“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.
Tom Forsythe, the vice president of global communications for General Mills, said in an e-mail that the company tried hard to point out that it didn’t work that way, that no obligation was created by liking anything.
The company says a box would pop up and the consumer had to click “agree,” not much different from how it works with Dropbox or Amazon.com or other consumer companies.
George Friedman, the former head of dispute resolution for the Financial Industry Regulatory Authority who looked closely at the General Mills policy, said while that’s accurate, there were actually two levels to click through. The first referred to a legal policy. The second click took you to it.
Consumers routinely blow past a page on a computer screen with a box that says “I agree” on the bottom, seeking agreement to terms that likely have binding arbitration clauses in them. In one high-profile study of about 50,000 consumers, fewer than one in 1,000 clicked on the agreement itself and just a few who did ever read the whole thing.
“Litigation is awful for consumers, especially class-action,” Friedman said. “But to hide [arbitration] under two levels of user agreement, that’s a bit of a stretch.”
His advice to General Mills is to come back, but with a clearer way to show consumers what they are agreeing to.
Forsythe said the lesson learned here is a reminder of how quickly issues can blow up in 2014’s media environment.
As to why General Mills reversed course, he said, “We’re a consumer products company. We listen to our consumers. And consumers didn’t like it. It was not a difficult decision.”