. Thank you, Mr. Chairman, very much. And 
thank you for convening today's hearing.
    Online review sites provide customers with an important and 
open forum to provide feedback, to share experiences, and hold 
businesses accountable. Some of these websites even allow 
customers to compare products and prices amongst many service 
providers, helping consumers select the best product at the 
most affordable price.
    Last week, I visited TripAdvisor's headquarters in Needham, 
Massachusetts, and saw firsthand TripAdvisor's wonderful staff 
working on key innovations and interfaces needed to ensure 
consumers have unfettered access to online reviews and travel 
prices. And I am proud that one of the largest travel sites in 
the world is based in Massachusetts, and I am happy to see 
TripAdvisor testifying here today.
    It has come to my attention that some airlines may be 
restricting access to their schedules and prices, making it 
difficult for online travel sites like TripAdvisor to post 
different flight options online. If a consumer cannot view all 
of the flight options and prices on one website, the consumer 
may be unable to identify the best travel prices. As a result, 
the consumer may pay too much for their flight.
    Mr. Medros, how are consumers harmed when airlines do not 
provide fare and schedule information to travel sites?
    Mr. Medros. Consumers are harmed anytime you reduce 
transparency. In this case, it would be pricing and 
availability. And given the consolidation in the airline 
industry, particularly in the United States, that limit of 
information, that limit of visibility around real pricing, real 
availability, real fees, doesn't help consumers plan trips, 
doesn't help the economy grow through travel and tourism.
    Senator Markey. Are airlines currently preventing travel 
sites like TripAdvisor from accessing ticket fees and flight 
schedules?
    Mr. Medros. Yes. Increasingly, airlines are attempting to 
withhold that information and not make it freely available for 
consumers to price compare and shop.
    Senator Markey. Should, Mr. Medros, airlines provide travel 
sites with ancillary fee information, as well? The fee on 
baggage or advance seat selection fees and all those things, 
should that also be made available so that the consumer can see 
what the total charge is going to be to fly?
    Mr. Medros. Absolutely. I can't think of any consumer that 
wouldn't want to know outright what to expect in terms of 
pricing.
    Senator Markey. So we have gag clauses, provisions buried 
in contracts that discourage customers from posting negative 
reviews online, which ultimately may wind up hurting consumers 
and businesses alike. And I am concerned about these efforts to 
stifle Americans' freedom to post reviews.
    Mr. Medros, as we have learned today, some customers are 
getting penalized for posting honest but critical reviews, and 
the mere threat of penalizing customers from posting negative 
reviews may discourage some customers from posting at all.
    Without customers posting their honest assessments of 
products and services, other customers may not have the 
information needed to make informed purchasing decisions. How 
can gag clauses also hurt businesses?
    Mr. Medros. Gag clauses hurt businesses by reducing the 
amount of feedback that they get and by distorting the 
marketplace for other businesses in that market.
    Senator Markey. OK.
    Mr. Rheingold, what other attacks on consumer rights are 
some businesses including in contracts and terms of service?
    Mr. Rheingold. Sure. This is kind of the end of the line. I 
mean, we have seen it going on for years and years, clauses 
that restrict people's ability to get into court. Arbitration 
clauses have been existing for a long time, have now grown to 
be widespread across every single industry you can imagine, 
where people who have complaints simply cannot get into our 
public system of justice. It is a real concern.
    And the right to speak is sort of just naturally following 
the right to go to court. So I am not surprised at all by what 
we are seeing today.
    Senator Markey. Thank you.
    Ms. Palmer has highlighted one of the more egregious 
examples of gag clauses. Can you, Mr. Medros, provide other 
examples of consumers being harassed for posting a negative 
review?
    Mr. Medros. Absolutely. We have seen in the past cases, 
similar gag clauses, with fines upwards of $5 million and daily 
fines of $50,000 to consumers until the reviews are removed. We 
have heard of cases from consumers who have contacted us to 
remove a review because of the threat of a lawsuit or the 
threat of other action against that individual.
    In all of these cases, the consumer stands by their content 
but is choosing to remove their content and squelch their own 
speech so as not to end up, in the case of Ms. Palmer, with a 
lien against them.
    Senator Markey. OK. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Markey.
    I just had a couple quick questions here, and we will close 
this out.
    This would be directed to Mr. Atkinson or Professor 
Goldman. But are there particular industries where consumer gag 
clauses are especially pervasive?
    Mr. Goldman. I mentioned in my initial testimony about the 
medical and healthcare industry, where the entire industry was 
encouraged to adopt these restrictions, and many participants--
I don't know exactly what percentage, but many participants did 
so.
    I think that that industry has moved on. I would like to 
think that they have recognized the error of their ways. But I 
think it is an illustration of how the clauses can sweep an 
entire industry. Once a few people try it, other businesses 
might say, ``That sounds like a pretty good idea. That gives me 
the control over my reputation I want. And if I don't do it, 
other of my competitors are going to be having the glossy 
reviews while I will have the good and bad aired out in 
public.''
    So, in my opening remarks, I did mention that I think that 
we will see many other industries where the clauses will sweep 
that are driven by small businesses and professional service 
providers, so lawyers, doctors, accountants, et cetera, as well 
as small-business owners. Places like hotels or bed and 
breakfasts are good, fertile grounds for the breeding of these 
kinds of clauses.
    The Chairman. OK.
    Anything to add to that, Mr. Atkinson?
    Mr. Atkinson. No, I would agree with that. Certainly, 
health care, retail, hospitality, personal services, companies 
where you are dealing individually with the actual service 
provider.
    The Chairman. OK.
    And I would direct this to everybody on the panel, but some 
of you are familiar with the bill that we have introduced, the 
Consumer Review Freedom Act. And the question I have is, do you 
believe it strikes an appropriate balance in terms of consumer 
rights versus the ability of businesses to protect their 
reputations?
    Mr. Goldman. Businesses have already a wide range of tools 
to protect their reputation. I can't come up with a single 
circumstance where it is legitimate to tell consumers they 
can't share their honest, truthful feedback.
    So, in my mind, on the particular question that the bill 
addresses, there is no balance that I can see that would be 
appropriate to be worried about. It is really, in my mind, an 
abuse of the business-consumer relationship to tell consumers, 
``We want your money, but we don't want you talking about it.''
    The Chairman. OK.
    Anybody else?
    Mr. Rheingold. I agree. I mean, I think the bill is a very 
strong bill and a very important bill, and I think it protects 
consumers. And I think, as Mr. Goldman said, there are rights 
that businesses can pursue.
    I think it is very strong bill, again. And now that that 
one provision is being stripped, we are very happy to support 
it.
    OK. Thanks, Mr. Rheingold.
    Ms. Palmer?
    Ms. Palmer. I would also like to point out that, as 
consumers, as it has been stated, we don't have a lot of power 
when it comes to trying to defend ourselves against a business 
that would seek to have us remove a review or seek to come 
after us. They have a lot more money. They have a lot more 
lawyers on staff than we could ever choose to get.
    Knowing that there is a law in place that says, ``You guys 
can't come after us just because we told the truth,'' is 
extremely empowering to consumers. I believe it will go a long 
way.
    The Chairman. Thanks.
    Mr. Atkinson?
    Mr. Atkinson. I agree with Mr. Goldman; I don't think there 
is really anything here to balance. What your legislation is 
trying to prevent are things that are simply unfair and harmful 
to consumers.
    As we have all said, businesses have many other options 
that this bill would not take away.
    The Chairman. Go ahead.
    Mr. Medros. I would just add that not only are consumers 
harmed, but other businesses that play by the rules and want a 
level playing field are also harmed by the existence of gag 
clauses that distort the market.
    The Chairman. OK.
    Well, thank you all very much. And thank you for your 
testimony today, for your responses to our questions.
    And, Ms. Palmer, thank you for your inspirational story, an 
example that one person really can make a difference. I think 
you were sort of the reason why this issue has taken on a life 
of its own and certainly why we are here today.
    And thank you to all the panelists.
    You know, we spend a lot of time on this committee, in the 
Commerce Committee, studying these issues related to the 
Internet, how do we keep the Internet ecosystem protected, how 
do we look at the potential that it offers. You look at the 
digital economy and how powerful that is and how many people 
are using that to do business, to purchase products and 
services.
    And, obviously, what is happening out there in terms of 
these various practices seems to completely contradict what we 
are trying to accomplish, in terms of creating more freedom and 
protecting consumers' rights out there but certainly empowering 
people as they use this powerful tool in a way that can enhance 
not only their lives but those around them as well.
    And so we appreciate your insights, and thank you again for 
making the time to be here today.
    We are going to try our best, as we move forward--we have a 
markup scheduled here in a couple of weeks, and we will 
hopefully try and move this bill to the Senate floor and try 
and get some action on it there. We have a companion bill in 
the House, and it would be nice to see something that we could 
actually put on the President's desk that would address an 
issue that I think is becoming increasingly important in our 
digital economy.
    So the hearing record will remain open for two weeks. 
During this time, Senators will be asked to submit any 
additional questions for the record. Upon receipt, we would ask 
the witnesses to submit their written answers to the Committee 
as soon as possible.
    Thank you all again for being here today.
    This hearing is adjourned.
    [Whereupon, at 11:42 a.m., the hearing was adjourned.]

