Peacock Tales • Summer 2016

Non-Disparagement Clauses:
Making Your Bad Vacation Worse


Vacations are intended to be a time of fun and relaxation. However, they do not always go as planned. In an attempt to have their trips go as smoothly as possible, vacationers will often spend hours on travel websites reading reviews to ensure they will have the best possible vacation experience. One such popular website is vrbo.com, which allows owners of vacation properties to post their listing on the site and in turn, allows consumers to select properties and book directly with the property owner.

Frequently, once guests rent these properties they will return to the website and review their experience to either encourage future travel goers to rent the property, or conversely, warn them against doing so. Obviously, rental properties with good feedback are more likely to be rented by future visitors to the site, while others may tend to avoid properties with negative reviews. But in reality, do we really know the accuracy of those reviews?

Our firm was recently approached by a client who had rented a vacation home. Upon arriving, they discovered the property had been double-booked which left them without a place to stay. Upon returning to Pennsylvania, the client went to the listing website and posted a negative, but entirely truthful review, detailing their experience and cautioning other people against making the same mistake.

Several months later, our client received an e-mail from the property owner alerting them to a confidentiality provision in their rental agreement which prohibited any review from being posted to any website without first obtaining authorization from the property owner. This provision, known as a “non-disparagement clause,” included a term that any violation of the clause would result in an immediate charge of $500 to their credit card. It also contained a liquidated damages provision stating that any violation of the non-disparagement clause would result in an automatic judgment in the amount of $50,000 if a lawsuit was initiated by the property owner.

Rather than litigate the validity of the contract, our client offered to remove the review from the website in exchange for the $500 charge to their credit card being refunded. They were also able to avoid having a judgment obtained against them for the liquidated damages amount.

Proponents of these clauses argue that they are needed to protect their business from fraudulent or misleading reviews; they reason that even one harmful review could result in the inability to rent the property, thus leading to foreclosure of the property and/or bankruptcy of the business. Property owners argue that rather than an outright ban on reviews, these clauses simply provide a resolution process for any problems, which requires the consumer to work with the owner directly rather than posting a review online for the world to see.

Unfortunately, these types of experiences are occurring far too often. In response, the United States Senate has unanimously approved the Consumer Review Freedom Act, which, if passed into law, would prohibit businesses from contractually restricting a consumer’s ability to write an online review about a particular product or service. Specifically, the Act provides that any form contract which: (i) prohibits or restricts an individual who is a party to a contract from engaging in written, oral, or pictorial reviews of the goods, services, or conduct of a person or business who is also party to the contract, or (ii) imposes penalties or fees against individuals who engage in such communications, will be considered void from its inception.

Until this law prohibiting such restrictions is passed, consumers should remain cautious in posting online reviews where they may be subject to such a clause.

The Act is currently with a subcommittee within the House of Representatives and must pass a House vote before it becomes law. Once enacted, the proposed law will require the Federal Trade Commission to provide businesses with best practices for compliance with the law. Until then, businesses may want to consider revising any terms within their contracts which restrict or prohibit consumer reviews.


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Peacock Keller & Ecker, LLP • 70 East Beau Street • Washington, PA 15301 • 724-222-4520