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Last month, the New York Times reported that food manufacturer, General Mills, added new legal terms to its website which stated that consumers give up their rights to sue the company when interacting with them on social media.
So has all that money spent planning, building, maintaining and staffing courthouses in hundreds of American towns and cities been a complete waste of time? Can interacting with a brand online limit a consumer’s ability to litigate against it?
We asked Chris Hegerty, a solicitor specialising in consumer law at Slater & Gordon, to see how far companies can go in the UK...
A company can, in theory, contract with a customer on any terms it likes. But there are several major restrictions, particularly the Unfair Contract Terms Act 1977 (UCTA 1977) and the Unfair Terms in Consumer Contracts Regulations (UTCCR). These impose a reasonableness requirement on terms and the bar is set quite high for consumer contracts—those where one party has considerably less bargaining power than the other or where dealing on one party’s standard terms.
General Mills has attempted to extend the decision in AT&T Mobility v Concepcion 563 US 321 (2011) in which the Supreme Court of the United States allowed mandatory binding arbitration in consumer contracts.
The US position is based on the common law and statute. Like the UK, the US has specific statutes to address particular varieties of contract—in the General Mills case the claim relied on California’s Consumer Legal Remedies Act (Cal Civ 1750–1784) which provides for specific remedies for unfair or deceptive sales practices. The US also allows in certain cases for treble damages which make class action lawsuits attractive to claimant lawyers on contingency fee arrangements and by allowing arbitration clauses can prevent consumers from bringing such class actions.
In the UK there are significant statutes which alter the law in respect of contract of sale and supply of services such as the Sale of Goods Act 1979 and also specific consumer protections such as UCTA 1977 and UTCCR.
Although both systems of law allow significant freedom to contract, the UK also has the benefit of more strict European law to protect consumers—UTCCR and the Consumer Protection Act 1987 being significant examples.
The mandatory binding arbitration clause which General Mills attempted to introduce is highly unlikely to be effective in the UK or the EU as UTCCR has an indicative list of terms to be regarded as unfair which includes those which have the effect of ‘excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions’ (UTCCR, Schedule 2, paragraph 1(g)). The onus is placed on the supplier to prove that a term is not unfair therefore in this circumstances it is highly unlikely that a mandatory binding arbitration clause would be supported in the UK or Europe.
It may be worth noting that the Consumer Rights Bill, which is presently being debated in Parliament, specifically addresses whether competition related class actions should be made more accessible by becoming opt-out so that all UK consumers affected would be part of such a claim unless they chose to opt out.
If a UK consumer purchased from General Mills then in the UK they would have the benefit of UK and EU law on choice of law and jurisdiction. This means that the US company would be subject to the EU Regulations which allow an English court to hear the case if the US company directed business to the UK, for example by offering a ‘50p off’ coupon redeemable in the UK. When hearing a case in the UK the court would also have to consider mandatory provisions of English law, which includes UCTA 1977 and UTCCR, therefore an attempt to enforce such a provision in the UK would face an uphill struggle.
A mandatory adjudication provision in the RIBA standards terms was considered in the Technology and Construction Court, although the court pointed out that the guidance notes require that this clause be individually discussed and agreed with the client in Picardi v Cuniberti this was not done and the court considered that it would fall foul of UTCCR under Sch 2, para 1(q). The decision is obiter as the claim by the architect failed on other grounds.
Lawyers advising companies on these issues should be cautious of the UTCCR and UCTA 1977 as these place the onus on the company to ensure that their terms—particularly where there is no scope to negotiate—are reasonable and fair. While a company may not always face a class action for breaching such rules they must be aware that the Office of Fair Trading and other bodies can and will investigate complaints about unfair terms and impose sanctions.
Consumer lawyers, including those at Citizens Advice Bureaux and other pro bono organisations, are well placed to advise on potential breaches of consumer protection legislation and the steps consumers can take by way of formal complaint processes and complaints to regulatory bodies which can secure redress as can claims brought in the county courts.
As is often demonstrated, no one works in a vacuum. Lawyers, including general counsel, must consider the effects of their actions to ensure that their actions (such as changing terms) are appropriate and suitable, as well as in compliance with the law.
When looking at contractual changes in consumer contracts it is also worth considering whether making them more clear and intelligible would be beneficial, as doing so can help improve a businesses image by seeking the Plain English Campaign’s Crystal Clear Mark and distinguishing the business from its competitors by making it easy to see that it has clear and fair terms.
To me, the approach by General Mills seems unreasonable, although given the litigious nature of the US perhaps the case ought to be read more in that context? After all, the Guardian reported yesterday that a man is currently suing the City of New York for more money than actually exists.
As you do.
As always if you have any burning thoughts on this case, let us know. The comment box is below. We look forward to hearing from you.
Chris Hegarty practices in civil litigation particularly in relation to consumer law and personal issues such as professional negligence, breach of contract and property disputes. His work also extends to more complex contractual disputes and he has a particular interest in litigation involving foreign elements. Chris was interviewed by Kate Beaumont. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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