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U.S. law professor here. Yeah, it's really embarrassing. The bullshit story for why this is all the case is that it's priced into products and services---whic

U.S. law professor here. Yeah, it's really embarrassing. The bullshit story for why this is all the case is that it's priced into products and services---which are supposedly cheaper than they might otherwise be if companies had to fear massive liability and regulation. The real story for why this is the case is the combination of (a) fake contract law, in which we pretend people agreed to things that they in no way could have agreed to---including all those arbitration agreements that strip away class action rights, (b) a federal system that lets Congress preempt state economic regulations, including consumer protection regulations,[1] and (c) most fundamentally, the point that Mancur Olson identified in Logic of Collective Action: narrow special interests with intense preferences are lots better at getting their wills achieved than diffuse general interests; in the U.S. political lobbying is basically unrestrained; big industries like telecom have just utterly captured legislatures and regulators at every level. [1] This is my least favorite example, and a case that explains a lot about why airlines are so happy to crap all over the heads of their victims: https://www.supremecourt.gov/opinions/13pdf/12-462_p8k0.pdf https://www.supremecourt.gov/opinions/13pdf/12-462_p8k0.pdf

javajosh 6y ago
Thanks for speaking openly! Can I ask you for your opinion? I have come to believe that the justice system itself is the root of the problem, namely that it is so expensive and slow that it doesn't provide justice. Trials used to take days, and now they take months or years. They used to cost hundreds, now tens of thousands, or more. It is only within such a moribund system that lobbying can be successful! If trials were fast and cheap, people might still try to lobby, but the feedback loop would be fast and accurate.
- paultopia 6y ago
  Indirectly. This is kind of a complicated issue, so let me unpack it a bit. First, it's absolutely true that litigation is super-expensive. But from the company end, that doesn't necessarily make a real difference---arbitration is fairly expensive too (though not as expensive as litigation), they're not likely to realize huge savings from shoving consumers into all the arbitration agreements. Where costs really matter is from the consumer side, and it's intertwined with class actions. Arbitrations don't have class actions, real court does (in most states). So an arbitration clause is really a "no class actions" clause. And, because of litigation costs, a "no class actions" clause is really really effective at keeping consumers out of court at all. Why? Because a huge number of consumer claims are for really small rip-offs. For example, the phone company sneaks an extra 50 cents onto the bill of everyone every month for a fake tax that doesn't really exist, and in doing so dodges some rate regulation. No consumer in their right mind is going to incur the time and expense of suing (or arbitrating) individually for 50 cents a month. But the phone company, with millions and millions of customers, benefits hugely from this ripoff. With a class action system, some entrepreneurial lawyer can bring suit and win those millions back on behalf of the class of ripped-off consumers. Now, those class actions are pretty controversial, because the ripped-off consumers never really see any direct benefit from those lawsuits. They usually get some bullshit coupon in the mail, while the lawyer and one or two plaintiffs (the "named plaintiffs" or "class representatives") walk away with a big payday. But the point isn't to compensate the people who lost the 50 cents. The point is to hold out the threat of those stupid huge judgments against companies who would otherwise nickel-and-dime mass consumers to death. So when companies kill the class action, they know that they won't be held accountable in the courts for that kind of misconduct, and they can engage in small ripoffs with impunity. (Mostly less blatant than fake tax thing, because government regulators might pick up on that.)
mehrdadn 6y ago
Hi there, can I ask you a tangential question about this bit? > fake contract law, in which we pretend people agreed to things that they in no way could have agreed to I was wondering about exactly this a while ago, though in the context of traditional (offline) software license agreements, which I think present a more blatant case of this: Why is it that a contract in which a party doesn't even know they're a party is considered a valid contract in the first place? Shouldn't a contract be a "meeting of the minds"? What meeting is there when one side has no clue about it?
- paultopia 6y ago
  This is something that tons of people have written about---I'm not a contracts expert, so I don't want to opine too directly, but I will say that lots and lots and lots of people have criticized the idea that hidden contracts will be enforced. Some courts have enforced them, some courts have refused to enforce them, and the law is a little bit tangled and complex (hence why I won't speak to it with confidence). Those people who defend the enforcement of such contracts basically think that (a) consumers generally know that there is some contract, and can always ask to see the details before they buy, or demand a refund if they see them and they're unacceptable, (b) there will probably be some broad based public policy or unconscionability constraints on contracts entered into like this---nobody in their right mind, for example, would enforce a software contract that says that when you install it you promise to turn over the entire contents of your bank account to Mark Zuckerberg, and (c) it would be blindingly difficult to disclose full complex contracts before every consumer transaction anyway. As you can probably tell, however, I'm with the critics---I think such contracts are fundamentally bullshit. It has always seemed to me that the right answer is to enact a set of fair default terms in legislation, and then let companies provide real contracts, or lobby to change the default rules, if they're too burdensome.
  - mehrdadn 6y ago
    I see, thank you!
brokenmachine 6y ago
Would you mind summarizing your least favorite example for a layman?
- paultopia 6y ago
  Sure thing. In bullet point form: - Congress, when it legislates within its constitutional domain of authority, has the power to override ("preempt") contrary state law---and most of the classic legal principles that we inherited from England, such as the rules of contract law and tort (personal injury, fraud, other kinds of civil wrongs) are matters of state law. - when Congress enacted the Airline Deregulation Act, they chose to preempt state law having basically anything at all to do with how airlines ran their operations. - The plaintiff in the case I linked had just been randomly kicked out of Northwest Airlines's frequent flier policy, lost all her status, etc. He sued, claiming that they cancelled his policy for dishonest, bad-faith reasons (to cut costs before the Delta merger). - Even though the ToS of the frequent flier program essentially said "we can kick you out for any reason," state law added an "implied covenant of good faith and fair dealing," which required, essentially, that contracting parties not abuse terms like that in order to egregiously rip one another off---which is what the plaintiff alleged. The implied covenant of good faith and fair dealing is a pretty foundational contract law idea that lots of people think is fairly important. - The Supreme Court interpreted Congress's intent in the airline deregulation act to include preempting the covenant of good faith and fair dealing, thus implying that all kinds of abusive airline behavior, if it was strictly within the written words of the airline contract, even if normal state contract law wouldn't enforce it, would be perfectly hunkry dory. Plaintiff loses.
  - brokenmachine 6y ago
    Thanks.