                            A P P E N D I X

 Prepared Statement of Scott Michelman, Staff Attorney, Public Citizen
    Mr. Chairman Thune, Ranking Member Nelson, and Members of the 
Committee--

    My name is Scott Michelman, and I am a staff attorney at Public 
Citizen Litigation Group. Public Citizen is a national public interest 
organization with more than 400,000 members and supporters. For more 
than 40 years, we have successfully advocated before Congress, the 
courts, and Federal agencies for stronger measures to protect consumers 
from unscrupulous business practices. Public Citizen also stands for 
the free flow of information and ideas, including the rights of 
consumers to share their opinions and experiences in the marketplace 
and to learn from the opinions and experiences of others.
    In my testimony today, I'll begin by explaining the problem that 
the Committee has called this hearing to examine: the gagging of 
consumers who try to write truthful reviews. I'll address the nature of 
the problem, the harms it causes, and its prevalence. I will then 
articulate Public Citizen's position: We support congressional action 
on this issue. Although we cannot support S.B. 2044 in its current form 
because of a clause that limits its enforcement by state officials, we 
have been informed by members of the Committee that this clause will be 
removed. When that change is made, we will strongly support the bill.
The Non-Disparagement Clause and Its Harms
    Non-disparagement clauses are terms in consumer contracts--rarely, 
if ever, negotiated or knowingly agreed to and usually buried in the 
fine print--that purport to strip the consumer of his or her ability to 
criticize the company with whom he or she is doing business. Non-
disparagement clauses usually specify monetary penalties for 
violations, penalties that can range from hundreds to thousands of 
dollars. Sometimes non-disparagement clauses apply specifically to 
``criticism'' or ``negative reviews''; in other instances, they 
prohibit public comment of any type. Sometimes non-disparagement 
clauses extend beyond reviews to prohibit other actions consumers may 
wish to take if they feel they are being dealt with unfairly: For 
instance, some clauses we have seen ban or restrict ``disputes,'' 
whether brought to a third-party such as a credit-card company or even 
the company imposing the non-disparagement clause itself. Sometimes 
non-disparagement clauses include provisions assigning to the company 
the intellectual property rights to any review the consumer may write, 
so that the company has the ability to force the consumer to remove any 
review it doesn't approve. One clause we encountered required the 
consumer to submit her opinions for ``legal review'' to the company, 
which claimed that it could force the consumer to submit to mediation 
and arbitration at her own expense to obtain the right to complain. 
Although the specifics can differ, non-disparagement clauses have three 
essential elements in common: (1) they are imposed by companies in the 
contract or terms of use as a condition of service or sale; (2) they 
are rarely if ever up for negotiation and generally do not become known 
to a consumer until he or she is accused of breaching one and 
threatened with punitive action unless he or she retracts a review that 
the companies dislikes; and (3) they prohibit consumers from expressing 
their honest opinions or experiences with other people or entities.
    We believe that these clauses are invalid under the contract law of 
most if not all states, but there is no precedential case law on the 
subject, and the possibility of invalidity does not deter companies 
from enforcing these clauses.
    Non-disparagement clauses cause several types of harms to the 
consumers on whom they are imposed as well as harm to the marketplace 
as a whole:

