Sony Adds Mandatory Binding Arbitration and Class Action Waiver to PlayStation 3's Terms of Service
Sony has had some rough times recently dealing with hackers stealing customer data from them, but with Sony’s new additions to its terms of service, it seems that Sony is more concerned with defending itself from its customers than from hackers.
In April 2011, an online attack targeted the PlayStation Network (PSN), Sony’s online service for its PlayStation 3 and PlayStation Portable game consoles. Sony confirmed that personally identifiable information, including credit card numbers, were stolen from 77 million accounts, making this possibly the largest data security breach in history. The PSN was down for nearly a month, preventing millions of users from accessing online content and playing online games.
In the days and weeks that followed, Sony came under fire on numerous fronts. First, Sony shut off the PSN to prevent any further damage caused by the theft of their customers’ personally identifiable information. Sony waited 6 days before telling its customers that their credit card information had been compromised. Further, although the credit card information was encrypted, other user information, including user passwords, was not. Sony issued an apology in the form of a few free games available for download. Government inquiries and private lawsuits followed.
In an effort to head off further lawsuits and future litigation, Sony changed its terms and conditions of use for the PSN last week to include mandatory binding arbitration and class action waivers. Mandatory binding arbitration requires that consumers submit to arbitration rather than file a lawsuit. Mandatory binding arbitration can be a viable alternative to litigation when the two parties are equal in power, but arbitrators strongly favor repeat business and rule in favor of large businesses the majority of the time. Similarly, class action lawsuits are one of the few effective tools that consumers have—or had—in holding corporations responsible for their wrongdoing. A recent Supreme Court decision allowed corporations to add class action waivers to their contracts, even when consumers had no say in the contents of the contract.
Sony’s changes terms and conditions of use is particularly egregious, because these changes apply for existing customers and not just new customers. If existing customers wish to decline these new terms, they have to send a mailed letter to Sony (and include tracking to make sure that Sony cannot claim that the letter was lost in the mail). Failing to accept the terms, with or without a mailed declining letter, results in being banned from use of PSN, which includes most of the online functionality of the PlayStation 3 and PlayStation Portable.
Sony knows that its customers have little choice but to accept these terrible terms. Sony echoes the words of Darth Vader: “I have altered the deal. Pray I do not alter it any further.”
