Consumer Law & Policy Blog

New E-Bay Aribtration Agreements with Its Customers Include Class-Action Ban (but with an opt out)

We posted recently about Microsoft's new arbitration clause with its subscribers banning class actions a la AT&T v. Concepcion.

Now, Ebay has amended its form contract with its users to do the same thing. But the contract has a twist. Users can opt out:

Opt-Out Procedure

You can choose to reject this Agreement to Arbitrate ("opt-out") by mailing us a written opt-out notice ("Opt-Out Notice").  For new eBay users, the Opt-Out Notice must be postmarked no later than 30 days after the date you accept the User Agreement for the first time.   If you are already a current eBay user and previously accepted the User Agreement prior to the introduction of this Agreement to Arbitrate, the Opt-Out Notice must be postmarked no later than November 9, 2012 .  You must mail the Opt-Out Notice to eBay Inc., c/o National Registered Agents, Inc., 2778 W. Shady Bend Lane, Lehi, UT 84043. 

The Opt-Out Notice must state that you do not agree to this Agreement to Arbitrate and must include your name, address, and the user ID(s) and email address(es) associated with the eBay account(s) to which the opt-out applies. You must sign the Opt-Out Notice for it to be effective. This procedure is the only way you can opt-out of the Agreement to Arbitrate. If you opt-out of the Agreement to Arbitrate, all other parts of the User Agreement and its Legal Disputes Section will continue to apply to you.  Opting out of this Agreement to Arbitrate has no effect on any previous, other, or future arbitration agreements that you may have with us.

A couple thoughts. First, the opt-out offered by Ebay underscores that pre-dispute, take-it-or-leave aribration clauses are raw deals for consumers -- and that Ebay knows it. Ebay is offering an opt-out to all of its customers, without asking anything in return. What consumer wouldn't opt out if he or she knew what that meant and opting out was easy? It's not as if Ebay would decline a consumer's offer to arbitrate down the road, when a dispute arose, if the consumer opt outs now. Opting out just gives Ebay's customers the option of suing or arbitrating -- exactly what Ebay (or any proponent of pre-dispute mandatory consumer arbitration) wants to take away from consumers.

Second, it's obvious that Ebay wants to make it difficult for consumers who would like the option to sue. Ebay could have made aribtration opt in rather than opt out. That would be easy on consumers, but Ebay knows that no infomed consumer would opt in pre-dispute; again, an informed consumer would wait until a dispute arose and then decide whether to arbitrate--which Ebay prefers--or sue. Or Ebay could have allowed its customers to opt out just by replying to the email that it sent to its customers (like me) announcing the class-action ban, the opt-out right, and other provisons of its new contract. But that, too, would make things too easy. Instead, current customers have to opt out by sending a snail-mail letter containing detailed information postmarked by November 9. Why? Ebay wants to make it seem like it is attentive to its customers' interests (and that it values genuine contractual consent), while keeping a very tight lid on the number of opt-outs. So, how about a public mass-opt-out campaign encouraging Ebay customers to opt out? Anyone interested in joining in?

UPDATE:  Perhaps most onerously, to opt-out, Ebay requires that a customer sign the snail-mail letter to the company.

Times Report: Debt Collectors Harness Prosecutors

by Jeff Sovern

Today's Times has a story headlined "In Prosecutors, Debt Collectors Find a Partner."  An excerpt:

The letters are sent by the thousands to people across the country who have written bad checks, threatening them with jail if they do not pay. They bear the seal and signature of the local district attorney’s office. But there is a catch: the letters are from debt-collection companies, which the prosecutors allow to use their letterhead. In return, the companies try to collect not only the unpaid check, but also high fees from debtors for a class on budgeting and financial responsibility, some of which goes back to the district attorneys’ offices.

* * *

Consumer lawyers have challenged the debt collectors in courts across the United States, claiming that they lack the authority to threaten prosecution or to ask for fees for classes when no district attorney has reviewed the facts of the cases. The district attorneys are essentially renting out their stationery, the lawyers say, allowing the companies to give the impression that failure to respond could lead to charges, when it rarely does.       

