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[27 comments]

Retailer loses case over critical online review

May 20, 2014

The case is not that unusual in many respects. A consumer orders a product from a retailer and, after failing to receive the item from the merchant, posts a negative review.

What makes a case in Utah different is that the retailer, KlearGear.com, charged the customer (and her husband) $3,500 for violating a "non-disparagement" clause in its terms of service. When the consumers refused to pay the fine, KlearGear reported the failure to pay to credit bureaus, which promptly lowered the couple's credit rating, making it impossible for them to get a loan to fix a broken furnace. The result, as you might expect, was that the couple took KlearGear to court.

The U.S. District Judge in Salt Lake City, Dee Benson, ruled in favor of the plaintiffs, John and Jen Palmer, when KlearGear, which is based in Michigan, failed to respond to their suit. The company was found liable for defamation, intentionally inflicting emotional distress, interfering with prospective contractual relations and violating the Fair Credit Reporting Act.

Discussion Questions:

Generally speaking, how should retailers respond to negative reviews posted online about their products or services? Are you aware of any other retailers that include non-disparagement clauses in their terms of service?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Do you think a retailer should have a legal right to include a "non-disparagement" clause in its terms of service?

Comments:

You can't operate like you used to in the '60s. I can't imagine anyone on RW saying this suit was smart on a retailers' part to begin with. Imagine if Amazon or United added that wording to their sites. You wonder who thought this would pre-empt or solve anything. Be nice. Play fair. Move on.

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Bob Phibbs, President/CEO, The Retail Doctor

Congratulations to the Palmers - that was a horrible experience.

Not too long ago we had some discussion of a CPG brand imposing a non-disparagement clause on users of their coupons (if memory serves correctly). To me, any company in a democratic society that tries these tactics is A) likely (knowingly?) a problematic company and wants to cover themselves against their errant ways, or B) is so high and mighty that they believe they can exempt themselves from the generally accepted retail discourse. Either way, there's a big problem.

The best retailers let it all hang out, warts and all. The best retailers also work to minimize problems and satisfy customers, so for them, the negativity is at a minimum and consumers are confident in the brand's openness. That's how brands/merchants need to be. There is no possibility of achieving 100% happy customers, but by embracing the (reasonable) bad stuff and dealing with it in a fair and measured way, the bar stays high and ultimately everyone wins. Otherwise, backsliding into non-disparagement terms and the like, will not only lead to sad consumers, but ultimately, unhappy retailers.

If I'm wrong, ask KlearGear if they like the press they're getting.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

For a retailer to pursue litigation over a bad review, there must have been a number of bad decisions. But the thing I really wonder about is the existence of the non-disparagement clause in the first place. There doesn't seem to be a great reason why that made it into the T&Cs for an agreement with a customer. That's something you would see related to suppliers, employees, etc., but for customers it sounds crazy. Guess it was just an example of throwing as much into the legalese as possible?

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Matt Schmitt, President, Chief Strategy & Innovation Officer, Reflect

If you are a retailer who cares (not all do), fix the person's problem and if possible, also post online that you are doing so. If all you are doing is offering an apology, then do that as publicly as possible. I'm betting lots of companies have such a clause, but the courts are often reluctant to enforce "tiny print" clauses, especially when the company is initially at fault.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

Wow ... what happened to direct follow up with a customer to resolve an issue?

Negative reviews for the most part are consumers venting frustration regarding what they perceive to be lack of service. Fair or unfair, negative comments offer the retailer an opportunity to be proactive and even improve processes.

This case as described would seem to be a simple matter of direct follow up regarding the shipment, or failure to ship the product. Non-disparagement clause or not, the retailer should never have to resort to fining a customer.

I don't know of any other retailers including non-disparagement clauses ... it sounds like dynamite ready to explode on social media.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

You can ignore the reviews, or deal with them in a very user friendly way. I have addressed a few minor issues online, and have solved the problem quickly, without bad feelings on either side. You can not please everyone, but this suit was a horrible choice, and they deserve the consequences for what they did.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

This is a textbook example of what a retailer should not do. Fine a customer for a negative review; is KlearGear nuts? Once this gets widespread coverage, it would not surprise me if KlearGear gets flamed by consumers.

Negative reviews are part of running a business. How a retailer responds to them is vital. Rather than fine a customer, the company should have responded by apologizing for the problem and fixing it. What could have been a great way to demonstrate the quality of customer service turned into a costly disaster.

