Microsoft Joins List Of Companies Banning Class-Actions

Microsoft's new terms of service, which went into effect on Friday, have received a good deal of attention because they appear to allow the company to send ads to people based on their email messages. The company isn't actually doing so, but the new terms of service didn't make that clear.

But another change to Microsoft's terms of service -- one that hasn't received as much attention -- could have a more profound impact on privacy: The company now prohibits any U.S. residents who use any of its products or services from filing class-action lawsuits against the company. Instead, dissatisfied consumers must resolve all disputes through mandatory arbitration.

Microsoft rolled out the no-class-action clause earlier this year, when it updated the XBox Live user agreement. At the time, the company made clear that it intended to eventually ban all class-actions stemming from complaints about its products and services.

The software giant isn't alone in attempting to squelch class actions. Since the Supreme Court upheld AT&T's mandatory arbitration clause last year, more and more tech companies --  including Netflix, eBay, and Paypal -- are revising their terms of service to provide that consumers have no right to bring class-actions.

These companies undoubtedly have legitimate business reasons for wanting to head off potentially expensive litigation at the pass. But class-actions remain one of the few ways for consumers to force companies to revise problematic practices, especially regarding privacy.

Consider, Netflix alone has resolved two privacy-related class-actions in recent years. In one, the company canceled plans to publicly release data including customers' gender, ages, ZIP codes and previously rented movies. Netflix had intended to make that information available as part of a contest to create a better recommendation system.

Legal expert Paul Ohm issued a public plea to Netflix to change its plans, warning that the planned release might violate the federal Video Privacy Protection Act, which bans movie rental stores from revealing personally identifiable information about consumers. When Netflix didn't quickly retreat from its plans, a group of consumers filed suit. Several months later, Netflix canceled the contest.

In the other privacy class-action, Netflix agreed to decouple users' former customers' data from their personal information.

Microsoft itself is facing a pending class-action lawsuit for allegedly collecting information about the location of Windows Phone 7 users who activate their camera phones, even when the users have said they don't want to be tracked. 

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