  (1)  Consumers are disabled from expressing themselves. Most 
        obviously, non-disparagement clauses prohibit expression and 
        thereby impinge upon a freedom that Americans take as a given 
        in most aspects of their lives: the right to speak freely.

  (2)  Consumers are subject to bullying. The non-disparagement clause 
        gives the business that imposes it huge leverage over the 
        consumer. The clauses are generally legalistic in phrasing and 
        specify a monetary penalty, and companies usually invoke them 
        when they believe consumers have already violated them. As a 
        result, when a company demands that a consumer retract a 
        truthful expression of his or her experience or opinion, the 
        consumer is likely to feel a great deal of pressure to comply 
        with the company's demands. Factors that compound the pressure 
        on consumers include the fact that most Americans are not 
        lawyers and may feel like they do not have the expertise or 
        knowledge to assert their rights, most Americans do not have 
        the ability to hire counsel in these circumstances, companies 
        invoking non-disparagement clauses frequently use intimidating 
        language or threaten that resistance on the part of the 
        consumer will lead to larger monetary penalties either under 
        the terms of the non-disparagement clause or because the 
        consumers will allegedly become liable for attorneys' fees 
        spent to enforce the clause.

  (3)  Consumers may be subject to retaliation if they don't retract 
        their reviews. Threats against consumers may generally be 
        sufficient to achieve a company's ends, but when they are not, 
        consumers may be subject to retaliation. In an extreme case, 
        Palmer v. KlearGear.com, after online retailer KlearGear 
        demanded $3,500 from Jen and John Palmer for a three-year-old 
        negative online review and they refused to pay, KlearGear 
        falsely reported the money as a ``debt'' they owed, an action 
        that ruined John Palmer's credit for more than a year and led 
        to numerous denials of credit, accompanied by humiliation, 
        anxiety, and fear. Worst of all, the Palmers could not obtain 
        credit to replace their furnace when it broke and as a result 
        spent weeks' worth of nights, with temperatures around 
        freezing, wrapping their three-year-old son in blankets until 
        they could save up enough money to buy a new furnace with cash.

  (4)  Consumers who are the intended audience of reviews suppressed by 
        non-disparagement clauses receive a distorted view of 
        businesses using the clauses. Today's consumers increasingly 
        rely on online review sites such as Yelp, TripAdvisor, and 
        Angie's List to research businesses before they decide to buy 
        goods or services. When a business succeeds in using a non-
        disparagement clause to suppress honest negative reviews, the 
        result is that the business appears more attractive and 
        trustworthy than it would if the full range of reviews were 
        available. In this way, non-disparagement clauses harm even 
        consumers who are not subject to them, by limiting the reviews 
        available to all consumers and inhibiting the free exchange of 
        information and opinions among consumers.

  (5)  Scrupulous businesses that don't employ non-disparagement 
        clauses are disadvantaged by the skewing of available reviews. 
        When a company using a non-disparagement clause to suppress 
        critical reviews is successful in improving its overall image, 
        honest businesses that don't try to gag their consumers seem 
        worse by comparison. Thus, the use of non-disparagement clauses 
        warps the marketplace for businesses as well as consumers.

