S. HRG. 114–269 ZERO STARS: HOW GAGGING HONEST REVIEWS HARMS CONSUMERS AND THE ECONOMY HEARING BEFORE THE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION UNITED STATES SENATE ONE HUNDRED FOURTEENTH CONGRESS FIRST SESSION NOVEMBER 4, 2015 Printed for the use of the Committee on Commerce, Science, and Transportation ( U.S. GOVERNMENT PUBLISHING OFFICE 20–128 PDF WASHINGTON : 2016 For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 10:29 May 17, 2016 Jkt 075679 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\GPO\DOCS\20128.TXT JACKIE SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION ONE HUNDRED FOURTEENTH CONGRESS FIRST SESSION JOHN THUNE, South Dakota, Chairman ROGER F. WICKER, Mississippi BILL NELSON, Florida, Ranking ROY BLUNT, Missouri MARIA CANTWELL, Washington MARCO RUBIO, Florida CLAIRE MCCASKILL, Missouri KELLY AYOTTE, New Hampshire AMY KLOBUCHAR, Minnesota TED CRUZ, Texas RICHARD BLUMENTHAL, Connecticut DEB FISCHER, Nebraska BRIAN SCHATZ, Hawaii JERRY MORAN, Kansas EDWARD MARKEY, Massachusetts DAN SULLIVAN, Alaska CORY BOOKER, New Jersey RON JOHNSON, Wisconsin TOM UDALL, New Mexico DEAN HELLER, Nevada JOE MANCHIN III, West Virginia CORY GARDNER, Colorado GARY PETERS, Michigan STEVE DAINES, Montana DAVID SCHWIETERT, Staff Director NICK ROSSI, Deputy Staff Director REBECCA SEIDEL, General Counsel JASON VAN BEEK, Deputy General Counsel KIM LIPSKY, Democratic Staff Director CHRIS DAY, Democratic Deputy Staff Director CLINT ODOM, Democratic General Counsel and Policy Director (II) VerDate Nov 24 2008 10:29 May 17, 2016 Jkt 075679 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 S:\GPO\DOCS\20128.TXT JACKIE C O N T E N T S Page Hearing held on November 4, 2015 ........................................................................ 1 Statement of Senator Thune ................................................................................... 1 Statement of Senator Nelson .................................................................................. 3 Statement of Senator McCaskill ............................................................................. 44 Statement of Senator Fischer ................................................................................. 46 Statement of Senator Moran .................................................................................. 48 Statement of Senator Schatz .................................................................................. 50 Statement of Senator Daines .................................................................................. 51 Statement of Senator Klobuchar ............................................................................ 54 Statement of Senator Blumenthal .......................................................................... 56 Statement of Senator Markey ................................................................................. 57 WITNESSES Adam Medros, Senior Vice President, Head of Global Product, TripAdvisor LLC ........................................................................................................................ 5 Prepared statement .......................................................................................... 7 Robert Atkinson, President, Information Technology and Innovation Founda- tion ........................................................................................................................ 9 Prepared statement of Daniel Castro, Vice President, Information Tech- nology and Innovation Foundation .............................................................. 10 Jennifer Kulas Palmer, Plaintiff, Palmer v. KlearGear ....................................... 14 Prepared statement .......................................................................................... 16 Eric Goldman, Professor, Santa Clara University School of Law ........................ 18 Prepared statement .......................................................................................... 20 Article dated November 2, 2015 entitled ‘‘How Congress Can Protect Online Consumer Reviews ’’ ......................................................................... 21 Article dated March 27, 2015 entitled ‘‘Court Might Enforce A Contract Ban On Consumer Reviews’’ ........................................................................ 23 Article dated September 10, 2014 entitled ‘‘California Tells Businesses: Stop Trying To Ban Consumer Reviews’’ .................................................... 23 Article dated August 7, 2014 entitled ‘‘Fining Customers For Negative Online Reviews Isn’t New...Or Smart ......................................................... 