Do you “Like” mandatory arbitration? If so, “Like” this cereal

Photo of Carlos A. Maycotte

A couple of weeks ago, social media exploded with outrage over a news story in the NYT that reported that, by “liking” a brand on Facebook, a consumer would lose his or her ability to sue the company. The story referred to an update in General Mills’s online “terms of use,” which the NYT said, “quietly added language to its website to alert consumers that they give up their right to sue the company if they download coupons, “join” it in online communities like Facebook, enter a company-sponsored sweepstakes or contest or interact with it in a variety of other ways.”

This statement was a bit overblown and misleading – General Mills went to great pains to explain that the update only meant that dispute resolution would take place in arbitration rather than the courts and that merely “liking” a product on Facebook would not bind consumers to arbitration. Nevertheless, the volume of the outcry compelled General Mills to perform an abrupt about-face and to revert to its original terms of use.

According to some commentators, the reversal is a boon for consumers as ” a victory for corporate accountability.” From the consumer’s point of view, it is hard to argue with this conclusion. As the analysis reflects, the preservation of the ability to engage in class-action suits is a benefit for consumers. Class actions make some lawsuits designed to curb corporate overreach economically viable for plaintiffs. Moreover, litigating a claim (as opposed to arbitrating one) keeps the case in the public arena, where public “oversight” – a long-standing and important feature of the American judicial system – serves the interests of justice.

Although arbitration is generally more efficient and cost-effective than litigation, the choice between arbitrating and litigating is best left for the parties, both of whom should have an equal say in the matter. Indeed, whether the parties agreed to arbitrate is the central question explored by the courts when determining whether a case should be arbitrated or not.

With the advent of legal terms of use – which most computer users click through without thinking – we are now also faced with the issue of when a consumer elects to arbitrate. Does the consumer agree to arbitration – foregoing the opportunity for redress in the courts – when he or she “likes” something on Facebook? Or when he or she uses an online coupon? Or signs up for a mailing list? Or buys something online?

It is hard to say that a person agrees to give up the right to a jury trial by trying to save 20 percent on a $4 box of cereal. However, that is precisely what General Mills is arguing and it is something that the U.S. Supreme Court might agree with given their recent holdings on similar cases. As more and more companies update their terms of use to incorporate mandatory arbitration and expand the scope of when those terms are considered legally binding, it would not be surprising to see more and more of these cases pop up.


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