Microsoft's New User Agreement Sparks Binding Arbitration Flap

The Alliance for Justice sounds the alarm on a clause, nestled into the IT giant's user agreement, that the group claims denies customers their day in court.

Microsoft is getting ready to implement an updated services agreement that covers a broad set of the company's cloud and online services portfolio. In the weeks before the new agreement takes effect, Alliance for Justice (AFJ), a Washington D.C.-based advocacy group, argues that a clause contained within will hinder users' ability to seek restitution if they are harmed by Microsoft's services.

The clause in question involves a process called binding arbitration, or as AFJ terms it, "forced arbitration." It is detailed in Section 10 of the agreement, titled Binding Arbitration and Class Action Waiver If You Live in the United States.

The binding arbitration clause (Section 10.3) in the Microsoft Services Agreement, states:

"[You're] giving up the right to litigate disputes in court before a judge or jury (or participate in court as a party or class member). Instead, all disputes will be resolved before a neutral arbitrator, whose decision will be final, except for a limited right of appeal under the FAA. Any court with jurisdiction over the parties may enforce the arbitrator's award."

The AFJ asserts that such policies have gained ground in corporate America because it prevents costly lawsuits. When people agree to end-user license agreements (EULA) for software and cloud services, often just by barely glancing at their content and clicking the OK button, they generally agree not to involve the courts system when disputes arise.

The most glaring issue, according to AFJ, is that binding arbitration is often an imbalanced, one-sided process that is rife with conflicts of interest.

In an AFJ blog post, the group warned that Microsoft has been "phasing in forced arbitration clauses in its 'services agreement'." Earlier this month, the company announced that it was updating its Microsoft Services Agreement July 31.

Microsoft has yet to reply to a request for comment. However, a company representative did point out that the inclusion of the binding arbitration clause is not a new development. The clause was first introduced in 2012 as part of a previous Microsoft Services Agreement update, informed the spokesperson.

Ryan Gavin, general manager of Search, Cloud and Content for Microsoft, said that the company was doubling down on privacy. "We are now explicitly stating what we've said in the past, that we don't use people's documents, photos or other personal files or what they say in email, chat, video calls or voice mail to target advertising to them."

For the AFJ, the bigger issue is a user's day in court, or rather, lack thereof.

Users harmed by a Microsoft product or service can't stand up for their rights in court, asserts the group. "Instead, you have to take your case to an arbitrator hired by Microsoft. Arbitrators do not need to be lawyers or follow precedent, yet their word is nearly always final and unappealable," reads the AFJ blog post.

Michelle Schwartz, director of justice programs for the Alliance for Justice, described binding arbitration as a embarking on a losing battle, at least for the average consumer.

"You go into this secret forum and face a decision-maker that is not a judge or a jury," she told eWEEK. Often, these arbitrators are "paid for by the corporation," calling into question their neutrality. Schwartz added that arbitrators overwhelmingly rule in favor of the organizations that hire them, approximately 94 percent of the time.

More broadly, Schwartz is concerned that companies are using binding arbitration to shield them from consumer protection and anti-discrimination laws. "Civil rights laws, antitrust law ... [binding arbitration] allows them to opt out of these laws," she said. "It's a license to steal from consumers, a license to discriminate against employees."

Pedro Hernandez

Pedro Hernandez

Pedro Hernandez is a contributor to eWEEK and the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the network of...