EcommerceBytes-NewsFlash, Number 2907 - October 05, 2012     1 of 4

Advocacy Group Fights eBay Ban on Class Action Lawsuits

By Kenneth Corbin

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Alarmed at what it sees as a significant rollback of the rights of eBay users, a public-interest group plans to launch a campaign on Friday to encourage buyers and sellers to opt out of a new provision in the company's user agreement waiving their ability to join in any class-action litigation against the ecommerce giant in the event of a dispute, EcommerceBytes has learned.

The campaign, led by Public Citizen, aims to shine a spotlight on the implications of the arbitration clause, which stipulates that users must submit a written notice in the mail opting to retain their right to civil litigation as a member of a class. Those notices must be postmarked by Nov. 9.

Users who do not submit opt-out notices will be prohibited from pursuing claims against eBay in civil court as a member of a class, leaving their only recourse arbitration or individual action.

Critics of the move warn that users who do not opt out will relinquish a significant legal right, and that by requiring written notice through the mail, eBay is trying to ensure that as few people as possible remain eligible to participate in class-action lawsuits.

"It's a pain in the neck. eBay is trying to make it as hard as possible to opt out," said Brian Wolfman, the co-director of the Institute for Public Representation at the Georgetown University Law Center who helped Public Citizen organize the opt-out campaign. "They're trying to make the opt-out illusory, and they're likely to succeed in large part."

Public Citizen has posted a form letter that users wishing to opt out of the binding arbitration clause can download, print and mail to eBay. The group is also collecting signatures for a petition protesting the move on its website.

eBay is only the latest company to roll back its customers' rights to pursue class-action litigation, following Microsoft and others that have been emboldened by a 2011 U.S. Supreme Court holding that corporations could preclude the lawsuits by force of their user agreements.

In AT&T Mobility v. Concepcion (available in PDF format here), the high court ruled that a federal arbitration statute trumps state laws against contracts that ban class-action suits, dealing a major blow to a favorite legal remedy for consumers seeking relief from corporations.

PayPal has announced plans to update its own user agreement to bar class-action litigation, giving users until Dec. 1 to submit a written notice opting out of the arbitration clause.

Wolfman argued that eliminating the right to join a class action stacks the deck against consumers, who, as a practical matter, will generally not sue a company on their own for what are usually small sums. The Concepcion case stemmed from a dispute over a charge of $30.22. Quoting an earlier ruling of a lower court, Justice Stephen Breyer wrote in the dissenting opinion of the 5-4 decision, "The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30."

Limiting consumers' options to arbitration "essentially allows (companies) to contract out of the civil justice system," Wolfman said.

"You have to have a class action, or you have no action at all," he added. "Arbitration tends to be a much less fair forum. ... The judges tend to favor the repeat players, which are the companies."

Public Citizen is also sending a letter to eBay CEO John Donahoe and General Counsel Michael Jacobson calling on them to strike the arbitration clause from the usage agreement and taking them to task, as stewards of an Internet company, for requiring users to submit written notice of their decision to opt out in a postmarked letter.

Kari Ramirez, an eBay spokeswoman, said that the company modified its user agreement "to provide clarity around our policies and stay current with changing laws as our business and service offerings evolve."

"The arbitration provision encourages swift and reasonable resolution as opposed to litigation that can be protracted, expensive and often dissatisfying to customers," Ramirez said in an emailed statement. "We believe this approach will benefit both eBay Inc. and our customers. eBay has provided users with the option to opt out of the arbitration provision if they do not feel it is right for them and their account will remain active."

Ramirez declined to comment on the specific charges critics have leveled against eBay's policy change.

Wolfman acknowledged that eBay is not required to offer the choice to opt out of the arbitration provision, but suggested that the company only did so on the calculation that most users would overlook the email it sent out alerting them of the changes, just as most people don't read the fine print of the user agreements they sign. A more ingenuous approach would have been to offer the arbitration provision on an opt-in basis, or, at the very least, to allow users to opt out of it electronically.

"They're trying to give the illusion of consent and fairness when they know perfectly well that consumers are not going to be in a position to do this now. They curry favor with public opinion, perhaps with some reporters, and maybe with some courts," Wolfman said. "In some ways it's more deceptive, because it's trying to give the illusion of consent and fairness. In some ways it's a public relations ploy."

See this EcommerceBytes Blog post from August for seller reaction to the arbitration clause.

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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