tv Key Capitol Hill Hearings CSPAN November 6, 2015 6:00pm-8:01pm EST
host: people not in the labor force -- the indicator. marginally attached is jargon for a group of people who have looked for work within the past 12 months and say they want to job but have not looked within the past month. these are the people so these are the people who we think would be most likely to be ulled back into the labor market if conditions were better, right. 5%. 's in the guest: no. these are people who are not in percent. >> and they're not employed. guest: right. they're not employed. unemployed, we s want some evidence that they're very serious about looking for a
job so they must have done something actively in the past month. if they haven't done anything actively to look for a job in the past month, then they're in the -- they're not in the labor force category, but we still want to know if they'd like a job and how attached they are to the labor market. so these marginally attached folks, what you can see is that there was a big increase in folks arginally attached during the recession, and that since 2011, it's really been trending down, so these folks have are gotten pulled back into the labor force, but they all the way back to where they were before the started. >> what about the discouraged? guest: the discouraged workers lly a subset of the margina attached, and they're the ones in the red line, and they're the nes who say that the actual reason they're not looking for work is that they're discouraged. they don't think there's a job them. re for host: and that is -- we've got some numbers over here, around
600-700,000 workers, and the marginally attached, as you about 2 million? guest: uh-huh. right. unchangedof these were over the month, but they've been rending down, so the thing to realize there is that any decline in labor force participation can't be driven by an increase in these numbers, coming these numbers are down. host: these are numbers that economists and reporters and to as well? k >> oh, absolutely. is an, what i would look at how the marginally attached number today before the light on number on this blue bar. you see about a half million more people in this category. business, a especially someone that might be in that lower wage space or might or a restaurant say, oh, well i'm 45%, do i need to raise wages? if it's a half million people out there that say they want a ob but they haven't been
actively looking, maybe i can tap into that and maybe they'd an-hour job 0- instead of going to $11 to get worker next door. >> the bureau of labor morath with thec wall street journal. in on the line. hi, steve. of the a snap shot situation and make your comment. caller: i started working in '72. i worked over 20 years before i fall for o unemployment in the early '90s, when things kind of slowed down, and i worked probably another 10 years after that before i had to again.o unemployment i don't like calling it, you or anything but, ction on, i'm in constru the boiler maker, and union that, and this
mean, it is a , i war on, i think, anybody that actually does any work for a living. and these numbers, this 5%, i add a 4 or 5 d to in front of that 5. mean, so many people were so discouraged -- like here in crockett, there was a pipeline company come in, oh, it's going to bring jobs. they brought 600 employees of their own in. so you know, it's a small town. there's no industry or nothing. going right got now is oil, you know, pipeline bringing in ey're workers from out of state, from and i'll say te, this, most of them, i'm going to say, are illegal immigrants. host: all right. we're going to leave it there, that there is point should be a 4 or 5 in front of the 5% number, for there other , are
ways of measuring employment hat come up with different statistics? guest: absolutely. employment out the situation every month, we put ut a full press release with thousands of numbers in it, but we find it helpful to have a that's the ber, and official unemployment rate, which is most comparable over internationally. however, for different questions, you might want prefer measure of underutilization. so we publish six of them every month, and the most inclusive, we fondly call u6. t includes all of the discouraged workers and everybody who has a part-time ob who would prefer to have a full-time job is measured in the category, the underutilized category. that number is higher and this 9.8%., it came down to
so if that's the number you prefer to follow, you can do that with the statistics we provide. pattern out the same over time as the official unemployment rate, but because it's more inclusive, it is higher, and it's another way of measuring distress of the labor market market. host: steve talked about being unemployed and taking unemployment. nother chart thing that you bls, duration of unemployment. guest: all right, so every survey people, people ouseholds, when -- when it's determined by their description that people are unemployed, we ask them how long they've been searching for work, and so we can divide up our unemployed -- our pool of the loyed people by duration of unemployment. and this chart shows you those buckets, all right. a recession caused tremendous spike in long-term unemployment shown in gold.
and now it's on the mend. this spike has been coming down. where it ack down to was before, but it's come down hugely. so there's still a disproportionate number of long-term unemployed in our pool we've made a but tremendous amount of progress. it's been declining for the past four years. host: bryce is calling in for chestertown, maryland. hi, bryce. n would be --uestio and the gentleman from the wall street journal mentioned it 5% back when i was in hardly in the 1960s was full employment, but i would not consider maryland and other places i've traveled to be anywhere near full employment. the second question would be are -- when time employee you spoke earlier, like restaurants and retailers rising
up, probably because we're getting into christmas and all that stuff, but is that part-time in that 5% or is that in a different chart as well? first and then erica. 5%, there's another subnumber that would include full time and would like to have part-time work. 5%, if you have a part-time job, you are employed. no, i hear you're saying i think from some of the other things they're talking about, like the high level of -- lower level of labor force participation suggests that, you know, that 5% number today isn't as strong as the 5% numbers in the past, or when we looked at the number of folks that have been long-term unemployed, that's showing us that there's been a lot of folks that were unemployed for more than 27 weeks. as that falls, it doesn't mean necessarily all those folks got jobs. some of them have left the labor force and taken a different path, so that adds to the amount of work, of people that could
potentially be workers, but 5%. me at host: your answer to bryce's question? guest: you're absolutely right, people working part time and time in the official unemployment rate are considered to be unemployed. u6 i was to the talking about, the more inclusive measure, they're counted as underutilized. and we do have measures of -- host: we're going to show another chart. this is called involuntary part-time workers. the bureau of labor statistics. 5,767,000 is the figure you have listed here. erica, what does this mean? guest: this is the total number of people who have part-time jobs in the economy who would prefer to have a full-time job. his number spiked up dramatically during the recession and has been coming
down ever since. it's still elevated over where it was before. what we have here, there's two kinds of ways you may be involuntary part-time employed, in we have both of them here. one is normally you're a full-time job and your employer cut your hours, and the other is found was a you part time job and you prefer a full time one. but have been declining, what's been declining of late is slack work, that employers cut part of it. host: and i think that recent steep or fall is important, already hasbody who a job is going to be considered workery a more qualified than someone who's been out of work, especially someone who's months or work six more. one other point bryce mentioned, all these other numbers, and i think it's important, are seasonally adjusted. so you can compare month-to-month. retail doesn't necessarily spike around the holidays because it
a lot of hed out and people don't realize that. a lot of these numbers are comparable month to month. host: for involuntarily part time workers, you added a figure, 5.8 million people. at the unemployment rate, when 5%, how many at people does that translate into? guest: how many people are unemployed? host: yes. actual figure? guest: i do. host: look that up and we'll in this call from laura austin, texas. taking myhank you for call. mark twain said there are lies, lies, and statistics, and your program is underscoring that in ways, you know, i couldn't even explain to someone who doesn't understand statistics. i'm going to be quick, if you'll let me talk. statisticsl, the way are measured, sometimes gives
result that you want. and the 5% unemployment rate is a false positive, as long as the rate goes down rates go up t marginally, you'll have a lower unemployment rate. that unemployment rate is a narrow section of what is really going on in this country. host: all right. sorry, eric? guest: i was just going to say, at least this month, the itilian reports expanded, so wasn't the case -- sometimes they have decline in unemployment rate. but i will say in general, that the bureau of labor statistics is considered the gold standard across the globe. certainly, people use the numbers for their own purposes. dispute that but i would say you could have faith in these numbers and what they're measuring. been and have they measured the same way a long period of time? host: yes, that's why the unemployment rate is so important and been measured that
way for decades. host: eric aare you a political appointee or civil service person? uest: i am a presidential appointee, but i can -- i have a term, appointment, i don't serve with the president. can't be pointed, i removed for not towing the party line or something like that. we are a nonpartisan organization and i am the only bureau e in the entire of labor statistics. vice and has served as president of the federal bank of new york from 1994 to 2013 through both democratic and republican administrations. the number, how many people in 5.0% are -- what does that translate to? million unemployed. host: so we've got 7.9 million unemployed, 5.8 or so million who are part time or underemployed, you said? guest: sure.
