Once upon a time, consumers could band together in class actions against big companies when they were collectively aggrieved. Often, the injury to each person on her own was small — but the cumulative effect was a wrong on the business’s part. So, for example, Microsoft had been sued for various competition law abuses — class actions that the company expected to cost it $1.9–2.0 billion to resolve.[1] But those class actions are a thing of the past — as Microsoft and other companies have been making consumers surrender the ability to participate in one.
Arbitration agreements do more harm to consumers than merely prevent class actions, even if arbitrators are as fair to plaintiffs as judges would be; arbitration can make it more difficult to assert a meritorious claim on one’s own as compared to going to court. Procedural rules differ in arbitration, and the ability to conduct discovery — to force the other side, under pain of contempt, to cough up incriminating documents — may be more limited than the broad scope allowed under the Federal Rules of Civil Procedure. And as the #MeToo movement has revealed in employment-related arbitration agreements used to keep a lid on sexual harassment claims, the rules of arbitration could require you to keep quiet, even if you win — as contrasted to open dockets, public trials, and published judicial opinions in a real court system. So even if the consumer wins, the company wins tenfold more: first, they don’t have to deal with negative PR; second, in the aggregate, other plaintiffs could be discouraged from pursuing their claims because they don’t know that other similarly situated consumers have already prevailed.
Continue reading “Microsoft is strengthening its mandatory arbitration provision as of May 1, 2018”
Footnotes
| 1. | ↑ | See 2011 Annual Report — Contingencies, Microsoft Corp., https://www.microsoft.com/investor/reports/ar11/financial_review/contingencies.html (“A large number of antitrust and unfair competition class action lawsuits were filed against us in various state, federal, and Canadian courts on behalf of various classes of direct and indirect purchasers of our PC operating system and certain other software products. . . . We estimate the total cost to resolve all of the state overcharge class action cases will range between $1.9 billion and $2.0 billion. At June 30, 2011, we have recorded a liability related to these claims of approximately $568 million, which reflects our estimated exposure of $1.9 billion less payments made to date of approximately $1.3 billion mostly for vouchers, legal fees, and administrative expenses.”). |
