Consumer “Gag” Clauses Banned in Illinois

Non-Disparagement Clauses Conflict with Public Policy in the Digital Age

In August 2017, Illinois passed SB 1898, amending the state’s Consumer Fraud and Deceptive Business Practicesconsumer protection lawConsumer protection law is the body of federal and state laws designed to protect people from unfair, deceptive, fraudulent, or abusive practices in the marketplace. These laws regulate areas such as advertising, sales, lending, debt collection, credit reporting, warranties, financial services, and consumer products.Read more → Act to prohibit the use of non-disparagement clauses in contracts for consumer goods and services. The law “provides that a contract or proposed contract for the sale or lease of consumer merchandise or services may not include a provision waiving the consumer’s right to make any statement regarding the seller or lessor or the employees or agents of the seller or lessor or concerning the merchandise or services.”

Before the law was passed, businesses could arguably use non-disparagement clauses to prevent consumers from posting negative reviews online. Now such clauses are void and unenforceable.

What a ban on non-disparagement clauses means for businesses and consumers

In the past, businesses could—for the most part—control brand image and reputation through company-developed advertising and marketing. But with the advent of the Internet and social media, brand communication is no longer a one-sided conversation, especially on crowdsourced review websites like Yelp and Angie’s List. On the one hand, increased interactivity between businesses and consumers helps businesses gain insight, improve consumer engagement, and address issues to the benefit of both parties. On the other, consumers can easily share negative views of a company or product, however accurate or unreasonable.

Some businesses argue that non-disparagement clauses are necessary to protect their reputation and goodwill in the digital age, where social media has the potential to make or break a company. And while a negative review may be posted by a consumer with a legitimate complaint, a negative review may also be posted by a crooked competitor or Internet troll. Businesses known to use non-disparagement clauses include online shops, hotels and rentals, wedding photographers, and medical professionals.

For consumers, the glaring problem with non-disparagement clauses is they inherently contradict the principle of free speech by threatening penalties for sharing an opinion. However, courts have long upheld the validity of speech suppression contracts in employment, legal settlement, franchise, and personal relationship situations. With SB 1898, the Illinois legislature has decided that freedom of speech trumps freedom of contract when it comes to publishing reviews online, as the potential benefit to the public outweighs the potential harm to businesses.

Review Websites & Social Media Platforms Can Still Censor Reviews

SB 1898 does not prohibit or limit a person or business that hosts online consumer reviews from removing statements that are otherwise lawful to remove. For example, many websites do not allow the use of profanity or people’s names when posting reviews and comments. This means businesses may still petition review websites to remove reviews for other legal reasons.