Arbitration Clauses Created Through Data-Pass Marketing Programs and Shrink-Wrap Presentations May Create Enforceability Issues
American Bar Association, Business Law Section, Commercial Law Newsletter, Forthcoming
Posted: 16 May 2013
Date Written: March 5, 2013
On September 7, 2012 the Second Circuit struck a blow for those consumers that have been trapped by a data pass marketing programs, especially those that contain an arbitration clause hidden within its terms. In the case of Schnabel v. Trilegiant Corp., the court examined the enforceability of online contract terms. Most relevant and telling, however, was the fact that the court specifically invalidated the arbitration provision of the disputed agreement.
You likely are aware of what a post-transaction/data pass marketing program is, but you may have never heard the name associated with the activity. A ‘post-transaction’ or ‘data pass’ marketing program occurs when a consumer is presented with a ‘discount’ or cash-back offer from a third-party marketer at the conclusion of a transaction with an online retailer. If the consumer responds to the offer, whether by an affirmative ‘click’ or by the provision of personal information, their payment data is provided directly to the third-party marketer by the online retailer who collected it in connection with the original underlying transaction. The consumer is then enrolled in a program and their payment card is charged a monthly fee. As of 2010, the direct passing of payment information in this manner is prohibited by the Restore Online Confidence Act (S. 3386 (111th Cong., 2d Sess. 2010)) unless, among other things, the consumer’s “express informed consent” is obtained. However, issues still remain in relation to the agreement that arises in these types of transactions. Most concerning is the presence of an arbitration clause within these agreements and the absence of the need to present this information to the consumer.
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