Microsoft's new user license bans class-action suits. Is that fair?

Buy a Microsoft consumer product, and you won't be allowed to join a class-action suit against the company, even if you feel you've been harmed. That's what the fine print on Microsoft's new end user licence agreement (EULA) says. Is that fair, or Microsoft taking advantage of consumers?

Last week, Tim Fielden, assistant general counsel for Microsoft, announced the details about the new EULA in a Microsoft blog. Clearly, Microsoft knew the change wouldn't go down well, which is why it chose to make the announcement just before the Memorial Day weekend, when people are rarely paying attention to the news.

Fielden explains the change succinctly:

"When a customer in the United States has a dispute about a Microsoft product or service, many of our new user agreements will require that, if we can’t informally resolve the dispute, the customer bring the claim in small claims court or arbitration, but not as part of a class action lawsuit."

He goes on to explain:

"We think this is the right approach for both Microsoft and our U.S. customers. 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 instance, we permit arbitration wherever the customer lives, promptly reimburse filing fees, and, if we offer less to resolve a dispute informally than an arbitrator ultimately awards, we 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."

Microsoft made the same change to the Xbox Live EULA several months ago, Fielden says. 

In case you're wondering whether the new language is legal, it is, thanks to a terrible ruling from one of the worst Supreme Courts the U.S. has lived through. According to the New York Times, the court ruling in 2011:

"...appeared to provide businesses with a way to avoid class-action lawsuits in court. All they need do, the decision suggested, is use standard-form contracts that require two things: that disputes be raised only through the informal mechanism of arbitration and that claims be brought one by one."

Brian T. Fitzpatrick, a law professor at Vanderbilt University, said to the New York Times about the ruling:

"This is a game-changer for businesses. It's one of the most important and favorable cases for businesses in a very long time."

GeekWire points out that the four major U.S. wireless carriers have similar practices. Don't be surprised if it becomes an industry standard.

Just because it's legal and becoming the standard industry practice, though, doesn't mean that it's right. Businesses may argue that banning class action suits will stop frivolous actions against them. But I don't believe that to be the case. Vanderbilt professor Fitzpatrick told CNet:

"How is it really more efficient for a company to deal with thousands of individual claims instead of allowing people to present their case as a single group? Class action lawsuits actually streamline the process and correct wrongdoing often for people who didn't even realize they were being cheated."

Microsoft is doing what is clearly its legal right. But it's still bad for consumers.

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