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We here at FindLaw always like to remind our readers how important it is to read the fine print. If you're buying, selling, or downloading anything, you must understand the terms and conditions of whoever you're dealing with.
Amazon just made a big change to its terms of service that could make it easier for customers to take legal action against the online retail giant. The company will no longer force customers into arbitration for resolving disputes, allowing people to sue instead.
Arbitration is a form of alternative dispute resolution instead of a lawsuit in court. In the arbitration process, the parties meet with an impartial third-party judge. Like a lawsuit, the sides can present evidence and witnesses, and the arbitrator's ruling is binding.
Over the years, many companies have increasingly relied on arbitration instead of allowing customers to file lawsuits. They put clauses in their terms of service stating that by using the company's product, the consumer agrees to use binding arbitration to settle any disputes. In fact, a 2019 study in the UC Davis Law Review found that 81 out of the biggest 100 companies in the U.S. include binding arbitration in their terms and conditions.
Companies argue that arbitration is a cheaper, faster way for consumers to resolve their complaints. Whether arbitration is fairer for consumers is another issue. Arbitrators do not have to rely on case law, and discovery of evidence rules can be different as well. Arbitration claims are also individually resolved, denying consumers the ability to band together in a class-action lawsuit. Consumer advocates allege that companies use arbitration specifically to rig the game in their favor.
Under the rules of the American Arbitration Association, which Amazon bound itself to, the company was responsible for paying the thousands of dollars in fees for the arbitration whenever a consumer actually followed through on filing a claim.
To put pressure on Amazon, lawyers representing consumers alleging that Amazon's Echo devices recorded people without their permission flooded the company with arbitration claims. According to the Wall Street Journal, the company faced more than 75,000 arbitration claims from Echo users.
Facing a hefty bill to resolve all those claims and potentially more once other angry customers caught on, Amazon quietly changed its terms in May. The website now states:
Any dispute or claim relating in any way to your use of any Amazon Service will be adjudicated in the state or Federal courts in King County, Washington, and you consent to exclusive jurisdiction and venue in these courts. We each waive any right to a jury trial.
"Companies thought they were getting out of liability altogether, now they're seeing exactly what they bargained for, and they don't like it," Chicago attorney Travis Lenkner, whose firm filed the majority of claims, said to the Wall Street Journal.
For you, the consumer, it means if you have a claim to make against Amazon, you can attempt to resolve it through the courts — specifically, state or federal courts in King County, Washington — if the company does not resolve the complaint to your satisfaction.
However, we will note that the company's terms still say that you waive the right to a jury trial. That means the outcome will be in the hands of a judge and not a jury.
Whether other companies start to follow Amazon's lead is a question that consumer advocates are undoubtedly keeping an eye on. It could mean more class-action lawsuits against retailers in the future.