Most shoppers who forked over their share of the $3.07 billion spent with online retailers on Cyber Monday probably don’t know that there could be a downside to buying their holiday gifts over the Internet instead of in physical stores.
A large number of popular online retailers have inserted forced arbitration clauses and language banning class-action suits in their terms-of-service rules, forbidding consumers from taking the corporations to court if they feel they’ve been defrauded or given a defective or dangerous product.
An arbitration clause requires that the parties settle their disputes through a third party. Consumer watchdogs have been fighting against such mandatory arbitration clauses, arguing that they erode consumer protections and limit the rights of workers, investors, credit-card holders and mortgage borrowers, among others. The Consumer Financial Protection Bureau announced in October that it was considering proposing a ban on arbitration clauses used by financial companies.
Related: 5 Ways to Avoid Identity Theft Online During the Holidays
While the fight against forced arbitration has centered more on financial services products and labor laws, it touches on retail, too. The big-name online shopping sites that have forced arbitration clauses include Amazon, Ticketmaster, Starbucks (for its gift cards), Patagonia, H&M, Overstock.com, J.Crew, Sears, Under Armour, Walgreens, Lowes, L’Oreal, Sephora, Lego and Dell, according to watchdog group Public Citizen.
(Several companies did not respond to requests for comment about their use of arbitration clauses, or declined to comment.)
Most legitimate e-tailers have policies that allow customers to return merchandise regardless of the reason, without any cost or fuss. If a product is faulty or doesn’t function as promised, you can always sue the manufacturer directly. Unless you bought the product from the manufacturer, you probably didn’t sign their arbitration agreement.
One major concern relates to credit and debit card use. If an online retailer was negligent in protecting consumers’ confidential information, what recourse would one have through arbitration to recover any losses? After 70 million Target customers were hacked, the company paid victims $10 million in a widely publicized settlement.
Trial lawyers, unsurprisingly, are riled up about the arbitration clauses. “They’re in places where a typical consumer wouldn’t even dream they exist. Most don’t even know what a forced arbitration clause is, much less that they’re agreeing to one,” says the president of the New York State Trial Lawyers Association, Evan Goldberg.