host: okay, these are the once more is here the chart from this month, october. unemployed, 271,000 jobs added. bureau of labor statistics. eric gro shen is the commissioner of the bls and eric morath writes for the wall street journal. thank you very much. >> join us for a conversation about the six-year highway and transit funding bill passed by the house this week. edwards of re chris theicato institute and alison premo black of the highway and mass transition association. shedd, author of unequal city, race, schools, and perception of injustice. washington journal, live on -span every morning at 7:00 a.m. eastern. [captions copyright national cable satellite corp. 2015]
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who wrote a negative review of n online retailer, the company said she had violated its gag clause and sent her a bill for $3500. the bill, d not pay the company sent her to ollections, which damaged her credit score. >> good morning. come to order.ll today, we convene to examine a growing trend affecting consumers in the united states. imagine you're a consumer who an item online but the product isn't what you wanted or bargained for. media to postcial an honest account of your experience. you're then aggressively that ched by the company sold you the substandard product and threatened with a stiff take down the you critical review immediately. little did you know on the web or conditions was an anticonsumer clause prohibiting you from posting a negative review about the company even if it's true. this scenario sounds far-fetched
but the sad reality is that it's the ning every day across country. so-called nondisparagement or gag clauses are being forced on consumers and being used to intimidate them. provisions are egregious from a consumer protection standpoint but are doing harm to our internet economic system. amount of significant time unlocking the true potential of the internet, but speech stifling contract terms undermine what we're trying to policy.sh in internet the internet has the ability to freely share information with like.ver you what good is information if it's been sanitized to remove criticism. simply put, imposing consumer gag clauses can result in unfair bullying. the practice is frequently by a larger entity of using its power limiting itself from legitimate criticism.uctive online review sites and social
media have given american ofsumers a tremendous amount power. consumers rightfully place high value on the experiences of ther consumers and, therefore, frequently rely on the wisdom of the crowd when deciding where to spend their money. to some consumers sometimes abuse the internet with false reviews? ure, they do, but businesses that face unfair reviews have existing remedies available to them, including the ability to sue for defamation. in addition, businesses should be able to offset phony reviews assessments of satisfied customers. regrettably, there are a growing number of businesses in the blocking e that are honest consumer speech through gag clauses rather than responding to negative criticism by providing a better product are or service. today, we're joined by jan will share her personal experience fighting against unscrupulous company penalty ht a $3500 simply because she told the truth about poor customer service. fortunately, for the palmers, they were able to challenge this abuse in court and persevered. the palmers are far from alone in their experience.
in one case, a dentist included nondisparagement clause in her contract as well as a clause hat purported to grant the dentist a copyright to anything the patient may later write about the dentist. has an online review complaining about being overcharged, the dentist sent a take-down notice to the site. lso sent a series of invoices demanding payment of $100 for each day it appeared online. the court found the clause to be unconscienceable and void. in another case, a woman who did not receive the product. in response, the company demanded the consumer pay $250 for violation of its fine print terms of sale which prohibited a customer from even threatening to make a negative public statement about the retailer. the consumer filed suit against the retailer alleging actions contrary to nd
public policy. the court ultimately found in the consumer's favor. a ng even a step further in wedding contract, one hotel went prospective inform newlyweds they could be fined if violated a guests gag clause by leaving a negative review. after this clause was reported the business changed its terms. keep in mind, the vast majority f nondisparagement clauses never see public light. this is because consumers often succumb to pressure and remove the negative review. understandably, they'd rather avoid the fight than face threat of excessive penalty caused by litigation or damage to credit scores. of this feration problem led senators and me to introduce the bipartisan and bicameral consumer review freedom act that would ban nondisparagement clauses in form contracts while permitting companies to pursue good defamation claims. our federal trade commission and state attorneys general provisions.hese
the fdc recently filed suit over clause and a consumer review freedom act would guarantee the ability to fight against these provisions. since introduction we've worked with stakeholders and plan to make a few changes prior to bill.g up the i'm looking forward to moving this pro-consumer legislation through the committee and the will so americans continue to help each other make informed decisions. we have an excellent panel today with diverse experiences on this issue. you each bring a unique perspective and i look forward to hearing about your experiences and thoughts on our legislation. agreeing thank you for to testify and to be with us today. senator nelson mr. chairman. so companies want to muzzle consumers. and these companies are using unequal ze and bargaining power to force consumers to sign these take-it-or-leave-it agreements or contracts.
these agreements items t online pop-up that a consumer clicks on, reading all the small print to purchase a good on the internet. but t no one reads them, they can have major consequences. ow, when i was in law school, they called these contracts of adhesion. adhesion because you're stuck with them. you can't modify the contract in any way. you're bound by the fine print hat lawyers are so good at drafting, and the idea that some ompanies are suing or threatening to sue their review s for truthfully ng their consumer experience,
ecause of these so-cold disparagement clauses in the contracts and the fine print. i think it's appalling. so we need to do something about it, and thankfully, mr. in a state u are like mine, of florida, that's so dependent on tourism, we want isitors to share their experiences. businesses that do a good job rewarded with good comments and those who do not, they ought to be punished by telling the truth. so mr. chairman, i'm glad that stops this ich contracts ofoiding consumers sharing their experiences and opinions with
consumers. i think this hearing is timely, mr. chairman, because of this your bill, it brings up also in my mind a related issue that needs to be discussed. just a few weeks ago, the los fiates times reported that chrysler was requiring consumers wanted to receive a family on a car, they must, in rder to get that, sign a mandatory arbitration clause as part of the sales contract. so if the car is defective and , lls or injures that consumer as was the case with toyota's or g.m.'s leration aulty ignition switches or tacata's exploding air bags, ally barred potenti from seeking redress because of or-leave-it -
arbitration clause. this type of provision it outrageous, and i think it's business. and beyond the auto makers themselves, many dealers are also trying to use these arbitration provisions to shield themselves. has seen too tee many examples lately of away ies getting scott-free for killing and injuring and hiding the truth, nondisparagement and arbitration clauses are just nother way for companies to avoid accountability by silencing consumers. consumers ought to be review write a negative about their business experience, but consumers should also have to seek justice in a court of law when businesses up their end of the
bargain. especially if that failure ends up in injury or death. we just simply can't let people scott-free. get off so thank you, mr. chairman. thank you for the hearing. >> thank you, senator nelson for those comments, and i want to, or the record, just add a couple of letters of support for the legislation. angie hicks of ngie's list in which she says the bipartisan consumer freedom act would limit these clauses are blatant toch strip americans of their right to honestly discuss their service experience. the internet association says we applaud this hearing on the bill, the bipartisan bill, introduced as i mentioned by several of our colleagues. merican consumer institute center for citizen research, and research for liberty, also a letter of support and one as
well from another coalition that includes yelp, public knowledge, public participation project, others.f, among many so i want to enter those for the itord and now i want to open up and look forward to hearing from our panel today. we have with us beginning on my left, mr. adam medrose, who is the senior vice president for advisor.oduct trip mr. robert atkinson, who is the president of the information and technology innovation foundation. ms. jennifer palmer who i mentioned earlier, is one of the in palmer tiffs versus clear gear. mr. eric goldman is professor of santa clara university of law the director of the school's high-tech lawsuit reingold, and mr. ira who is executive director of the national association of consumer advocates. so welcome to all of you. great to have you here today, and we'll start on my left and medrose.ht with mr. please proceed with your statement, if you could.
confine it as close to five minutes as possible and we'll get into some questions here from the panel. thune,d morning, chairman nelson and members of the congress committee. hank you for inviting me to testifying on today's hearing on what we believe as a very topic.ant we very much appreciate your recent introduction of the consumer review freedom of act.mation i'm adam medrose, head of trip advisor. i lead a team in trip advisor that's responsible for all aspects of the site, including collection, moderation and display of travellers' reviews. for those that don't recall what and book a to plan trip prior to the advent of the years,et, let's rewind 15 making travel purchases, because of their significant cost, the frequent need for travel, either had to research and plan the multiple ur own, call hotels and airlines to check availability and pricing or rely n a travel agent looking at brochures filled with marketing language and staged photographs.
