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Online Businesses Restricting Customers' Right to Sue

Online shopping is increasingly becoming a way of life for most Americans. A recent study projects that by 2016, 192 million U.S. consumers will shop online spending an estimated $327 billion (roughly $1,700 per person). While online shopping offers the convenience of purchasing products from your living room or office and having them delivered to your doorstep, most consumers probably are not aware that many retail websites have language tucked into their terms-of-service rules that restrict consumers from bringing a lawsuit against the retailer.

Forced Arbitration & Class Action Ban Clauses

A recent analysis by the New York Times showed that over a third of the top 200 online stores had restrictions that blocked the company from being sued. The legalese, which is typically buried in lengthy terms-of-service rules that most consumers don't read, contain legal provisions such as forced arbitration clauses and class-action ban clauses. What this means is that if a consumer is harmed by the product they have purchased or feels that they were misled about the cost of the product, they are unable to file a lawsuit in court. Instead, the consumer's claim will be sent directly to arbitration where the dispute will be heard by an independent arbitrator.

Legal experts have argued that these clauses further shift the power away from consumers by limiting their legal options if they feel they have been harmed by the company. While companies argue that arbitration is a faster and less complicated means of dispute resolution than the court system, they leave consumers with little recourse if they are not satisfied with the arbitrator's ruling. Additionally, many arbitration clauses restrict consumers from making the outcome of their case public.

Clickwrap vs. Browsewrap

While forced arbitration clauses are legal, there has been some debate over whether burying the clause in a terms-of-service agreement properly notifies the consumer of the clause. There are two main types of terms-of-service agreements: clickwrap and browsewrap. Clickwrap is a common method of having consumers agree to the terms-of-service. Clickwrap forces the consumer to confirm they have read the terms-of-service either by clicking a button, checking a box, or performing some other voluntary action. These have generally held up in court as whether the consumer actually read the terms-of-service or not, they did take an action acknowledging that they had.

Browsewrap agreements, in which the webpage only offers a link to the terms-of-service but does not require the consumer to acknowledge having read it, have been a bit murkier. In one case involving the online shoe retailer, Zappos, a Federal District Court in Nevada ruled that Zappos' link to the terms-of-service was not displayed prominently enough on the website to assume the consumer had noticed it. As a result, the court allowed the consumer to move forward with a lawsuit. However, other courts have ruled that browsewrap terms-of-service are enforceable.

Consumer Protection Laws

While arbitration and class-action ban clauses in the terms-of-service can be effective at limiting the company's exposure to lawsuits, they are not ironclad. The terms cannot prevent regulatory agencies from suing to enforce consumer protection laws. For example, when thousands of families complained to Amazon about unauthorized charges made by children whom which the company had not gotten parental approval, the FTC filed a lawsuit against Amazon contending that it improperly billed customers. If you have been harmed by a product you purchased online, contact our product liability lawyers for a free case evaluation. Our lawyers can review the facts of your case and help you determine your legal options.


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