Company Slaps $3,500 Fine on Customer for Negative Online Review

Before we make a purchase online or signing up for something online, most of us hit the “I agree” button in a hurry. We all know we’re supposed to read the Terms and Conditions before we hit that button. But, really, who does? The website Kleargear.com, which bills itself as the seller of “office toys for geeks,” slipped in a clause in its agreement telling buyers that those who post negative comments online about them will be fined $3,500.

 Bullied into Submission

Mashable.com talks about the story of Kleargear.com customer, Jen Palmer, who ordered merchandise from the company. But she never actually received the package she ordered and Paypal automatically cancelled the transaction after a month. But when she couldn’t get in touch with the company, Palmer vented her frustrations by posting a negative comment about Kleargear.com at ripoffreport.com. Palmer was shocked to get a notice from Kleargear three years after she posted the negative review. The notice demanded that she delete that negative comment or pay $3,500 for “legal fees and court costs.” They even threatened to go to a third-party collection firm if she didn’t pay the money in 30 calendar days.

As it turned out ripoffreport.com refused to delete Palmer’s comment and told her that she would have to pay them $2,000 to do so. When the Palmers were unable to pay either site, Kleargear dinged their credit making it hard for them to even apply for much-needed loans. Their story was made public by a local CBS affiliate in Utah this week. Strangely enough, the offending clauses appear to have been dropped from Kleargear’s website entirely.

What Does the Law Say?

Under California Civil Code section 1670.5, the enforcement of such a term in a contract such as this one can be defeated as an “unconscionable clause.” This law is most often applied to terms that are buried in the middle of the contract – terms that have no relevance to the central purpose of the contract. However, such contracts have become a part of our daily lives. We enter into these contracts for a variety of purposes from online shopping to renting a house.

In this case, the Palmers may also argue that the contract’s clause attempted to restrict them from expressing their opinion. This, in legal terms, is known as “prior restraint’, which is illegal when it comes to disputes, let alone a contracting party imposing the restraint on the right of the other person to speak.

The other issue in the case of the Palmers is the manner in which the company tried to extract a fine for the alleged breach of contract. The law requires that any such amount set must represent the result of a “reasonable endeavor” by the parties to estimate a FAIR, average compensation for any loss that may be sustained. However, in this case, the penalty for posting a negative review was not negotiated between the parties. It is also nearly impossible to estimate an across-the-board damage amount that such a company may suffer from a negative online review.

The Financial Damage

There is no question that these types of actions on the part of companies and corporations can have serious emotional and financial impacts on consumers. In this case, a company took the law into its hands, in the most outrageous manner. The consumer’s credit report was damaged, which meant that they could not apply for a home loan, car loan or even store credit. A ding on your credit doesn’t go away for many years, which is certainly a long-term impact on the consumer – not to mention the stress it causes. In such cases, it may be well worth your time to schedule a free consultation with a consumer rights attorney to explore your options.