f you were lucky, maybe a friend visited that city or country before but before, you were buying blind. the internet, web sites like rip advisor quickly improved that experience for consumers. our ability to make decisions is no longer constrained to what friends and family have purchased or where one local should stay on vacation. americans can make more mportant decisions on how to spend their hard-earned money. minority of hold-outs refuse to let consumers share their experiences. a popular tactic is trying to use contractual leverage to silence their critics. this underhanded practice harms those rating reviews, those seeking transparency through others' consumers experiences that are businesses playing by the rules. trip advisor hosted more than opinionson reviews and from our community, covering more than 5 million businesses all over the world. encourages our visit arors to share their
opinions, good or bad, at their experiences at hotels, restaurants and attractions and we strongly believe in their right to do so. the so give all businesses right to respond to those reviews. in order to ensure that consumers are presented with both sides of the story. as you know, trip advisor is far from the only source of consumer reviews. americans are ever increasingly returning to web sites like yelp, soft dock and angie's list to educate themselves on everything from visit and who they should hire to remodel their kitchens. shoppers, inmerican a recent study reveals rely on making a iews before purchase. 54% of u.k. adults rely upon reviews and nearly 70% of hotel shoppers consider online reviews to be more important of other sources information. no matter what population is being researched, it is clear that consumer reviews had become today's al part of marketplace. while consumer reviews have ubiquitous many
americans won't make a buying decision without researching those opinions, we know some businesses don't like online transparency it has brought the world. some bully consumers to get them reviewed or stop them from being submitted. others seek the same result by hiding small print in contracts, stipulating any negative review will result in hefty fines. consumers usually have no idea signing up for such agreements, which are usually only provided in small print at check-in or f purchase and those who read hese types of clauses lack the leverage to have non-negotiable clauses removed while standing t their checking desk with family in tow and their well arned vacation hanging in the balance. the exact language can vary. language trip advisor has received from travellers include since bad eviews are detrimental to our business, woo we place a fine for unwarranted reviews on our the of service to property. if a hotel receives a bad review
context or control of the hotel management, then a fine of $300 will be charged to the credit card on file. dealing with companies and individuals that try to include their ypes of clauses in customer agreements can be tricky for a web site like trip advisor. while the easiest solution would the business ve listing from our web site, that is often exactly what the company wants, to eliminate the commentfor consumers to on them. doing though would chill speech so trip avellers advisor has taken the approach of posting a red text box on the visitor's listing, warning travellers of this behavior, and one which would be approved upon by chairman thume's act. it goes against everything we stand for at trip advisor. ust as a consumer can tell family and friends with their experience in the off line world, they have a right to share that experience and opinion online allowing businesses and other customers to learn and benefit there from. includes a gag order in the agreement with its
customers, everyone is harmed. the consumer is improperly censored, the consuming public at large is less informed and it qualitye would be about of service or lack thereof at a given business. even the business doing the silencing is harmed because it loses the ability to learn from the experience of its customers. hese types of clauses serve no positive role in the american marketplace and stand in the way of consumer transparency. mr. chairman, trip advisor looks forward to working with you and the entire ensure that american consumers are not prevented from openly sharing their opinions and experiences ith other potential customers, whether it's done in person or via the internet. we welcome your questions on this important topic. >> thank you, mr. medrose. mr. atkinson. n senator, u, chairma nelson and members of the committee. i appreciate the opportunity to today to talk about the impact of nondisparagement clauses on consumers in the economy. the information technology and innovation foundation has long enable on policies to the internet economy to thrive
in this particular area that you're addressing with the consumer review freedom act is a critical one, if that is going to be our goal. three to really raise issues today. the first one really being about economics eory and behind this. here's long been a view in economics that the effective depends ing of markets upon information. akerlof, george received the nobel prize in economics in 2001 for their to what they ed called asymmetric information and this is exactly what's going on here. hotel, you to a don't know anything about the hotel maybe other than what you see. everything.nows this is a market with asymmetric information. that prize won because they showed markets with asymmetric information underperform what would be otherwise economic welfare for everyone, consumers, and the overall economy. in particular, this and other
found cs research has that markets don't perform effectively if, number 1, buyers can't accurately assess the value of the product or service before they buy it. you go to a hotel and you have no idea what's going on there, you can't make an informed decision. second, if an incentive exists for the seller to pass off a low-quality product or service as a high-quality one, clearly as the examples have shown that incentive exists, certainly for some sellers. third, where the sellers of good products and services have a quality. proving their and fourth, where there's a deficiency of public quality assurances. hard er words, where it's for a consumer to find some independent assessments of quality. that is why the emergence of online rating tools are so important. they essentially are the tool to solve this long age-old problem that has bedevilled economic markets. help line rating systems solve the problem because they provide a public quality
ssurance of that, and they let people know why -- and when there is poor quality. second point is the issue about preemption. that some argue that the federal government shouldn't be involved in some of these questions and we should just let with these eal there are better positions for them. in many cases, states are in best position. to in general, when it comes the internet economy, we can't rely on states to set policies for two big reasons. one is that you end up with a acavny of different and conflicting policies between states. and the second reason is that in cases, trip e advisor, hotel reviews in florida, many of those are non-florida residents. so a state might say, we want to protect our businesses by not allowing this, but they're hurting consumers all around the ountry because consumers everywhere use these and contribute to these. ut i think it really is a very
clear justification for federal action. the third would be, what about the possible harms to businesses where there is a bad review, and think it's been pointed out already that this bill would not rohibit companies from already using existing legal tools for defamation, but more a lot ntly, there's been of evidence now that we cite in our testimony that even when a company receives a bad review, whoever mpany manager, that might be affirmatively responds to that review and says, we're sorry, or thanks for the review. we're going to try to fix that problem, it actually turns out that that gets them better results with consumers, because consumers believe that the manager or the company is taking consumer complaints seriously. likely to 're more trust this. this was a study, for example, hotels and found that regardless of whether reviews are good, neutral, or
began to receive higher ratings from guests after started to rs respond to feedback. 've heard that from hotel managers and we've done some study on hotels. they actively go out and tell the managers that they should respond online because it brings back trust. we should worry too much about the impact on companies. if companies are smart, what they will do is affirmatively monitor these rating platforms and then respond appropriately. where there are clear cases of efamation and outright lies, again, they have other legal means. we n summary, that's why support this legislation and believe it's very important for marketplace. thank you. >> thank you, mr. atkinson. next up is ms. palmer. share your story. >> chairman thume, member nelson and other members of the committee. thank you for inviting me to
testify today. i am jen palmer and my family's ordeal for a company that tried a negative review demonstrates why this clause should be prohibited. placed an husband order from the online merchant lear gear for a couple of certificates that totalled less than $20. when they failed to arrive, we contacted the company through phone and e-mail. we never got a human being on the phone. the e-mail response was that the order never came through and was not paid for and was canceled. i posted a review and moved on with our lives. in may 2012, john got an e-mail from clear gear demanding this removed within 72 hours or we'd be fined $3500 for violating the nondisparagement clause in their terms of sale and use. this clause, which barred customers from, quote, taking any action that negatively impacts clear gear.com, its services, , products, management or employees, didn't
xist when john ordered the items and the fact that john didn't write the review didn't matter to them. esearching vi at internet archives confirmed the clause didn't appear until february 2012, three years after my review had been posted. we were shocked and scared. i spent hours researching how to remove the review, only to find had a policy of not removing the reviews. john tried to explain that the review couldn't be removed, that the nondisparagement clause didn't exist at the time he laced the order and that he didn't write the review, i did. clear gear responded by threatening to report the $3500 fine as a debt to the credit bureaus. this frightened so much we ing hased a credit monitor service for john. three months later, the negative with clear gear as a creditor appeared on his credit report. we immediately disputed the debt with no success. clear gear e-mailed us repeated admitted they had confirmed the debt as valid. but we couldn't afford to hire
an attorney and didn't know how to fix our credit report without legal help. it would be more than 18 months before john's credit would be clean again. we have been very careful to live within our means using inancing only for large purchases like our cars in 2008 and 2011, our house in 2009, and medical bills that weren't covered by insurance. we had no problems getting financing for any of those. year and-a-half, clear gear's black mark on john's credit caused us constant anxiety, fear, and humiliation when people would ask us, who's clear gear and why do you owe them $3500? because of the credit problem, we were denied a credit card, car loan, and deterred from trying to buy a ew home that would move us closer to our work places. the worst came when we were denied emergency financing to replace a broken furnace in october 2013. we were desperate, wrapping our hree-year-old son damian in blankets every night as temperatures dropped near freezing. i was terrified, too scared to tell anyone for fear social services would take him away
from us because we had no heat. we had to cut every expense that month and between both of our pay checks we were able to buy a basic furnace with cash. at that point, we were tired of living in constant anxiety and fear. i contacted a reporter at kutv in salt lake city who did a segment on our story and gotinous contact with a nonprofit organization. they helped us to clear up john's credit and we won a default judgment against clear gear. after belittling us for so long, they could never even bother to show up to defend themselves in court. throughout our entire ordeal, we wanted two things, that all traces of the clear gear actions against us be cleared from john's credit and to do everything we could to ensure nobody else ever had to experience the nightmare we endured. we want congress to ban nondisparagement clauses and we applaud the committee for proposing to address the problem by giving state authorities the unscrupulous fter company that is use them. we aren't the only victims of
this kind of conduct as public several as reported times on their web site and blogs. companies should not have the power to restrict consumer speech or punish people who criticize them. it needs to stop. companies should earn their reputations honestly with good products and services and fair dealings. states should be free to enforce they can.n every way i was glad to hear a research in he state attorney general's office from hiring outside attorneys is being removed. i'm grateful for the opportunity with you.y experience on behalf of my husband, john, my son damian and all the who are out there being bullied in silence by companies wielding nondisparagement clauses, i urge the bill that prohibits these clauses and rovides for robust enforcement of the law. thank you. >> thank you, ms. palmer, for our willingness to share that story and be with us today. professor goldman. thume, ranking
member nelson and other members of the committee, i appreciate the opportunity to discuss the consumer review freedom act of 2015 and how congress can help reviews.onsumer economic committee and the bill sponsors for their leadership on this topic. consumer reviews are vitally important to our modern economy. markets become stronger and more efficient when consumers share their marketplace experiences and guide other consumers towards the best vendors and away from poor ones. despite the social benefits reviews, by consumer some businesses try to distort their public reputation by contractually sequestering reviews from their customers. these efforts are categorically illegitima illegitimate. the act will ensure every consumer has an opportunity to discourse voice to the so others can benefit from their experiences. because contractual restrictions n consumer reviews are such a terrible idea, it seems like existing law should already practices.e although, there is some precedent to support that ecision, also explore two reasons why i think we need the
consumer review freedom act. courts t's not clear if will enforce antireview clauses, nd i use the term "antireview clauses" to describe what other people are calling gag contracts r clauses or nondisparagement clauses. we have a nomenclature problem, and i'm sorry for compounding that. many judges will refuse to enfoe enforce these clauses for public policy or other reasons, but judges also don't like to override contractual provisions. ew clauses are not guaranteed to fail in court. i'd like to call your attention case galan r to the ersus johnston, which involved a vacation rental contract which required tenants to agree they web sitesuse blogs or for complaints, anonymously or not. we don't have any idea how many consumers were deterred by this clause from sharing their do know thatbut we two tenants did post public vacation rental
online in defiance of the ban. he landlord sued these tenants in federal court. the court held that the reviews but the efamatory tenants may have breached the rental contract. in other words, this really antireview clauses exposed the tenants to potential sharing what was a nondefamatory review. he consumer review freedom act will eliminate any ambiguity over enforcement of antireview clauses. tenants and other customers will enjoy legal certainty about up.ir rights to speak the second reason why we need the consumer review freedom act is that businesses are always seeking ways to shape and manage their online reputation. as they offer the illusion of control, antireview clauses will keep proliferating unless banned. the experience of the healthcare industry might indicate how that happened.
in late 2000, a company called medical justice sold formed doctors and other medical professionals that contained antireview clauses. failed to -- was elegant and tempting, the pitch was. it implied by using the form contract, doctors and healthcare rofessionals would seemingly obtain a magic wand to scrub unwanted patient reviews from the internet. estimate that i over 1,000 doctors and other ealthcare professionals deployed such antireview clauses and that over a million americans signed such provisions. the long term marketplace damages attributable to medical justices misguided campaign is incalculable. changed medical justice its position in 2011 and told consumers to stop using its can, even today in 2015, it be hard to find robust numbers of patient reviews for many providers. although the healthcare industry's adoption of antireview contracts may seem to be an extreme case, we're likely
to see similar effects in other ndustries dominated by small businesses and professional service providers. why these categories of businesses? in many cases, these providers felt identities are closely linked to their professional reputations. negative feedback about their business feels like it reflects upon them as an individual. if a vacation tenant says she didn't like the rental decor, as landlord might take that a criticism of her aesthetic taste or if a patient says she didn't like her doctor's bed side manner, the doctor may feel like her personality is being criticized. small business owners and professional service providers will be attracted to antireview these public vent ego blows. therefore, without the consumer eview freedom act, i suspect other industries will embrace antireview clauses like the healthcare industry did, and we will all be poorer for it. consumer reviews are worth tohting for and i'm thrilled see congress takog that fight. i want to thank you for for your work on this bill and the opportunity to share my views
>> thank you very much, professor goldman. reinhold. >> thank you, mr. chairman, thume, and other members of the committee. i'd like to make three points. one, no one who has been paying attention over the past decade as consumer rights have been away through d unseen contracts should be surprised about the presence and growth over nondisparagement and gag clauss. two, the idea behind the problem on crafted the is a good one and fits into a legislative of action designed to not only protect consumers but also on market economy. now, we are s of unable to support this bill because it seeks to limit the state and rights of federal officials. when i see nondisparagement theses, i unfortunately see logical conclusion of a decade-long corporate effort to of yet another fundamental right. buried in fine print, consumers ly required to al
waive all sorts of rights, including the right to seek relief in our public justice system. and now with these gag clauses, the right to even speak. what's happening is obvious. through the use of indecipherable languages and onnegotiable form contracts, corporations have successfully stripped consumers of their seventh amendment right to a jury trial. why should we be surprised when corporations want to do the same o consumers' first amendment right to free speech? in my early years as an attorney, i would believe that hese clauses that waive fundamental constitutional rights would have been deemed unconscienceable and unforceable. surely, there was no consent by the consumer, surely it was impossible for businesses to deny consumers the right to tell our stories in our public courts. that these prove clauses prevent consumers from proper legal help from redress, they would be unenforceable. surely i would be wrong. ng courts,g in expecti particularly the supreme court, rom stopping businesses from
stripping fundamal rights from consumers. i, we, should not repeat that mistake. pass ore, congress should a bill that prohibits gag clauses as well as pass the arbitration fairness act. simply, these gag clauses attack the very heart of a fair and marketplaceamerican by prohibiting consumers from exercising the freedom of sharing their thoughts and consumers.th other consumer protection laws in a market nomy protect the itself and all of its participants. congress and state legislatures on recognized this fact ountless occasions and have passed a wide variety of laws. the state udep laws were created with the understanding that our market economy would not function properly if unscrupulous businesses were left to profit from unfair and practices and gain competitive advantages over anonymous businesses. lending act exists in large part because of our understanding that a fair and marketplace is
dependent upon consumers making informed and knowledgeable decisions. the fair credit reporting act, a law that this committee is intimately familiar, was passed with the full recognition that credit decisions made on the , sis of faulty information whether by credit granters or consumers undermined the vitality of the economy. the idea to ban nondisparagement clauses stands in a long line of fundamental consumer market protection statutes. our market economy only functions properly when unfair practice are exposed and consumers do not make decisions information but instead on all information, whether disclosed by law or hared by others, it's made available for consumers to use and/or ignore in their decision-making process. while it's essential for our consumer marketplace to function fairly and efficiently, its mere passage is not nearly enough to law is hat the rule of complied with. strong enforcement of these
regulators public or by private consumers is essential for laws to have their full effect. attorney generals across this country have done yeomen's work to enforce protections. with ever-shrinking budgets and staff, these important servants have sought ways to maximize their ability to protect itizens and their state's economy. their efforts collectively working across state-wide in a bipartisan manner have been essential in obtaining justice to consumers far beyond what might be possible if the work as limited to what was achievable by their own limited staff and advocacy tools. similarly, the partnership that some attorney generals have formed with private attorneys, particularly in instances when they were attempting to force the law against big and deep-pocketed corporations, has led to a measure of justice and consumer relief otherwise completely unattainable. simply, if we want attorneys general to enforce the law, congress should not limit these state officials from choosing how they best protect consumers in their own state. we fully support the idea behind
f-2044. there's no place in the american economy for denying consumers like jen palmer the right to speak freely about their experiences in the consumer marketplace. however, for a consumer market protecting statute to be fully ffective, it must be fully enforceable. because this still limits the ability of public regulators of their all necessary enforcement tools we cannot currently support it. removed provision is from the bill we will be pleased to offer our full support in this important legislative effort. thank you. >> thank you, mr. reingold. your comments on the legislation and will take into consideration your thoughts as we continue to shape it while it moves through the process. i want to start with five-minute rounds of questions, and i will just want to, ms. palmer, ask you, you've been through a harrowing ordeal before finally winning in court. up,t people would have given but you persisted and kept
fighting. nd even now, you know, to come across the country to share your tory with us today, the experience that you had, speaks volumes about your commitment to issue. so just why have you continued to stay engaged as you have on this issue? >> as i said, the only two things we ever wanted to have happen was for my husband's credit to be cleaned so that we ould move on with our lives as we had originally planned, and we really did want to make sure that this never happened to ever again. when i first contacted the our storyoped that if got out there, other people would have -- would be inspired o come forward and say hey, these people are doing this to me too. what can i do to stop it? would come amed it this far. we really didn't. i'm so pleased that you're pushing through legislation on the federal level. anything i can to assist that. > well, we appreciate your
story has gotten out there. you testified today that one of he purposes of these gag clauses is to bully and intimidate consumers into removing negative reviews and in described ony, you how clear gear's demand for scared you.d and guess i'm wondering if your experience with clear gear has given you pause about posting products? other >> absolutely not. absolutely not. continue to post reviews for both companies that have given wonderful service and great other consumers know, yes, you should definitely buy from this company, they're wonderful. and also for companies that may be short of the mark and didn't provide such a great product. that information is just as important as the good review. >> good. well, i guess after what you kleargear, it th couldn't get any worse, right?
>> i would hope not. >> mr. medrose, trip advisor has taken steps to inform its users hen a company employs gag clauses and on the other side of the equation, i might add, a number oftly sued companies that allegedly facilitate fake reviews online. see other large internet companies taking measures to reviews to make sure that consumers are getting ccurate and authentic information? >> absolutely. before i answer that, let me first, again, thank you for for pushing this legislation forward. we think it's incredibly important legislation. ithout a doubt, we see businesses in the hospitality ndustry attempt to silence critics of their services, and this plays out across a number of other industries. you mentioned the amazon case. yelp, in n it with
yelp reviewers or other reviewers to remove their comments, to reduce the severity of their comments, or to out bury those comments with other content, more positive ought you great -- i th made a great in your testimony. to what degree do you think that gag clauses may be distorting the market? do you think that most consumers are aware that is going on? >> i think the contract clauses are a small part of the much larger problem. there are some any disincentives -- so many disincentives for consumers to share their experiences. each of those have gone through a friction point in their willingness to share. palmer said proudly she has
not been bullied off the internet. but most consumers don't have the fortitude that she has. gag clauses are one way that businesses can threaten consumers to get them do not only stifle themselves, but to remove their legitimate abuse once posted. other tools, needs use as well. like threatening defamation, simply saying we will sue you and take you to court if you don't remove it. that is why i would also call your attention to things like the federal antislap law. that would be another tool to protect consumers from having their blood sugar views driven on the internet. -- there legitimate reviews driven off the internet. >> i will turn to senator nelson. sen. nelson: miss palmer i'm so sorry you had to go through this experience. when you went to the tv station and started getting publicity, is that when you then decided to go into court, because you are
listed as the plaintiff in palmer versus kleargear. >> we had been seeking legal help before we went to the media. all the lawyers i spoke to, i asked to be advocates? they said oh no, we are not touching that with a 10 foot pole. it is so shady and so big most did not want to touch it. it was not until after we spoke to the media. i was hoping to find a lawyer willing to step forward. that is when public citizen stepped forward and said they want to help you, we have the means and resources to do so. nelson: that is a good news story.
i want to look at the other side. tell us about evidence of bad actors trying to take advantage of businesses by threatening to post a false negative complaint. >> there are certainly some instances where consumers threaten a business with a negative review, threatened to share their experience online. so that business rightfully has concern that is going to impede their future marketing efforts and future business. the reality is we encourage businesses to proactively communicate those threats to us. we then monitor those properties for the instance of negative reviews. the last majority of cases, those negative reviews never appear. they are empty threats. second, one of the tenants of trip advisor is to allow
businesses to respond to any consumer review. we believe that transparency will solve this problem. consumers write reviews, businesses get to respond. future consumers get to read those responses, the back-and-forth between those two parties, and make their own decision, weigh their own beliefs about whether or not this is the right business for them to visit. soverall this is a not a large problem. sen. nelson: you encourage those businesses to contact you if there is a false review. with this legislation prevent a business owner -- would this legislation prevent a business owner threatened with a false review bringing a case in court against a consumer for defamation? probablyly -- i am not the best person to answer from a legal standpoint. i don't believe it will prevent businesses from interacting with advisor and asking reviews to be. reviewed
we do employ an entire staff and look at every review where an owner or another member of the community flags it as inappropriate, against our guidelines, or irrelevant. sen. nelson: at the end of the day, i think what we want is the access to the courts for whoever -- in the case of ms. palmer, it was her access to the court that finally brought about the redress of her terrible situation. mr. rheingold, on the arbitration clause. when fiat used this friends and family program to basically tade away therade right to go to court in exchange
for a $200 discount. should we be doing something to protect consumers for more than just the non-disparagement clauses? >> absolutely. i think you made a very good point, senator. the way consumers can seek redress is through our public court system. a lot of these stories and a lot of the bad damages done to consumers is that they don't have access to the courts. ms. palmer was lucky. her story is a very compelling story, and the press picked it up right away. sometimes need to go to court and publicize stories. what fiat did in that instance is happening across the country in every consumer place you can imagine. it has gotten sanctioned. in the fiat case, there was a reward for signing. in most instances, people are signing away their right to go to court without ever knowing about it. it has been in clauses, it's in shrink wrap, click on things. arbitration clauses are
everywhere in our economy today. there really is a dual justice system happening, where consumers don't have access to our courts whenever they reach an agreement or enter into any sort of agreement with any type of business. nelson: this committee has seen a proliferation of these things just recently. fiat is just one example. the gm ignition switches and so forth. and now the toccata -- the takat a airbags, that is still in the news. as a matter of fact, today. commentsyou for your because these things that are subject to mandatory arbitration or adhesion, you would really lose a lot of your ability if we cut off the access for either of agreement -- aggreived or
the content. >>, if something said is untrue those cases can proceed. we don't do anything to impinge on that right. senator mccaskill and senator blunt, senator rand are still basking in the glory of the kansas city royals victory. >> we hardly had anybody show up for the party yesterday. >> i know everybody in missouri and kansas were there. i don't know what you guys are doing here. >> first i'd like to point out that i had a bet with the senator from new york. the offer was i would offer him a city barbecue if you would not agree to talk for 45 minutes. [laughter] he accepted your bet, not mine. >> that was a bad move on your part. >> many missourans have loyalty elsewhere interstate. and senator blunt are wearing
blue and you are wearing red. sen. mccaskill: oh look at that. i will never go into the history of the team of kansas city, missouri. but we are welcoming all the fence from kansas. -- fans from kansas. >> you're up senator mccaskill. sen. mccaskill: i am pleased that senator thune has agreed to take out the provision that limits the tools available to attorney general's as it relates to contingency fees. let me ask you, ms. palmer. i'm assuming there was a contingency agreement with the lawyers that ultimately represented you in this case? palmer: fortunately public citizen was able toward with us pro bono because we cannot afford representation on the scale that we needed. those that said, what if you
just wrote a cease-and-desist letter? they were offering thousands of dollars. sen. mccaskill: of course. it's very hard for an individual to get to court unless there is a contingency fee. ms. palmer: even with the contingencies we said no, we want a retainer. if we don't have $4500 to pay kleargear, we don't have the other money. >> one important point. i will admit publicly i am a chicago cubs fan. so i'm disappointed today. congratulations to kansas city. one thing about consumer statutes -- something like the fair credit reporting act has fishing provisions. attorneys who take the case like a fair credit reporting case like the damage done to ms. palmer when i have to charge her. -- would not have to charger. it's not a contingency.
they only get paid if they win that case. the court will award them damages after they successfully win. it's different from contingency. the weight -- the way congress has drafted this in the past when it comes to private enforcement is to have those extended. that provides access to consumers who have been damaged. sen. mccaskill: did public citizen recover the cost, even, of the litigation? ms. palmer: we are still working on tracking kleargear down to track the cost. sen. mccaskill: so you have not collected yet. are they still in business? ms. palmer: as far as i know. sen. mccaskill: that drives me crazy. ms. palmer: the judge did award or settlement and tacked on the lawyer's fee for public citizen as well. if something is corrected, public citizen --
sen. mccaskill: but if you have lost, they would never have gotten anything. ms. palmer: true, and that was always a fear. however with any of the other lawyers we contacted, they were not interested on working on a contingency basis. they wanted a retainer up front. sen. mccaskill: that is one of the challenges, how we fund lawsuits with a legitimate can paint with the damages don't appear to be enough to warrant the risk that a lawyer takes on when they given to costly litigation. that's one of the advantages these big companies have. they know that it's small enough. there are two things a lawyer has to have to bring a lawsuit. one is liability. the second is damages. how large the damages are is relevant to whether or not that lawyer wants to take on the costly risk of going forward with a lawsuit.