    In sum, non-disparagement clauses impose significant harms on 
consumers, businesses, and the marketplace as a whole, all by 
inhibiting a core American value: free expression.
Non-Disparagement Clauses Serve No Legitimate Purpose
    The obvious reason that a company would use a non-disparagement 
clause is to artificially enhance its own reputation by silencing its 
critics. No one argues that this purpose is a legitimate one that 
deserves consideration or respect.
    A defender of non-disparagement clauses might argue instead that 
they are a reasonable tool for businesses to protect their reputation 
in the Internet age, because a negative online review can be very 
detrimental. This rationale is a canard.
    First, most online review sites already provide an avenue for 
businesses to defend their reputation--by responding to the criticism 
and pointing out, for instance, how the business's practices have 
changed from what a consumer is criticizing or why a consumer's concern 
is unreasonable. Many businesses take advantage of these features on 
sites like Yelp. As Justice Brandeis famously explained in interpreting 
the First Amendment, ``If there be time to expose through discussion 
the falsehood and fallacies . . . the remedy to be applied is more 
speech, not enforced silence.'' \1\
---------------------------------------------------------------------------
    \1\ Whitney v. California, 274 U.S. 357, 377 (1927) (Brandeis, J., 
concurring in the judgment).
---------------------------------------------------------------------------
    Second and more fundamentally, most criticism is lawful and indeed 
protected by the First Amendment. The only type of review about which 
businesses have any legitimate ground for complaint is the false and 
defamatory review--which is unprotected by the First Amendment and 
which is already subject to a cause of action under ordinary tort law 
for defamation. Accordingly, non-disparagement clauses are unnecessary 
to defend against unlawful reviews (i.e., defamation) and thus serve 
only to suppress lawful reviews.
The Extent of Non-Disparagement Clauses
    Public Citizen has litigated three cases concerning non-
disparagement clauses and assisted (in a non-litigation capacity) 
several other individuals in successfully resisting bullying tactics 
arising out of non-disparagement clauses. In our work, we have become 
aware that non-disparagement clauses are used by businesses in a number 
of industries, including online retail, medical services, hospitality 
(including hotels and vacation home rentals), wedding services, and 
more.
    The website TechDirt compiled a list of such clauses it found 
online as of December 2014.\2\ That list includes a textbook rental 
company; a seller of wine storage mechanisms; a tour company; a 
marketing company; and a collection company. Several more companies 
appear to have simply copied and pasted the non-disparagement clause 
used by KlearGear.com (described in more detail below). The clauses 
cited include stated penalties ranging from $2,500 to $100,000 for 
violations.
---------------------------------------------------------------------------
    \2\ See https://www.techdirt.com/articles/20141214/16102629441/
here-are-companies-that-want-to-charge-you-2500-100000-negative-
reviews.shtml.
---------------------------------------------------------------------------
    Specific examples are useful to show how non-disparagement clauses 
are used and the various contexts in which they arise:

   In Palmer v. KlearGear.com, online retailer KlearGear 
        invoked a non-disparagement clause in 2012 to try to fine Utah 
        couple Jen and John Palmer $3,500 for a critical online review 
        posted in 2009. KlearGear's non-disparagement clause, which was 
        not inserted into the company's Terms of Sale and Use until 
        years after Jen Palmer posted the review at issue, forbade 
        KlearGear's customers from ``taking any action that negatively 
        impacts KlearGear.com, its reputation, products, services, 
        management or employees.'' When the couple wouldn't pay the 
        fine and couldn't remove the posting, KlearGear falsely 
        reported the $3,500 as a ``debt'' they owed, an action that 
        ruined John Palmer's credit for more than a year and led to 
        numerous denials of credit. On behalf of the Palmers, Public 
        Citizen sued KlearGear in 2013 under the Fair Credit Reporting 
        Act and state tort and contract law. KlearGear never appeared 
        in court to defend itself, and in 2014, we won a default 
        judgment declaring the debt invalid and awarding compensatory 
        and punitive damages to the Palmers.\3\
---------------------------------------------------------------------------
    \3\ For key case documents, see http://www.citizen.org/litigation/
forms/cases/getlinkforcase
.cfm?cID=851. The case is No. 1:13-cv-00175 (D. Utah).

   In Lee v. Makhnevich, a New York dentist's service contract 
        provided that each patient gave up the right to criticize the 
        dentist publicly and assigned to the dentist the copyright in 
        anything that the patient may later write about the dentist. 
        When a patient later posted an online review complaining about 
        being overcharged, the dentist sent a ``takedown'' notice to 
        the review sites, claiming that the posting violated her 
        copyright. The dentist also sent the patient a series of 
        invoices demanding payment of $100 for each day the 
        ``copyrighted'' complaints continued to appear online. 
        Representing the patient, Public Citizen sued the dentist in 
        2011. In response, the company that created the dentist's 
        contract recommended that its customers stop using it. After 
        the court denied a motion to dismiss the case, the dentist 
        moved abroad and stopped communicating with her lawyer.\4\
---------------------------------------------------------------------------
    \4\ For key case documents, see http://www.citizen.org/litigation/
forms/cases/getlinkforcase
.cfm?cID=706. The case is No. 11-civ-8665 (S.D.N.Y.).

   In Cox v. Accessory Outlet (later Cox v. Blue Professional) 
        a Wisconsin consumer who hadn't received her order from an 
        online retailer told the company she was going to contact her 
        credit card company. In response, the company demanded that Cox 
        pay $250 under its fine-print ``Terms of Sale,'' which 
        prohibited ``any complaint, chargeback, claim, dispute,'' the 
        making of ``any public statement,'' or threats to take any of 
        these actions, within 90 days of purchase. The company 
        threatened to report the $250 ``debt'' to credit reporting 
        agencies, to damage Cox's credit score, and to have a 
        collections agency call Cox's home, cell, and work phones 
        ``continuously.'' The company ominously warned Cox that that it 
        had enforced the terms of sale against ``many individuals'' and 
        that Cox was ``playing games with the wrong people and [had] 
        made a very bad mistake.'' Public Citizen represented Cox in 
        filing suit in 2014. We discovered that the business that 
        threatened Cox was part of a larger company that did business 
        using four different names and websites, all of which had 
        reportedly engaged in similar practices or imposed similar 
        terms. The company never appeared in court but in response to 
        our lawsuit, all four websites went dark and remain so today. 
        We won a default judgment.\5\
---------------------------------------------------------------------------
    \5\ For key case documents, see http://www.citizen.org/litigation/
forms/cases/getlinkforcase
.cfm?cID=893. The case is No. 652643/2014 (N.Y. Sup. Ct.).

   The Union Street Guest House, a hotel in Hudson, N.Y., 
        included terms in its wedding contracts providing that the 
        wedding couple could be fined if a guest leaves a negative 
        review. After this clause, which apparently had been used to 
        threaten at least one customer, was reported widely in the 
        press in August 2014, the business changed its terms.\6\
---------------------------------------------------------------------------
    \6\ See http://pubcit.typepad.com/clpblog/2014/08/internet-shames-
new-york-hotel-into-removing-non-disparagement-clause-fining-wedding-
couple-for-thei.html.

