Is It Legal to Fine Customers for Negative Online Reviews?

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Aug. 5 2014 9:46 AM

Is It Legal to Fine Customers for Negative Online Reviews?

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What Union Street Guest House might look like when reviewers are done with it.

Photo by Kevin Dooley via Flickr

Union Street Guest House, a self-described "historic" hotel in New York's Hudson River Valley, is testing the proposition that all press is good press. After the hotel's attempt to fine a wedding party $500 for each negative online guest review went viral, the Internet unleashed a torrent of outraged, one-star reviews on the inn's Yelp page.

The specific language in the hotel's terms—outlining how the $500 fines would be withheld from the wedding party's security deposit until the negative reviews were taken down—has since been removed and Union Street Guest House is quickly backtracking. "The policy regarding wedding fines was put on our site as a tongue-in-cheek response to a wedding many years ago," the inn said in a statement. "It was meant to be taken down long ago and certainly was never enforced." Union Street Guest House did not return multiple Slate requests for comment.

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It would be convenient for the hotel if all this were just a bad joke gone awry. But the experience of one former guest, Rabih Zahnan, suggests that’s not the case. Last November, Zahnan wrote on Yelp that the hotel's management "had the gall" to threaten him financially about a negative review he’d posted two months earlier:

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Screenshot from Yelp

Alarmed by the emails, Zahnan told me he called the wedding couple to see whether Union Street Guest House had, in fact, charged them for the review. It hadn’t. A month later, he received a third message from the hotel. “We have no idea why you feel the need to continue to talk bad about us on-line,” read the unsigned email, which came from info@unionstreetguesthouse.com. “You guys do realize that your wedding party saw and agreed to this policy and your new comments will cost another $500.” The fourth and final email arrived a few days later, with a marked change of tone:

I am so sorry you did not enjoy your recent stay in my Inn.  Please know that I have taken your comments to heart and will work on all of the issues.
I just wanted you to know, however, that I designed this place as an artist retreat  and we very rarely allow wedding parties to hold all of our rooms for their guests mostly because I feel there are much better-suited places for wedding folk to stay here in Hudson.  
Having said that, when I do agree to let a wedding party hold the rooms, because they cannot find rooms anywhere else, I ask for a deposit, part of which is to guarantee that I won't see any negative reviews online when, again, I have warned everyone that my place is not for everyone. (i.e. I want people who choose us, not forced to stay here because these were the rooms held).
So, just please know the staff can't refund the wedding party until your review is removed.  I guess it's just up to you really.
By the way, I had a great time with some of your party (mutual Michigan fans) in the Lobby so I'm not sure why you felt folks felt uncomfortable, but I am truly sorry if that was the case.
Best wishes to you!!
Chris Wagoner

Zahnan never replied to any of the emails and didn’t hear anything else from Union Street Guest House after that. The couple, he says, told him they never signed any sort of contract with the hotel and only requested that it hold a few rooms for wedding guests to rent. His own arrangements with the hotel were made entirely by email, and at no point during that process was he sent or pointed to the policy around negative reviews. (He adds that he never met the owner at the wedding and is not a Michigan fan.)

“I’ve never heard of an experience like this, never been harassed like this,” Zahnan says. “They were using intimidation to take down reviews and scare people. In my opinion, you would never have a policy like this if you weren’t already getting negative reviews.”

Few would argue that threatening financial revenge on unsatisfied wedding parties is an acceptable business tactic. But did Union Street Guest House ever actually stray outside the law?

Oddly, perhaps, the legal system hasn't clearly dealt with this question. In 2003, the Supreme Court of New York came close to addressing this issue in People of the State of New York v. Network Associates. The New York attorney general's office had sued Network Associates (later McAfee) for a "censorship clause" that prohibited users of its software from publishing reviews of the product without "prior consent" from the company. The state declared that clause "unenforceable, illegal, and deceptive."

The court ruled in New York's favor but based its decision on a separate issue of consumer fraud; it ignored the question of whether a clause prohibiting customer reviews was unenforceable. "Right now there's not a lot of precedent as to how far a company can go in restricting the speech of users of its product," says Ken Dreifach, New York's lawyer on the Network Associates case and now an attorney at the ZwillGen law firm. "The truth is it doesn't come up very often."

That said, if a policy like the one employed by Union Street Guest House were to wind up in court, it would most likely be struck down as illegal under a doctrine of contract law known as unconscionability. "It says if there's a surprise term in the contract that is so unfairly one-sided that one can doubt that a reasonable party would have knowingly agreed to it, that the clause cannot be enforced," Scott Michelman, an attorney with Public Citizen, says. "Nobody enters into a consumer contract expecting that they're going to be paying a fine if another consumer doesn't like the business."

"This is a fairly unusual term that most people would not expect in the consumer setting and that really imposes unfair penalties on people for their speech or for other people's speech," Michelman adds. "It also has the effect of shutting people up, which we as a society don't generally condone."

Eric Goldman, a professor at Santa Clara University School of Law and director of its High Tech Law Institute, notes that the Union Street Guest House scheme was only possible because it was structured to deduct the fines from a security deposit the hotel already possessed. For the inn to get the money otherwise, it would have to go to court, where a judge would have likely struck down that particular clause in its contract.

"There are some things we just don't allow contracts for," Goldman says. "The restriction on people being able to share their opinions about products and services in a marketplace—that's something we're not going to allow."

And if this week is any indication, consumer outrage is often sufficient to make businesses change their ways before the courts ever get involved.

Alison Griswold is a Slate staff writer covering business and economics.

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