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Microsoft Latest to Thwart Consumer Class Actions

Jaclyn Jaeger | May 29, 2012

One year has passed since the U.S. Supreme Court rendered its decision in AT&T Mobility v. Concepcion, which granted companies broad authority to settle disputes through arbitration, rather than costly class-action lawsuits. As predicted, the decision is having far-reaching implications on corporate legal departments.

Microsoft Assistant General Counsel Tim Fielden said in a corporate blog post on May 25 that Microsoft has begun to revise its user agreements to prevent consumers from filing class-action lawsuits against the company in response to Concepcion. Fielden added that Microsoft already revised its terms of use agreement for Xbox Live several months ago and plans to implement similar changes in user agreements for other products and services in the coming months.

“We think this is the right approach for both Microsoft and our U.S. customers,” Fielden wrote. “Our policy gives Microsoft powerful incentives to resolve any dispute to the customer's satisfaction before it gets to arbitration, and our arbitration provisions will be among the most generous in the country.”

For example, Microsoft allows arbitration wherever the customer lives. Furthermore, if an arbitrator's award is greater than what the company informally offered to resolve a dispute, Microsoft will pay the greater of the award or $1,000 for most products and services—plus double the customer's reasonable attorney's fees.

“Most important, this approach means customer complaints will be resolved promptly, and in those cases where the arbitrator agrees with the customer's position, the customer will receive generous compensation, and receive it quickly,” Fielden wrote.

Microsoft is not the only company to have adopted this approach in light of Concepcion. Sony, for example, revised its Sony Network and PlayStation Network Terms of Service with a newly added section that bans users from forming class-actions against the company.

The agreement states: “Any dispute resolution proceedings, whether in arbitration or court, will be conducted only on an individual basis and not in a class or representative action or as a named or unnamed member in a class, consolidated, representative or private attorney general action, unless both you and the Sony entity with which you have a dispute specifically agree to do so in writing following initiation of the arbitration.”

Sony was forced to take down its PlayStation Network service last year after hackers stole the personal information of millions of its Sony PlayStation users.