Taking It Back!: FCC’s New Promise to Tackle Forced Arbitration and Protect ConsumersOctober 31, 2016
Last week, the Federal Communications Commission made two huge moves to help consumers navigate the digital marketplace. The first was to finally pass its long-awaited landmark broadband privacy rules. But tucked inside that order was something equally important, if less high-profile: a commitment by the FCC that by February 2017, it will embark on a proceeding to address mandatory binding (or forced) arbitration clauses.
If these have flown under the radar for you, it’s because they are the epitome of fine print. Forced arbitration clauses are sneaky language injected into contracts, which can eliminate one of your fundamental legal remedies as a consumer: the class action lawsuit. Without the threat of a class action, consumers can be left without a practical legal remedy, which is critical in the event that a company pursues business practices that clearly rip customers off.
Some background: The class action is designed so that if a whole lot of people are harmed by the same company, they don’t have to all hire separate lawyers and fight back alone. It enables consumers to band together against the overwhelming power of major corporations in our legal and political system. The class action suit exists to make it potentially more painful for them to rip you off than it is for them to just give you good service. Not all companies necessarily pursue these types of damaging business practices, but for those that are considering less than savory actions, the potential of class action provides an important disincentive.
Companies don’t necessarily like that legal watchdog. So some companies started burying forced arbitration clauses inside the fine print of the long contracts consumers sign every day, often without reading them. The result is that many of us may unknowingly be signing away our ability to pursue reasonable legal action in the event that companies don’t play fair. And even if you know the clauses are there, a lot of the industries that utilize forced arbitration (think banking and internet connectivity) provide services that are pretty essential to get through the day. If you don’t accept it, there’s the door. We’re all pretty regularly signing away our fundamental right to our day in court, just for the privilege of participating in today’s marketplace. That’s not a choice we should have to make.
For example: think about the last time you bought a smartphone. Maybe there’s low-price deal in the window, but a month later, your bill might inexplicably jump as a result of some new $10 fee you didn’t know about. Are you going to hire a high-priced attorney to protest that vague “administrative fee” you weren’t notified about? Probably not. Instead, you’d round up the troops and join with the other millions of customers who have probably had the same surprise fees sprung upon them. But if a company tacks on wrongful extra fees you didn’t know you were purchasing, and the contract you signed contains a forced arbitration clause, that fundamental consumer protection tenet of our legal system – the class action – is inaccessible, and your only option is to go it alone. Your rational cost-benefit analysis is probably not going to be to go to the mat with a giant corporation over $10 a month, because you’ll end up spending more than you gain back. More than likely, you’ll end up spending four hours on the phone with a customer service representative, tearing your hair out to little satisfaction. And even if you get your fee reimbursed, those other millions of customers are still getting squeezed by their provider – many unknowingly, as cable and wireless providers continue to siphon this free money into their coffers.
It seems that those types of contracts that undermine fundamental legal remedies should be illegal by any rational standard. Unfortunately, in a case called AT&T v Concepcion, the Supreme Court held that it was fine under current federal law. The decision was called a “tsunami that is wiping out existing and potential consumer and employment class actions.” As a result, many companies run with the forced arbitration strategy, since now the law gives them much more leeway to visit whatever business practices upon their customers that they want. This could run the gamut from ratcheting fees as discussed above, or deceptive advertising that said you were paying one thing and then doubling down with sneaky “fees and taxes,” privacy violations, and more. If you subscribe to cable, internet, or mobile, you might be familiar with this already. To be fair, this kind of shenanigans isn’t ubiquitous – but when it does occur, customers need to have a workable solution to seek remedy.
Thankfully, in the wake of the Supreme Court’s decision in AT&T v. Concepcion, some federal agencies tasked with protecting consumers realized they could do something about these abuses. So a contingent of them — like the Consumer Financial Protection Bureau, which oversees banking, one of the few industries that treats consumers worse than the telecommunications industry does — started stepping in and examining how they could prohibit forced arbitration clauses and give consumers back their right to go to court.
The FCC, with their action last week, is the most recent arrival to the party. This move was just the latest example of the FCC fighting for consumer rights in the face of continued pushback from corporate interests. Consumers should cheer loudly – but also remember that this is just the kick-off. Important issues for consumers remain on the FCC’s agenda, and it remains incumbent upon all of us to be vigilant — to help the Commission enact yet another critical consumer protection in the telecommunications industry, which is central in our daily lives. And, much like in a class action itself, that’s something we can all get behind together.
As for Public Knowledge, we’ll be tracking as we move into the forced arbitration pushback season, so stay tuned for more updates on how the FCC is working to bring back our right to take on giant companies when they do us wrong.
Image credit: nyphotographic.com