General Mills (GIS) Facebook Backlash: Could Arbitration Fairness Act Nullify Policy That Sparked Outcry?

This is what it looks like when social media users eat a multinational cereal company for breakfast.

General Mills Inc. (NYSE: GIS), the company behind Cheerios, Cocoa Puffs and numerous other household-name cereal brands, is being lambasted on Facebook and Twitter Thursday after telling customers who join its online communities that they have given up their right to sue the company. The change is part of a new privacy policy, instituted on April 2, which says General Mills customers must resolve disputes through binding arbitration, an increasingly common tactic that critics say puts companies at an unfair advantage.

The policy change caused an uproar when it was reported in the New York Times, which interpreted the broadly worded terms to mean that “joining” online communities could be something as simple as “liking” the Facebook page of a General Mills brand. On the Facebook page for Cheerios, reactions to the policy have been swift and severe. “I’m now un-liking Cheerios,” one person wrote. “I do not agree with this policy and will no longer buy any product of General Mills.” It was a sentiment echoed repeatedly in a steady stream of negative comments flooding the page on Thursday.

On Twitter, users had equally harsh words, with countless angry tweets directed at the @Generalmills Twitter account:

General Mills was quick to respond to the outcry with a statement posted in a follow-up article in the Times. In the statement, a spokeswoman for the company denied that the policy applies to customers who simply like a Facebook page or purchase one of its products at a grocery store; just those in online communities hosted by General Mills on its own websites. However, the wording on its privacy policy appears to tell a different story:

“These new provisions contain an agreement to resolve any and all disputes you may have with General Mills or any of its affiliated companies or brands contain through informal negotiations and, if these negotiations fail, through binding arbitration. This includes disputes related to the purchase or use of any General Mills product or service.”

The tactic, known as “forced arbitration,” is becoming more and more common in everything from consumer agreements to employment contracts. Critics say the clauses, often buried in the fine print of contracts and user policies, essentially ask Americans to sign away their right to go to court. As an alternative, customers with a beef are forced to resolve their disputes in a system of privatized arbitration designed to benefit corporations. Companies often foot the bill for private arbitration, which critics say influences arbitrators to rule in their favor.

Over the last few years, the practice has become even more pervasive, thanks to two Supreme Court decisions that upheld the use of forced arbitration. Given the rulings, opponents of the practice say they are not surprised to see companies like General Mills broadening their policies so that their arbitration clauses incorporate virtually every customer they do business with. “These decisions out of the Supreme Court are emboldening companies to take forced-arbitration clauses as far as they want to,” said Michelle D. Schwartz, director of justice programs for the advocacy group Alliance for Justice. “Companies are really testing to see how far can they take this and get away with it.”

Schwartz placed some of the blame on the conservative leadership of Chief Justice John G. Roberts, whose court, she said, has issued pro-businesses rulings to the detriment of consumers and employees. “That’s the direction this Roberts Court is going,” Schwartz said. “They’re building this wall of protection around corporations.”

But there is a fix, Schwartz added. The Arbitration Fairness Act, a bill that has been winding its way through the legislative process for the last five years, would prevent forced arbitration in any employment, consumer, antitrust or civil rights dispute. The bill, introduced by Sen. Al Franken, D-Minn., has a growing number of co-sponsors, but it has failed to gain the wider attention Schwartz and other supporters think it deserves. The bill was assigned to a congressional committee on May 7, 2013. And while their hasn’t been much movement since, Schwartz thinks high-profile dustups like the one currently surrounding General Mills are likely to help expedite the process. “As the public becomes more aware of this really disturbing practice, then that’s going to give legs to this legislation,” she said.

Schwartz said garnering traction for the bill requires conveying exactly what’s at stake. Terms like “private and impartial arbitration” may sound harmless enough when buried in fine print, but the loophole they enable is anything but. “Corporations are opting out of federal laws,” Schwartz said. “This is one of those issues that people are not aware of, and once you tell them about it, they’re outraged.”

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