There is a very disturbing trend in the world of corporate terms and conditions. Consumers (and small merchants) are increasingly being forced by fine-print clauses into binding arbitration to resolve disputes with companies.
The very pro-business US Supreme Court not long ago ruled this was entirely legal.
What it means as a practical matter is that individuals give up their right to sue in court as well as the right to join together in class action litigation against corporations. The problem is that consumers, even if they’re permitted to sue individually, won’t because they don’t have the motivation or money.
While class action litigation has certainly been abused it also has enabled consumers to join together to balance their almost complete lack of legal power vs. large corporations. Class actions in one sense have provided a corporate oversight and legal enforcement mechanism that Congress has largely abdicated.
A recent decision in the Google “Wiretapping” litigation (over Gmail scanning) denied class action status to the would-be plaintiff class. That wasn’t a dismissal of the case in Google’s favor. But it amounts to the same thing because plaintiffs won’t proceed against the company individually.
Very soon every single corporate terms of service agreement in the US will include a binding arbitration clause.
The NY Times is also reporting today that companies are quietly amending privacy policies and online terms to expand the range of consumer actions that allegedly constitute “consent” to binding arbitration. This includes downloading a coupon or “Liking” a brand on Facebook:
General Mills, the maker of cereals like Cheerios and Chex as well as brands like Bisquick and Betty Crocker, has quietly added language to its website to alert consumers that they give up their right to sue the company if they download coupons, “join” it in online communities like Facebook, enter a company-sponsored sweepstakes or contest or interact with it in a variety of other ways.
The idea here is that any interaction with a company or its products (however slight) that confers a “benefit” upon the consumer will be treated as an acceptance of the company’s terms including the waiver of any and all legal rights against the company.
Consumers are held to these terms by courts. At one point in time, one-sided agreements that were imposed on individuals by more powerful parties (i.e., corporations) were called “contracts of adhesion” and not enforced by courts. In other words where there was no negotiation or evidence of consent to terms, courts wouldn’t allow the agreements.
That has long-since changed. Now consumers are held to have accepted fine-print and boilerplate terms regardless of whether they actually read, understood or affirmatively consented to them. A UC Berkeley study found that only 1.4 percent of survey respondents said they actually read “end user license agreements.”
Another example of the impact of this “consent fiction” was on display in the recent dismissal of a potential class action against Facebook by minors who claimed that the company misappropriated their images when it used them in Sponsored Stories ads without affirmative consent. The judge ruled, as reported by Reuters, that “the minors gave their consent when they signed up for Facebook under the company’s “statement of rights and responsibilities” that governs usage of the site.
Companies and courts would counter my arguments by saying that corporations can’t be expected to solicit and obtain evidence of actual consent (beyond the perfunctory checkbox) because they operate at global scale and it would simply be impractical or impossible to do so. Consumers always have the choice not to use a product or service — right?
The very disturbing suggestion in the NY Times report is that corporations are increasingly going to try and use any online or real-world interaction with their services or products to force consumers into binding arbitration. Like a brand, download a coupon, visit a website, follow a company on Twitter — and give up your rights.
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