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FTC Sues Diet Pill Maker For Trying To Silence Unhappy Customers

Shouldn't you have the right to talk about products that don't work?
Image:FTC Seal
The Federal Trade Commission's seal is seen on a podium during a news conference at the FTC's Midwest Regional office.Kiichiro Sato / AP

You have a right to complain or post negative comments about the products and services you buy – and companies can’t use retaliatory non-disparagement clauses, a.k.a. "gag clauses," to stop you from doing this, according to the Federal Trade Commission (FTC).

The FTC made it clear last week that it now considers any attempt to scare customers into silence unacceptable and a violation of the law.

“The Commission believes that using a gag clause that prohibits consumers from saying anything negative, making any truthful negative comments about a company, is an unfair practice that violates the Federal Trade Commission Act,” said Mary Engle, associate director of the FTC’s Division of Advertising Practices. “We believe that it's really important for truthful information about products to be out in the information marketplace.”

The FTC made its position on these non-disparagement clauses known in a recent action against Roca Labs, a Florida company that sells a line of weight-loss supplements on its website.

In its complaint filed in federal court, the government alleges Roca Labs made “outrageously deceptive claims” for its products and sued or threatened to sue customers who shared their negative experience online or complained to the Better Business Bureau. The company claimed those customers violated the disparagement provisions of the “Terms and Conditions” that they’d agreed to when they bought the products.

This is the first time the FTC has sued a company for having a disparagement clause. Engle told NBC News the Commission was using this case to send a message to businesses across the country.

“We’re saying that as a matter of law it’s an unfair practice to prohibit your customers from providing truthful negative information online or to the Better Business Bureau,” she said. “If a marketer prohibits its customers from sharing this information, prospective customers are at a disadvantage.”

NBC News contacted the lawyer who represents Roca Labs in this case and she declined to comment.

FTC praised for its action

Scott Michelman, a staff attorney with the consumer group Public Citizen, commended the FTC for taking this action and encouraged the Commission to go after other companies that try to “bully consumers” into never saying anything negative about them.

“The bottom line is businesses should not be able to take away a customer’s rights to criticize them, express their opinion and exchange information with fellow consumers,” Michelman said. “As long as consumers aren't reviewing businesses in a way that is false and defamatory, consumers have the right to make those reviews. And if it is false and defamatory, businesses have a defamation claim against them.”

With the Internet, companies risk the possibility of getting a bad review that isn’t justified. But the solution isn’t to limit speech, rather to encourage more speech, said Jeff Sovern, a professor at St. John's University School of Law in New York City.

“I think consumers are smart enough to realize that just because one or two people say they’re unhappy doesn’t mean the company is a bad company or selling a bad product,” he said. “And if the company is selling good products, presumably other consumers will say so on these sites and that will outweigh the ones who are unfairly maligning the company.”

Professor Sovern noted that for the free market to work as intended, people need to be able to warn others about bad products or services. Otherwise, how will other consumers know which products to avoid?

Is this an issue Congress should address?

Last month, Sen. John Thune (R-S.D.), chairman of the Senate Commerce Committee, introduced the Consumer Review Freedom Act (S.2044). Sens. Brian Schatz (D-Hawaii) and Jerry Moran (R-Kan.) are co-sponsors. (In April, a similar bill with the same name was introduced in the House in April.)

The bill would prohibit the growing use of non-disparagement clauses that “restrict the ability of consumers” to communicate about the goods and services they buy.

“Online customer reviews have become an integral part of not just e-commerce but consumer choice everywhere,” Sen. Thune said in a statement. “This free market system, which empowers customers, cannot thrive if reviewers face intimidation against airing truthful criticisms.”

“Every consumer has the right to share their experiences and opinions of any business,” Sen. Schatz said in a statement. “Our bill would protect that right and ensure consumers are free to share their views, free from intimidation.”

The Internet Association (IA), a trade group that represents online companies such as Facebook, Yelp and Google, supports the Consumer Review Freedom Act.

“Creating a strong national standard protecting freedom of speech online is fundamental to the success of the Internet, said IA president and CEO Michael Beckerman in a statement.

Herb Weisbaum is The Consumer Man. Follow him on Facebook and Twitter or visit The ConsumerMan website.