Consumer Law & Policy Blog

Is Amazon's Recent Suit Against Anonymous Reviewers Barred by Its Own Arbitration Clause?

by Paul Alan Levy

Yesterday I discussed a lawsuit filed by Amazon seeking relief against over a thousand anonymous individuals who offered to sell their services posting phony positive reviews about products available for sale on Amazon.  The theory of Amazon's complaint is that the users are all registered Amazon users and hence forbidden from taking money for their reviews.  Amazon will have to use the subpoena process to identify these users, of course.

But "Gregory Gauthier" posted a comment that is worth considering: there is a mandatory arbitration  clause in Amazon's Terms of Service, requiring arbitration of "Any dispute or claim relating in any way to your use of any Amazon Service, or to any products or services sold or distributed by Amazon or through Amazon.com."  The clause is unconditional and two-way -- it does not purport to bind only Amazon's users.  And what Internet Service Provider will honor a letter from an arbitrator asking it to provide documents or information identifying its users?  

There is an additional problem for the litigation -- the dispute resolution clause strictly requires claims to be pursued "on an individual basis" and forbids the use of "class, consolidated or representative action" procedures. That seems inconsistent with suing "Does 1-1114," and again it is a two-way clause -- it limits Amazon as well as its users from joining multiple users in a single proceeding. 

Has Amazon been hoisted on its own petard?

Did copyright law hinder detection of VW's emissions scheme?

As regulators and policymakers consider how to respond to VW's emissions scandal -- in which the company programmed its vehicles to emit less during tests than under normal conditions (for our prior discussions, see here, here, and here) -- one angle they might consider for future reform is copyright.

Sen. Ron Wyden opined last week that regulators might have figured out the scheme sooner had it not been for copyright protections that deterred researchers from diving into the vehicle's software, on pain of a costly suit for copyright infringement. “The obstacle thrown up against access to copyrighted software makes it more difficult for researchers and engineers to find similar problems in the future,” Wyden wrote in his Wall Street Journal op-ed.

The Hill has the story and a link to the op-ed (the Hill story is free; the WSJ op-ed is behind a paywall).

Reifa & Markou: Advertisers Know You are a Dog on the Internet!

Christine Riefa of Brunel and Christiana Markou of the European University Cyprus have written Online Marketing: Advertisers Know You are a Dog on the Internet!, in Savin, Trzaskowski (Eds) Research Handbook on EU Internet Law (Edward Elgar 2014) 383-410.  Here's the abstract:

This piece explores the regulation of online marketing. The Internet has enabled advertisers to get to know their customer base and harness technology to a point where the once anonymous Internet is now a space where advertisers know you are dog. There is much progress however for the law to make in order to catch up with technology and the marketing practices it enables. The many dangers allied with those advertising techniques should force the legislator to rethink and tighten controls in a bid to protect consumers.

To tip or not to tip? (Or more accurately but less punchily: to have a tipping system or not?)

In wake of last week's announcement by New York restaurateur Danny Meyer that he would be eliminating tipping at his restaurants (and instead building a service charge into the menu prices), dueling op-eds in the Times and Post over the past week debate the merits of tipping as a custom and means of paying workers.

In the Times, Saru Jayaraman, Director of U.C. Berkeley's Food Labor Research Center, argues that tipping helps keep in place the special, lower minimum wage for restaurant workers (she aptly calls it the "subminimum wage"). Jayaraman also traces the racialized history of the tip and notes that tipped workers are still disproportionately minorities or women, with the latter group forced to endure sexual harassment from customers in expectation of a tip. Employers, not customers, should pay the workers, she argues.

In the Post, columnist Richard Cohen responds with the view that tipping actually helps ensure better service by injecting loyalty to the customer into a restaurant worker's calculus, and he dismisses the notion that sexual harassment by customers would be reduced if tipping were eliminated. Tipping is, for Cohen, "both a responsibility and a privilege."

What stands out to me about these contrasting arguments is whose perspective each adopts in considering the practice of tipping: Jayaraman is thinking chiefly about the worker; Cohen, the customer.

Amazon Damns a Thousand Anonymous Reviewers for Paid Praise

by Paul Alan Levy

The problem of false reviews bedevils web sites that invite customer reviews as a basis for other consumers to judge goods and services available to them on the market.  Disgruntled merchants can be counted on bring defamation claims against false negative reviewers, but few merchants feel they have any incentive to sue customers who falsely praise them.  And we ought to worry about the distortions of the marketplace of ideas that would be created when it is only critics who face legal pressures not to lie.

The FTC has blogger guidelines that require companies which give incentives to others to offer their endorsements, including endorsements posted online, to insist that the posters disclose their incentives so that consumers can take those financial incentives into account in deciding whether to trust the reviews.  But those guidelines are not meant to be enforced against the bloggers expressing their opinions, but only against companies that hand out incentives.  

Operators of the sites that host consumer commentaries have struggled to find ways to create meaningful disincentives for the false positive review.  Yelp, for example, has collaborated with local consumer protection authorities to pursue merchants who arrange for the posting of false positive reviews.  

Amazon recently filed suit in Washington state court against 1114 anonymous individuals who, according to Amazon’s complaint, have advertised their willingness take money for using their Amazon accounts to post fake reviews praising products available for sale on Amazon.  Because of my close association with the Dendrite standard for deciding whether to compel identification of defendants who have been sued for wrongful speech, which the Washington Court of Appeals adopted earlier this year in Thomson v. Avvo where we represented a Doe defendant who had used Avvo to criticize her former divorce lawyer, I have been asked for my view of Amazon's suit against these anonymous speakers.

Experts Disagree Over Whether Earth is Flat and CFPB Has Power to Regulate Arbitration Clauses

by Jeff Sovern

Did Congress give the CFPB the power to ban or regulate arbitration clauses in consumer financial contracts?  Not according to a Pepper Hamilton partner, according to a pair of recent reports.  Here's an excerpt from a piece at credit.com. The CFPB’s Arbitration Ban Could Be the Next Supreme Court Showdown:

“It comes down simply to whether the (bureau) can now make rules that run directly counter to clear Supreme Court findings [interpreting the Federal Arbitration Act],” said Matt Adler, a law professor at the University of Virginia and chair of the arbitration practice at Pepper Hamilton law firm.

* * *

Now comes the CFPB, offering its own ban on class-action waivers — seemingly in direct contradiction of these Supreme Court rulings.

“It’s really going to come down to whether an agency rule can overcome those cases. There’s absolutely going to be test litigation,” Adler said.

His opinion was clear-cut — absent an explicit amendment to the 1925 Federal Arbitration Act, the CFPB rule won’t survive.

“I think you’re going to need a Congressional Amendment,” he said. “The court will most certainly not roll over in face of an agency rule.”

And here's what an American Banker article, Fierce Battle Ahead for CFPB Arbitration Plan, had to say:

Matthew Adler, a partner at Pepper Hamilton, said a 2013 Supreme Court decision in a case involving American Express made it difficult to invalidate such arbitration clauses without a legislative amendment to the Federal Arbitration Act. Adler said the provisions in the Dodd-Frank do not go that far.

"It's going to be very difficult, without Congress amending the Federal Arbitration Act to invalidate class action waivers, for an administrative agency to do that on its own," said Adler.

As any first-semester law student knows, the starting place to answer a question involving a statute is the statute itself. So let's go to the Dodd-Frank Act, 12 USC § 5518(b):

The [Consumer Financial Protection] Bureau, by regulation, may prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties . . . .

I cannot imagine how that statute could be interpreted so as not to give the CFPB the power to "prohibit or impose conditions or limitations" on arbitration clauses in contracts within the Bureau's jurisdiction.  Because Dodd-Frank was enacted decades after the FAA, it is obvious that Dodd-Frank was intended to supersede the FAA as to the authority Dodd-Frank grants the Bureau.  Put another way, Dodd-Frank amends the FAA. As a result, it takes precedence over cases, even decided by the Supreme Court, interpreting the FAA, just as any congressional amendment to a statute can overturn Supreme Court decisions interpreting the statute in question--as has happened many times. 

 

Michael Barr Article on Arbitration

Michael S. Barr of Michigan has written Mandatory Arbitration in Consumer Finance and Investor Contracts, 11 New York University Journal of Law and Business (2015). Here is the abstract:

Mandatory pre-dispute arbitration clauses are pervasive in consumer financial and investor contracts — for credit cards, bank accounts, auto loans, broker-dealer services, and many others. These clauses often ill serve households. Consumers are typically presented with contracts on a “take it or leave it” basis, with no ability to negotiate over terms. Arbitration provisions are often not clearly disclosed, and in any event are not salient for consumers, who do not focus on the importance of the provision in the event that a dispute over the contract later arises, and who may misforecast the likelihood of being in such a dispute. The lack of salience means that there is no meaningful competition over arbitration provisions or likely any price effect. Some arbitration proceedings lack procedural protections, and unbiased arbitrator selection essential for fair outcomes. In addition, many arbitration provisions contain “gag” rules barring disclosure of reasoning, evidence, or outcomes. Moreover, arbitration clauses typically preclude consumers from banding together in aggregated actions, which diminishes redress and weakens deterrence. In the wake of the financial crisis, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which authorizes the new Consumer Financial Protection Bureau and the U.S. Securities and Exchange Commission to prohibit or condition the use of arbitration clauses in consumer finance and investment contracts, respectively. It is well past time for these agencies to use this authority.

It’s Getting Harder To Move Beyond A Minimum-Wage Job

... reports fivethirtyeight.com. For instance:

During the strong labor market of the mid-1990s, only 1 in 5 minimum-wage workers was still earning minimum wage a year later. Today, that number is nearly 1 in 3, according to my analysis of government survey data. There has been a similar rise in the number of people staying in minimum-wage jobs for three years or longer.

In addition:

Even those who do get a raise often don’t get much of one: Two-thirds of minimum-wage workers in 2013 were still earning within 10 percent of the minimum wage a year later, up from about half in the 1990s. And two-fifths of Americans earning the minimum wage in 2008 were still in near-minimum-wage jobs five years later, despite the economy steadily improving during much of that time.

To read the full story and see the accompanying charts and graphs, go here.

Are e-cigarettes good for the public health?

Yes, very good, with the potential to save hundreds of thousands of lives, says reporter Joe Nocera in this NY Times op-ed.

With friends like these ...

Today's LA Times has another story on the Fiat-Chrysler stratagem of offering customers a "friends and family" discount in return for which consumers sign away their right to sue the automaker by agreeing to arbitration. (We had a short blog entry on the subject last week.)

The story points out that most consumers can get just as good a deal without signing an agreement with the manufacturer. The beauty of the transaction for the manufacturer is that it gets a direct arbitration agreement with the consumer, which doesn't usually happen when consumers buy a car from a dealer, and it doesn't even have to give consumers a very good deal to get it.

The company's justification is that these are special discounts for "close friends," and, after all, close friends shouldn't be suing each other. And anyway, the consumer doesn't have sign up for the discount: "No one's holding a gun to your head," according to a company spokesman.

Let us hope consumers take those words to heart and pass up this opportunity to sell their birthright for a mess of pottage.