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Max Goldberg, President, Max Goldberg & Associates

Hmmm. If you are suing your customers, I have to question whether you should continue to be in the retail business. The best way to respond to negative reviews is to apologize profusely and do whatever it takes to make it right. With the reporting of the bad debt, it almost sounds like it got personal to me - someone at the company got mad and made it punitive.

Just goes to show - you can put whatever you want in your T&C's, but that doesn't mean you have blanket immunity from people who feel like it's an unfair business practice.

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Nikki Baird, Managing Partner, RSR Research

 
10

I think a retailer should validate that they care about the customer and look into the specifics of the complaint, then respond. A few times now I have complained in social media about several service providers and they responded and actually resolved my problem within social media.

People talk in social media about negative experiences hoping that the company will show them that they are being heard. If you do NOT respond to an irate customer, you will only make them go off even worse.

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Joel Rubinson, President, Rubinson Partners, Inc.

Understand what drove the issue and improve their products and services. KlearGear's behavior in this case is plain stupid.

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Bill Davis, Director, MB&G Consulting

Assuming there isn't more to this story (highly unlikely), the folks at KlearGear obviously don't understand the power of digital communication. I just went to KlearGear's website and I have a hard time believing that a bad online review could impact their business that dramatically. Perhaps there is a marketing genius at KlearGear because their action caused a lot of people to talk about them. I suspect the traffic to their website spiked after this story broke. Given their offerings, I also suspect a lot of people would never admit purchasing any products from them either!

I am not aware of any retailers having non-disparagement clauses, but I'll pay more attention now as a shopper and if they do, it will certainly raise a red flag.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

How many of us really have the time to read in detail a website's terms of service? The use of non-disparagement clause in TOS unnecessarily restricts consumers' actions and recourse against a merchant. Last month, the California Assembly Judiciary Committee voted 10-0 to approve a bill that would prohibit companies from suppressing negative consumer reviews via "non-disparagement clauses" in their contracts.

If a retailer cares about their brand and reputation, they'll deal with customers in respectful way with speed and acknowledgment to correct the situation. Mistakes will happen; it's how you deal with them that sets you apart.

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Mohamed Amer, Vice President, Global Integrated Retail Unit, SAP

We seem to be of one mind on this one and as Bob said, it's hard to imagine a BrainTrust member - or any reader - siding with the retailer. It is really hard to imagine executives at KlearGear thinking this was a winning strategy. "If we clamp down on this now, we'll put the fear of God into all our customers and they'll never complain again!"

As the ancients said, when you live by the sword, you'll die by the sword. Or in modern language...what you put out comes back on you many times over; and that works with both negative energy and positive energy.

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Ian Percy, President, The Ian Percy Corporation

There's probably more here than meets the eye, and there is some balancing act required. Contrary to most of the comments here, there is probably a line that some consumer crosses that requires some action. If a retailer is flamed falsely, it's libel. Doesn't sound like that is the case in this instance, but there is some line that a shopper may cross that calls for something other than apologizing on behalf of the retailer. I don't think a non disparagement clause is necessary, there is a path to relief for libel in any case.

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Peter J. Charness, SVP America, Global CMO, TXT Group

Obviously there is likely more to this story than is showing up all the way around. Nevertheless, the retailer here KlearGear made some real mistakes and likely worsened them by failing to satisfy the customer immediately, if not sooner.

Retailers due to the whole online world and the speed of reputation management simply must react at lightening speed. If you can't, this type of thing is bound to happen.

As far as the retailer doing what they did to these customers? No matter the fact that the customer won the suit, they have been severely damaged . This is a case like Ray Donovan in the 1980s where these customers will be asking for a long time "Where do I go to get my reputation back?" The damage done to them with respect to credit reporting is long lasting and may be irreversible. This retailer hurt this consumer far more than any online comment of any nature could even begin to do.

Judge's rulings are nice but they are not always what it will take to change a thing for the Palmer's. Just think, this retailer didn't even respond to the suit! Do you think they will take the actions necessary from the order to repair the Palmer's reputation? Not likely or if they do, it won't be timely.

'Scanner'

This is a very complicated question.

While the Palmers obviously had a huge problem with their retailer, there are other instances where competitors have posted bogus "reviews" to disparage a given company. A rug care company near me is fighting against negative reviews posted by "customers" who live in states where the rug care company doesn't do business.

This story makes me wonder what is in those terms of service I agree to on Web sites without reading them....

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Cathy Hotka, Principal, Cathy Hotka & Associates

Make it simple. All complaints are free consulting. They are telling you what is wrong and what you need to fix.