javajosh 6y ago

Thanks for speaking openly! Can I ask you for your opinion? I have come to believe that the justice system itself is the root of the problem, namely that it is so expensive and slow that it doesn't provide justice. Trials used to take days, and now they take months or years. They used to cost hundreds, now tens of thousands, or more. It is only within such a moribund system that lobbying can be successful! If trials were fast and cheap, people might still try to lobby, but the feedback loop would be fast and accurate.

paultopia 6y ago
Indirectly. This is kind of a complicated issue, so let me unpack it a bit. First, it's absolutely true that litigation is super-expensive. But from the company end, that doesn't necessarily make a real difference---arbitration is fairly expensive too (though not as expensive as litigation), they're not likely to realize huge savings from shoving consumers into all the arbitration agreements. Where costs really matter is from the consumer side, and it's intertwined with class actions. Arbitrations don't have class actions, real court does (in most states). So an arbitration clause is really a "no class actions" clause. And, because of litigation costs, a "no class actions" clause is really really effective at keeping consumers out of court at all. Why? Because a huge number of consumer claims are for really small rip-offs. For example, the phone company sneaks an extra 50 cents onto the bill of everyone every month for a fake tax that doesn't really exist, and in doing so dodges some rate regulation. No consumer in their right mind is going to incur the time and expense of suing (or arbitrating) individually for 50 cents a month. But the phone company, with millions and millions of customers, benefits hugely from this ripoff. With a class action system, some entrepreneurial lawyer can bring suit and win those millions back on behalf of the class of ripped-off consumers. Now, those class actions are pretty controversial, because the ripped-off consumers never really see any direct benefit from those lawsuits. They usually get some bullshit coupon in the mail, while the lawyer and one or two plaintiffs (the "named plaintiffs" or "class representatives") walk away with a big payday. But the point isn't to compensate the people who lost the 50 cents. The point is to hold out the threat of those stupid huge judgments against companies who would otherwise nickel-and-dime mass consumers to death. So when companies kill the class action, they know that they won't be held accountable in the courts for that kind of misconduct, and they can engage in small ripoffs with impunity. (Mostly less blatant than fake tax thing, because government regulators might pick up on that.)

