![\"non-disparagement](\"https:\/\/paceadelaidelegal.com.au\/wp-content\/uploads\/2023\/09\/non-disparagement1-768x766.jpg\")
<\/p>\nSimply put, in this context \u2013 disparagement means publicly saying or writing (for example, on Facebook) negative comments which are criticising a business, it\u2019s property or products and services.<\/p>\n
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The publication of false and injurious statements that are derogatory of another’s property, business, or product \u2014 called also business disparagement, commercial disparagement, disparagement of property, slander of goods, trade libel.<\/p>\n
Non-disparagement clauses are those, which prevent customers writing online reviews about their experience with a certain company.
\nWhat do they aim to achieve?
\nThe aim to prevent customers from writing bad Google Reviews, Facebook Reviews or indeed reviews on any social media site, review site or forum.
\nWhy Would These Clauses Be Desirable?
\nBad reviews are bad for business. A large proportion of people read online reviews before engaging with a business. This can be as high as 88%. So by preventing customers from writing bad reviews a business aims to prevent potential future customers from being put off.<\/p>\n
As a business owner the idea of preventing any negative feedback from being broadcast to the public is appealing. After all, as a business owner, you will very aware of how negative comments online can damage your business reputation.<\/p>\n
The ACCC has been finding such \u2018non-disparagement\u2019 terms to be \u201cunfair\u201d and therefore void from the contract.<\/p>\n
The Australian Consumer Law (ACL) makes small business contract terms void when the terms are unfair and the contract is in standard form.
\n(ACL) (Found in Schedule 2 of the Competition and Consumer Act 2010 (Cth))<\/p>\n
For further discussion and to unpack the meaning of unfair contract terms, see one of our previous blog posts \u201cIs Your Contract Unfair?\u201d<\/strong><\/p>\n The main concern for the ACCC is that, by preventing negative reviews a business is not allowing potential customers from getting a balanced view of a product or service. Below are 2 recent case studies, which illustrate how the ACCC views non-disparagement clauses and why, as a business owner, you should seek advice from an experienced professional, before adding any such terms to a contract or taking a customer to court for breach of these terms.<\/p>\n The following case studies will help explain how disparagement clauses are viewed as unfair by the ACCC.<\/strong><\/p>\n Wisdom Properties Group Pty Ltd (Wisdom Homes) is a New South Wales company specialising in building residential homes. Over a ten-year period (2008-18) they entered into standard form contracts with their customers containing non-disparagement clauses which:<\/p>\n \u2022 Prohibited customers from making any announcement, blog, public statement or article for publication about the agreement or the services provided pursuant to it, whether in electronic form or otherwise without prior written consent of Wisdom Homes<\/p>\n \u2022 Entitled Wisdom Homes to determine the timing and wording of any (approved) publication made by customers<\/p>\n \u2022 If any loss did occur resulting from the publication made by a customer, the customer was to indemnify Wisdom Homes This is not the first time the ACCC has claimed that non-disparagement clauses are unfair. Prior to this, the ACCC took action against 101 Residential Pty Ltd (\u201c101 Residential\u201d), another residential building company, this time based in Western Australia. Some debate has ensued on whether disparagement clauses actually fulfil the requirements for a term to be deemed \u2018unfair.\u2019 The ACCC\u2019s concern was not actually whether customers who entered into the agreement suffered any loss but instead that potential customers are losing the opportunity to source negative reviews about Wisdom Homes.What Is The ACCC\u2019s Concern?<\/h2>\n
\nAs A Business Owner – What Should You Do?
\nIf you have any similar clauses in any of your contracts or you are considering adding any such terms, consult a lawyer.
\nIf you are considering suing someone for a breach of a non-disparagement clause in a contract and your lawyer is encouraging this, it may be wise to consider a second opinion.<\/p>\nCase Studies<\/h3>\n
Non-Disparagement Case Studies<\/h3>\n
Case Study<\/strong><\/h4>\n
\n\u2022 Wisdom Homes was provided with the right to commence any action against a customer in relation to their publications even if they had been authorised by Wisdom Homes.
\nSo What Did The ACCC Do?
\nThe proceedings were resolved by the ACCC accepting a court enforceable undertaking from Wisdom Homes that they will:
\n\u2022 Ensure future Agreements, for a minimum period of three years, do not include the Non-disparagement clauses, or clauses of a similar effect
\n\u2022 Not enforce or rely upon the Non-disparagement clauses, or clauses of a similar effect, for all customers that have signed an Agreement that includes the Non-disparagement clauses
\n\u2022 Publish a corrective notice on the Wisdom website
\n\u2022 Issue a corrective consumer letter to all affected customers who signed an Agreement with Wisdom since 1 January 2015
\n\u2022 Establish and implement an ACL Compliance Program.<\/p>\nOther cases:<\/strong><\/h4>\n
\nThe company had similar contractual terms that prohibited customers from publishing any “material which is or may be disparaging or harmful to the business interests of” 101 Residential without their consent, including “any online posts, blogs or comments that do, or may reasonably be inferred to, relate to\u201d 101 Residential. Again in this case, Residential 101 gave a court enforceable undertaking to the ACCC undertaking that:
\n\u2022 101 Residential will not include in its Building Contracts clauses that prevent or prohibit consumers from publishing or disseminating genuine feedback and\/or information relating to Residential or home building services provided by 101 Residential
\n\u2022 101 Residential will not include in its Building Contracts clauses that impose condition or sanction on consumers for publishing or disseminating genuine feedback and\/or information relating to 101 Residential or home building services provided by 101 Residential, including but not limited to suspending work on a consumer\u2019s building site or terminating a consumer\u2019s Building Contract.
\n\u2022 A corrective notice was to be published on 101 Residential\u2019s website for 60 days (this has since been removed)
\n\u2022 Other undertakings related to 101 Residential\u2019s liability and representations were also made.<\/p>\nAre these terms actually \u2018unfair\u2019 under the ACL?<\/h3>\n
\nPutting this aside however, the ACCC has publically stated: \u201cAny standard form contract terms that prevent or limit a customer from making public comments about goods or services are likely to be unfair under the Australian Consumer Law.\u201d
\nFurther that \u201cThis outcome should serve as a warning to other businesses that imposing contract terms that prevent their customers from making public comments will attract ACCC attention.\u201d<\/p>\nWhy is the ACCC concerned?<\/h2>\n
\nACCC Deputy Chair Dr Michael Schaper stated in relation to the undertaking of 101 Residential \u201cOnline reviews help people make informed purchasing decisions. Consumers should be free to have their say about their experience with a business and must not face penalties.\u2019
\nThese non-disparagement clauses prevent customers from posting online and consequently restrict others\u2019 ability to access balanced reviews, conduct which the ACCC is becoming increasingly troubled with.
\nThey successfully brought an action against Meriton Property Services Pty Ltd for manipulating Trip Advisor to decrease the possibility of customers posting negative reviews on the site; however, this action was regarding misleading and deceptive conduct not unfair contract terms. The principle behind the action was comparable though, in that the rights for consumers to access information about goods and services is one that should be protected.<\/p>\nConclusion<\/h2>\n