Arbitration Clauses: Coming Soon to an Online Customer Service Agreement Near You

October 29, 2014

Earlier this year, I wrote about the online storage company Dropbox adding an arbitration clause to its customer service agreement. It seems Dropbox is in very good company on the Internet these days. According to New York Times blog “The Upshot,” one-third of top online stores include this provision or one similar to it.

“The Upshot analyzed terms of service for the top 200 online stores, as ranked by the trade publication Internet Retailer, to see which carried similar provisions. Of those 200, 68 contained some flavor of these restrictions. A similar proportion of the top 500 most-visited websites in the United States also included at least one of the clauses.”

We’ve covered these mandatory binding arbitration clauses many times on this blog. As a refresher, arbitration clauses are provisions in customer agreements that limit a customer’s ability to sue in court or as part of a class action. Instead, consumers must bring their claims individually to an arbitrator. Several reports have found that this alternative to the courts is inherently biased against consumers.

While the clause is limiting, the array of websites incorporating this language into their terms and agreements is vast. Online dating websites like OkCupid, e-commerce giants like Amazon and media companies like Buzzfeed all include an arbitration provision somewhere in their customer agreements. In addition, brick and mortar stores, like Target and Domino’s have enacted arbitration provisions to their online agreements that do not exist for their physical stores.

The addition of arbitration clauses in customer agreements has only gained momentum since the court’s 2011 AT&T Mobility v. Concepcion decision, and just recently the State of Michigan Court of Appeals has added another layer to this story. The court recently ruled that arbitrators should not be held to the same ethical standards as judges. In a blog post by Paul Bland, Executive Director of Public Justice, he explains that the court recently decided that the “appearance of impropriety” standard does not apply to arbitrators. Given issues in the recent past with the National Arbitration Forum – the one-time single largest provider of consumer arbitration services – Bland argues now is not the time to create more lax rules for arbitrators. He writes:

“Holding arbitrators to lower ethical standards is contrary to the promises the Supreme Court and corporations have made. There has been a recurring pattern in the law for some decades. A corporation will urge the Supreme Court to permit forced arbitration of some new category of claims – first the antitrust laws, later the securities laws, later consumer protection laws, still later civil rights laws – and plaintiffs would question if this was really a good idea. And again and again, the Supreme Court would justify its decision to permit forced arbitration of such claims on the grounds that there was nothing to be concerned about because arbitration would be just as fair as the civil justice system.”

Fairness in the civil justice system and arbitration simply do not go hand in hand. Companies argue that point and continue to add arbitration clauses to their customer agreements, and truth be told, unless Congress takes action to slow the rising tide of mandatory arbitration agreements, there’s not much the average consumer can do about it.



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