Forced Arbitration Isn't 'Forced' Because No One Has To Buy Service, Says AT&T (arstechnica.com)

An anonymous reader quotes a report from Ars Technica: AT&T is denying that its contracts include "forced arbitration" clauses, even though customers must agree to the clauses in order to obtain Internet or TV service. "At the outset, no AT&T customer is ever 'forced' to agree to arbitration," AT&T Executive VP Tim McKone wrote in a letter to U.S. senators. "Customers accept their contracts with AT&T freely and voluntarily; no one 'forces' them to obtain AT&T wireless service, DirecTV programming, or other products and services." AT&T was responding to concerns raised by Sens. Al Franken (D-Minn.), Richard Blumenthal (D-Conn.), Ron Wyden (D-Ore.), Patrick Leahy (D-Vt.), and Edward Markey (D-Mass.), who previously alleged that AT&T's use of forced arbitration clauses has helped the company charge higher prices than the ones it advertises to customers. While AT&T is correct that no one is forced to sign up for AT&T service, there are numerous areas of the country where AT&T is the only viable option for wired home Internet service. Even in wireless, where there's more competition, AT&T rivals Verizon and Sprint use mandatory arbitration clauses, so signing up with another carrier won't necessarily let customers avoid arbitration. One exception is T-Mobile, which offers a way to opt out of arbitration. The terms of service for AT&T Internet and DirecTV require customers to "agree to arbitrate all disputes and claims" against AT&T. Class actions and trials by jury are prohibited, although individual cases in small claims courts are allowed. AT&T doesn't offer any way to opt out of the arbitration/small claims provision, so the only other option is not buying service from AT&T.

Comments

No one is forced my ass

[Anonymous Coward]

In a lot of markets, AT&T is part of an oligopoly or even may have a monopoly. High speed internet is necessary for a lot of people, especially if they need it for their jobs or classes. When there are very limited options for service, AT&T and their competitors might all include forced arbitration clauses. Get rid of the monopolies and oligopolies, and perhaps AT&T might have a point. Right now, the statement sounds like something I'd say when I'm trolling. No one is forced my ass. Bring in more competition, then we'll talk.

Re: No one is forced my ass

[Anonymous Coward]

Maybe for rural farmers in nowhere Indiana. For the rest of the developed world, internet is a necessity to conduct business and live a modern life.

Re:No one is forced my ass

[jonsmirl]

Has anyone here ever received anything of value from a class action lawsuit? My best win so far is a $10 check. Most of the time I never received anything, and a few times I have received useless coupons.

On the other hand the lawyers doing these suits get paychecks of $10M or more. And where do you think this $10M comes from? It is being added to the price of the product. I think it is probably more cost effective for consumers that these class actions are stopped. I don't really see them as helping consumers, instead they just enrich lawyers.

I think it is far more effective to bombard a company with a thousand individual small claims. That makes them have to show up which costs them a lot of money. And get this -- you can actually win in small claims. My best win in small claims is over $5,000. Several times the judge has just ripped up their thirty page contracts, asked their rep if I have been harmed, and when they say yes, he awards what I am asking for. These small claim judges work more on what is a reasonable outcome, not on what is contained in a lopsided thirty page contract which the consumer is powerless to alter.

In one case the judge even yelled at them for putting such ridiculous clauses in the contract. That was with ADT which has a clause stating that if you moved the contract automatically extended three years. I had moved three times so my original contract had extended to 12 years. Then I moved into a high rise which did not allow alarms and tried to terminate. ADT demanded over $10,000 to terminate my contract. They ended up with nothing.