Two comments: first while the Fair Debt Collection Practices Act, in § 1692p, provides that under certain circumstances operators of check diversion programs are not automatically debt collectors, the exception applies only if the company "does not exercise independent prosecutorial discretion" and if the prosecutor determines that "probably cause of a bad check violation under State penal law exists, and that contact with the alleged offender for purposes of participation in the program is appropriate. . . ."  If no prosecutor is involved, it seems unlikely that those criteria are satisfied, meaning that the company operating the program can qualify as a debt collector and would be subject to the FDCPA's requirements. Section 1692e of the FDCPA bars the use of false or misleading representations, which includes the "false representation or implication that the consumer committeed any crime" and falsely representing a document as issued by state officials.

Second, the sequence of events makes me wonder what the debt collectors are paying the District Attorneys for.  The DAs don't seem to conduct the class, the fee for which generates the payment for the DA.  Nor are the DAs making the determination of who should take the class. 

Voluntary Blocking of "Offensive Material" by Facebook and Google

by Paul Alan Levy

Two voluntary takedowns of user-generated have been in the news lately, spurring some reflections, on the one hand, about the dangers of becoming overly dependent on certain platforms for free expression, and about how online service providers exercise their discretion under section 230 to remove material even though the providers cannot be held legally responsible for the hosting.

AP Story: Consumer regulator barks; an industry shudders

Here. An excerpt:

For some banks and industrial lenders, the new oversight may be so costly that they stop offering some products, says Bill Himpler, vice president of the American Financial Services Association, a trade group for card companies, mortgage lenders and finance companies. He says the bureau's tactics put companies on the defensive.

"It doesn't leave somebody with the best feeling that what they're trying to do is ensure compliance so much as create a gotcha situation," Himpler says.

Kent Markus, who heads up the bureau's enforcement office, says the costs are necessary to make sure companies aren't preying on consumers. "We want to make it more expensive to break the law than to abide by it," he says.

It's Official: New York City Bans Super-Sized Sugary Drinks

We've blogged a number of times (for instance, here and here) on NYC Mayor Michael Bloomberg's proposal to ban the sale of sugary drinks in containers larger than 16 ounces. The idea is behavior modification: One factor in obesity is drinking sugary drinks, and the ban will force some consumers to drink less of them. It's now official: As explained in this LA Times article, the NYC Board of Health has enacted the ban, complete with a $200 fine for violating the rule. A legal challenge is expected.

Here's an excerpt:

New York on Thursday became the first city in the nation to ban super-sized sugary drinks in restaurants, setting the stage for a legal challenge by the beverage industry, which calls the rule a violation of consumers' rights to drink what they want even if it is destroying their health. The Board of Health, which is appointed by Mayor Michael Bloomberg, easily approved the rule [by a vote of 8-0, with one absention], which will limit to 16 ounces the size of sodas and other sugary drinks sold in food-service establishments such as restaurants and delis. Assuming it is not blocked by legal challenges, it would take effect in six months and impose a $200 fine on businesses found in violation.

Paper on Behavioral Advertising

Chris Jay Hoofnagle of Berkeley, Ashkan Soltani of Berkeley's School of Information, Nathan Good of Good Research, Dietrich James Wambach, a student at Wyoming, and Mika Ayenson of the Worcester Polytechnic Institute have written Behavioral Advertising: The Offer You Cannot Refuse, 6 Harvard Law & Policy Review 273 (2012).  Here's the abstract:

At UC Berkeley, we are informing political debates surrounding online privacy through empirical study of website behaviors. In 2009 and 2011, we surveyed top websites to determine how they were tracking consumers. We found that advertisers were using persistent tracking technologies that were relatively unknown to consumers. Two years later, we found that the number of tracking cookies expanded dramatically and that advertisers had developed new, previously unobserved tracking mechanisms that users cannot avoid even with the strongest privacy settings.

These empirical observations are valuable for the political debate surrounding online privacy because they inform the framing and assumptions surrounding the merits of privacy law.

Our work demonstrates that advertisers use new, relatively unknown technologies to track people, specifically because consumers have not heard of these techniques. Furthermore, these technologies obviate choice mechanisms that consumers exercise. We argue that the combination of disguised tracking technologies, choice-invalidating techniques, and models to trick the consumers into revealing data suggests that advertisers do not see individuals as autonomous beings. Once conceived of as objects, preferences no longer matter and can be routed around with tricks and technology.

