Uber, Amazon paying litigation price over fine print

2nd September 2016. By Richard Vanderford

For apps, fine print that’s too fine might as well be invisible, federal courts have said in separate decisions against Uber and Amazon, refusing to enforce agreements that purported to bind users who clicked to the next page.

Recent decisions in the US Court of Appeals for the Second Circuit and federal court in the Southern District of New York questioned small-type notice of expansive terms of use. The decisions have called into question user agreements that notably included clauses the forced disputes into arbitration and banned class actions, provisions meant to be a bulwark against costly litigation.

In New York, US District Judge Jed Rakoff offered a hearty criticism of Uber’s use of a small-print notice for customers who signed up on cell phones. The judge said in July that the transportation company couldn’t use its user agreement to force a proposed antitrust class action into arbitration (see here).

Customers who want to register for Uber have only a “barely legible” notice that, if they choose to, leads them to “nine pages of highly legalistic language that no ordinary consumer could be expected to understand,” Rakoff said.

“The purveyors of electronic form contracts are legally required to take steps to provide consumers with ‘reasonable notice’ of contractual terms,” he said.

Uber has appealed the decision.

Last week, the Second Circuit similarly ruled against Amazon in a proposed class action over diet pills sold through its website that contained a dangerous stimulant that had been pulled from the market years before.

Amazon’s notice that consumers agreed to its terms was lost in a sea of information, the appeals court said.

The rulings come as consumer advocates increasingly question the fairness of those clauses, which can discourage customers from taking action on claims that are low value for any given user but might be worthwhile when lumped together.

Traditional companies, like credit card issuers, have tended to include the provisions in printed contracts, drawing attacks over the substance of those contracts.

But app makers have faced challenges not just to the message of their user agreements, but also the medium, one that consumer-minded courts seem ready to entertain.

The legal tide could pose challenges to tech companies, like Amazon with its impulse-indulging “1-Click” purchases, that have grown based on their ability to provide a seamless experience for users from sign-up onward.

So far, the decisions don’t delineate clear guidelines on how big a notice is big enough.

Amazon’s notice is “not bold, capitalized, or conspicuous in light of the whole webpage,” US Circuit Judge Denny Chin wrote for the Second Circuit.

The website placed the text “By placing your order, you agree …” in relatively small print above a form that had numerous details about the order, payment and shipping. Chin compared it to an apple stand that has a wall of signs about price, method of payment and delivery details, with a sign nestled among them binding a purchaser to additional terms if they buy.

“Has the apple stand owner provided reasonably conspicuous notice?” he asked. “We think reasonable minds could disagree.”

In Uber’s case, Rakoff groused that he couldn’t readily see the text notifying users of an agreement. The judge, whose courtroom banter evinces an encyclopedic knowledge of common law history, said that he wouldn’t deny consumers the “most precious and fundamental right” to a jury trial on that basis.

The case against Uber has been put on hold while the company appeals Rakoff’s decision. Most consumers would know that signing up for a service tends to come with a contract, Uber said.

Companies have a relatively simple-to-implement solution if they want to insulate their agreements, with their litigation-busting arbitration clauses, from this kind of challenge: so-called clickwrap agreements.

In a clickwrap agreement, a consumer affirmatively assents to an agreement. This is as opposed to a browsewrap agreement, which assumes the consumer has seen a notice posted somewhere on a site.

Though a user presented with a clickwrap probably hasn’t actually read it, that kind of agreement tends stand up better before judges.

“They are certainly the easiest method of ensuring that terms are agreed to,” Chin said.

But, as Chin noted, Amazon seemed to want to streamline the user experience. Why remind a customer about the four-thousand word document you’ve drafted to govern disputes (4595-word in Uber’s case) when you can simply fulfill their wish and take their money with a click?

Trouble is, if the experience is too seamless, consumers might credibly argue that they didn’t see any agreement. Courts might believe them.

	Eliot Gao