Re: No one is forced my ass

[ringringbeep]

I bought internet in Rural PA last year. Verizon, AT&T, and a regional company were the only options. After the local company did a survey and determined they could not get a line to me, I called AT&T. The AT&T customer service rep looked up my address and said that's in a Verizon area, can I transfer you to Verizon support?" Having worked for AT&T just after deregulation, I was curious. So instead of saying, "ok" I asked some questions. AT&T and Verizon internet have worked out regional monopolies. Choice is a farce in these areas, and so an arbitration agreement is forced upon any customer who "wants" internet service. Take our terms, or have no internet. Cellular data was also abysmal in the area. On some days climbing out onto th me 2nd story roof was the only way to get email. So I "agreed" to Verizon's land line terms of service.

Re: No one is forced my ass

[Anonymous Coward]

But since most jobs require you to "go to our website to apply", not having internet drastically reduces your ability to provide for yourself. Yes, it's not a necessity in the same way electricity isn't a necessity, your life can continue on without it, but you will be at a disadvantage compared to everyone else.

Re: No one is forced my ass

[mysidia]

having an internet connection is not a right.

It is enough of a right that the supreme court ruled Social networking website bans for past sexual offenders unconstitutional.

Re:No one is forced my ass

[jonsmirl]

Much more impact could be created by publicizing packets of info instructing exactly how to file the small claim and what to say. Filing small claims is usually less than $100 and you almost always get more than $100 back. And filing small claims very clearly lets the corporation know that their customers are upset with them. That turns the customers in to real people, not just faceless names. Plus I've only had two companies argue with me, the rest have settled and tried to patch things up. Base on my tiny sample two responses occur - we're sorry, let's try to make things right - or please refer to the fine print on page 31, now read the clause on page 7, next the judge yells at them and tells them to write contracts consumers can comprehend.

These large class actions just get shuffled off to the legal department and ignored as a cost of doing business. I think they are completely ineffective and only serve to enrich the lawyers. Making the settlement bigger will get transferred directly into higher product prices.

Of course filing a small claim means you personally have to take some action which is much more effort that signing the bottom of some form that comes in the mail. In my opinion the cumulative effect of the small claims is much more impactful.

Re: No one is forced my ass

[Alain Williams]

In the UK the only way of submitting a VAT return (aka quarterly Sales Tax report) is on-line. Access only on-line to other government services is the way that things are going. That makes it a necessity.

Re:No one is forced my ass

[jedidiah]

> Has anyone here ever received anything of value from a class action lawsuit?

Yes. Safe consumer products.

Civil servants don't have the resources or motivation to properly enforce this stuff.

The point of class action suits is to keep corporations in line and prevent them from turning you into green crackers. It's not about a personal pay day for you.

It's not even about a personal windfall if it's just you and it's an injury lawsuit. It's about holding the responsible party responsible.

Re: No one is forced my ass

[alexgieg]

Here's a better analogy. What if ever single company you applied for included a job application form in which in agreed to solve any dispute about discrimination through arbitration? And then, when you got the job, the contract had a clause in which you also agreed to solve any employment dispute through arbitration? Should that be legal? After all, you're not obliged to work for a company that does that, you can chose any other one. No company left not doing it? You can start your own business! Except all the businesses you need to deal with so as to be able to have one of yours have similar clauses in their contracts. Well, you're not obliged to have a business! You can... er, become a beggar, I guess?

No system of laws should allow contractual clauses to overcome legal rules. The hierarchy of authority should *always* be that only what *isn't* determined by a law is free to be contractually determined between parties. Everything else, the law should take precedence. Don't want that law? Vote a legislative body that will clearly and unambiguously revoke it. But don't insert in the system "option" stuff. That's a recipe for all kinds of extremely damaging slippery slopes.

Re: No one is forced my ass

[Antique Geekmeister]

I'm afraid that there are too many cases where "just get another job!" has been an excuse for systemic Gender abuse, racism, and homophobia in the workplace are merely examples. It's also included unpaid overtime, nepotism, sexual harassment, and employment fraud. Forced arbitration, which is what this inherently is for all employees, provides much stronger benefit to the larger legal entity, who is typically the entity that selects the arbitrator. These arbitrations are also typically sealed: the evidence submitted to them is not available to any other possible plaintiffs.