   The egg-donor matching site Fertility Bridges, based in 
        Illinois and California, tried to bully a dissatisfied consumer 
        into silence using a non-disparagement clause earlier this 
        year. The company backed down after Public Citizen confronted 
        the company with the ambiguous language of its clause and its 
        illegality under applicable California law.\7\
---------------------------------------------------------------------------
    \7\ See http://pubcit.typepad.com/clpblog/2015/10/fertility-
bridges-use-of-a-nondisparagement-clause-to-bully-dissatisfied-
customers.html.

    Public Citizen has received several other complaints concerning 
non-disparagement clauses, the details of which cannot be disclosed on 
account of attorney-client privilege.
    To date, only one jurisdiction, California, has banned non-
disparagement clauses.\8\
---------------------------------------------------------------------------
    \8\ See Cal. Civil Code 1670.8.
---------------------------------------------------------------------------
    Just as troubling as the cases we know about are the instances we 
don't know about--instance in which a consumer does not contact a 
lawyer but instead backs down and retracts a critical review in the 
face of a business's threats. Given the aggressive behavior in the 
instances documented above, along with the high fines companies seek to 
enforce and the fact that companies are asserting consumers are already 
in the wrong when the companies demand retractions, most people likely 
feel strong pressure to cooperate and therefore understandably 
acquiesce to a business's demands. Accordingly, the harm from non-
disparagement clauses almost certainly extends beyond the instances we 
know about.
    Current legal tools are insufficient to address the problem of non-
disparagement clauses because many consumers do not have the resources 
to hire a lawyer and do not feel empowered to assert their rights in 
the face of bullying tactics and legalistic language. Additionally, as 
illustrated by the websites that have copied KlearGear's non-
disparagement clause, KlearGear's loss in court has not prevented other 
businesses from following its model. And KlearGear itself continues to 
evade efforts to collect on the judgment against it. Legislation and 
robust enforcement by Federal and state authorities are likely to be 
the most powerful weapons against non-disparagement clauses.
Public Citizen's Position on S.B. 2044
    Public Citizen strongly supports a legislative response to the 
problem of non-disparagement clauses. As explained below, we cannot 
support S.B. 2044 in its current form, but we understand that there is 
an agreement to amend it to a version we would support, and we look 
forward to supporting it after amendment.
    S.B. 2044 rightly bans non-disparagement clauses and provides for 
both Federal and state enforcement of this new prohibition. However, 
Section 2(e)(7) of the proposed bill needlessly hinders state 
enforcement by barring state attorneys general from working with 
outside counsel on a contingency fee basis.
    Government enforcement is vital to the enforcement of consumer 
protection laws. Many state enforcement offices are under-resourced and 
are unlikely to enforce these laws if they cannot do it in partnership 
with outside counsel. Public Citizen therefore categorically opposes 
any provisions barring states from hiring outside counsel for 
enforcement purposes because such provisions serve no purpose but to 
weaken enforcement. Additionally, states hire outside counsel all the 
time for all kinds of legal work. Carving out consumer protection 
measures for special restrictions on outside enforcement consigns these 
important laws to a second-class status in terms of states' ability to 
enforce them.
    Specific to the context of non-disparagement clauses, effective 
enforcement against the types of companies using these provisions can 
be difficult; in all three cases Public Citizen has brought to court, 
we have encountered problems with defendants fleeing abroad or hiding 
their assets. Bringing in private counsel might be the best way to 
enforce the ban on non-disparagement clauses without unduly detracting 
from states' other important law enforcement work.
    For these reasons, we cannot support the bill in its current form, 
but we are pleased to have learned that the Committee has agreed to 
remove Section 2(e)(7), and we look forward to supporting the bill once 
that has occurred.
Conclusion
    Non-disparagement clauses harm consumers, honest businesses, and 
the marketplace in general. They lead to the bullying of consumers and 
the chilling or suppression of speech on which consumers rely to make 
informed decisions in the marketplace. In recent years, non-
disparagement clauses have appeared in a variety of contexts. 
Litigation under current laws is insufficient to address the problem.
    Public Citizen therefore believes that congressional action is 
needed to address the significant problem of non-disparagement clauses. 
We cannot support S.B. 2044 in its current form because of the 
restriction on state enforcement contained in Section 2(e)(7), but once 
that provision is removed, we will strongly support the bill.
    I thank you for the opportunity to address the Committee.
                                 ______
                                 
Prepared Statement of Angie Hicks, Founder and Chief Marketing Officer, 
                              Angie's List
    Senator Thune,