sen. mccaskill: i think he would have run in horror. if ms. palmer knew before she ordered those items, what that company was planning to do. this is something we really have to work on. this is a lot of waste. nobody is reading this stuff. so why are we doing it is not providing service that it needs to provide to the consumers that it ostensibly is designed for? we have to work on that. thank you mr. chairman. >> in your case, ms. palmer, they added this long after the transaction occurred, correct? palmer: i read through the terms of service three times to make sure there was nothing in there that would've prevented me. i did not purchase the items, my husband did. i wanted to make sure there was nothing prevented me from posting the review versus my husband posting it. i did read through it several times. when they came back three years later and said you violated the
non-disparagement clause, i look at my husband and said, that didn't exist. there was no non-disparagement clause. [laughter] >> that you actually read that agreement is impressive to start with. senator fisher, my partner from the south. mentioned small businesses in particular may make use of these non-disparagement clauses. as many of them view it as personal when they get negative feedback. i'm on the small business committee here in the senate. i fully understand how important small businesses are to the state of nebraska and also to the economy here in our country. while i agree that the use of these non-disparagement clauses is a practice that should be discouraged, i would like your views on whether this bill
contains sufficient protections for small businesses that are out there. do you think it does? >> at the end, the goal is to create a level playing field for small businesses. anybody distorting their public persona using these non-disparagement clauses is hurting the overall marketplace and opportunity for small businesses to win over customers to their side of the operation. if anything, this bill is essential for making and preserving the vitality of the small business community and making sure that markets are open for them to come and enter. sen. fisher: do you think those protections are in this bill? >> i support this bill as it is currently drafted. i did write thoughts about how we can be treat. -- can be tweaked. those deserve further discussion. even so, this bill would be super helpful in advancing the
interests of small businesses. sen. fisher: mr. atkinson, do you have any comments? do you believe that small businesses are being protected, while still allowing consumers to be able to express their views without being punished? >> i would echo mr. goldman's comment that a lot of the damage from these clauses actually are harming small business competitors who are doing a good job. consumers don't have a way to weight who is better. it might hurt a particular small business, but it helps others. secondly, there are still legal remedies that a company can use if they feel like some one has outright lied. it does not prohibit a company from taking action in that way. as i said before, there is a lot of evidence that small businesses are active. a small business owner posts something and says we are concerned about that, we don't agree with the review, then it can minimize the damage.
fisher: do you think a small businesses have the resources where they would be able to respond to those negative comments, where they really can take actions? it's hard for consumers to take action. we have heard that. it is difficult. lawsuits are expensive. but what about small businesses as well? how do we reach a balance here? >> lot of the online rating platforms work is that you can monitor what people, your customers are saying about you. frankly, in the internet age, that is something every business needs to do. you're not going to search the web every day for everything. but there are platforms you can and should monitor as a small business owner. doing that i don't think is overly burdensome. and a quick reply, just a one minute reply every once in a while. you don't get negative reviews every day. i don't think it is important
for companies to do that. i think it's just good practice now in the internet age. sen. fisher: thank you. mr. atkinson, any senate version of this bill, we are looking at investment of the prohibition on non-disparagement clauses by the ftc. in the house version, we have the enforcement by the department of justice. do you have an opinion one way or the other on who would be the best position to assume that role? >> i don't have an opinion on that. the person who leads this work for us, who was not able to be here, i will talk with him and get back with you on that. sen. fisher: that would be great. thank you all very much for being here. >> thank you. senator moran. sen. moran: thank you for the concepts contained in this legislation. autumnal small business -- on the topic of small business, i assume it business uses reviews
as well. they are a consumer. small businesses need information about what other small businesses they might want to deal with. all my reviews may be helpful to a small business in making a business decision. -- online reviews may be helpful. one of the other ways is that i small business cannot make a mistake. it's more difficult to enter into an agreement for purchase what another corporation that turns out to be a bad deal. the consequences are harder to recover from. i assume that small businesses also utilized reviews. everybody is shaking their head., anybody want to disagree with that? then let me ask about state laws. california in particular has state laws dealing with this issue? >> yeah, california is the only state. sen. moran: others are pursuing
that, is that true? >> i have not considered that. sen. moran: i hate asking that question. is or anything we can learn from california in the way this has been enforced? >> we don't have any data points about how that is applying to the field. is relatively new in the process. there is a statutory damages provision in the california statute that awards the consumers who are subject to today's clauses to obtain statutory damages. that is a topic that is worth escutcheon. -- worth discussion. sen. moran: in addition to that suggestion, let me ask a broader question. while we're focused on non-disparagement clauses, in this world of online reviews, are there other or similar issues that the commerce committee ought to be paying attention to? a couple that i think of been mentioned, fake reviews, false
reviews -- are there issues that surround this new development? as part of a small town, these reviews occurred. they occurred after church, they occurred at the grocery store, they occurred at the cafe. people in our community would talk about what service they got were did not get, have quality the product was or wasn't. today i suppose the consequent is are magnified because of the volume of information available. is there something missing as we only look in this legislation as to this issue of non-disparagement clauses? mr. professor. >> i will reiterate my interest in the federal anti-slap solution. it would enable lawsuits alleging defamation or other ones of harms that are
content of social interest to be tossed early. to fee shift if they are illegitimate. the real way that reviews get scrubbed off the internet isn't through these clauses. these clauses are problematic, but those are threatened to take them off-line, like ms. palmer explained. in her case, she could not remove them. but in all other cases, when consumers get those threats, the content comes down instantly. the federal anti-slap law would help consumers decide, i would not be bullied off the internet. and i won't be betting my house on legal fees that i can defend my interest in court. >> mr. atkinson. mr. atkinson: i would second mr. goldman's point about. i released a report last year on the into -- on the issue of anti-slap. we would agree with that. i think that's another component. ofould see both pieces
legislation as important. sen. moran: thank you for this hearing. i apologize for intruding into your commentary on the royals. it's impossible not to have the continued kansas-missouri battled in the senate. [laughter] >> i would not have it any other way. senator schatz. sen. schatz: thank you mr. chairman. thank you ms. palmer for your courage and clarity. you have been through a lot. and i imagine it has been a difficult several years. we appreciate everything that you are doing. your case perfectly illustrates why we need a law. individual consumers are in a new position to fight this injustice. your case also shows why we need federal law, a patchwork of individual statutes are not going to work. my first question is for mr. atkinson. we have been talking little bit
about -- two things. one is that consumers don't know what rights they may be waiving as they click "i agree" or sign a contract at the hotel desk. another question related to intimidation and admonishing or warning customers against a negative online review. those are different technical approaches. which is it that these companies are employee? -- are employee in? are they -- emplying? are they treating customers into signing away their rights? or are they warning them against a negative online review? they can be doing both at the same time, it seems to me..... me./ >> there has been a lot of anecdotes, which seemed quite compelling. we heard one here and folks have talked about that. there is a lot there. we don't know which strategy
company's are using more of. one of the reasons this bill is so important is is not just the fact that even if there were no law, if people think they may are been gone after -- we at a point if we don't solve the problem soon, there could be something in most consumer's minds that gives them a doubt and fear. " i heard about some of getting sued, i'm not going to take the risk." if you think about someone contribute in a review, they are contributing to the public good. that you're taking their valuable time. it's not going to help them, it will help everybody else. if we have a collected climate of fear. people will not be able to do it. >> we are operating at the beginning of this problem. goodfore we are lacking decision support on exactly the size and scope of the process. speaking of that, does anybody on the panel no primarily whether these clauses are being
employed by small or large enterprises? it seems that is an important question. i would imagine the reputational risk of big international brands would probably cause bigger companies not to utilize these. i would like to know whether some of the bigger companies are using them. does anybody know? advisor't think trip sees evidence one way or the other. businesses want to distort consumer opinions online by getting negative reviews withheld in favor of positive reviews. >> let me move on to the way that trip advisor works. you essentially have a pop-up screens that warns consumers if there is a particular hotel or
travel company that has a non-disparagement clause. is that correct? >> yes, we put a red badge on the company warning consumers so that they can make informed decision knowing that there is a non-disparagement clause. >> had you figure out whether the company has a non-disparagement clause? is that based on consumer complaints, or do you have a internal process? i imagine it is a resource question for you to have a team of lawyers scrubbing all of their individual contracts. is it just based on if something pops up, then unified public? -- then you notified the public? >> we are notified by consumers. that is why we need this legislation. we only see a small percentage of these contracts that may exist. some consumers may not notice the clause, maybe too fearful to reported. widespread banishment of these types of clauses is critical for all consumers. >> that is the most important
point with respect to whether or not there is a private sector and internet-based solutions. it seems to me there is not without a statute. you just can't make yelp portrait advisor or anybody else -- yelp or trip advisor or anybody else responsible for sifting through legal language. >> i would wholeheartedly agree. it's a unique game of whack a mole. >> thank you. >> thank you senator schatz. senator daines. sen. daines: this is a really intriguing subject. i spent a number of years with customer experience solutions. touchedtions that millions of consumers. it's an overused cliche to suggest that the customer is in charge we all know that.