From my experience with corporate lawsuits, they're workable for modest cases where the cost of a lawsuit would outweigh the cost of any reasonable settlement. But they have no legally binding force for anyone but the plaintiff and that company's relationship with that particular plaintiff. For widespread workplace abuse, they're not helpful at stopping or preventing the abuse as a matter of policy.

Re: No one is forced my ass

[AutodidactLabrat]

Says no one in business anywhere
Even job hunting requires access for all but the most menial of jobs
Nope, this is why "An Unregulated monopoly is the only thing worse than a Regulated monopoly".

Re: No one is forced my ass

[mysidia]

Demanding that someone subsidize or provide you pen and paper is not.

I just demand fair, reasonable, non-discriminatory, and equitable access to purchase pen and paper (Or Internet access) without
being requested or required to sign over or waive any basic rights in the process, including the right to have disputes between me and a vendor mediated by the courts, and to pursue class action if damage or deception is committed against a large number of customers .

Re: No one is forced my ass

[saloomy]

He is wrong, but not because of why you think. AT&T are asserting their market position, because the market will bear it. They spent the time and money to build out to where they are one of a few if not the only carrier, and so they can corner you into unreasonable agreements. The response should have come from negotiations with he municipalities that gave these ass-hats exclusivity arrangements and tax dollars to build out. The pricing, terms, and arrangements should have been negotiated then, not now with every single customer. Expecting a giant company with millions of customers to independently negotiate every contract with every customer is pretty unreasonable. Call up MS and tell them you don't agree with a provision in their EULA to one of their products, see how far you get.

The response now is to invite in competition, and rip up the exclusivity agreements by enacting legislation that stops such agreements so that the courts can't side with the carriers when they inevitably sue the municipality for backing out on its word.

No *customer*

[kav2k]

[...] no AT&T customer is ever 'forced' to agree to arbitration [...]

[...] no one 'forces' them to obtain AT&T wireless service, DirecTV programming, or other products and services.

So basically, you only qualify as a customer if you do use products or services (that require agreement), but no customer is ever forced? I fail to see the logic here.

Re:No *customer*

[msauve]

Yep. "...no AT&T customer is ever 'forced' to agree to arbitration"

They're not a customer unless there's a contract, so it's the opposite of what AT&T claims - all customers are forced to accept arbitration.

Of course, if they want that claim to be true, they simply have to stop enforcing (or remove) that clause.

quite peculiar

[gsslay]

Why is it that American law permits clauses in contracts that deny people access to the law of the land?

It's quite peculiar. In the UK any contract that attempts to limit a consumer's statutory rights and legal protections is automatically void. It cannot be done. This is why most sales contracts actually state that "This does not affect your statutory rights", because it cannot.

Re:quite peculiar

[ewanm89]

Yes, even in the US this is absolutely true, also unilateral contracts (one where all terms are set by a single party like an eula or a conditions of sale contract) are seen very different from a bilateral contracts and do not have anywhere near the same enforcement value.

The courts frequently strike down such arbitration clauses as such clauses are direct unilateral violation of rights in a given jurisdiction.

IANAL

Re:quite peculiar

[DRJlaw]

The courts frequently strike down such arbitration clauses as such clauses are direct unilateral violation of rights in a given jurisdiction.

IANAL

That's obvious, because you're wrong.

The Federal government passed the Federal Arbitration Act, which authorizes such arbitration clauses, and there's a pesky thing in the Constitution called the Supremacy Clause. AT&T itself won a U.S. Supreme court case that said that the Federal Arbitration Act of 1925 preempts state laws that prohibit contracts from disallowing class-wide arbitration, on the basis of statutory interpretation, since nobody seriously questioned that wireless contracts were within the scope of the Interstate Commerce Clause.

