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California bars online retailers' fines for negative reviews

Law prohibits online retailers from imposing contracts that require customers waive their right to express a negative opinion about their service experience.

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In response to online retailers threatening their customers with hefty fines for posting negative reviews, California has passed legislation that bans businesses from trying to contractually prohibit customers from publicly expressing their opinion about the business.

Signed into law by Gov. Jerry Brown on Tuesday, AB 2365 outlaws so-called "non-disparagement clauses" from contracts that require customers waive their right to express a negative opinion the service they received. Businesses violating the new law face fines of $2,500 for the first violation and $5,000 for each subsequent violation. An additional fine of $10,000 will be imposed on violations deemed willful, intentional, or reckless.

Viewed as a victory for online free speech, the measure was inspired by the experience of a Utah couple that was left with a damaged credit rating after an online retailer demanded a $3,500 penalty because they posted a negative review about their purchase, according to Assemblyman John A. Pérez (D-Los Angeles), the bill's sponsor.

"Most of us assume we have just as many rights after making a purchase as we did before," he said in a statement when he introduced the bill in April. "If a merchant thinks our First Amendment free speech rights need to be curtailed, they should say so, up front, and in plain language."

The measure is the latest effort to combat strategic lawsuits against public participation (SLAPP), which seek to penalize defendants in retaliation for leaving negative comments about a business made on a blog or reviews site. Businesses argue that non-disparagement clauses are aimed at protecting their reputation from defamation, but critics counter that the lawsuits are unreasonable and intended to stifle public criticism. Twenty-eight US states have enacted anti-SLAPP statutes, according to the Digital Media Law Project.