second, feedback is a gift. , think it's insecure companies like bullies on a playground are insecure, would have these anti-disparagement clauses. welcome to the free market and the internet. let's compete and let consumer have its voice. frankly, it tends to be confident thing to consumers -- condescending to consumers to -- consumers can wade trhough. let the consumers sort that out. recognizing there is still the problem with some companies posting false claims to profit and competitors posting claims to disparage. having said that, i can tell you from montana's economy viewpoint, tourism is one of our largest businesses. $4 billion. 11 million people visit our state. they are going online, booking trips, they are relying on
online reviews. i spoke to a small business iner just a couple weeks ago a secure place in montana. i said, how was your summer? he said, best summer ever. i said why? i wondering a big marketing campaign. he said, online reviews. people searched and found us. yellowstone park has a 4.5 out of 5 rating on yelp. just a hometown advertisement there. [laughter] i am curious about how we ought to approach fake online reviews. is there a thought on best practices? whether businesses paying for positive reviews for competitors who are writing false negative reviews. entries he could share -- i am curious if you could share best practices that you would recommend that should be used to combat fake online reviews?
>> your first point about consumers becoming more sophisticated in some ways analyzes them. consumers are becoming more sophisticated. people know there are bad and good reviews. as we get more comfortable with the internet economy, they will be able to sift through that. in terms of companies, there are certainly companies like yelp and others that have very sophisticated algorithms. they have employee software and data scientists to use reviewsgy to flag these that are at a high risk of being false, and taking them off automatically. there is technology that companies are employing that simply don't post those reviews. >> i would first like to point out, no matter how big the problem is, anti-review clauses are never the solution. is orthogonal to the reviews, although it's a
legitimate concern. this bill is irrespective any concerns about a fake reviews. with fake reviews, we should recognize that consumer reviews are still a relatively new phenomenon. we can take it back maybe as far as 20 years ago. really the modern consumer review economy is maybe a dozen years old. if you think about it in those terms, we are seeing the evolution of review sites and developing better techniques for managing reviews. in the end, they are the solution. we need to have trustworthy by forms -- trustworthy platforms. we are see improvement on that front everyday. >> i worked for procter & gamble for 12 years. this is incredible data. this is what you paid a lot of money to focus groups for. now you get it real-time unedited, right at the coal face of the consumer experience. that is why these disparagement clauses, based on a lot of
stories-- this is part of the new economy. this is a gift, i think. if you want to become a world-class company, embrace it. >> senator daines, we see over and over again stories like what you told. businesses in remote places that consumers would not have thought of traveling to or not have had the courage to travel to pre-internet. in fact, the best businesses leverage the platform like visor to encouragevisor people to share their opinions and send their expectations of what the trip will be like, so that you feel safe to venture to some of these more remote places that are amazing experiences all around the world. what makes that possible is the scale of our platforms. the free ability for consumers to share this opinions without the threat of being sued or
bullied by owners who may not like every piece of feedback. lest businesses take that feedback on ongoing is this and make it business. -- and make it better. they change things about their property. they remodel. they use that as a feedback tool that otherwise companies would have paid millions of dollars for. thank you senator daines. in our line of work, we get plenty of feedback. [laughter] >> we do. >> i will embrace the idea that it is a gift. >> i will stay off of your facebook, you stay off of mine. [laughter] >> thank you. senator from minnesota, and noted author. >> thank you very much mr. chairman. i was thinking the exact same thing when he said it was a gift. i was thinking of some of the hilarious tweets and facebook posts that i get. i won't go into them right now, but i collect them.
they are so amusing. [laughter] this is a very important bill. i want to thank th the chairman -- the chairman and senator schatz for the work they have done on this. i would like to start with you, ms. palmer. your experience sounds like quite an ordeal. i read about it. the scale of the harm caused by what was initially a $20 purpose is astounding. your persistence in finding a solution is extraordinary. sn response to kleargear' initial demand to take down review before they meet the negative reports to the credit rating agency, how much time did you and your husband spent researching to their demands? >> it was several hours. ripoffreport.com seemingly at random. it took me several hours to find out what options i had.
to the point of actually e-mailing them and say, here's my problem, what options do i ihave? they had to respond to me and spell out, this is in our policy in the legal link which is convoluted, but basically we don't allow you to take them down, and here's why. we want to make sure people are free to post review without feeling bullied and without feeling like they can take it businessest allowing to remove it. it was several hours. >> do you think most consumers are likely to be as persistent as the palmers in response to threats from companies seeking to inform non-disparagement clauses? what will likely happen if they are not as persistent? >> ms. palmer's story is mark will. i wish all consumers acted like she did. -- story is remarkable.
most people give up. consumers will do whatever they can to just move on with their lives and get a review removed. they would just walk away from the problem. unlike ms. palmer, they would probably stop posting reviews. ms. palmer is unique and we should clone her in terms of her behavior here. >> very good. thank you. i found some people that had pursued things like ms. palmer did. it was about cramming on phone bills. it was like a lutheran minister and a math teacher going to the depth to see these tiny little charges that added up over time. you are in good company, i guess. i understand the concerns of small business owners that worry
that unfair or false reviews and hurt their livelihood. was it you mr. atkinson cited a study showing that 1 star increase in a restaurant's rating can lead to a 5-9% increase in revenue? to put a less rosy spin on it, a one star decrease can have a serious consequence on its bottom line. besides non-disparagement clauses, what role do small business owners have to address unfair war's -- unfair or false reviews? >> the lions share of those readings are accurate reviews. the most important thing a restaurant could do is to improve the service and quality of their food, the reasons why they are getting a better view. that is valuable information for a company to continuously improve their service. secondly, a lot of these platforms, including yelp and trip advisor have mechanisms
where you can challenge of use that are bad. thirdly, companies can and do post. they say, we don't agree with this review, and heres' why. or we do, and here is why we are going to fix it. >> i was looking at some last night. not in preparation for this hearing. but i like to say that it was. incentives toat companies like trip advisor have to limit false reviews? disabilityconsumers -- the ability to share their experiences. the incentive ultimately, when we hear about limits to free speech, is to warn and penalize businesses that try to chill that speech. goldman, does your research bear out what mr. medros just talked about? >> which aspect?