Specifically,

Relying on the California Supreme Court's Discover Bank decision, [the Ninth Circuit Court of Appeals] found the arbitration provision unconscionable because it disallowed classwide proceedings. The Ninth Circuit agreed that the provision was unconscionable under California law and held that the Federal Arbitration Act (FAA), which makes arbitration agreements "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract," 9 U. S. C. sec. 2, did not preempt its ruling.

Held: Because it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," Hines v. Davidowitz, 312 U. S. 52, 67, California's Discover Bank rule is preempted by the FAA. Pp. 4-18.

IAAL.

Re:quite peculiar

[Dragonslicer]

Companies can put anything they want in a contract. If the company forces you to arbitration, you can challenge it in court.

There are three major problems with how the American legal system works with stuff like this:

1. You can't challenge it in court until you're actually harmed, i.e. get in a situation where you're forced into arbitration.
2. Court cases are expensive, and large companies have far more money than you do. A lot of litigation in the US is simply a competition to see which side is first to make the other side not want to pay any more.
3. Even if you win and the clause is determined to be unenforceable, the only penalty to the company is not being able to enforce the clause against you. They'll still include the clause in their contracts and hope that most other people don't fight it.

Re:quite peculiar

[ooloorie]

Binding arbitration exists in the UK, just like it does in the US.

Re:quite peculiar

[Wrath0fb0b]

Why is it that American law permits clauses in contracts that deny people access to the law of the land?

That's incendiary phrasing. You could ask why does British law forbid people the right to designate an arbitrator to resolve disputes. Both would be formulations of the question that do not shed light on the tension between two goals: giving people the power to determine their own arrangements versus ensuring that those arrangements are not contrary to public policy. Those two goals are non-orthogonal.

To make it more concrete (and over-simplified), let's say that Alice hires Bob to write and deploy some software. They have a good description of the project and agree on a price of $25,000. Both parties foresee a dispute over whether Alice delivered: Bob fears the software won't be delivered as promised, Alice fears that she'll deliver but Bob will refuse to pay. But both understand that going to court ridiculous because the 'cost' of dispute resolution in the courts will destroy their margin. So they both trust Charles and designate him as an arbitrator and write a clause that says "Charles will be the arbiter of any disputes we have and we are agree not to sue each other over it".

Now, here's the rub, let's suppose both Alice and Bob believe that Charles is not as accurate of a dispute resolver than the courts. This is true even if Bob believes that Charles is partial to Alice instead of being neutral. It might still be rational to him because the expected additional loss (e.g. the conditional probability that there is a dispute and that Charles rules in a biased way against him multiplied by the expected judgement) is actually less than the expected additional loss if it was litigated in court (e.g. the conditional probability that there is a dispute and Bob has to pay a lawyer hourly fees).

So in England, this arrangement is (apparently) not allowed -- Alice and Bob are not free to designate Charles as the binding arbitrator and instead have to resolve any disputes through the expensive court system even when a worse system might be better for them. This has certain perversities: the courts can take a long time, which for a freelancer waiting to get paid can be near fatal. If Bob has in-house counsel, he suffers little from dragging this out and raising every possible legal/factual dispute since he's not paying hourly for the lawyers but Alice is. No matter what happens, both sides will pay more than is reasonable to resolve disputes under a $25,000 contact.

At the same time, the US system has perversities. Maybe the arbitrator is biased and Bob ends up having to pay $25,000 for an unstable software deliverable that doesn't meet any of the requirements. Maybe all the freelancers (or all the purchasers) require a particular set of arbitrators such that you can't buy (or sell) services without being bound by some biased arbitrator.

In the end, the point I'm trying to (at length) get to here is that dispute resolution is a non-trivial thing to deliver, especially for contracts where a lay person would have difficulty assessing the performance of the contract (after all, it's pretty easy to understand whether a fence was installed, not so easy to understand why a custom POS system freezes once a day). And the more you 'over engineer' the dispute resolution to make it more reliable, the more it costs and the more inaccessible you make it to Alice and Bob that have a piddly $25,000 contract.

