ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, February 6, 2017

Federal Law Bans Gag Clauses

We’ve written about non-disparagement or “gag” clauses in wrap contracts on this blog in the past.  These clauses prohibit consumers from writing negative reviews about a company and typically impose a penalty or fee if the consumer does so.  California already has a law which prohibits them and now there’s a federal law.  The Consumer Review Fairness Act (CRFA) prohibits gag clauses and intellectual property transfer clauses in consumer form contracts.  (The prohibition on IP transfers is intended to prevent companies from using the DMCA takedown provisions to get posted content removed).  “Form contract” is defined as a contract with standardized terms “imposed on an individual without a meaningful opportunity for such individual to negotiate the standardized terms.”  Form contract does not include an employment or independent contractor contract.  The CRFA permits state attorney generals to bring a civil action on behalf of state residents.  The Federal Trade Commission may also institute action or intervene in a pending action.    

The law goes into effect for on March 14, 2017.

http://lawprofessors.typepad.com/contractsprof_blog/2017/02/federal-law-bans-gag-clauses.html

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