Sony new Terms of Service – you can’t file a class action suit

Following the recent spree of data breaches at Sony, resulting in a bevy of class-action lawsuits, it has updated the Terms of Service to preclude future class action suits from being leveled. To be sure, Sony has had sleepless nights following the breaches, but they’d prefer not to deepen the stack of lawsuits if similar situations occur in the future.

Users will now be presented with a message saying “The first time you sign in to your PlayStation®Network account on or after September 15, 2011, you will be asked to enter into a new Terms of Service and User Agreement (“TOS”) and Privacy Policy with SNEI if you wish to continue using your PlayStation®Network account. Please review all changes to the TOS and Privacy Policy carefully before indicating your agreement. In particular, please review Section 15 of the TOS, which now includes a class action waiver and requires that most disputes be resolved through arbitration.”

So after the 15th, if you want to continue using the service, you would be agreeing to resort to arbitration, rather than a class action suit. This has some wondering whether this will stand legal tests, i.e. if a company produces an agreement that may seek to ban a class action suit, and later a judge rules a company can’t do that, what happens next?

On the other hand, companies are seeking ways to control costs following data breaches. Someone at Sony has been writing lots of checks lately for legal-related expenditures, which affects the bottom line, along with budget to create new products to compete in the marketplace. Arbitration is one way companies can avoid the sometimes staggering costs of going to court. Also, arbitration tends to be a less press-aware event than a more public courtroom. Companies involved in data breaches tend to prefer to quietly go about business, without the ongoing attention public legal battles tend to attract.

We’ll see how this affects future breaches, or really whether companies that add similar language to their Terms of Service agreements are able to prevail against future legal challenge, and whether mandatory arbitration will be able to address the angry users’ issues in a successful way.

Author , ESET

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