They're not wrong

[rsilvergun]

And if you accept that the free market should best sort these things out then this is the way to go. Let the two parties take care of it and if people don't like it they can vote with their wallets. Someone's bound to come along and compete directly with AT&T, right?

Re: Tell me, AT&T...

[guruevi]

The true option is to go to court anyway, most small claims courts will not allow those clauses to stand, you can't sign away your state's right to control commerce, you don't have that sort of authority.

The Canadian Supreme Court disagrees

[davecb]

In cases where the company is breaking Canadian law, contract language to force arbitration in California is null and void. A class action about “Sponsored Stories”, which uses the name and picture of a customer "without consent for the purposes of advertising" will go forward.

The legalese is summarized at http://www.slaw.ca/2017/06/28/... and the full case is https://www.canlii.org/en/ca/s...

It's primarily an arguement about choice of forum (country) in a contract.

Everyone knows this is bunk.

[Cyberpunk Reality]

AT&T has sued cities to prevent competition. This is part of the broken pattern here in America. Powerful companies openly flout the law, and then find some technicalities to hide behind. Everyone knows it's BS, and the only question is how long it can go on before the public breaks out the guillotines and starts setting things on fire. Those profiting are betting the answer is "long enough to flee and live like kings in Patagonia".

Re:Notice that the only Senators are Democrats

[DontBeAMoran]

Rule of acquisition 17: A contract is a contract is a contract... but only between Ferengi.

American law?

[Anonymous Coward]

We are a plutocracy in this land. Shit like this is forced on us without a peep from most people because they are being distracted by other issues. They don't care until the day comes that AT&T screws them over and discover that they have no choice but to pay up and shut up.

While they are being gouged by the ISPs and given third world quality service, they are all being distracted by the latest tweet from the Big Orange small fingered vulgarian in the Whitehouse. While my state legislature (mostly Republicans) are being "lobbied" by these ISPs to keep their un-free markets and not-capitalistic business models, they are arguing over laws about who can use what bathroom depending on the sex on one's birth certificate.

And my fellow citizen's allow themselves to get sucked into a moronic fight.

That's the state of the American people. And we blame immigrants for our declining standard of living.

Hobson's Choice

[Anonymous Coward]

Philosophers call this sort of "choice" a Hobson's choice. See

https://en.wikipedia.org/wiki/Hobson%27s_choice

Re:Tell me, AT&T...

[ewanm89]

Yes, even in the US this is absolutely true, also unilateral contracts (one where all terms are set by a single party like an eula or a conditions of sale contract) are seen very different from a bilateral contracts and do not have anywhere near the same enforcement value.

The courts frequently strike down such arbitration clauses as such clauses are direct unilateral violation of rights in a given jurisdiction.

Force depends on the alternatives

[Opportunist]

Not on someone physically pressing you to do it. You're not forced to cheer on li'l Kim in North Korea. You can always opt for the lengthy stay in one of the reeducation camps where you get taught why you want to cheer on him. You're not forced to take a job in a country where welfare doesn't exist, you can always freely opt to starve to death.

Whether you are forced to do (or not do) something is not dependent on someone pointing a gun at your head but on the alternatives you have. And internet access has become pretty much a necessity these days, certain services are either hard to get or entirely unavailable to you if you do not have internet access.

A century ago, you would have argued that access to power or telephone was, if not a luxury, then at the very least far from something that was to be expected. Try, just TRY, to apply for a job today and not offer a phone number where the prospective employer can reach you. You wouldn't even be considered for a burger flipper job if I can't get a hold of you NOW, not in the 3-4 work days it takes for a letter to reach you and your reply to reach me.

And no later than any office job, you better have some way to get email from your prospective employer. I cannot think of any job I had in the past 2 decades that didn't require me to have an email address and a way to check it frequently.

There's always other options

[slazzy]

Where I live for example, there's also carrier pigeon and smoke signals...