    Thank you for the opportunity to speak out strongly in favor of 
this legislation. Thank you and Sens. Moran and Schatz for bringing 
this important matter to the Nation's attention. I am sorry that other 
obligations kept me from addressing you in person about this important 
legislation but I welcome continued discussion about this matter in the 
weeks and months ahead.
    On behalf of our member and all consumers, I have been speaking in 
opposition to efforts to stifle honest expression since we discovered 
in 2009 that some within the medical community were inserting ``Mutual 
Agreement to Maintain Privacy'' forms within their patient paperwork.
    I am proud that Angie's List was one of the first to speak out 
against this practice and helped end the trend in the health care 
arena. When we learned about the agreements, the company pushing them 
had already signed up 2,000 physicians.
    I started speaking out about it to the national news media--TV news 
shows, newspapers, online publications--any outlet that would help us 
raise awareness. I wrote repeatedly about it on my blog, and warned our 
members through our magazine, e-mails and alerts on company profiles.
    Not long after we started speaking out, the company selling the 
agreements to physicians reached out to me personally to try to 
convince me the agreements were a good step forward. Suffice it to say 
I was not convinced. Not long after that, the company stopped selling 
the agreements.
    Unfortunately, since then, other similar efforts have erupted in 
other types of business. The latest efforts are ``non-disparagement 
clauses'' within service contracts, which businesses use to threaten 
legal action against their own customers simply for speaking their 
mind.
    The bipartisan Consumer Review Freedom Act would prohibit the use 
of these clauses, agreements and waivers, which are blatant--though 
often cleverly disguised--efforts to strip Americans of their right to 
honestly discuss their service experience.
    Angie's List has collected and shared consumer reviews for 20 years 
in an effort to help consumers find reliable, high quality service 
companies and just recently accepted our 10 millionth verified review. 
We have never accepted anonymous reviews and we require members to 
affirm they are giving us their honest feedback on their own 
experience.
    I could spend hours telling you of the companies that have been 
able to grow from literally ``a guy in a truck'' to thriving 
businesses, including franchises across the country because they have 
earned high grades from Angie's List members.
    I could give you dozens of examples of companies that earned 
negative reviews from Angie's List members, took that criticism to 
heart, made the members whole and turned their businesses around thanks 
to the customer insight.
    A common argument for using gag orders is that they protect 
companies from untrue and/or anonymous criticism. At Angie's List, our 
members reaffirm they are giving honest feedback about their own 
experience each time they submit a review. If reviews--on our site or 
any other--are untrue or malicious, there are already legal remedies at 
hand under existing libel and defamation laws.
    I don't think you need me to tell you that stifling consumer 
expression is simply wrong. There is no benefit or need for these gag 
orders whatsoever.
    As a consumer advocate, Angie's List can only go so far to stop 
this kind of unwarranted, right-stifling tactics. But you, the 
Congress, can outlaw these practices.
    I urge you to use your power, pass this legislation and stand up 
for consumers.
                                 ______
                                 
                                            Consumers Union
                                                   November 3, 2015
Hon. John Thune,
Chairman,
Hon. Bill Nelson,
Ranking Member,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.

Dear Chairman Thune and Ranking Member Nelson:

    Consumers Union, the policy and advocacy arm of Consumer Reports, 
is pleased that your Committee is holding hearings on the troubling use 
of non-disparagement clauses, or ``consumer gag clauses,'' in standard-
form consumer contracts. S. 2044, the Consumer Review Freedom Act, 
would help protect consumers' freedom of speech in the marketplace, by 
making it illegal for businesses to stop their customers from writing 
negative online reviews, or to punish their customers for doing so.
    Today, consumers regularly offer their personal reviews about 
hotels, restaurants, and other products and services online. 
Unfortunately, some businesses have sought to block consumers from 
communicating such information to each other--by taking them to court, 
or by threatening to. Some businesses have inserted ``non-disparagement 
clauses'' into the lengthy boilerplate in their standard-form consumer 
purchase agreements. These paragraphs purport to indicate that the 
consumer has supposedly agreed to waive the right to say anything 
negative about the product or service or business. Or that the consumer 
has supposedly turned over to the business a copyright ownership for 
any review the consumer might write, so that the business can stop the 
review from being published or can threaten suit for copyright 
infringement. At least one business reportedly tried to use a 
consumer's supposed liability under a non-disparagement clause to ruin 
the consumer's personal credit rating.
    These same tactics could also potentially be used against 
professional product and service testers and raters. At Consumer 
Reports, for example, we buy the products and services we test and rate 
in the marketplace, anonymously. Indeed, it is a hallmark of the 
integrity and credibility of our ratings that sellers do not know they 
are selling their product or service to Consumer Reports--that by 
outward appearances, we are an individual buying for personal use.
    Consumer Reports is also a forum for the views of individual 
consumers. We survey consumers regarding their experiences in various 
product and service sectors, and publish the results. Sometimes we 
report an individual consumer's experience. A consumer's participation 
in these activities could also be attacked as an alleged violation of a 
non-disparagement clause.
    It is no exaggeration to say that non-disparagement clauses in 
consumer purchase agreements could be exploited to interfere with our 
ability at Consumer Reports to bring objective, unbiased, reliable 
information to the consuming public about the safety and performance of 
products and services--and more broadly, could be exploited in an 
attempt to silence the consumer voice.
    S. 2044 would help stop these outrageous anti-consumer tactics, by 
making such non-disparagement clauses in consumer contracts null and 
void. And it would give the Federal Trade Commission and state 
attorneys general authority to turn the tables and take enforcement 
action against businesses that attempt to use these clauses against 
consumers.
    Consumers Union looks forward to working with you to enact 
effective legislation to protect the rights of consumers to speak their 
honest opinion about the products and services they purchase, and about 
how they are treated by the businesses they deal with.
    Thank you for your leadership on this important consumer rights 
issue.
            Sincerely,
                                          George P. Slover,
                                             Senior Policy Counsel,
                                                       Consumers Union.
cc: Members, Senate Committee on Commerce, Science, and Transportation
                                 ______
                                 
                  R Street Institute, Institute for Liberty
                                American Consumer Institute
                                                   November 4, 2015

Hon. John Thune,
Hon. Bill Nelson,
United States Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.

