Non-disparagement clauses:Why nixing negative reviews may be a net negative

Tripadvisor's recent travails in Italy made headlines around the travel world with a not insignificant release of schadenfreude amongst many in the trade. The company was slammed by Italy's competition authority for  "unfair business practices through the dissemination of misleading information" and added insult to injury with a fine of €500K.

However, businesses reveling in TA's legal troubles ought to pause before escalating the war against allegedly fake reviews on sites and worse, embark on customer-centered punitive actions such as non-disparagement clauses which seek to deter customers from posting negative reviews. As noted in an earlier column on this site, a very low percentage of customers  "trust" online reviews and yet an overwhelming majority rely on them prior to making purchase decisions. Having a plurality of viewpoints about a product or service instead of mostly positive reviews due to a culling of negative contributions can only lead to even less trust on the part of customers, both current and future.

Non-disparagement clauses that seek to penalize customers who post negative reviews are increasingly prevalent including in hotels with some such as a hotel in the UK going so far as to fine customers.  Somewhat surprisingly given California's general fondness for regulation, the state recently put in place a law that bans these clauses.  What is unsurprising is that these clauses have no restriction on praise, warranted or not, for businesses.

Seeking a remedy at a national level in the US, two congressmen from California have introduced a bill to make "non-disparagement clauses in consumer contracts unenforceable, in addition to providing authority to the Federal Trade Commission and state attorneys general to take action against businesses that include them". The proposed bill underscores the fact that firms do not need non-disparagement clauses to sue folks who post false reviews as that right already exists; the clause principally seeks to freeze out real negative reviews. That  can only lead to an echo chamber that eventually costs businesses far more than real negative reviews which if used for corrective action can lead to more not less customers.



Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.