More and more often, when a customer has a good or bad experience with a business or service provider, whether it be a restaurant, dentist, mechanic or hairstylist, the customer will take to the internet and online review sites like Yelp to tell the world about it.  Such reviews - whether negative or positive - can impact whether potential customers choose to shell out their hard-earned cash at the business.

In an effort to control the negative reviews, some businesses have resorted to legal action against customers that post bad reviews or comments.  A new California law, however, protects people who post truthful, negative reviews online about businesses or services they receive.

The new law is the result of recent attempts by certain businesses to enforce so-called "anti-disparagement" clauses that appear in the terms and conditions of service between the business and its customers.  These clauses purportedly prohibit customers from posting negative reviews or comments about the services they receive.  

In one example, a New York hotel and wedding venue attempted to institute a policy of fining members of wedding parties $500 if they posted negative reviews or comments about the hotel online.  In another example, a company fined a Utah couple $3,500 after they posted a negative review of the company for failing to deliver a product the couple ordered online.  In that case, the couple refused to pay the fine and the company reported the debt to a collections agency and the credit bureaus.  The couple sued and eventually obtained a judgment of $306,750 in compensatory and punitive damages, plus attorneys' fees.  

Whether these clauses are enforceable to begin with or not, A.B. 2365 (signed into law on September 9, 2014) makes clear that the clauses cannot be enforced in California and also provides civil penalties for businesses that attempt to do so.  The bill provides for a $2,500 fine for a first violation, $5,000 for every subsequent violation, and $10,000 for "a willful, intentional, or reckless violation of this section."  The penalties can be sought in a civil action brought either by the consumer, the Attorney General, or by the district attorney or city attorney in the county or city where the violation occurred.  

Yelp has welcomed the legislation, praising it as protection of free speech in a blog post on its website.  Indeed, Yelp calls on other states to follow California's lead and adopt similar laws.

It should be noted that the legislation specifically provides that it is not intended to be an exclusive remedy and "does not affect any other relief or remedy provided by law."  In other words, this bill should not affect the right of a business to sue individual online commenters and reviewers who post defamatory statements online.