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Watchdog calls eBay's user policy 'underhanded'

Public Citizen says the auction site's new user agreement tries to prevent users from going to court or pursuing class-action lawsuits.

eBay's revamped logo.
A consumer rights group accused eBay of making it tough for users to pursue litigation against the company and said the auction site operator's new user policy goes against the company's "commitment to openness."

Public Citizen, which called eBay's new user agreement "underhanded," takes issue with a section in eBay's policy that details how eBay and users' will handle legal disputes. In the agreement (scroll down to the section about legal disputes), eBay says that all claims that arise against eBay should be "resolved exclusively through final and binding arbitration," rather than in court. Some users may be able to argue their dispute in small claims court if the claims qualify, the agreement says.

Public Citizen, which sent a letter to eBay, says the terms prevent people from banding together in class action lawsuits and also forces users to give up their right to go to court. And it says the terms "disproportionately favor the company in disputes." It's starting an online petition to garner support for its requested changes.

"Most eBay users accept the take-it-or-leave-it contract language without reviewing it, and most don't understand that the forced arbitration clause means they will be shut out of court if they are harmed by company misconduct, particularly when large numbers of users each suffer small-dollar losses," Public Citizen said.

EBay, meanwhile, said it recently updated its user agreement to provide clarity about its policies and stay current with changing laws as its business and service offering evolve.

"The arbitration provision encourages swift and reasonable resolution as opposed to litigation that can be protracted, expensive and often dissatisfying to customers," a spokeswoman said. "We believe this approach will benefit both eBay Inc. and our customers."

eBay's added arbitration policy isn't the first time companies have included such language in their user contracts. The Supreme Court last year upheld a company's right to include a clause in contracts prohibiting subscribers from suing the company as part of a class action. U.S. wireless carriers include such arbitration-only clauses in their contracts, and that has helped them avoid multibillion-dollar lawsuits.

AT&T, for example, faced a suit earlier this year related to data speed throttling, with a customer complaining the carrier slowed down his access despite the fact he had an unlimited plan. Instead of facing a large class-action suit, AT&T battled one person and had to pay him only $850.

Consumer advocates warn that allowing companies to ban class actions is bad for consumers in part because individuals must fight the same complaint multiple times. Rulings are often inconsistent, and individual claims lack the necessary financial muscle to prevent future corporate abuses. In AT&T's case, it continues to throttle customers.

eBay says users can opt out of the arbitration provision if they don't agree with it, and their accounts will remain active. Public Citizen, however, attacked eBay's opt-out provision, which requires users to respond via mail rather than online.

"To put it charitably, eBay's requirement that opt-outs be submitted through traditional mail raises questions about the sincerity of its commitment to permitting users to protect themselves," Weissman said.

The group wants eBay to either remove the "Agreement to Arbitrate" from its user agreement or at least eliminate the provision barring class-action suits. It also wants eBay to change the opt-out procedure so it can be done online and forward a message from Public Citizen explaining to users why they should opt-out.

"Average users have no way to appreciate what they may be sacrificing in permitting eBay to impose arbitration provisions on them," President Robert Weissman said in a letter to eBay.

eBay revamped its user agreement several weeks ago, with the agreement going into effect next week. The company said its previous amendment to the user agreement came a couple years ago.

Updated at 1 p.m. PT with background about arbitration clauses.