Regulators May Prevent ISPs From Forcing Subscribers Into Arbitration

When a group of AT&T's unlimited data subscribers sued the company for allegedly slowing down their broadband connections, the telecom successfully argued that the case belonged in arbitration.

AT&T convinced a judge that the company's terms of service, which call for arbitration of all disputes, required him to send the matter to an arbitrator.

And when Verizon users sued the ad company Turn for allegedly violating people's privacy with "supercookies," Turn was able to have the case sent to arbitration. That's because the lawsuit involved allegations about Verizon's tracking technology, and that company's contract with users called for arbitration of disputes.

Consumers have appealed  both of those rulings, but it's not yet clear how the judges will view the issue.



But even if the consumers lose on appeal, Internet service providers may soon find they're no longer allowed to force subscribers to waive their rights to go to court. That's because the Federal Communications Commission is considering a proposal to ban broadband providers from forcing consumers to sign mandatory arbitration clauses as a condition of receiving service.

Broadband providers, not surprisingly, oppose any attempt to restrict their ability to insist on arbitration. Verizon argues in a recent FCC filing that Congress already passed a law -- the Federal Arbitration Act -- that allows arbitration clauses.

The company goes so far as to contend that any attempt to outlaw arbitration clauses would be bad for consumers. "Multiple studies have found that consumers obtain relief in arbitration at rates higher than they do in court," Verizon contends. "Indeed, many companies -- including Verizon -- have voluntarily adopted a set of best practices designed to make arbitration even more consumer-friendly."

Whether Verizon's arguments will carry the day isn't yet known. But many observers have argued that arbitration agreements are the opposite of consumer-friendly.

At least one regulator, FCC Commissioner Mignon Clyburn, appears unimpressed with Verizon's claims. She and Sen. Al Franken (D-Minnesota) recently co-authored an op-ed arguing that Internet service providers shouldn't be able to force consumers to agree that disputes will be handled by "a private arbitration process that is inherently biased towards corporations and offers no meaningful appeals process."

"A broadband provider is not necessarily out to defraud its customers. But with mandatory arbitration clauses in place, what’s to stop them from doing so?" the two wrote. "In an age where reliable and affordable internet access is an absolute necessity, we believe that you shouldn’t have to give up your day in court to go online."

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