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Mel Kleiman, President, Humetrics

That company needs to understand that the world has changed. If they don't like bad reviews, then deliver on expectations.

Edward Chenard, Consultant , Echenard

How a retailer should respond to a negative review depends on a number of factors. Did the retailer have a chance to remedy the situation with the customer? Is the review the exception or is there a pattern? Is the negative review about service or a particular product? Is the review based on facts or simply vitriolic? How widespread is the review - has it become viral? How credible is the reviewer? There's no one-size-fits-all here.

Non-disparagement clauses raise suspicion that a company has its own best interest at heart and not consumers'. Buyer beware.

'RetailRetell'

I just wonder if there's anyone that could mount a cogent argument in favor of the retailer. I can't think of one positive thing to say about this retailer's behavior. And, remember, people (and the retailer in question), when you call attention to something, you shine a light on it that might not have been seen or known if you had just dealt with it and let it go.

Naomi K Shapiro, Market Communications Manager, Upstream Commerce

Oh my gosh. Is it possible to manage social media worse than in this example?

The consumer did not receive a good customer experience from the company and expressed their concern and dismay on social media. Rather than address the problem using best practices (i.e. take the problem off-line, resolve it and then encourage the consumer to let others know that the problem had been resolved online), they actually chose to impose a fine. When they didn't receive the payment, they then damaged the couple's credit rating by reporting them to a credit bureau. That is social media suicide.

Given this story as relayed, if true, I would never deal with that company in 100 million years, nor would I encourage anyone else to do so.

I'm not aware of other retailers who have non-disparagement clauses in their terms of service. Whether they do or not, no company that I know of has been arrogant enough to actually consider fining a consumer, and damaging their personal credit rating.

"I got nothing."

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Mark Price, Managing Partner, M Squared Group, Inc.

Not sure why this question ("should have a legal right") is being asked in a retail forum, since it's purely a legal issue (and my - admittedly limited - legal background says contractual clauses that violate public policy, as this seems to do, are unenforceable); but anyway: no, of course they shouldn't respond in this way. (Actually, some of the comments in the linked stories suggest this is actually a scam, so perhaps no retailer really is responding this way.)

But true or not, this broaches the broader issue of how complaints should be handled, and more particularly, what should be done when one of the parties "doesn't play fair." Social media, of course, exaggerates the problem...welcome to the dark side of our connected world.

'notcom'

Perhaps the most baffling everyday event in retail is the continuance of contemptible behavior for seemingly unruly consumers and the judicial system. This well documented condition costs the industry billions of dollars in both lost business and lawsuits.

I see this condition as a demonstration that all of retail leadership is not on board or in ownership of a clear understanding or commitment to customer satisfaction. There truly is something insane about insisting on making the wrong decisions over and over again. The time to put an end to this even as a possibility is long overdue.

'gjarnoldjr'

A legitimate retailer does not need to bury a disparagement clause within its terms of service to take action against an individual who seriously defames its business. In practice, I can hardly imagine a circumstance where this would be worthwhile.

Complaining publicly about an actual service failure is only libel if it includes false and damaging statements. I'd prefer to see those retailers accept most complaints as small favors -- opportunities to improve practices and demonstrate good will to customers. Build trust, not fear.

Taking unilateral punitive action against a shopper who complained online (three years previously!) is simply foolish policy -- unwise and in my opinion contrary to shareholder interests. Instead, fix it! Then show others how committed the firm is to get things right.

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James Tenser, Principal, VSN Strategies

I love online review sites - and all social channels that allow consumers to have a voice. They help promote good service. The fear is that the customer will slam a company for bad service. Good fear. Will help keep the company focused.

Retailers should respond publicly that they want to solve the customer's problem. Don't argue, but instead, reach out and ask the customer to connect so the company can help the customer. Then solve the problem, fix the complaint, make it right, etc. Ideally the customer will go back on the site and leave a response to the company's effort to make things right.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

WOW! What retailer in their right mind would do something like this? By trying to stop negative talk you generally only succeed in increasing it.

Retailers should use the opportunity to show the customer that they care. Just my 2 cents....

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

Negative reviews must be dealt with transparently, acknowledging the issue, possible remedies and apologies for not meeting expectations. Others who read the review will see the honest effort made to meet expectations and make their own judgment.

A negative review is not he same as multiple bad reviews , the latter a wake up call to reconsider the offering and execution. Look to the hospitality industry for responses to disappointed travelers and diners; they handle these situations professionally and transparently - once a review is out here, it stays on a site.

Hard to understand how a non-disparagement clause could actually benefit a retailer in the age of social media.

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Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

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