Schafer: General Mills botched rollout of a routine policy

  • Article by: LEE SCHAFER , Star Tribune
  • Updated: April 24, 2014 - 8:49 AM

“YOUR CEO AND LAWYERS ARE SCUM” begins one online response to new legal terms that General Mills recently introduced for its websites.

Well, at least the writer was direct about his outrage, after the company demanded that anyone who engaged with its websites also agreed to handle disputes through arbitration rather than the courts.

People mad enough to leave inflammatory comments aren’t that rare in the Wild West of the Internet, but it seemed odd to read this one and others like it on General Mills’ own website — under the very blog post announcing the company’s unconditional surrender on the issue.

And now that General Mills has said never mind, we’ve changed the terms back, it’s difficult to see what all the fuss was about. Arbitration clauses in consumer agreements have become more or less business as usual. This should have been more business as usual — although General Mills could have been a little clearer in how it asked for agreement.

There was no immediate flare-up after General Mills put up new language on its websites early in the month, although some consumer pushback could have been expected. Sometimes grumbling breaks out online after adoption of arbitration provisions, as it did earlier this year with the computer file-sharing company Dropbox.

Consumer advocates argue that arbitration seems to favor big companies over a regular guy with a problem, and what’s worse is that by agreeing to it, consumers sign away the right to make a legal claim.

It’s actually more like a change in the process to see if a consumer’s claim has merit.

The companies argue that arbitration, when a third party hears both sides and makes the call, is far cheaper and fairer — for the consumer.

It’s certainly true that anyone who thinks district court is efficient or particularly fair to small-claims plaintiffs has probably never seen the inside of a courtroom. In one recent case that solidified the law on arbitration, AT&T Mobility vs. Concepcion, the U.S. Supreme Court’s majority seemed pretty impressed with AT&T’s process.

AT&T’s customers had the right to arbitration in their own county, and to proceed on the phone, in person or through writing. AT&T paid the costs. If the arbitration award exceeded its last written settlement offer by even a penny, AT&T agreed to pay a minimum of $7,500.

Andy Pincus is a Washington, D.C., attorney with the global law firm of Mayer Brown who argued on AT&T Mobility’s behalf, and he explained that another reason companies seek arbitration agreements in advance of a dispute is to derail class-action suits. Arbitration is case-by-case.

Consumer advocates would say that what gives consumers power against the likes of General Mills is banding together into a class, represented by counsel with a financial incentive to win compensation.

But corporations would counter that class-action litigation is how the legal system is being abused, with lawyers getting paid to argue cases of dubious merit, with little ever going to consumers even if there’s a settlement.

Pincus said his firm looked at class actions from 2009, nearly 150 cases in all. None was decided by the courts on the merits. In the 40 that actually were settled and for which the firm could get good data, by far most of the eligible class members got nothing.

Wireless telephone companies like AT&T have millions of accounts and lots of complaints, but Golden Valley-based General Mills is not particularly vexed by litigation. Its last annual regulatory disclosure on legal proceedings was less than 100 words and contained the typically bland assurance that it knew of no claims that could cause a “material” financial hit.

What Pincus found interesting about the General Mills flap is how General Mills and the consumer would come to agree on using arbitration. In a cellphone contract that’s clear.

And here is where General Mills never quite got its point across — at least, not after publication of a headline in the New York Times last week that read “When ‘Liking’ a Brand Online Voids the Right to Sue.”

In this account, the consumer could have agreed to arbitration with General Mills by clicking “Like” on Facebook. As of this week Cheerios had 1,064,417 likes on its Facebook page.

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