In the political debate, “paternalism” is a frequently invoked objection to privacy rules. Our work inverts the assumption that privacy interventions are paternalistic while market approaches promote freedom. We empirically demonstrate that advertisers are making it impossible to avoid online tracking. Advertisers are so invested in the idea of a personalized web that they do not think consumers are competent to decide to reject it. We argue that policymakers should fully appreciate the idea that consumer privacy interventions can enable choice, while the alternative, pure marketplace approaches can deny consumers opportunities to exercise autonomy.

Pink slime attack!

 

Beef Products, Inc., which saw a fair deal of public attention drawn to one of its beef products (something it calls "lean, finely textured beef" but which was popularly known as "pink slime") has sued ABC and others for, in essence, being mean to it. 

It filed a 263-page complaint in state court in South Dakota. Its lawyer said to NPR that ABC "did this with malice, and they knew what they were doing. They decided to destroy this business... and they decimated the product in the marketplace." In part, this was because ABC didn't believe information BPI supplied to the network.

We'll see if the First Amendment trumps this lawsuit, but a few thoughts are in order right off the bat.

(Please note that all the following statements are just one fellow's opinion and nothing I say from here on out is represented to be factual, except when I talk about McDonald's making a similar ill-advised move. I don't want to be the next libel defendant.)

When stung by negative press, one of the dumbest (opinion) things a (generic) company can do is sue over the press. Because that insures (opinion) that the issue comes to the front again. Look at McDonald's experience in the McLibel trial in the UK. McDonald's didn't like statements on brochures that two activists passed out. By suing the two activists, McDonald's (1) gave these activists an excellent platform for the months and months the case went on, and (2) gave the UK press an opportunity to publish the activists' statements, despite the UK's very strict libel law (which is the reason we in the US have a First Amendment).

McDonald's was stupid (opinion) to sue and any other (generic) company similarly situated is nuts (opinion) to replicate that incredible (opinion) failed (fact) strategy.

UPDATE: After I posted this opinion piece, someone reminded me of the Streisand Effect, and this is an excellent example. For more info, see (but take with a grain of salt) the Wiki article on the Effect. (I also want to note that my post never referred to the product as Soylent Pink, which is not in fact its name but which, IMHO, should be.)

 

 

 

CFPB Issues Second Semi-Annual Report; Nearly Mum on Enforcement

The Consumer Financial Protection Bureau has issued its 82-page second semi-annual report. It should be an interesting read. This article by Jenna Green notes that the report contains only "four sentences about the Office of Enforcement — even though the category "Supervision, Enforcement, Fair Lending" accounted for a hefty $63 million in agency spending through June 2012 — almost a quarter of all CFPB expenditures." The report says that '[t]he investigations currently underway span the full breadth of the Bureau's enforcement jurisdiction. Further detail about ongoing investigations will not generally be made public by the Bureau until a public enforcement action is filed." So, we should expect to hear a lot more about enforcement down the road.

McDonald's to Disclose Calories

First, there were a handful of cities, such as New York, San Francisco, and Philadelphia, that required chain restaurants to disclose the calories in the foods they sell. Some counties followed suit. California joined in. Then, as part of the Affordable Care Act, Congress demanded calorie disclosure nationwide, but the new rules probably won't go into effect until late 2013. Now, McDonald's has decided to disclose ahead of the national law. As Reuters reports:

The world's No. 1 hamburger chain said on Wednesday it is going to start listing calorie information on menus in some 14,000 U.S. restaurants and drive-throughs - ahead of a national rule that will require larger restaurant chains to make such disclosures.

So, you're wondering. How many calories for a Big Mac and fries? About 1,050 -- or more than half of the the appropriate daily intake for a (non-dieting) average adult male. That's bad, but nothing compared to Dave & Buster's new "South Philly Burger," served "with over half a pound of seasoned fries." That lovely dish is more than 2,000 calories itself!

 

Income Inequality in the U.S. Still on the Rise

Yesterday we posted on the significant rise in U.S. wealth inequality. Now, the Census Bureau is reporting that income inequality continued to grow in 2011. The top fifth now takes in 50% of the nation's income.