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Businesses Lose a Key Tool Against Consumers Who Give Lousy Reviews

· Defamation,Disparagement,Contracts

Companies will no longer be able to insert a non-disparagement clause in their boilerplate consumer contracts. This means that consumers will be able to post negative reviews on-line without risking retaliation from the company.

In one of his last acts as President, President Obama signed the Consumer Review Fairness Act into law this week.

The law is intended to head off cases like Palmer v. KlearGear. In that case, Jennifer Palmer in Utah posted a negative review of a couple of cheap knickknacks she had bought online from Kleargear. Shortly after, she was slapped with a $3,500 bill for breaching the disparagement clause of the form contract that popped up as she was trying to order the toys.

The Consumer Review Fairness Act voids any consumer contract that contains a clause that restricts a consumer's ability to write or speak a review about the company. It only applies to form contracts, in which the consumer can't negotiate with the company. And it still allows a company to go after the consumer for defamation, breach of confidentiality, or for violating restrictions on the use of the company's product.