Microsoft Updates Service Agreement To Make It Easier To Read The New Mandatory Binding Arbitration Clause

While we appreciate that Microsoft has made its online services agreement much easier to read, the update comes with a questionable addition: a shiny new mandatory binding arbitration clause with class action waiver. The clause states that you agree to settle any legal disputes (except intellectual property rights disputes) in either the small claims court in your county of residence or Microsoft’s, or through the arbitration procedure outlined in the agreement. Microsoft announced that this change was coming awhile back, and has already added similar language to its XBOX Live service.

Here’s Microsoft’s side of the story (from their blog):

When a customer in the United States has a dispute about a Microsoft product or service, many of our new user agreements will require that, if we can’t informally resolve the dispute, the customer bring the claim in small claims court or arbitration, but not as part of a class action lawsuit. Many companies have adopted this approach, which the U.S. Supreme Court permitted in a case it decided in 2011. We made this change to our terms of use for Xbox LIVE several months ago, and we will implement similar changes in user agreements for other products and services in the coming months as we roll out major licensing, hardware or software releases and updates.

We think this is the right approach for both Microsoft and our U.S. customers. Our policy gives Microsoft powerful incentives to resolve any dispute to the customer’s satisfaction before it gets to arbitration, and our arbitration provisions will be among the most generous in the country.

The Supreme Court decision that Microsoft refers to in this article is the imfamous AT&T vs Concepcion. Back in April, a study by Public Citizen found that following Concepcion, a growing number of companies — from banks to cable and satellite providers to video game producers — have inserted forced arbitration clauses into their contracts, and at least 76 possible viable lawsuits have been stopped dead in their tracks.

There is no way to opt-out of this change per the agreement:

Your use of the services after the date the change becomes effective will be your consent to the changed terms. If you do not agree to the changes, you must stop using the services and cancel any paid services by following the instructions in section 9.10. Otherwise, the new terms will apply to you.

The services affected by this agreement include: Microsoft Hotmail, Microsoft SkyDrive, Microsoft account, Windows Live Messenger, Microsoft Photo Gallery, Microsoft Movie Maker, Microsoft Mail Desktop, Microsoft Writer , Bing, MSN, and

In addition to this change, Venture Beat spotted another modification that will allow Microsoft to share your data between its services.

But hey, at least it’s readable.


Edit Your Comment

  1. YouDidWhatNow? says:

    My usual post:

    MBA should be illegal. In no case does it benefit the consumer, but instead allows the corporation to flaunt the legal system of this country with impunity. All contracts between 2 parties should always be subject to the normal legal system, without any modification.

    • Abradax says:

      If companys want MBA so badly, they should all be forced to give money to a government fund, and when arbitration is needed, the CSPC would hire the arbiter to ensure fair arbitration.

      Then the arbiter wouldn’t have to worry about pleasing the person writing the paychecks (I.E the company)

      • Applekid says:

        I know! They could call that arbitration room a “court” room, and the truly neutral arbiter a “judge”. We could call it a “judicial system”.

        And because legal issues are complicated, we ought to be able to hire experts to help plead our case. These “law-yers” can handle the minutia. Also, because it might be expensive to hire a law-yer, maybe everyone harmed by the unfair action, a “class” if you will, could bring a complaint together and pool our resources, kind of like a “class action”.

    • tlvx says:

      Agreed, “MBA should be illegal.”

      Anything where you have to sign away your rights, just in order to use a product or service, should be wholly illegal.

      That’s akin to making a contract to do something illegal, which voids the contract. But, these large corporations get away with it, because it’s the type of semantics that can be lobbied and bought and paid for, like giving a, “cash-discount,” instead of charging a, “credit card surcharge.” That should be against the rules also.

    • ARP3 says:

      For Business to Consumer agreements, I agree. For B to B agreements, I’m fine with MBA clauses.

  2. MrMongerty says:

    I am sort of numb to these any more. The only class action suits I have been a part of only net a few bucks.

    I feel like if I was actually damaged materially (and wanted to sue), I would prefer a small claims court anyways.

    • sqlrob says:

      MS didn’t start fixing or acknowledging the RRoD until threat of a few class actions popped up.

      I’m not going anywhere near Durango with this clause.

      • MrMongerty says:

        That is true. I suppose that the 3 year warranty on my Xbox was probably the biggest material gain I have had from a class action (at least the most tangible).

        Sort of makes me rethink how I feel about it.

  3. Invader Zim says:

    Meh, yet still no two stage authenication? What gives MBA company?

  4. valen says:

    Yet another terms of service change that allows a mega-corporation to dodge pesky concepts such as “responsibility”, “liability”, and “customer service” while playing the usual “throw the customer under the bus” card. Seems like this maneuver is showing up everywhere these days.

