Tuesday, November 13, 2012

Upsell By Clickwrap? The Second Circuit Says "Not So Fast..."

Have you ever purchased something from a website only to get bombarded at the checkout or payment screen with offers of other products or services?  That process, called "upselling", is a merchant's last ditch effort to get you to spend a few extra bucks before you close your browser. 
Sometimes upsells are easy to spot.  Other times, upsells are so intertwined in the checkout page that it's difficult to figure out where the terms of the original purchase end, and the upsold product begins. All too often, flashy and deceptive upsells trick unwary consumers into buying items that they didn't want, and don't need.

But a recent court ruling may help put an end to deceptive and confusing upsells.  In Schnabel v. Trilegiant Corp., the Second Circuit held that purchasers who unknowingly enrolled in an upsold "Great Fun" membership plan were not bound to an arbitration provision contained in the membership plan's "Terms & Conditions" agreement.  The case, which you can read here, clearly demonstrates how courts are loathe to enforce clickwrap agreements that are anything less than clear and conspicuous.

In Schnabel, the plaintiffs were invited to click on a hyperlink to receive "cash back" on purchases they had made at Priceline.com and Beckett.com--pretty standard stuff as far as upsells are concerned.  But the "Great Fun" membership was no ordinary upsell. In this particular case:
  1. The upsell did not indicate that the "cash back" offer involved merchants other than Priceline and Beckett.com;
  2. The upsell included terms (including an arbitration provision) that were emailed to the plaintiffs after they had already enrolled in the Great Fun membership plan; and,
  3. The membership cost $14.99/month, which was automatically charged to each plaintiff's credit card. Curiously, however, the plaintiffs never provided their credit card numbers to the membership plan.  (How can that be?  Answer: it's called 'post transaction marketing'.  It's also called 'data passing'.  More on that in a future blog entry...)
The court questioned whether, in light of the peculiar conditions involved in the Great Fun upsell, the plaintiffs ever gave their assent to enroll in the Great Fun membership plan.  The court focused on three factors: (i) the timing of the contract formation ("an offeree cannot actually assent to an offer unless the offeree knows of its existence"), (ii) notice ("A]n offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he is unaware, contained in a document whose contractual nature is not obvious"), and, (iii) manifest or implied assent ("silence constitutes assent only in particular circumstances, such as where there is a duty to respond or where there is a contemporaneous oral agreement").
  After considering the relevant factors, the court held that 
[t]he plaintiffs were never put on inquiry notice of the arbitration provision, and their continued credit-card payments, which were auto-debited from their credit cards, were too passive for any reasonable fact finder to conclude that they manifested a subjective understanding of the existence of the arbitration and other emailed provisions and an intent to be bound by them in exchange for the continued benefits Great Fun offered.
If there's a lesson to be learned here, it's this: clickwrap agreements are alive and well--and generally enforceable--unless they are too complex, confusing or generally unfair, in which case they won't be enforced. 

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