California law says companies can’t punish customers who post negative reviews

A swanky hotel in New York caught flak this summer for threatening to fine brides $500 if any of their wedding guests posted a negative review on social media. In that case, the hotel backed down, but that doesn’t mean other businesses aren’t trying the same trick: stuffing so-called “non-disparagement clauses” into customer contracts in order to muzzle online criticism.

This explains why Governor Jerry Brown of California signed a law this week that will turn the tables on such businesses, by fining them up to $10,000 if they use contracts that prevent customers from expressing their opinion about a good or service online.

The law is a victory for consumers’ free speech rights, and comes after repeated instances of merchants trying to collect penalties of thousands of dollars from customers who criticized them. In one notorious case, a Utah couple received an email from an online retailer saying they would have to pay $3,500 unless they removed a comment they had posted to the review site, RipoffReport.com.

The text of the law is straightforward, and says businesses may not impose contract terms “waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.”

The law, which is the first of its kind in the U.S. and was reported by the LA Times, goes into force in California in 2015.

Businesses meanwhile continue to struggle with how to manage review forums and social media tools that empower customers, and that can make or break their reputation. Earlier this month, a federal appeals court threw out a class action that accused review site Yelp of”extorting” small businesses.