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Amazon did the math and would actually prefer getting sued

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Amazon was reportedly on the hook for millions in arbitration fees

Illustration by Alex Castro / The Verge

Amazon has recently changed its terms of service to allow its customers to bring lawsuits against the company instead of having to go through an arbitration process. According to The Wall Street Journal, the company made the change after over 75,000 Echo users were organized to file individual arbitration cases, which would have left Amazon on the hook for millions of dollars in fees.

Unlike lawsuits, arbitration cases are handled by a third party instead of a judge or jury. According to the American Arbitration Association’s rules (which Amazon was bound by in its old terms of service), the company involved is responsible for hundreds, sometimes thousands of dollars in fees when a consumer brings a case against it — and those numbers add up quickly if a law firm is able to coordinate large numbers of consumers to bring complaints at once.

We’ve seen mass-arbitration happen before in attempts to pressure tech companies (often with the goal of having those companies drop the aforementioned arbitration clauses from their worker contracts). Both Uber and DoorDash have faced thousands of disputes from their workers. As consumers and workers seem to be cluing in to the possibility of using arbitration clauses to their advantage, it actually seems like Amazon’s terms of service change may be more out of self interest: win or lose, a class action lawsuit is very likely to be less expensive for the company.

Amazon’s conditions of use page says it was last updated on May 3rd, 2021. As of May 1st, according to the WayBack Machine, the “Disputes” sub-section explained, at length, the process users would have to go through if they wanted to make a claim against the company. It also made clear Amazon’s responsibility to reimburse auditors fees for claims under $10,000, unless the claim was declared frivolous. Now, the disputes section reads:

Any dispute or claim relating in any way to your use of any Amazon Service will be adjudicated in the state or Federal courts in King County, Washington, and you consent to exclusive jurisdiction and venue in these courts. We each waive any right to a jury trial.

The updated terms of service also removes the requirement that users agree to the Federal Arbitration Act in order to use any Amazon services.

That last bit about waiving the right to a jury trial may be unusual for tech company ToS agreements, but as an alternative to arbitration, it’s certainly been tried in other industries — though some states have found such clauses to be unenforceable.

While Amazon’s customers may now no longer have to go through arbitration, some of its Flex workers are currently fighting for the ability to sue the company, despite their arbitration agreements.

It’s also worth noting that certain consumer suits were able to bypass arbitration before the change — Amazon is currently being sued after allegations that some of its Alexas devices made audio recordings of minors. Judges have ruled that the case did not have to be handled by arbitration, as the minors didn’t agree to the terms of service. However, Amazon’s change opens the gates for other suits to be handled in court as well, and it helps the company avoid expensive mass arbitrations in the future.