Microsoft Adds Binding Arbitration Clause and Class Action Waiver to TOS

Today, I noticed the following message in my inbox:

We’ve updated the Microsoft Services Agreement, which governs many of our online services – including your Microsoft account and many of our online products and services for consumers, such as Hotmail, SkyDrive, Bing, MSN, Office.com, Windows Live Messenger, Windows Photo Gallery, Windows Movie Maker, Windows Mail Desktop, and Windows Writer. Please read over the new Microsoft Services Agreement here to familiarize yourself with the changes we’ve made.

The updated agreement will take effect on October 19, 2012. If you continue to use our services after October 19th, you agree to the terms of the new agreement or, of course you can cancel your service at any time.

We have modified the agreement to make it easier to read and understand, including using a question and answer format that we believe makes the terms much clearer. We also clarified how Microsoft uses your content to better protect consumers and improve our products, including aligning our usage to the way we’re designing our cloud services to be highly integrated across many Microsoft products. We realize you may have personal conversations and store personal files using our products, and we want you to know that we prioritize your privacy.*

Finally, we have added a binding arbitration clause and class action waiver that affects how disputes with Microsoft will be resolved in the United States.

Thank you for using Microsoft products and services

Notice, if you will, the part in bold. Now, most people, when they sign up for things, don’t actually read the terms of service. But in this case, you should. The actual TOS looks like this:

18.1.4. BINDING ARBITRATION. IF YOU LIVE IN THE UNITED STATES, YOU AND MICROSOFT AGREE THAT IF YOU AND MICROSOFT DO NOT RESOLVE ANY DISPUTE BY INFORMAL NEGOTIATION UNDER SECTION 18.1.2 ABOVE, ANY EFFORT TO RESOLVE THE DISPUTE WILL BE CONDUCTED EXCLUSIVELY BY BINDING ARBITRATION IN ACCORDANCE WITH THE ARBITRATION PROCEDURES IN SECTION 18.1.7 BELOW. YOU UNDERSTAND AND ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION, YOU ARE GIVING UP THE RIGHT TO LITIGATE (OR PARTICIPATE IN AS A PARTY OR CLASS MEMBER) ALL DISPUTES IN COURT BEFORE A JUDGE OR JURY. INSTEAD, YOU UNDERSTAND AND AGREE THAT ALL DISPUTES WILL BE RESOLVED BEFORE A NEUTRAL ARBITRATOR, WHOSE AWARD (DECISION) WILL BE BINDING AND FINAL, EXCEPT FOR A LIMITED RIGHT OF APPEAL UNDER THE FEDERAL ARBITRATION ACT. ANY COURT WITH JURISDICTION OVER THE PARTIES MAY ENFORCE THE ARBITRATOR’S AWARD.


18.1.6. CLASS ACTION WAIVER. YOU AND MICROSOFT AGREE THAT ANY PROCEED­INGS TO RESOLVE OR LITIGATE ANY DISPUTE, WHETHER IN ARBITRATION, IN COURT, OR OTHERWISE, WILL BE CONDUCTED SOLELY ON AN INDIVIDUAL BASIS, AND THAT NEITHER YOU NOR MICROSOFT WILL SEEK TO HAVE ANY DISPUTE HEARD AS A CLASS ACTION, A REPRESENTATIVE ACTION, A COLLECTIVE ACTION, A PRIVATE ATTORNEY-GENERAL ACTION, OR IN ANY PROCEEDING IN WHICH YOU OR MICROSOFT ACTS OR PROPOSES TO ACT IN A REPRESENTATIVE CAPACITY. YOU AND MICROSOFT FURTHER AGREE THAT NO ARBITRATION OR PROCEEDING WILL BE JOINED, CONSOLIDATED, OR COMBINED WITH ANOTHER ARBITRATION OR PROCEEDING WITHOUT THE PRIOR WRITTEN CONSENT OF YOU, MICROSOFT, AND ALL PARTIES TO ANY SUCH ARBITRATION OR PROECCEDING.

This effectively means that regardless of whether they were in the wrong, if you use Microsoft’s services, you are not allowed to sue them. At all. For any reason. Ever.

Some may say “Well, binding arbitration should handle it!’ And in theory, this is perfectly true and acceptable. In practice, though, it is sadly lacking. The issue is that arbitration is oftentimes just as expensive as actually going to court. It involves the same type of hassle with expensive paperwork, lawyers, and so on and so forth. Really, the only difference is that you go to see an arbitrator instead of a judge and jury.

