wednesday, 14 september of 2016

Yelp, TripAdvisor Gain Legal Cover for Negative Reviews

Online review sites gained some added legal cover this week after Congress advanced a bill that makes it harder for businesses to sue customers over negative reviews and a federal court ruled in favor of Yelp Inc. in one dispute.

The U.S. House of Representatives on Monday passed the Consumer Review Fairness Act, which bars businesses from tucking nondisparagement clauses into contracts with customers, effectively gagging negative online reviews. The Senate last year approved a bill with similar wording. Both chambers need to iron out differences in the bill and await the president’s signature before it becomes law.

The legislative action came the same day a federal appeals court in California affirmed Yelp wasn’t liable for negative reviews posted on its site about a Washington state locksmith.

Sites like Yelp and travel site TripAdvisor Inc. rely on millions of consumers to post reviews and then charge local businesses for advertising to reach people reading those reviews. Some business owners balk at the sites’ practice of highlighting or promoting companies that pay for advertising.

The pending law assures users they can speak their minds online. That is an important point for review websites, which count active user growth among their most closely watched financial metrics. Yelp has warned of slowing traffic growth, while TripAdvisor has told investors its business is at risk as users book more travel on mobile devices.

TripAdvisor assistant general counsel Brad Young said gag clauses have become more common over the past five years, threatening the review system as a whole.

“Consumers are harmed by receiving less information,” he said.

Both the House and Senate versions of the legislation ban contracts that restrict consumers from making truthful reviews. The bills charge the Federal Trade Commission with enforcement. The FTC has said it supports the House bill.

Few local businesses take reviewers to court, but the ones that do tend to draw the glare of media attention. A Dallas pet-sitting service last year sued an area couple for damages after they posted a one-star review on Yelp of the company that said its worker had overfed their fish. The resulting case was dismissed and the company ordered to pay court fees.

An attorney for the Dallas pet-care service, Prestigious Pets, said the company is reviewing options and still considers its nondisparagement clause enforceable.

In the latest court case, Seattle-area locksmith Douglas Kimzey sued Yelp itself for two negative reviews a customer posted on its website. He argued that Yelp’s star-rating system, which appears on Google search results, transforms customer reviews into its own content. Yelp countered that existing law protects it from liability for hosting content written by other people. The U.S. Court of Appeals for the Ninth Circuit agreed.

Mr. Kimzey said he plans to appeal the ruling. “I’ve lost 95% of my business but there’s nothing I can do about it,” he said in an interview. “It’s extortion.”

(Published by The Wall Street Journal - September 13, 2016)

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