Free-Market, Taxpayer, and Consumer Groups Support the Consumer Review 
            Freedom Act

Dear Committee Members,

    As free-market organizations, we write to express our strong 
support for your committee's ongoing efforts to defend commerce and 
freedom of expression. In particular, as advocates for a free and open 
Internet that facilitates robust online markets, we urge you to support 
the critical free-speech protections in the Consumer Review Freedom Act 
of 2015 (S. 2044).
    We take this position for one simple reason: when conducting 
business on the Internet, firms must maintain good reputations to stay 
competitive. Without this channel for accountability and transparency, 
public confidence in online commerce itself would be undermined.
    The Internet is a critical nexus for commerce, providing a quarter-
billion Americans with access to new markets and enhanced economic 
opportunities. Of central importance to these online markets is their 
ability to conduct reliable transactions with a full range of 
commercial firms and entrepreneurial individuals.
    Thanks to online reviews and feedback, consumers can feel secure 
doing business with those whom they've never met to make a purchase, 
get a ride, arrange a place to stay or conduct myriad other 
transactions. Potential customers also have access to far better, 
richer information about restaurants, hotels and local service 
providers than ever before. Online reviews are an essential channel for 
reputational feedback; they provide online firms and entrepreneurs with 
the greatest incentives to maximize benefits to customers.
    Unfortunately, bad actors sometimes use abusive lawsuits to silence 
their critics and weaken their competitors. This undermines everyone's 
ability to engage in an open, transparent and free market.
    The Consumer Review Freedom Act addresses this issue by targeting 
non-disparagement clauses, which sometimes are buried within firms' 
terms of service or other non-negotiable agreements and which restrict 
consumers' ability to review their experiences fairly and honestly. 
These agreements represent unfair contracts of adhesion and threaten to 
strangle the vast economic benefits of online reviews. Furthermore, 
they restrict freedom of speech and undermine the promise and spirit of 
the First Amendment.
    We urge you to support this package of reforms to help create a 
strong national standard for the protection of both free expression and 
free markets.
            Sincerely,
                                               Mike Godwin,
                                                    R Street Institute.
                                              Mytheos Holt,
                                                 Institute for Liberty.
                                             Steve Pociask,
                                           American Consumer Institute.
                                 ______
                                 
                                       Internet Association
                                   Washington, DC, November 4, 2015

Hon. John Thune,
Chairman,
Senate Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.

Hon. Bill Nelson,
Ranking Member,
Senate Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.

Dear Chairman Thune and Ranking Member Nelson:

    The Internet Association is the unified voice of the Internet 
economy, representing the interests of leading Internet companies and 
their global community of users.\1\ It is dedicated to advancing public 
policy solutions to strengthen and protect Internet freedom, foster 
innovation and economic growth, and empower users. Important to our 
mission is the advancement of public policies that preserve free speech 
online. We applaud today's hearing on The Consumer Review Freedom Act 
(S. 2044), a bipartisan bill introduced by Chairman Thune, Senator 
Schatz, and Senator Jerry Moran.\2\
---------------------------------------------------------------------------
    \1\ The Internet Association's members include Airbnb, Amazon.com, 
auction.com, Coinbase, Dropbox, eBay, Etsy, Expedia, Facebook, Gilt, 
Google, Handy, LinkedIn, Lyft, Monster Worldwide, Netflix, Pandora, 
PayPal, Practice Fusion, Rackspace, reddit, Salesforce.com, Sidecar, 
Snapchat, SurveyMonkey, TripAdvisor, Twitter, Yahoo, Yelp, Uber, 
Zenefits, and Zynga.
    \2\ We respectfully request that this letter be submitted to the 
record for this hearing.
---------------------------------------------------------------------------
    In today's digital economy, nearly 70 percent of consumers now rely 
on online consumer reviews for information on where to eat, shop, 
travel, and more.\3\ The Internet enables millions of consumers to 
access timely, honest feedback that empowers them to make informed 
choices when purchasing goods or services. The result of the efficiency 
gains for these and other web enabled information sharing is a 
significant consumer surplus that benefits our economy in myriad ways. 
Experts calculate this consumer surplus was the equivalent of billions 
of dollars annually.\4\
---------------------------------------------------------------------------
    \3\ American Lifestyles 2015: The Connected Consumer--Seeking 
Validation from the Online Collective--US 2015, Mintel (June 3, 2015) 
http://www.mintel.com/press-centre/social-and-lifestyle/seven-in-10-
americans-seek-out-opinions-before-making-purchases.
    \4\ Hal Varian, The value of the Internet now and in the future, 
The Economist (Mar. 10, 2013, 3:49PM),http://www.economist.com/blogs/
freeexchange/2013/03/technology-1; Shane Greenstein, Measuring consumer 
surplus online, The Economist (Mar. 11, 2013, 3:20PM), http://
www.economist.com/blogs/freeexchange/2013/03/technology-2. 
---------------------------------------------------------------------------
    Unfortunately, an increasing number of companies who are unhappy 
with consumer reviews are utilizing non-disparagement clauses, often 
buried in non-negotiable form contracts, to stifle online consumer free 
speech. These clauses often impose penalties as high as hundreds of 
thousands of dollars for negative reviews by unknowing consumers of 
goods and services nationwide. In particularly egregious cases, 
individuals have been threatened with reporting to credit agencies and 
other tactics meant to intimidate and silence consumers.\5\
---------------------------------------------------------------------------
    \5\ Palmer v. KlearGear, No. 13-cv-00175 (D. Utah, filed Dec. 18, 
2013).
---------------------------------------------------------------------------
    The range of form contracts engaging in this attempt to stifle 
speech is varied across the Nation and includes hotels and restaurants, 
apartment buildings, repair services, and more.\6\ As Internet 
platforms utilized by millions of businesses provide consumers 
unprecedented opportunities to engage in the feedback economy, the 
threat against consumer-generated speech is growing rapidly and 
increasingly difficult to quantify.
---------------------------------------------------------------------------
    \6\ Tim Cushing, Here are the Companies that Want to Charge You 
$2,500-$100,000 for Negative Reviews, TechDirt (Dec. 17, 2014, 8:27AM), 
https://www.techdirt.com/articles/20141214/16102
629441/here-are-companies-that-want-to-charge-you-2500-100000-negative-
reviews.shtml.
---------------------------------------------------------------------------
    A patchwork of state laws, court decisions, and Federal agency 
actions have attempted to protect consumers subject to non-
disparagement clauses. However, we must address the issue on a national 
level to ensure the protection of all consumers online. The right to 
free speech--including online reviews and comments from customers--is 
critical to our rights as Americans and should not be curtailed.
    The Consumer Review Freedom Act, which would prohibit the use of 
these non-defamation clauses, will protect consumers nationwide from 
these meritless attempts to silence free speech. The Internet 
Association strongly supports this legislation's effort to protect 
online reviewers of goods and services from clauses that inhibit honest 
reviews and commends the Committee for examining this issue in detail 
during today's hearing.
    The Consumer Review Freedom Act is narrowly tailored to non-
disparagement clauses in form contracts that do not allow individuals a 
meaningful chance to negotiate a contract, and provides the necessary 
protections for businesses, including for medical and personal 
information, trade secrets, and confidential information.\7\ The bill 
strikes a fair balance between speech rights and legitimate business 
needs. The Internet Association additionally supports the intent of the 
bill to combat these clauses in the cases of form contracts for goods 
and services, and would support clarifying language to provide 
businesses and agencies certainty in enforcement of this legislation.
---------------------------------------------------------------------------
    \7\ S. 2044, 114th Cong. Sec. 2(a)(3) (2015).
---------------------------------------------------------------------------
    We look forward to hearing the discussion at the Committee's 
hearing today, and to working with you and your staff to pass The 
Consumer Review Freedom Act.
            Respectfully submitted,
                                         Michael Beckerman,
                                                 President and CEO,
                                              The Internet Association.
                                 ______
                                 
                                                   November 3, 2015

Dear Chairman Thune and Ranking Member Nelson:

    Every day, countless Americans use consumer review sites to share 
their experiences and opinions on the businesses and services they rely 
upon. These reviews have become instrumental in educating customers and 
informing their choices on everything from what doctor or mechanic to 
visit to where to shop, eat, and stay. In fact, today, nearly 70 
percent of customers rely on online reviews before making a 
purchase.\1\
---------------------------------------------------------------------------
    \1\ The Consumerist (Jun. 3, 2015), http://consumerist.com/2015/06/
03/nearly-70-of-consumers-rely-on-online-reviews-before-making-a-
purchase/; Ashlee Kieler, Nearly 70% Of Consumers Rely On Online 
Reviews Before Making A Purchase.
---------------------------------------------------------------------------
    However, companies are now increasingly using unfair non-defamation 
clauses to silence consumers and limit their right to free speech. 
Businesses are employing these clauses, which are often hidden in non-
negotiable form contracts for goods and services, in order to penalize 
or monetarily fine customers who decide to share their negative 
experiences with others in the form of online reviews.
    Non-defamation clauses stifle free speech and harm citizens' 
ability to make informed purchasing decisions, while rewarding bad 
businesses that are willing to bully their clientele into silence. In 
response, we are joining together to express our support for the 
Consumer Review Freedom Act (S. 2044), which we believe will go a long 
way to protect consumers' right to share legitimate speech on and 
offline.
    This bipartisan legislation, introduced by Sen. John Thune (R-SD), 
Sen. Brian Schatz (D-HI) and Sen. Jerry Moran (R-KS), strengthens First 
Amendment protections by prohibiting businesses from using non-
defamation clauses to intimidate and muzzle honest reviewers. The 
Consumer Review Freedom Act will outlaw non-disparagement clauses in 
consumer contracts nationwide, while protecting the rights of consumers 
to freely share their experiences and opinions on the Internet without 
fear of intimidation.
    Currently, Americans rely on a patchwork of state laws that do not 
equally protect the free speech rights of all Americans. Having Federal 
legislation in place to help preserve the free speech rights of 
American consumers will go a long way to ensuring deep-pocketed bullies 
are unable to quiet their critics.
    By sharing honest reviews about the places we eat, shop, visit and 
stay, consumers are using their personal experiences to help their 
friends and neighbors make informed purchasing decisions while ensuring 
American businesses are held accountable to their customers. We look 
forward to working with the Commerce Committee to quickly address any 
necessary technical amendments that might be needed as the bill moves 
forward, but wholeheartedly support the Senate's efforts to pass this 
important legislation that protects the Internet as an open speech 
platform.
            Respectfully,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
                                 ______
                                 
                                                   November 3, 2015
Dear Senator:

    On behalf of its low-income clients, the National Consumer Law 
Center writes in support of the Consumer Review Freedom Act of 2015, S. 
2044. This bill would prohibit companies from using non-disparagement 
clauses in boilerplate, consumer form contracts. While we have 
objections to the provision limiting the ability of state attorneys 
general to use contingency fee arrangements when engaging outside 
counsel, we understand that this provision will be removed during the 
Committee markup.
    We support S.2044 because it protects the rights of consumers to 
express their opinions in reviewing products and services, especially 
in online forums. Such reviews help inform other consumers and enable 
them to comparison shop. Unfortunately, some companies have attempted 
to suppress or muzzle negative reviews by including contract provisions 
that restrict consumers' ability to write such reviews. The most 
notable example was the case of KlearGear, which tried to impose a 
$3,500 penalty on two consumers for a negative review, even going so 
far as to report this penalty on their credit reports. S.2044 would 
prevent such attempts to suppress consumers' ability to freely review 
products and services.
    Please contact me at cwu@nclc.org or 617-542-8010 with any 
questions about this letter.
            Sincerely,
                                                Chi Chi Wu,
                                          National Consumer Law Center 
                                 (on behalf of its low-income clients).

                                  [all]

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