It’s Time For Legally Standardised TOS Agreements

PC game download service Steam released a new Terms Of Service Agreement today, and among the changes is a new clause that bans Valve’s customers from bringing class-action lawsuits against them and binds customers to arbitration.  If you’re interested in the legalese, the new agreement states that:

YOU AND VALVE AGREE TO RESOLVE ALL DISPUTES AND CLAIMS BETWEEN US IN INDIVIDUAL BINDING ARBITRATION. THAT INCLUDES, BUT IS NOT LIMITED TO, ANY CLAIMS ARISING OUT OF OR RELATING TO: (i) ANY ASPECT OF THE RELATIONSHIP BETWEEN US; (ii) THIS AGREEMENT; OR (iii) YOUR USE OF STEAM, YOUR ACCOUNT OR THE SOFTWARE. IT APPLIES REGARDLESS OF WHETHER SUCH CLAIMS ARE BASED IN CONTRACT, TORT, STATUTE, FRAUD, UNFAIR COMPETITION, MISREPRESENTATION OR ANY OTHER LEGAL THEORY.

And also that:

YOU AND VALVE AGREE NOT TO BRING OR PARTICIPATE IN A CLASS OR REPRESENTATIVE ACTION, PRIVATE ATTORNEY GENERAL ACTION OR COLLECTIVE ARBITRATION, EVEN IF AAA’s PROCEDURES OR RULES WOULD OTHERWISE ALLOW ONE. THE ARBITRATOR MAY AWARD RELIEF ONLY IN FAVOR OF THE INDIVIDUAL PARTY SEEKING RELIEF AND ONLY TO THE EXTENT OF THAT PARTY’S INDIVIDUAL CLAIM.

This follows similar moves by both Sony and Microsoft on the Playstation 3 and Xbox 360 consoles respectively.  Both companies were following on the heels of AT&T, which instituted a similar waiver in their Terms Of Service at least as far back as 2006.  The State of California passed a law banning such clauses, but the U.S. Supreme Court ruled in 2011 that states do not have the power to implement such laws, and so these waivers are currently legal in the U.S.  I do not know of a case where such a waiver has ever been tested in another jurisdiction, so I can’t speak to their legality elsewhere.

These changes are not meaningless.  In 2005 Sony settled a class action lawsuit dealing with disc read errors on Playstation 2 consoles.  Sony has also faced class actions in relation to their removal of Other OS support from the Playstation 3 as well as the theft of customer data from the Playstation Network.  Microsoft has not been spared either, as they were sued over the infamous Red Ring Of Death problems with the Xbox 360.  I couldn’t find information on how any of those lawsuits other than the PS2 disc read error one were resolved, but there is at least one instance of a class action succeeding against one of these corporations.

I have a number of problems with these waivers and they relate to problems with Terms Of Service agreements more generally.  One of the problems is the ability for companies to update Terms Of Service at virtually any time, thus changing the rules that consumers have to operate under.  Let’s say that I own a 360, PS3, and some number of games on Steam (all of which are true).  In the past year I have now had my legal rights restricted in relation to products I have already paid for in ways that were not present when I paid for those products.  For example, Xbox Live Indie Games will not play on an Xbox 360 without an active Xbox Live connection nor can a user play an online game without an active Playstation Network connection.  Therefore, consumers are presented with two options – agree to new rules arbitrarily thrust upon them or lose access to content they already paid for under different rules.  That this is patently unfair is, I think, pretty obvious.

One could, of course, refuse the agreement and not be bound by the new terms, but in that case they would lose access to something bought under a perfectly fair prior agreement.  And yes, in theory customers should know that a Terms Of Service agreement can be modified and thus they are in some way agreeing to the potential for the rules to change at some point in the future, but without legal limits on the ways in which these contracts can be modified a consumer is presented with an impossible scenario in which they are required to attempt to foresee every possible change that could ever be made to the agreement before deciding whether or not to use a service.  This is completely unreasonable.

Making matters worse, most consumers probably don’t read Terms Of Service agreements.  You can say that in theory they should, but the suggestion is not feasible; The Atlantic’s Alexis Madrigal has reported on a study which found that to read the Terms Of Service agreements you’re bound to in just one year would take 78 work days – and that was just for the TOSs from web sites, no mention of cell phone providers, video game manufacturers, etc..  No human being can reasonably be expected to do this.

Combating these problems is going to require legislation.  What we need are a set of legally standardised Terms Of Service agreements.  A number could exist – for example, one for web pages, one for telecommunications, one for software, etc.  But the important thing is that users should only have to read one TOS in order to understand their rights and responsibilities.  There could be room for some negotiation within them (for example, I think it’s perfectly reasonable for a cable company to raise rates with reasonable notice that they intend to do so) but fundamental rules like what your legal remedies are ought to be standardised and non-changing.  Let’s say we create 10 TOS under this new law for various kinds of goods and services.  That works out to an hour and forty minutes of reading.  That’s still a fair amount, but I don’t think it’s unreasonable and since they would only ever change when legislation changed users wouldn’t have to keep re-reading new agreements all the time to keep up with changes.

This would allow consumers to have a much better idea what specifically they’ve agreed to and it would also level the playing field by ensuring that companies could not cut off access to goods or services already paid for by unilaterally changing the rules.  I should say that I would include Privacy Policies as part of these standardised TOSs, but I have a number of ideas for fixing Privacy Policies and that’s a complicated issue for another day.  Consumers should have the right to know what rules they’re being governed by and to have those rules be consistent.  The only way we can ever fix that is through legislation because it’s clear that corporations are going to continue pushing those boundaries as far as lawmakers let them.