Teresa McUsic

Beware of gag clauses designed to thwart online complaints about businesses

Teresa McUsic

A Dallas pet sitting service unsuccessfully sued a Plano couple for complaining about their business on Yelp.
A Dallas pet sitting service unsuccessfully sued a Plano couple for complaining about their business on Yelp. AP

Texas consumers won a big case in late August for their right to complain about a company online — as more people are complaining about companies trying to keep them from exercising that right.

The case involved a lawsuit filed by a Dallas pet sitting service against a Plano couple for up to $1 million in damages after they complained and gave a one-star review on Yelp. Prestigious Pets sued Michelle and Robert Duchouquette, claiming they had signed a “nondisparagement” clause in their contract and that their review, and a subsequent television report, cost it business.

The Duchouquettes used the Texas Anti-SLAPP statute, which allows judges to dismiss frivolous lawsuits, as a defense, and a Dallas district judge did just that, throwing out the case on Aug. 30. The company said it is evaluating its options.

But this scenario may well play out more, especially in Texas.

The Better Business Bureau in Fort Worth said this week that of the 2,500 complaints against so-called gag clauses in contracts nationwide in the past three years, 1,360 — 55 percent — came from Texans.

“After scanning the Texas complaints, it is evident that this is a practice that is catching on down in Austin and San Antonio, and it’s making its way to Fort Worth,” said Lindsey Haase, spokeswoman for the Fort Worth BBB, which offers a free database of companies and consumer reviews.

The legal challenges come at a time when research shows 80 percent of Americans look at online reviews before purchasing a product or hiring a service, said Cheryl Reed, spokeswoman for Angie’s List. (Angie’s List, which gathers ratings and customer reviews on businesses, recently made its service free to consumers searching its database.)

Both Angie’s List and the BBB alert consumers searching their databases about which companies carry the nondisparagement clause, if they know about it. Angie’s List excluded four companies from its list in the past four years because of the clause — two dentists, a property manager and a lawn irrigation company. One of the dentists dropped the clause and is back in good standing on Angie’s List, she said.

The BBB did not have information on how many in its database have the clause, but if a clause is discovered the bureau posts it under the “other details” section of the company’s page, Haase said. Also, companies can’t keep their BBB accreditation and use the clause, she said.

“We don’t really have a way to determine what fields/industries the practice is most prevalent in, nor can we say the size of the business,” she said. “But it is fair to say that any company capable of producing a contract would be capable of incorporating a nondisparagement clause into the contract.”

Consumers should be wary of signing up with a company that has these clauses, she said.

“Walk away if you don’t feel comfortable,” Haase said. “You always have a choice.”

A few states including California and Maryland have adopted laws prohibiting nondisparagement clauses, said Richard Alderman, director of the University of Houston’s Consumer Complaint Center.

“Texas is viewed as a ‘pro-business’ state and perhaps that is why more Texas businesses feel free to include such clauses,” he said.

Alderman said he sees these gag clauses more with small businesses than larger companies.

“In my opinion, most ‘big players’ are more concerned about the negative publicity that arises from trying to enforce a nondisparagement clause than the possible benefits of limiting consumers’ negative comments,” he said. “While some big players include such a clause, it is mostly the smaller businesses that are concerned with negative publicity.”

Reading the contract thoroughly and understanding the clause can be difficult for consumers, Alderman said.

“In many cases, the language is understandable. But consumers do not believe they give up the right to complain, and assume a truthful comment would not be prohibited,” he said.

Such clauses can be difficult to find in a contract, however, said Reed, of Angie’s List. She said her company first came across such clauses in 2009 when doctors were putting them in new patient forms.

“They are not only aggressive, but it is a transparency issue,” Reed said. “We raised this issue to the national scene when we came across it.”

Angie Hicks, co-founder of Angie’s List, testified in writing before a Senate committee in November to encourage Congress to pass a law prohibiting such clauses.

“Not long after we started speaking out, the company selling the agreements to physicians reached out to me personally to try to convince me the agreements were a good step forward,” Hicks said in her testimony. “Suffice it to say I was not convinced. Not long after that, the company stopped selling the agreements. Unfortunately, since then, other similar efforts have erupted in other types of businesses.”

In December, the Senate passed the Consumer Review Freedom Act to stop such gag clauses. The House passed similar legislation, the Consumer Review Fairness Act, on Sept. 12. The bills are in reconciliation before a final vote by both chambers.

“I believe the federal bills are the answer to this problem and one will be passed,” Alderman said, although he is not optimistic Congress will act quickly.

In the meantime, the BBB and Angie’s List recommend that consumers read their contracts thoroughly and be wary of businesses that include such clauses.

“We see these clauses as huge red flags,” Reed said. “Either the company doesn’t trust their customers will tell the truth or they are not concerned with their service to change their practice when they meet negative reviews.”

Companies, too, should be wary of using the clauses, Reed said.

“A negative review is a great opportunity for a company,” she said. “They get to listen in on consumers and what they’re saying to real people. If they step in and fix the problem, what we have found is that a company earns a customer for life.”

As the axiom says: The customer is always right.

Teresa McUsic’s column appears Saturdays. TMcUsic@SavvyConsumer.net