Amazon.com does not require US consumers to go to arbitration in the event of a dispute. Since May 3rd, Amazon’s contractual terms have stipulated that lawsuits must be brought before public courts in the US state of Washington. Like other US corporations, Amazon had previously avoided public justice as much as possible. But then the company had to spoon out its own soup: 75,000 consumer requests to arbitration tribunals cost Amazon tens of millions in fees.
Arbitration tribunals usually work in closed circuit in simplified procedures. This means that they usually make decisions faster than regular dishes. And because the decisions are secret, companies can minimize damage to their image and consequential claims from other injured parties.
At the same time – according to the previous assumption – there are significantly fewer proceedings than before public courts: The arbitral tribunals have their work paid by each party to the dispute, and regardless of the outcome of the proceedings, each party has to pay its own lawyers and other costs. Sometimes the arbitration tribunals even sit in distant countries.
Class action is cheaper
Class actions are usually inadmissible before arbitration tribunals, which means that each injured party must litigate individually. It is correspondingly difficult to find a litigation funder for arbitration proceedings. So there are high financial hurdles and the company completely saves itself from many procedures.
But not necessarily. Large law firms have invested in modern IT infrastructure. Suddenly you are able to conduct a large number of similar arbitration proceedings in parallel. US attorneys have filed for no fewer than 75,000 arbitration proceedings alleging that Amazon’s Echo devices have secretly wiretapped consumers.
Nobody at Amazon expected that. Amazon also had to pay an arbitration fee for each application. That adds up to tens of millions of dollars. On the other hand, opening a single class action lawsuit in an ordinary court is a mezie.
Individual case Amazon
This cost saving explains Amazon’s change of heart when it comes to arbitration proceedings with US consumers. you are now allowed to sue in a state or federal court in King County, Washington. The abolition of this arbitration clause does not apply to employees and suppliers. The Pacific city of Seattle is located in King County, where Amazon has its headquarters.
According to Wall Street Journal at least three class action lawsuits were filed against Amazon in May. This includes the accusation that Amazon secretly overheard Echo users, which the company denies. The newspaper does not expect a domino effect for arbitration clauses at other corporations. At the end of 2017, Microsoft abolished the obligation to arbitrate employees for allegations of sexual harassment.
EU prescribes courts
Amazon’s rule change only applies to the United States. In neighboring Canada Amazon.ca continues to have arbitration courts outside of Quebec, but allows lawsuits to be brought before the appropriate Canadian courts for small consumer claims.
Amazon Europe excludes UN sales law and conflict of laws. However, EU law forces the company to accept ordinary courts at the consumer’s EU place of residence and the EU Commission’s platform for dispute resolution. Amazon Europe expressly does not take part in other consumer arbitration proceedings. Anyone who is not a consumer or does not have a place of residence in the EU must sue Amazon Europe in Luxembourg.