    • Applekid says:

      Well, as consumers, we have a choice to not do business with anyone that has a MBA clause. Yup, the Supreme Court said so. We definitely have a choice and, one by one, every company is definitely not forcing us to waive our rights to these kangaroo courts.

      • valen says:

        As a college student at one of the many institutions that use “Microsoft Live” for email, I have found that I do have a choice in this matter. I can either agree to the changes or stop attending classes at the college. It is the same type of choice that Germany or Japan faced at the end of World War II.

  5. dicobalt says:

    Still not sure how it’s legal to take away a legal right. Seems sketchy to me.

  6. MarkFL says:

    It’s not just products. A lot of companies are, um, “encouraging” their employees to sign agreements that they will not sue their employers, and that all disputes are to be resolved by binding arbitration. They claim this is for the employee’s benefit. (cough)

    If you’re applying for a job, you have to sign the waiver during the application process at many companies.

    • Lt. Coke says:

      That doesn’t sound legal. Binding Arbitration for consumer disputes is wrong, but BA for employees just sounds criminal. The first guy that loses his leg due to unfair conditions that is forced into arbitration better fucking be the last.

      • Mr. Bill says:

        We already have something similar Workmans Comp. You can’t sue your employer over workplace injures.

      • MarkFL says:

        Where I work now, everyone was sent a big packet about how we were supposed agree to binding arbitration UNLESS we specifically requested to be excluded. Of course, if you didn’t respond by a certain date, that was considered agreement with the new rule. I’m not sure how it works with employees hired since then. It should be noted that our company settled a class-action lawsuit last year.

        However, I’m still looking for another job, and I have filled out a few online applications that require you to agree to BA if you have a dispute. This sort of implies to me that they are expecting trouble.

        I think they are looking not so much at potential injuries (which are liability issues) as pay disputes — unpaid overtime, required tasks performed off the clock, etc. Just think of all he lawsuits filed against Wal-Mart for unpaid OT, and how much money they would save if they didn’t have to go to court. Even if they lose, they’re not likely to have to deal with punitive damages.

    • shepd says:

      Interesting. For any contract to be valid (assuming this is an existing employee) it must offer something for both parties that neither party had before. If the company wishes to require arbitration, then for the contract to be valid, they will need to offer the employee something.

      In a large enough company, I’d enjoy requesting, say, a 20% raise in compensation. When told there would be no compensation, I’d have to discussion that with the legal team who are clearly failing to do Lawyer 101.

      • MarkFL says:

        I’m guessing that’s why they claimed the requirement was for the employees’ benefit.

        Sorta like, “we’re cutting your pay by 20 percent, reducing your health insurance coverage, and eliminating the bonus program. But you still get to work here.”

  7. MarkFL says:

    Here’s an interesting thought. Since corporations are people, can they be sued for personal liability?

  8. Trick says:

    Arbitration is not always a bad thing for some. For consumers in California, it is probably a better idea to to go arbitration over a dispute.

    In California the consumer is not liable for any costs/fee’s associated with arbitration for the most part. Depending on the arbitration firm, you may be liable for $125 to $250 if you don’t qualify for no charge at all. (you don’t pay if you are below 300% of the poverty line)

    For the company, arbitration can be very expensive. Anywhere from $1000 up to $5000 for a hearing and with so many companies using arbitration clauses, chances are you will get a “nuisance” win because it is often cheaper to settle than fight and win for a large company.

    So Microsoft bricks your XBOX, cancels your account for no real reason. Rips you off. You then file a arbitration claim. Will Microsoft pay $1000 to $5000 for just the hearing, not including lawyer costs to address your claim of $70 (made up number?) or do you think they will just settle?

    As always there are lots of things to consider before any legal action but large companies put arbitration clauses in their contracts to avoid class actions suits. It is easier to deal with the few people who will file against them and lose than lose a major class action lawsuit…

    • MarkFL says:

      You’re talking about a situation where you go to what might be called “arbitration court,” in which a neutral arbitrator — usually a retired judge — decides the case.

      This is different from a situation where a professional arbitrator — usually from a firm retained or chosen by the side who made the arbitration mandatory — decides the case.

    • shepd says:

      Do you really think Microsoft will pay “Microsoft Arbitration Limited (TM)” anything for their services? :)

  9. DrD2012 says:

    Good thing NOBODY uses Bing. :)

  10. Press1forDialTone says:

    Ballmer is trying to soften his own fall from loud-mouthed flunky to silent humiliated flunky.
    Only the Surface Tablet knows for sure.