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Congress Saves Social Media by Nixing the Non-Disparagement Clause

As it has exploded into prominence, social media is a regular fixture in the legal news. Entire generations live through their social media links, finding friends, products, and restaurants online. Instead of a single review from a newspaper or magazine, you get feedback from actual regular customers – sometimes in the hundreds.

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Non-Disparagement Clauses. As any business owner knows, a bad review can sink a business. Some businesses and websites have resorted to including non-disparagement clauses in their invoicing and user agreements. Non-disparagement clauses are elements or a contract that require a party to refrain from saying anything bad against the other party. These can be quite useful to resolve existing disputes and allow the parties to move forward. However, when they are applied in a place where feedback is expected, like review sites, they can unfairly tip the scales of public opinion; if negative reviews can be forbidden, how sure can you be that you are getting an accurate gauge of public opinion? Further, if the business banning negative reviews is a rip-off, there would be little way to warn others if the user had to agree to a non-disparagement clause before the transaction.

The 114th Congress addressed the problem by passing HR 5111, the “Consumer Review Fairness Act of 2016.” President Obama signed this bipartisan bill on December 14, 2016. Introduced by New Jersey Republican Representative Leonard Lance, HR 5111 forbids non-disparagement clauses in form contracts – those with standardized terms, used in the course of selling or leasing a goods or services, and there is no “meaningful opportunity” to negotiate the terms. The Federal Trade Commission and state attorneys general can enforce the act. HR 5111 does not affect a business’s right to go after false or defamatory posts.

Enforcement will not begin until the end of 2017. However, businesses that use non-disparagement clauses should prepare to dump them as soon as possible.

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