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California is on the Forefront of Banning Gag Clauses in Consumer Contracts

California is falling into line with Congress’ attempt to put an end to the gag clause associated with a number of consumer contracts. Whether you are a consumer or a producer, you know the importance of reviews. Many people turn to quality review sites to better understand what they should expect for certain products or services. As a result, many businesses are including gag clauses in their consumer contracts to avoid potentially negative reviews. In September, California became the first state to outlaw such clauses. The reasoning was that this type of approach is unfair and keeps consumers unaware of the true quality of certain products.

A Need for Change
The reality is that many companies will do whatever it takes to avoid negative reviews about them. In their consumer contract they have been able to include language that not only forbids consumers from speaking out negatively, but also fines them for doing so. This creates a kind of hostage situation where the company controls the situation and will revoke the fine if the individual removes the negative comment. Creating an atmosphere where consumers cannot be truthful about their experience hinders the ability for the marketplace to adequately serve everybody involved. Likewise, the marketplace can no longer operate at a truly competitive rate if nobody is truthful about their experience. Essentially, consumers will hear only good news and all companies are considered to be on the same plane.

Congress Takes Action
In mid-December congress unanimously passed a bill, the Consumer Review Freedom Act, that makes it clear that companies can no longer retaliate against consumers that post a negative review. Congress indicated that while the company intends to avoid people posting inaccurate negative reviews, in the end, it makes it impossible for people to post the truth. Reviews must be available and made at the discretion of the consumer so that people can once again trust the reviews made by the public.

An Honest Marketplace
This bill will make it so that people can rely on the reviews in the marketplace. Essentially, this will mean that consumers can trust the products and services that they purchase to be similar to the experiences of others. The marketplace needs to be truthful because so many people rely completely on reviews to give them a general understanding of a company. Allowing people to post genuine reviews will keep the marketplace fair and competitive. In the end, this is intended to help both the company and the consumer because it will create a level of transparency that simply has not existed in a long time.

Need More Information?

If you would like to learn more about consumer information, please reach out to a knowledgeable attorney. Kristina Reed is located in Sacramento, California, and she has years of experience within the business realm. Allow her expertise to answer the questions you may have and guide you through the process. Call her today for your business needs.