At my apartments

[l0n3s0m3phr34k]

There is no other service available. Someone long ago went to each cable box and cut off the coax right at the top of each incoming pipe. Fox Cox to bring in service, there would need to be some major work done to re-run, or at least fix, all the connections. So, if I want any internet service, I am forced to go through AT&T.

Re:Did they really?

[msauve]

"If you're talking about the line poles, well, AT&T paid to put those up, didn't they?"

They put them on (mostly) public rights-of-way, at a time when they were given the status of a regulated monopoly because of the perceived efficiencies of only building a single wired telephone infrastructure.

It's not a free market unless at a minimum they're forced to negotiate with local municipalities and landowner's for continued use of those rights-of-way.

Re:FFS, it's a phone contract

[tepples]

If AT&T is the local DSL provider in your area, and no DOCSIS (cable Internet) provider serves your address, then who provides Internet access suitable for an entire household? Or would you recommend moving in such a situation?

Utility, not a luxury

[Roger W Moore]

having an internet connection is not a right. its a luxury good that you choose to buy or not.

No, it is a utility just like gas, water and electricity. In theory, you can survive without all of these but you would be camping in your house and while an internet connection might be regarded as a luxury while camping it isn't really a luxury anymore for everyday life. In addition, the cost of duplicating the infrastructure to each house means that at a local level there is no real competition which is how capitalism keeps companies focused on providing the best service. Hence the utility market has to be heavily regulated otherwise companies can abuse their monopolistic power by putting unreasonable terms into their contracts leaving consumers with a choice between accepting them or house-camping.

Re: Notice that the only Senators are Democrats

[jedidiah]

It's deluded to think that Democrat politicians and their own 1% patrons give two shits about this stuff. It's just another set of fat cats with a different financial agenda pulling the strings.

It generally makes the companies stop the behavior

[rsilvergun]

though not always. It's the only remedy the working class has left. Voting doesn't work. We're more or less an oligarchy and even if we weren't single issue voters plus our winner take all system means we're boned. What do you do with gun fans that will vote away every economic issue on the off chance that somebody is going to outlaw assault rifles? Or the Cuban voters still punishing the left for Castro? Or the Religious Right? As for the American left wing, they're a lose confederacy at best that lacks the cohesion of the right wing. So unless the pro-corp right wing agenda's your bag you're pretty much SOL.

Why US does this

[eddeye]

It's true, US allows private arbitration when many countries don't. It's a by-product of our legal system.

Litigation in the US is both more expensive and more common than in most other countries. It has been designed to be more forgiving, permit broader latitude in developing a case. The idea is to allow greater access to the courts for poor and disadvantaged groups.

US courts allow more discovery (forcing opposing party to turn over documents) than most countries. Some cases are very hard to prove, particularly discrimination cases. So we give plaintiffs ample time and opportunity to compel discovery and uncover documents to prove their case.

Discovery is very expensive. All documents have to be reviewed by attorneys before being handed over, and reviewed by attorneys after they're received. This adds up to many many billable hours.

Further, each party typically pays their own legal costs in the US. In other countries, the loser of the litigation pays all the legal costs. This discourages frivolous litigation. The US system permits and in some ways encourages such behavior.

All this means that litigation is both more costly and more frequent in the US than elsewhere. US companies are tired of dealing with frivolous litigation and "nuisance suits", designed to get a quick payout settlement. Companies use the Federal Arbitration Act (FAA) to alleviate these problems by "opting out" of federal courts.

That's not how it was supposed to be. The FAA was originally intended as a way for businesses to resolve disputes among themselves more quickly and cheaply with arbitration, since the federal courts are clogged as a result of permissive litigation rules. It was never meant to be a weapon for companies to immunize themselves against suits from their customers.

But that's why we have arbitration in the US when many other countries wouldn't stand for it. Frankly they never needed it, because litigation is less frequent, less expensive, and the loser usually pays the entire cost. Hooray for freedom. :/