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In case you missed it during the holiday weekend, a set of consumers’ rights were killed off and then rose from the dead, all in the span of about three days.  While consumer advocates are declaring victory over the Cheerios fine print incident, there’s a bigger story you are probably missing: You, dear consumer. have already signs hundreds, if not thousands of “contracts” that contain the exact same provisions as ill-fated Cheerios/General Mills terms.

Verizon. Comcast. Match.com. Wells Fargo. Sallie Mae. Sony. Dell. I could could go on and on, but you get the point.  (If you want to go on and on, visit Citizen.org’s great rogues gallery of firms that require forced arbitration agreements.) Binding arbitration clauses that restrict lawsuits or ban class action cases are like a virus to consumer rights, infecting contracts one by one across the land.

They are simple to enact. Corporations put a piece of paper in front of you and make you sign it to get their service…or they hide a term under an “OK” button on a website … or in some cases they simply declare it so, without any interaction from consumers.  And suddenly, the consumer either cannot sue a company, or cannot join a class action lawsuit, or both.

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During the weekend, I shared the Cheerios saga with plenty of family and friends, and the response was universal: “That can’t be true!” “That would never hold up in court!” Au contraire, it has in fact help up in the highest court of the land. But let me pause here for a moment:

I write about outrageous things for a living, and one of the reasons I’ve concluded that outrages continue is that people just simply can’t believe such a thing is happening.  I tell them mutual fund fees are stealing one-third (or more!) the money they are saving for retirement in their 401(k) plans, and they don’t believe it (email me! I’ll prove it!). I used to tell them, “Send in your credit card bill one day late, and your interest rate could rise from 10 percent to 30 percent!” For a while no one believed that, either.  In some ways, this means that the more outrageous the behavior, the easier it is for corporations to get away with it. Things go on because no one believes them … until consumers have a personal experience with lost retirement funds, or interest rates, or lost rights.

This deeper truth is right there in General Mills apology, issued Saturday evening

“We never imagined this reaction. Similar terms are common in all sorts of consumer contracts,” the firm wrote in its non-apology apology.

We should thank the Cheerios maker for this: binding mandatory arbitration clauses have been infecting consumer contracts for years. Last week’s incident shined a large spotlight on a serious consumer issue that is often easy to miss, hidden as it in in fine print.  So now that General Mills has relented, why stop there? Consumers should be equally outraged by Verizon, Comast, Match.com and all the rest.  Spend a few moments today reading up on forced arbitration.  I’ll repeat myself, but it bears repeating: If arbitration were so great for consumers, companies would make it voluntary, not mandatory.  Here are some resources:

• The National Association of Consumer Advocates’ “What is arbitration? page.
• If you want to hear the other side of the story, read this page at The Heritage Foundation.
• License to Steal: A report on the history of arbitration.

I’ll just make two important points:

1) Folks in favor of binding arbitration say it’s not mandatory. If you read that Heritage page, it claims that no one is ever forced to enter a contract.  That’s goofy: If you have only a few choices for cable TV, or cell phone service, or banking, and every one of them requires you to sign an arbitration agreement, then arbitration is forced on you.

2) It’s true class action cases are sometimes abused by lawyers, and that system needs reform.  But how do consumers fare in arbitration? Data is scant, because arbitration ruling are kept secret (unlike open court proceedings).  Public Citizen offers some scant data on outcomes, like this: ” California, National Arbitration Forum arbitrators handled more than 19,000 disputes involving credit card holders. The card holders prevailed only 4 percent of the time. The companies won 94 percent of the time.”

Corporations argue often that arbitration is more efficient that the traditional court system. Sure sounds like it.

Let’s not stop with Cheerios.

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Cheerios.com – but don’t click! You’ll lose your rights.

Cheerios, Betty Crocker and Pillsbury might sound like the most American of American brands, but it sure sounds like Betty and friends hate America.

Perhaps you spotted a New York Times story today about consumers giving away their right to sue Big Brand companies if they do something as simple as download a coupon or like a page. In this case, the Big Brand company is General Mills, and it has now joined the long list of firms that are cajoling consumers into surrendering their right to sue by sneaking oppressive legal terms into every last corner of fine print. The good folks at the American Association of Justice alerted me to this on Monday, and I didn’t jump on the story right away because — well, what company hasn’t snuck binding abitration/class action prohibition language into standard form contracts?  I thought everybody knew you can’t really sue big corporations any more. The Supreme Court made that law of the land in 2011 with its chilling 5-4 ‘AT&T vs. Concepcion’ decision. 

Here’s how bad things are. Contracts, as you know them, require some basic things, including consent of the parties, right? WRONG!  After all, even the most sinister, cynical lawyer couldn’t argue that clicking like on a Facebook page signifies consent. So lawyers in this field have changed the word “consent” to “assent.” I’m not even sure I know what the word assent means. But I know it means you are screwed.

I spoke at a conference at Georgetown Law School two weeks ago devoted to this very topic, sponsored by Citizen Works and its super FairContracts.org project.  The list of big brains in the room was remarkable, including Deepak Gupta, the fine lawyer who argued for consumers (and lost) on the Concepcion case.  Ralph Nader spoke, too.  He suggested lawyers who have designed fine print that literally takes away citizens’ right to their day in court should be disciplined.  Others were more measured, though several lawyers repeatedly referred to the Supreme Court as “The Death Star.” Consumer lawyers who still find narrow topics in limited venues to file lawsuits are compared to the Rebel Alliance, hopping from planet to planet (state court to state court) to survive.

