Boiling Mad Consumers over Boilerplate Language: Non-Disparagement Clauses in Online Sales Contracts

By Marcum, Tanya M.; Perry, Sandra J. | Labor Law Journal, Spring 2017 | Go to article overview

Boiling Mad Consumers over Boilerplate Language: Non-Disparagement Clauses in Online Sales Contracts


Marcum, Tanya M., Perry, Sandra J., Labor Law Journal


Introduction

Recently a federal statute became law that prevents businesses from threatening or taking punitive actions against consumers from writing or posting negative feedback or complaints against businesses. Some businesses have created nondisparagement, or "gag" clauses that contain threats of legal action or financial penalties against the customer to prevent negative comments about that business-even if what is said is actually true. The Consumer Review Freedom Act makes it a violation of the Federal Trade Commission Act to use an unfair nondisparagement clause in a consumer contract. This law is similar to one introduced in Congress in 2014 but not enacted. This article will discuss the recently passed statute, legal cases, and potential outcomes.

I. Stirring the Pot to Make It Boil-E-Commerce on the Rise

A. Increasing Online Sales

Customers are increasingly using the internet to research and purchase items. According to Statista, 41% of global internet users participated in online retail shopping or e-commerce in 2013-1 In the United States, 191-1 million people shopped online and it is expected that the number will reach or pass 200 million by 2015.2 Online shopping hit $2.29 billion in sales on Cyber Monday in 2014.3

According to the U.S. Census Bureau,

the estimate of U.S. retail e-commerce sales for the fourth quarter of 2015, adjusted for seasonal variation, but not for price changes, was $89.1 billion, an increase of 2.1percent (±0.9%) from the third quarter of 2015. Total retail sales for the fourth quarter of 2015 were estimated at $1,184.8 billion, virtually unchanged (±0.2%) from the third quarter of 2015. The fourth quarter 2015 e-commerce estimate increased 14.7 percent (±1.4%) from the fourth quarter of 2014 while total retail sales increased 1.3 percent (±0.4%) in the same period. E-commerce sales in the fourth quarter of 2015 accounted for 7.5 percent of total sales.

On a not adjusted basis, the estimate of U.S. retail e-commerce sales for the fourth quarter of 2015 totaled $107-1 billion, an increase of 32.2 percent (±0.9%) from the third quarter of 2015The fourth quarter 2015 e-commerce estimate increased 14.5 percent (±1.4 %) from the fourth quarter of 2014 while total retail sales increased 1.6 percent (±0.4%) in the same period. E-commerce sales in the fourth quarter of 2015 accounted for 8.6 percent of total sales.

Total e-commerce sales for 2015 were estimated at $341.7 billion, an increase of 14.6 percent (±0.9%) from 2014. Total retail sales in 2015 increased 1.4 percent (±0.4%) from 2014. E-commerce sales in 2015 accounted for 7.3 percent of total sales. Ecommerce sales in 2014 accounted for 6.4 percent of total sales.4

Given these numbers, it is no wonder retailers are moving or expanding their e-commerce presence to customers. Retailers without an online presence are losing valuable business as consumers have an increased expectation of online sales from their favorite retailers and customers have the power of choice when shopping online.5

Increased sales come with increased headaches for the retailers. E-commerce internet sites often have places for consumers to rate the products or leave other comments. There are sites dedicated to consumer complaints. For instance, Reddit6 provides a forum for consumers to post their complaints and others can comment on the post. Consumers make comments about products and customer service on social media sites like Instagram and Facebook. It is clear that the "power of the public" due to social media and the internet has created a defensive position by many businesses.7 Some businesses believe that the online forums in which consumers post negative reviews of businesses do not adequately allow for the businesses to refute the negative comments.8 "While 45 percent of people use social media to share bad customer service experiences, only 30 percent use social media to share good customer service experiences. …

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