First, some background. Earlier this month, General Mills updated its online privacy policy to include a binding arbitration clause that said that any consumer agreeing to the new terms when interacting with its brands online (e.g., downloading coupons, entering sweepstakes or subscribing to publications) revoked their right to sue the company in court, agreeing instead to settle any claims outside the courts.
A New York Times piece published shortly after the update called out the packaged foods giant for effectively taking away consumers’ right to sue for simply “liking” the brand (inferring that the phrase “joining our online community” used in the provision meant Facebook).
General Mills quickly called this a mischaracterization in an explanatory blog post, but the damage had already been done, as national news media picked up the story and consumers took to the company’s Facebook page to air their indignation. So on April 19, General Mills issued an apology and changed back to its old legal policy.
So what made the general public so quick to equate “arbitration clause” with “if I ‘like’ your company, I can’t sue you”?
“I think that there’s a predisposition in the public to perceive any change in policy done solely for the purpose of protecting the company,” Levine, who co-chairs the litigation department at Herrick, Feinstein LLP in New York, said. “There’s this assumption that companies are doing something to protect themselves from liability, and this fell into that category.”
There’s a reason why Gen Mills emphasized that ‘liking’ wasn’t enough to enter into an agreement
The big elephant in room, Levine added, was the question of whether this provision was going to bar class action for consumers who had agreed to it.
“Interestingly, the General Mills provision provided consumers the option to opt out. By law, if it’s a class action settlement with damages, under federal rules, consumers have to have the right to opt out as well,” he said. “These kinds of cases have been requiring that consumers be given reasonable notice and that there be clear agreement before the provision is enforced. That’s why General Mills emphasized that merely liking their product was not sufficient to enter into the agreement. The courts want to be sure whether or not consumer knowingly agreed to the provisions.”
That said, one potential issue with social media is how many consumers actually read the terms of click-through agreements before agreeing. “They may just agree without reading to get through them as quickly as possible,” Levine noted.
There was and is an opportunity to educate the public
Though it’s not uncommon for companies to make frequent changes to their online legal policies, the very public way in which the events unfolded for General Mills left it few options but to backtrack on its online policy.
“I think this was and is an opportunity for General Mills to talk about some of the benefits of arbitration," Levine said. "The problem with this story was the public was being educated through a front-page headline. There’s a lot to be learned about legal processes, and it’s hard to communicate that to the public through brief articles in the press. Companies are typically reluctant to comment in great detail on their legal policies. They need to emphasize they are available to redress and address consumer concerns and complaints and they are not running from responsibility if there’s a true problem. ”
Arbitration can provide a much more efficient way to handle lawsuits, and can be less costly and complicated than going to court. It also may provide a more amicable avenue for resolving disputes. “Courts might be more intimidating to some,” Levine said. “There can be arbitration where you can handle it without counsel, though it’s often not recommended.”
But it also has its setbacks, most notably the fear it forces consumers to give up certain rights, such as jury trials. “There’s concern that they are private and therefore some concerns and issues don’t get public airing.”
What’s the best way to address and redress consumer concerns?
Still very few cases ever go to trial; about 90% of all litigated cases are dismissed or settled. Moreover, there has not been one trial of a food class action suit.
Given such statistics, Levine called into question whether the class action vehicle is the best way to resolve issues. Indeed, alongside the growth of social media have come innovative approaches to resolving disputes online.
“Just like you have Craig’s List, eBay and other mechanisms for transactions and purchases online, there should be mechanisms to resolve disputes. And they’re out there. The theory that I have to take day off work and go to an arbitration hearing for $5 … there must be an easier way.”