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I’ve resisted getting into the nitty gritty of this discussion in this piece because the details really don’t matter much. Before, if a company wronged you, you could sue, now you can’t.  There are some exceptions and qualifiers, but that’s all you really need to know.

Just in case, for quick review: Concepcion made it permissible for companies to include language in “contracts” that ban consumers from filing class-action lawsuits against them, and generally forces them into an outside-the-court process called binding mandatory arbitration (or in some cases, small claims court).  This is important because when companies misbehave $30 at a time, there is really no way to get justice now. When large corporations misbehave in large-scale ways, only large-scale lawsuits involving groups of consumers can stop them.  Today, such class action lawsuits are all but illegal.

Some additional details about General Mills situation from the folks at AAJ:

“General Mills has quietly updated its electronic terms of service to include a forced arbitration clause that will eliminate many of its customers’ rights to hold General Mills accountable in court. The April 2 change means that people who purchase General Mills products with coupons, turn in box tops or even just visit their website won’t be able to bring the corporation to court – parents can’t hold anyone accountable if their child has an allergic reaction to a mislabeled product; individuals will be denied access to justice for chipping their tooth on a rock in the cereal; and if you find a dead mouse in the box and get any reimbursement from the corporation, you are prohibited from ever telling anyone about this disgusting discovery.”

Here’s what consumer lawyer Brad Shear thinks of this:

“General Mills new terms of service are very troubling.  It is suspect that a consumer may waive their legal rights by utilizing a digital platform that is not owned or controlled by General Mills.  I doubt a court of law would uphold these new terms of service in regards to platforms that General Mills does not own.  If these new terms of service were deemed legal every single company in the world would incorporate them and nobody would be able sue a company for negligence or bad acts.”

General Mills refused to talk to the New York Times about it — hey, General Mills doesn’t have to anything, right? — and instead emailed a reporter a blah-blah-blah statement about how efficient arbitration is.  Hey, if arbitration were so great, why don’t corporations make it voluntary instead of mandatory?

OK, back out of the weeds.  This is classic divide and conquer strategy.  While you weren’t paying attention, American corporations have invented an extra-legal process and eliminated your due process.  With the Supreme Court squarely on the side of corporations, there isn’t an easy fix. A new federal law banning mandatory arbitration would be nice, but it’s probably not happening. Laws banning specific unconscionable terms, such as requiring consumers to fly long distances to argue their cases,  would be nice.

At a bare minimum, our legal system has to invent a new word for what’s going on here, and it’s not “assent.”  When companies puts some words on a paper in an unreadable small font, that shouldn’t constitute a contract. It’s a lot more like a no parking sign you didn’t notice before you got a ticket.   Now ask yourself: When did General Mills, or AT&T, or any of these corporations become equal to your town government?

If you aren’t angry about this, you aren’t paying attention.  If you want to learn more, you can watch a webcast of the seminar, “Making the Fine Print Fair,” at Georgetown’s website.  I speak at the 7:44 mark of the video. In this case, I compare the shock of fine print that robs you of money or your rights to the Windows Blue Screen of Death. Our legal system has crashed. We need a new operating system.

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Consumers Union

Smart phone theft is exploding nationally, but carriers this week promised to deploy a simple new technology that could soon render stolen phones useless.

Consumer Reports said Thursday 3.1 million consumers had their smartphones lifted during 2013, double the number of victims in 2012, according to its annual State of the Net survey. Another 1.4 million phones were lost and not recovered, the survey found.

All that theft has had state and federal legislators sniffing around the problem for some time, urging cell phone makers and carriers to implement a “kill switch” that would render a lost or stolen phone useless. That would  theoretically dry up the now-thriving market for stolen phones.   Carriers have resisted the solution for some time. Why would they do that? If you value each smartphone at $600, the market opportunity presented by 4.5 million lost and stolen phones is $2.7 billion.  That might have something to do with it.  There are also legitimate concerns about hackers wiping out phones as pranks, and about the customer service headache that will no doubt accompany implementation.

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But in part under threat from a state law that could be passed as soon as next week in Minnesota,on Tuesday the industry announced the “Smartphone Anti-theft Voluntary Commitment.”  Carriers promise to implement a kill switch and remote data wiping for new phones manufactured after July  2015.

Meanwhile, we certainly shouldn’t blame carriers for the whole problem.  Consumers still don’t seem to realize how serious loss of a cell phone can be — at least until after they lose the phone. (And if you’ve ever been with someone who’s just lost a phone, you know about the hyperventilation, etc.) How do I know this? Look at this data on what consumers do (and don’t do) to protect their phones:

• Set a screen lock with a 4-digit pin (36 percent) NOTE: Those who don’t are CRAZY
• Backed up data to a computer or online (29 percent)
• Installed software that can locate the phone (22 percent)
• Installed an antivirus app (14 percent)
• Used a PIN longer than 4 digits, a password, or unlock pattern (11 percent)
• Installed software that can erase the contents of the smart phone (8 percent)
• Used security features other than screen lock (e.g. encryption) (7 percent)
• Took none of these security measures (34 percent)

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