24 Article from The Next Digital Decade:Essays on the Future of the Inter- net entitled ‘‘The Regulation of Reputational Information’’ ...................... 28 Article from Medical Ethics entitled ‘‘Patients’ Online Reviews of Physi- cians’’ .............................................................................................................. 34 Ira Rheingold, Executive Director, National Association of Consumer Advo- cates ...................................................................................................................... 35 Prepared statement .......................................................................................... 37 APPENDIX Scott Michelman, Staff Attorney, Public Citizen, prepared statement ............... 63 Angie Hicks, Founder and Chief Marketing Officer, Angie’s List, prepared statement .............................................................................................................. 67 Letter dated November 3, 2015 to Hon. John Thune and Hon. Bill Nelson from George P. Slover, Senior Policy Counsel, Consumers Union ................... 68 Letter dated November 4, 2015 to Hon. John Thune and Hon. Bill Nelson from Mike Godwin, R Street Institute; Mytheos Holt, Institute for Liberty; and Steve Pociask, American Consumer Institute ............................................ 69 Letter dated November 4, 2015 to Hon. John Thune and Hon. Bill Nelson from Michael Beckerman, President and CEO, The Internet Association ...... 70 (III) VerDate Nov 24 2008 10:29 May 17, 2016 Jkt 075679 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\GPO\DOCS\20128.TXT JACKIE IV Page Letter dated November 3, 2015 to Chairman Thune and Ranking Member Nelson from the companies: Demand Progress, Engine, Electronic Frontier Foundation, Fight for the Future, Glassdoor, Information Technology & Innovation Foundation (ITIF), Public Knowledge, Public Participation Project, RealSelf, R Street and Yelp ................................................................... 71 Letter dated November 3, 2015 from Chi Chi Wu, National Consumer Law Center (on behalf of its low-income clients) ....................................................... 72 VerDate Nov 24 2008 10:29 May 17, 2016 Jkt 075679 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\GPO\DOCS\20128.TXT JACKIE ZERO STARS: HOW GAGGING HONEST REVIEWS HARMS CONSUMERS AND THE ECONOMY WEDNESDAY, NOVEMBER 4, 2015 U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. The Committee met, pursuant to notice, at 10:02 a.m., in room SR–253, Russell Senate Office Building, Hon. John Thune, Chair- man of the Committee, presiding. Present: Senators Thune [presiding], Blunt, Ayotte, Fischer, Moran, Gardner, Daines, Nelson, Cantwell, McCaskill, Klobuchar, Blumenthal, Schatz, Markey, and Manchin. OPENING STATEMENT OF HON. JOHN THUNE, U.S. SENATOR FROM SOUTH DAKOTA The CHAIRMAN. Good morning. This hearing will come to order. Today, we convene to examine a growing and disturbing trend af- fecting consumers in the United States. Imagine you are a consumer who purchases an item online, but the product isn’t what you bargained for. Because you don’t want other consumers to waste their time or money, you take to social media to post an honest account of your experience. You are then aggressively approached by the company that sold you the sub- standard product and threatened with a stiff penalty unless you immediately take down the critical review. Little did you know that buried in the fine print of the website’s terms and conditions was an anti-consumer clause forbidding you from posting a negative review about the company, even if it is true. This scenario sounds farfetched, but the sad reality is that it is happening every day across the country. So-called non-disparagement or gag clauses are being forced on consumers and then being used to intimidate them. These gag pro- visions are egregious from a consumer protection standpoint, but they are also doing harm to our Internet ecosystem. Our committee spends a significant amount of time focusing on how we can increase broadband adoption and create policies that unlock the true potential of the Internet, but speech-stifling con- tract terms undermine what we are trying to accomplish in Inter- net policy. A core tenet of the Internet is the ability to freely share informa- tion with whomever you like. What good is information if it has been sanitized to remove truthful criticism? (1) VerDate Nov 24 2008 10:29 May 17, 2016 Jkt 075679 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\20128.TXT JACKIE 2 Simply put, imposing consumer gag clauses can result in unfair bullying. The practice is frequently about a larger entity abusing its power