Amazon reinstates binding arbitration, bars class-action lawsuits

Amazon has reinstated binding arbitration for U.S. customers and prohibited them from filing class-action lawsuits, making it harder for users to seek legal action through traditional court proceedings. These changes came into effect immediately, with customers agreeing to the terms by continuing to use Amazon's services. Previously, Amazon directed customers to pursue legal claims in Washington state, where the company is based.

Earlier this year, Amazon abandoned binding arbitration after encountering tens of thousands of expensive individual cases. The company reasoned that reinstating the arbitration clause would provide customers with a quick and cost-effective means to resolve disputes while still allowing them the option to file claims in small claims court.

In 2021, Amazon received approximately 75,000 arbitration claims from customers alleging that its Alexa service was recording them without permission. This surge in claims served as a strategy used by some law firms to overwhelm corporations with arbitration cases, resulting in significant fees and administrative burdens. Amazon clarified in its updated terms that 25 or more arbitration cases concerning the same matter within a six-month period would be classified as a "mass arbitration" and would be resolved in batches of at least 25.

Legal experts have generally upheld corporations' right to include terms of service that dictate the conditions under which customers can pursue legal action. Arbitration cases are typically settled privately by a third-party adjudicator, ensuring that disputes and settlements remain confidential. However, disputes with Amazon, including class-action lawsuits, that began before Friday remain unaffected by these new terms.