>> that incentives for companies to limit unfair involved refuse-- >> you are talking about review sites. they fall under remediation. they are the mechanism for providing that feedback. they themselves compete in the marketplace be persuasive. fierce competition among review sites to convince their consumers they are trustworthy. that competition is a great incentive to fight against fake reviews. >> thank you very much to all of you. >> senator blumenthal. >> i would like to thank the chairman for not only having this hearing, but lending his support to the idea of attacking consumers against this new ingenious wrinkle in the sort of age-old practice of tricks and traps the fine print of
contracts. they discourage consumers from warning other potential consumers about the downsides of particular experiences or products. sorts of -- sorts of sneaky paragraphs bars a consumer from giving a good a negative review. they paid for it, they are disappointed in it, and they want to warn other consumers. usually they are paraded in the fine print. they are a one-way ratchet. they prohibit negative reviews, but not positive. standpoint,omic they distort free market and chill speech.
i am a supporter of the bipartisan bill that has been announced. i thank you for engaging me on this bill. my initiative objection arose from the original language of the bill, which included a provision related to state attorney general enforcement. that was concerning to me as a former attorney general. language will be removed when we moved to a markup. my support as a cosponsor of this bill. i appreciate the chairman's understanding. law?o we need a federal the answer is quite simply,
these standardized anti-defamation provisions may be considered void under state common law, but there are a number of them throughout the country. they confuse consumers because consumers have to go to different state law to know whether or not they are valid in one state or another. i would like to simply say that making the revisions -- provisions is the right thing to do. prohibiting their use and the chilling effect they create promotes the free market nationally. services ares, sold and marketed nationally. the information should be available nationally without impediment of a patchwork of
different state laws. i'd like to ask mr. goldman and mr. medros -- can you talk about the virtue of a solution here, let's say a connecticut consumer gets a hotel from a website located in north dakota for a hotel in utah. should a have to research the state laws in three different jurisdictions for they can exercise their free speech rights? >> certainly we would think ms. palmer's case is a great example of how difficult it is for a consumer to one, understand the limits of these causes and two, to get relief from them. they don't add any value to anybody in the ecosystem. they certainly hurt consumers. they probably and certainly hurt other businesses that play by the rules. and they depress the overall market. >> i would add to the extent
that we believe the clauses might already be illegal, that might depend on things like state interpretations of a conscious ability or public po licy. providing a federal standard clean of any anti-duties -- any ambiguities. >> thank you. my time has expired. this subject is one that is extremely important. i thank you all for being here today. chairman, andmr. thank you for convening today's hearing. online review sites provide customers with an important and open forum to provide free feedback to share experiences, and hold businesses accountable. some of these websites even allow customers to compare products and prices amongst many service providers, helping consumers select the best product at the most affordable price. last week i visited trip advisor's headquarters in
massachusetts and saw firsthand the visor's wonderful step -- trip advisor's wonderful staff working with interfaces to make sure that consumers have unfettered access to online reviews and travel prices. i am proud that one of the largest travel sites in the world is based in massachusetts. i'm happy to see trip advisor testifying here today. it's come to my attention some airlines may be restricting access to their schedules and prices, making it difficult for online travel sites like trip advisor to post different flight options online. if the consumer cannot view all of the flight options and prices on one website, the consumer may be unable to identify the best travel prices is a result. the consumer may pay too much for her flight. mr. medros, howard consumers harmed when airlines do not provide scheduled and fair
information to travel sites? dros: consumers are harmed anytime you reduce transparency. in this case it would be availability. given the consolidation in the airline industry, particularly in the u.s., that limited visibility and information around real pricing and availability and fees does not help consumers plan trips, does not help the economy grow. >> are airlines currently preventing travel sites like trip advisor from accessing ticket fees and the flight schedules? >> yes. increasingly airlines are attempting to withhold that information. availableot making it for consumers to price compare and shop. >> should sites provide consumers with ancillary information as well as fees on baggage, or advanced seat
selection fees, and all those things? should that also be made available so that the consumer can see what the total charges going to be to fly? >> absolutely. i can't think of any consumer that would not want to know outright what to expect in terms of pricing. >> so we have gag clauses. provisions buried in contracts that discourage customers from posting negative reviews online, which ultimately may wind up hurting consumers and businesses alike. i am concerned about these efforts to stifle american's freedom to post reviews. mr. medros, some customers are getting penalized from posting honest critical reviews and the mere threat of penalizing customers from posting negative reviews may discourage some customers from a posting at all. without customers posting of their honest assessments of products, other customers may not have the information needed
to make informed purchasing decisions. how can gag clauses also hurt businesses? mr. medros: gag clauses hurt businesses by reducing the amount of feedback that they get. and by distorting the marketplace for other businesses in that market. >> what other attacks on consumer rights are some businesses including in contracts, in terms of service? >> sorry about that. this is the end of the line. we have seen it going on for years and years. clauses that restrict people's ability to get into court. arbitration clauses have been existing for a long time that have now grown to be widespread across every single industry you can imagine. people who have complaints simply cannot get into a public system of justice. it's a real concern. the right to speak is naturally following the right to go to
court. i'm not surprised at all about what we are seeing today. >> thank you. ms. palmer has highlighted one of the more egregious examples of gag clauses. can you, mr. medros, include other examples of customers being harassed? >> absolutely. in the past, similar gag clauses with fines upwards of $5 million and delete fines of $30,000 -- daily fines of $50,000. we've heard of cases where consumers contacted us to remove overview from the threat of a lawsuit or other action against that individual. in all these cases, the consumer stands by their content, but is choosing to remove their content speech soh their own as not to end up in the case of ms. palmer, with eight lien against them. -- with a lien against them. >> a couple of quick questions and we will close this out.
this is directed to mr. atkinson or mr. goldman. are there particular industries where consumer gag clauses are especially pervasive? i mentioned in my initial testimony about the medical and health care industry, where the entire industry was encouraged to adopt these restrictions. many participants, i don't know what percentage, but many did so. i think that industry has moved on. i would like to think they have fixed the error of their ways. but it shows how clauses can sweep an entire industry. once a few people try it, other businesses say, that sounds like a pretty good idea, that gives me control over my ruby tatian, and if i don't do it, other competitors will have glossy
reviews. competitors. lawyers, doctors, accountants, as well as small business owners, places like hotels, or bed-and-breakfast -- good fertile grounds for bringing up these kinds of clauses. >> any to add to that, mr. atkinson? >> no, i would agree with that. retail, hospitality, personal services, areas where you would , companies dealing with national service providers. some of you are familiar with the consumer review freedom act. do you believe it strikes an appropriate balance in terms of consumer rights versus the abilityof businesses to protect
their reputations? businesses already have a wide range of tools to protect verifications. i can come up with a single exhibit since to tell consumers they can't share their honest, truthful feedback. on my mind, there is no balance that i can see that would be appropriate to be worried about. it's really in my mind, an abuse of the business-consumer relationship to tell consumers, we want your money, but we don't want you talking about it. i think the bill is a strong and important bill and it protects in consumers. as mr. goldman said, this is a very strong bill. now that that one provision is stripped, we are very happy to support it. >> ms. palmer. ms. palmer: i'd also like to point out that as a consumer, we
don't have a lot of power when it comes to trying to defend ourselves against a business that would seek to have us remove a review or seek to come after us. they have a lot more money, a lot more lawyers on staff then we could ever choose to get. knowing that there is a law in cane that says, you guys come after us just because we told the truth, it's extremely empowering. i believe it will go a long way. mr. atkinson: i agree with mr. goldman. i don't think there is anything to balance with what you are legislation is trying to prevent . as we have all said, businesses have many other options that this bill would not take away. >> i would add is that not only are consumers harmed, but other businesses that play by the rules.
gag clauses distort the market. >> thank you all very much and thank you for your testimony today, for your responses to our questions. ms. palmer, thank you for your inspirational story an example that one person really can make a difference. i think you are sort of the reason why this issue has taken on a life of its own, and certainly why we're here today. thank you to all the panelists. we spent a lot of time on this committee and e-commerce committee studying these issues related to the internet. how do we keep the internet ecosystem protected, how do we look at the potential that it offers -- you look at the digital economy and how powerful that is and how many people are using that to do business, to purchase products and services. obviously what is happening in terms of these various practices
seems to completely contradict what we are trying to accomplish in creating more freedom and protecting consumers' rights. certainly empowering those as they use this powerful tool to enhance not only their lives, but those around them as well. andppreciate your insights thank you again for making the time to be here today. we are going to try our best as we move forward. we have a markup schedule in a couple of weeks. we will hopefully move this bill to the senate floor and get action on it there. we have a competing bill in the house. it would be nice to have something on the president's desk to address an issue that is becoming more important in our digital economy. the hearing record will remain open for two weeks. during this time, senators can submit additional questions for the record. when received, we would ask the witnesses to submit their written answers to the committee
announcer: and also in washington, d.c., resident obama rejecting a plan to construct the keystone pipeline. we want to get your thoughts and reaction to the decision today. byer seven years of review various agencies, the u.s. government saying it is not going to allow a permit to be issued for transcanada, the company that would be heading that proposed pipeline. we will beginning your reaction, but first, let's take a look at president obama making the announcement. he appeared with secretary of state john kerry. key ondepartment deciding the environmental impacts of what the hype line would be. he also appeared with vice president joe biden. [applause]