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By: Mike Wolak
Consumers could soon be learning more than just the number of calories in their favorite foods when looking at packaging labels. They may also see that their purchase of the food product subjects them to binding arbitration for any claims, including a class action waiver. General Mills – maker of popular cereals such as Cheerios and Wheaties – recently backed off of its controversial decision to add a binding arbitration clause and class action waiver to the terms of its website. With food companies facing consumer class actions alleging false and misleading food labels (e.g., claims of “organic” or “all natural”), General Mills added a pop-up banner announcement to its website that purported to bind consumers to arbitration simply by using its website to – among other things – view product offerings, download coupons, join its Facebook page, or enter a sweepstakes. While consumers could choose to opt-out if they notified General Mills in writing, the new terms sparked consumer and media outrage. General Mills defended its new policy but chose to remove the new terms to keep its customers happy.
Binding arbitration clauses are an important and effective tool for businesses to avoid the high costs and risks of protracted litigation and consumer class actions. The U.S. Supreme Court’s 2011 ruling in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011) (striking down California’s judicial rule invalidating class action waivers) generated a host of decisions enforcing binding arbitration provisions that also prohibited consumers from bringing class action lawsuits. These cases, however, generally involved an arbitration clause in a contract signed by the consumer. While General Mills removed its new terms before they were subjected to any judicial scrutiny, we will likely see other food companies implement similar arbitration terms to their websites and/or food labels. This will certainly raise the interesting question of whether consumers “consented” to the arbitration clause simply by purchasing a food product off the shelf or surfing a food company’s website to download coupons.
As food companies continue to seek to bind consumers to binding arbitration, we will likely see these attempts tested in the courts. Stay tuned.