mehrdadn 6y ago

Hi there, can I ask you a tangential question about this bit? > fake contract law, in which we pretend people agreed to things that they in no way could have agreed to I was wondering about exactly this a while ago, though in the context of traditional (offline) software license agreements, which I think present a more blatant case of this: Why is it that a contract in which a party doesn't even know they're a party is considered a valid contract in the first place? Shouldn't a contract be a "meeting of the minds"? What meeting is there when one side has no clue about it?

paultopia 6y ago
This is something that tons of people have written about---I'm not a contracts expert, so I don't want to opine too directly, but I will say that lots and lots and lots of people have criticized the idea that hidden contracts will be enforced. Some courts have enforced them, some courts have refused to enforce them, and the law is a little bit tangled and complex (hence why I won't speak to it with confidence). Those people who defend the enforcement of such contracts basically think that (a) consumers generally know that there is some contract, and can always ask to see the details before they buy, or demand a refund if they see them and they're unacceptable, (b) there will probably be some broad based public policy or unconscionability constraints on contracts entered into like this---nobody in their right mind, for example, would enforce a software contract that says that when you install it you promise to turn over the entire contents of your bank account to Mark Zuckerberg, and (c) it would be blindingly difficult to disclose full complex contracts before every consumer transaction anyway. As you can probably tell, however, I'm with the critics---I think such contracts are fundamentally bullshit. It has always seemed to me that the right answer is to enact a set of fair default terms in legislation, and then let companies provide real contracts, or lobby to change the default rules, if they're too burdensome.
- mehrdadn 6y ago
  I see, thank you!

brokenmachine 6y ago

Would you mind summarizing your least favorite example for a layman?

paultopia 6y ago
Sure thing. In bullet point form: - Congress, when it legislates within its constitutional domain of authority, has the power to override ("preempt") contrary state law---and most of the classic legal principles that we inherited from England, such as the rules of contract law and tort (personal injury, fraud, other kinds of civil wrongs) are matters of state law. - when Congress enacted the Airline Deregulation Act, they chose to preempt state law having basically anything at all to do with how airlines ran their operations. - The plaintiff in the case I linked had just been randomly kicked out of Northwest Airlines's frequent flier policy, lost all her status, etc. He sued, claiming that they cancelled his policy for dishonest, bad-faith reasons (to cut costs before the Delta merger). - Even though the ToS of the frequent flier program essentially said "we can kick you out for any reason," state law added an "implied covenant of good faith and fair dealing," which required, essentially, that contracting parties not abuse terms like that in order to egregiously rip one another off---which is what the plaintiff alleged. The implied covenant of good faith and fair dealing is a pretty foundational contract law idea that lots of people think is fairly important. - The Supreme Court interpreted Congress's intent in the airline deregulation act to include preempting the covenant of good faith and fair dealing, thus implying that all kinds of abusive airline behavior, if it was strictly within the written words of the airline contract, even if normal state contract law wouldn't enforce it, would be perfectly hunkry dory. Plaintiff loses.
- brokenmachine 6y ago
  Thanks.