General Mills Reverses Mandatory Arbitration for Coupon Clippers and Social Media Followers

On April 17, 2014, General Mills explained recent, controversial changes to legal terms on its website that mandated any disputes related to the purchase of General Mills’ products would be resolved in binding arbitration and applied to all customers that “interacted” with the company online. Two days later, and following significant criticism of the clause, General Mills announced the retraction of that policy. While the legal and practical ramifications of this particular clause appear to have been avoided, mandatory arbitration clauses are arising in an array of contexts and food litigation is on the rise. Is it just a matter of time until another producer of food products attempts to limit litigation using this legal tool?

General Mills Policy

After many reports of General Mills’ “quiet update” to their terms and one specific accusation that even “liking” the company on Facebook constituted a waiver of the right to bring a suit to court, General Mills explained the changed policy and attempted to put a rest to the controversy. A press release issued by the company explained that all individuals who interacted with the company online, either through entering a sweepstakes or downloading a coupon, would be required to first agree with certain terms and conditions. One of those terms, which General Mills claimed had been previously misinterpreted as barring all attempts to recover damages against it, required that any dispute or claim against General Mills be resolved in binding arbitration. In the release this was characterized by the company as “merely determin[ing] the forum,” of a suit. It also clarified that liking or following the company on Facebook or purchasing products in a store does not preclude the consumer from suing General Mills. Yet, that comment was followed by the qualifier: “But should an individual agree to the terms, they would then apply.”

Despite the explanation offered than seemed to attribute the controversy to misunderstanding rather than backlash over the policy, criticism of the mandatory arbitration clause continued, particularly in the form of comments that highlighted the fact that arbitration does not allow for class action suits. As a result, two days later, General Mills retracted the new policy. The accompanying press release stated that not only was the policy not in place anymore, and that General Mills was sorry for “even start[ing] down this path,” but also noted that they were taken aback by the reaction to the mandatory clause: “We’ll just add that we never imagined this reaction. Similar terms are common in all sorts of consumer contracts, and arbitration clauses don’t cause anyone to waive a valid legal claim.”

Trends in mandatory arbitration

Indeed, similar clauses have been showing up in the legal terminology attached to the use of many products and even have been upheld by the Supreme Court in the past few years in A.T.&T. v Concepcion and  American Express Company v Italian Colors Restaurant. In both cases, the Supreme Court affirmed the power of mandatory arbitration clauses that prevented class-wide remedies, and according to one report, made “pursuing a legal claim so economically irrational that, in all likelihood, no cases would ever get brought.” More recently, Dropbox announced its new mandatory arbitration clause that included an explicit ban on class actions of any kind. While Dropbox allowed a user to opt-out of those terms, that option was only available 30 days after accepting the terms.

Implications for Food Litigation

Unlike General Mills, Dropbox has yet to back down from the adoption of the mandatory arbitration clause. Could this be due to the nature of General Mills’ business and the explosion of food-related class action litigation in recent years? In the last few years, General Mills’ products and alleged misrepresentations on General Mills’ labels and packaging have been the subject of several class action suits, including a case that settled for $8.5 million after a class of consumers alleged the health benefits of Yoplait yogurt products were misstated on labels. While General Mills has shown it is unwilling to withstand the consequences and criticism following the introduction of an arbitration clause that could potentially put an end to class action suits and large settlements, will another company take this risk in an attempt to reap those benefits? In light of the large stakes in food litigation and the rise of these mandatory policies in other areas, it seems as if the interplay between food litigation and mandatory arbitration clauses may  be just beginning.