Consumer Groups to Starbucks: Remove Forced Arbitration Language From Gift Cards’ Terms of Service

Dec. 1, 2011

Consumer Groups to Starbucks: Remove Forced Arbitration Language From Gift Cards’ Terms of Service

Public Interest Groups Petition Coffee Giant to Delete Harmful Provisions Before Holiday Gift Card Craze

WASHINGTON, D.C. – Coffee giant Starbucks should stop requiring customers who use prepaid cards to give up their legal rights, consumer advocates say. Four groups – Public Citizen, Alliance for Justice, National Association of Consumer Advocates, and National Consumers League – called on Starbucks Coffee Company to remove the forced arbitration clause and class-action ban from the terms of service of its prepaid cards. Both of these policies limit consumer access to the courts.

The groups also launched an online petition to urge Starbucks to remove the objectionable contract provisions from its prepaid card.

Clauses in consumer contracts requiring that disputes be settled by forced arbitration have mushroomed in the past decade. These clauses shield corporations from accountability for wrongdoing. In forced arbitration, there is no impartial judge or jury to settle disputes, but rather a secretive proceeding run by arbitrators who rely on their corporate customers for repeat business.

The fine print accompanying Starbucks’ prepaid cards also bars customers from participating in class actions against the company. Such actions enable consumers to band together as a class when it is not feasible for them to bring individual claims. Class-action bans allow businesses to evade well-established consumer protection, civil rights and employment laws. 

Starbucks’ arbitration clause and class-action banare clearly inconsistent with the company’s reputation as a leader in corporate social responsibility, the letter said. In the event the company does engage in wrongdoing, like imposing hidden fees on its gift cards or violating the law in some other way, each customer seeking a refund would have to go to the company’s hand-picked arbitrator in Seattle. This possibility is not so remote: Massachusetts fined Starbucks in mid-November for charging customers an undisclosed fee on bags of coffee.

“Starbucks, which has held itself up as an upstanding corporate citizen, should set an example and remove this language because it preys on consumers’ rights,” said Christine Hines, consumer and civil justice counsel with Public Citizen.

Alliance for Justice President Nan Aron added, “More and more, the legal system is being rigged to protect the interests of corporations at the expense of everyday Americans. Forced arbitration clauses and class-action bans are making it increasingly difficult for consumers to receive justice and deter corporate misconduct. Starbucks should demonstrate its long-held belief in social responsibility by removing these pernicious provisions from its cards and reaffirming the bedrock right of its customers to have unfettered access to the courts.”

The National Consumers League also weighed in. “The National Consumers League urges Starbucks to live up to its own high standards for corporate social responsibility and shed these odious mandatory arbitration clauses from their fine print in consumer contracts,” said Sally Greenberg, executive director of the National Consumers League. “Starbucks’ millions of loyal customers expect – and deserve better – from this company.”

“When consumers realize that their gift card or cup of coffee comes with a forced agreement rigged in favor of corporations, they will think twice about their purchase,” said Delicia Reynolds, legislative director of the National Association of Consumer Advocates. “We urge Starbucks to rethink using forced arbitration and do what’s best for consumers.”

To read the letter sent to Starbucks, visit: https://www.citizen.org/sites/default/files/starbucks-letter-11292011.pdf

To sign the petition, visit: http://pubc.it/StarBks. To follow activity on Twitter, check out the hashtag #droptheclause.

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Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org. The National Association of Consumer Advocates is a non-profit association of consumer advocates and attorney members who represent hundreds of thousands of consumers victimized by fraudulent, abusive and predatory business practices. The Alliance for Justice is a national association of over 100 organizations, representing a broad array of groups committed to progressive values and the creation of an equitable, just, and free society. National Consumers League, founded in 1899, is the nation’s pioneering consumer organization. Its non-profit mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad.