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Forced Arbitration: Difference between revisions
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== How it Works == | == How it Works == | ||
Businesses will typically add an arbitration clause to their Terms of Service or Terms of Use. This clause generally outlines how disputes are handled between the consumer and the business. A good example of a typical arbitration clause can be found in Instagram's Terms of Use, which, as of January 6th, 2025, is under Section 7.4 - How We Will Handle Disputes:<ref name=":0">https://web.archive.org/web/20250106102429/https://help.instagram.com/581066165581870/</ref><blockquote>"Except as provided below, you and we agree that any cause of action, legal claim, or dispute between you and us arising out of or related to these Terms or Instagram ("claim(s)") must be resolved by arbitration on an individual basis. Class actions and class arbitrations are not permitted; you and we may bring a claim only on your own behalf and cannot seek relief that would affect other Instagram users."</blockquote> | Businesses will typically add an arbitration clause to their Terms of Service or Terms of Use. This clause generally outlines how disputes are handled between the consumer and the business. A good example of a typical arbitration clause can be found in Instagram's Terms of Use, which, as of January 6th, 2025, is under Section 7.4 - How We Will Handle Disputes:<ref name=":0">https://web.archive.org/web/20250106102429/https://help.instagram.com/581066165581870/</ref><blockquote>"Except as provided below, you and we agree that any cause of action, legal claim, or dispute between you and us arising out of or related to these Terms or Instagram ("claim(s)") must be resolved by arbitration on an individual basis. Class actions and class arbitrations are not permitted; you and we may bring a claim only on your own behalf and cannot seek relief that would affect other Instagram users."</blockquote>Currently, in the United States, arbitration clauses such as this one are legal under the Federal Arbitration Act (FAA).<ref>https://www.govinfo.gov/content/pkg/USCODE-2019-title9/html/USCODE-2019-title9.htm</ref> However, efforts have been made to prohibit forced arbitration, most notably the Forced Arbitration Injustice Repeal (FAIR) Act of 2023.<ref>https://www.congress.gov/bill/118th-congress/senate-bill/1376</ref> | ||
== Why It's a Problem == | == Why It's a Problem == | ||
Revision as of 01:05, 14 January 2025
Forced Arbitration is a practice in which businesses can require its customers to resolve disputes through arbitration, instead of a traditional court system. Per Wikipedia: "Arbitration is a formal method of dispute resolution involving a third party neutral who makes a binding decision."[1]
How it Works
Businesses will typically add an arbitration clause to their Terms of Service or Terms of Use. This clause generally outlines how disputes are handled between the consumer and the business. A good example of a typical arbitration clause can be found in Instagram's Terms of Use, which, as of January 6th, 2025, is under Section 7.4 - How We Will Handle Disputes:[2]
"Except as provided below, you and we agree that any cause of action, legal claim, or dispute between you and us arising out of or related to these Terms or Instagram ("claim(s)") must be resolved by arbitration on an individual basis. Class actions and class arbitrations are not permitted; you and we may bring a claim only on your own behalf and cannot seek relief that would affect other Instagram users."
Currently, in the United States, arbitration clauses such as this one are legal under the Federal Arbitration Act (FAA).[3] However, efforts have been made to prohibit forced arbitration, most notably the Forced Arbitration Injustice Repeal (FAIR) Act of 2023.[4]
Why It's a Problem
Revocation of Rights
The practice of Forced Arbitration is one that is designed to revoke the rights of the consumer. In this case, the consumer's right to sue or participate in a class action against a business. Instead, the consumer must work with an arbiter of the businesses' choosing behind closed doors to resolve claims, which is widely believed to result in biased outcomes.
Inconvenient Opt-out Procedure
Arbitration is often made inconvenient for users to opt-out of. Instead of giving users the option to do so at sign-up digitally, most businesses will require users to send a handwritten letter within 30 days of their sign-up to opt-out of arbitration. This type of opt-out clause can also be seen in Instagram's Terms of Use:[2]
"You can opt out of this provision within 30 days of the date that you agreed to these Terms. To opt out, you must send your name, residence address, username, email address or phone number you use for your Instagram account, and a clear statement that you want to opt out of this arbitration agreement, and you must send them here:" [Address redacted]
This practice is similar to how gyms will often require members to travel to their location or send snail mail to cancel a membership, while an online system could easily be put in its place.