Sure, if you win, the other party pays your fees. But how many of us can afford to sue Microsoft out of pocket? Not a whole lot of us, right? Now, couple with this the fact that your rights to class action (often a way cheaper and more successful option) are gone, and you’re in a real pickle

Additionally, here’s a little tidbit about arbitration, courtesy of Public Citizen:

A judge is accountable to higher courts and to the public. Arbitrators are not legally accountable for errors they make. Arbitrators are accountable only to the market, and the market for arbitrator services is dominated by “repeat players” – litigants that are likely to hire arbitrators in the future. This creates a subtle incentive to rule in favor of companies that impose mandatory arbitration clauses.

Does arbitration still sound like the way you’d like to resolve your issues with a company as big as Microsoft?

Another difference many may have noticed is that Microsoft is not the only company to include this type of clause. Blizzard, EA, and even Valve include similar agreements in their TOS. What’s easy to ignore is the fact that these other companies allow you to break contract by clicking “I do not agree” and waiving your service rights. What Microsoft fails to mention is that in order to waive your rights — which are, in effect, retroactive — you must send a paper, certified letter into their offices. This process is both annoying and not stated outright either in the email or on their website.

The lesson here? Be very, very careful when ordering Microsoft’s services, and be careful that you are getting what you want and paid for. Because unfortunately, there may be no recourse if you are not.

 

Comments

  1. Hmm, here’s what I would do based on my brief research in arbitration:

    Sue Microsoft that the binding arbitration in the TOS is not enforceable because the arbitrator cannot exceed the limits of their authority in their award.

    PS: Not a lawyer.

  2. can some body tellme yf you can ignore binding arbitration clause and sue the company? and can you tellme the advantages and desavantages of this arbitration clause please I will like to know thanks a lot

  3. Seems like it would not be enforceable due to the following part:

    “18.1.6. CLASS ACTION WAIVER. YOU AND MICROSOFT AGREE THAT ANY PROCEED­INGS TO RESOLVE OR LITIGATE ANY DISPUTE, WHETHER IN ARBITRATION, IN COURT, OR OTHERWISE, WILL BE CONDUCTED SOLELY ON AN INDIVIDUAL BASIS, AND THAT NEITHER YOU NOR MICROSOFT WILL SEEK TO HAVE ANY DISPUTE HEARD AS A CLASS ACTION, A REPRESENTATIVE ACTION, A COLLECTIVE ACTION, A PRIVATE ATTORNEY-GENERAL ACTION, OR IN ANY PROCEEDING IN WHICH YOU OR MICROSOFT ACTS OR PROPOSES TO ACT IN A REPRESENTATIVE CAPACITY.”

    Specifically the “ANY PROCEEDING IN WHICH YOU OR MICROSOFT ACTS OR PROPOSES TO ACT IN A REPRESENTATIVE CAPACITY” part.

    Microsoft is a corporation. So all it can do is send a representative. Class actions kind of leveled the playing field by letting a group of people (the class) fight another group of people (the corporation). So now with these arbitration only clauses, they are changing it into a group of people (the corporation) against an individual. Totally understandable that any corporation or large group of people would like that advantage when dealing with a dispute.

    But in the end I’m sure there are ways for them to weasel through it and do whatever they want.

  4. The public has been so duped by arbitration. It is not cheaper, faster and most of all not fair. You have to experience this vile process, first hand to realize what has been done to the American people. Microsoft is telling you, in order to purchase their products you must first give up your seventh amendment rights. This is a contract of adhesion. IT MEANS NO MATTER WHAT OCCURS YOU HAVE LOST THE RIGHT TO A TRIAL BY JURY. Also, they have signed an agreement with one of the major arbitration companies that will dispose of you if you dare complain…ususally AAa the American Arbitration Ass. Please read my testimony to the congressional commmittee on the effects of arbitration on the consumer. It is shocking to think this can be done to us and that our government allows it. When you read this you will see the arbitration companies already own you. Jordan Fogal http://www.jordanfogal.com, jfogal281@aol.com

  5. These Microsoft terms are non binding because they are illegal.

    It is covered by Statutory Laws and “Unfair terms and conditions”.

    If you do not live in my country… your Statutory Law may be different.

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