General Mills Legal Policy Change Spooks Facebook Fans

Image: David Duprey/Associated Press

UPDATE April 17, 7:05 pm ET General Mills says a New York Times report cited in an earlier version of this story incorrectly stated that the company's legal policy change prevents consumers from suing the company if they like any of the company's brands on Facebook. This post has been updated to reflect the correction from GeneralMills.

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General Mills faced a PR disaster Thursday after a report in The New York Times stated that liking any of the company's brands on Facebook prevents them from suing the company in court.

On Tuesday, Cheerios parent company General Mills updated the privacy policy on its website. The new language alerts consumers that they waive their right to sue the company if they download coupons or join one of the company's 'online communities,' which legal experts took to mean social media sites. A rep for General Mills, though, now says those communities don't include Facebook. Those who join one of the online communities are required to use informal negotiation via email or go through arbitration - rather than the courts - to seek relief if they have a dispute with the company.

A General Mills rep offered the following statement from the company:

While it rarely happens, arbitration is an efficient way to resolve disputes - and many companies take a similar approach. We even cover the cost of arbitration in most cases. So this is just a policy update, and we've tried to communicate in a clear and visible way.

Law experts contacted by Mashable say they believe General Mills is the first food company to require consumers to enter into such an agreement.

However, Ann Bartow, law professor at Pace Law School, says if you, for instance, accidentally ingest a piece of glass that found its way into your box of Cheerios, you are more likely to be able to sue General Mills in court if you live in New York than other jurisdictions. That's because such consumer disputes are governed by state law, and New York laws are more consumer friendly than those of many other states. Under New York law the General Mills binding arbitration clause is not likely to be enforceable. But you still might have to go to court and get a judge to agree that the clause is unenforceable before you could bring a suit on the merits, increasing the time and costs of litigation.

Bartow adds that it's unclear if a New York-based consumer would need to go to General Mills' home state of Minnesota to argue that the case shouldn't be settled in arbitration, though. 'If you did find glass in the product, now you're not just dealing with General Mills, but you have to sue just to get into court,' she says. Either adds court costs that the average consumer might find prohibitively expensive.

One option that's off the table is a class-action lawsuit. The 2011 Supreme Court decision AT&T Mobility v. Concepcion let companies bar consumers from banding together to sue if the companies include a standard form contract that requires that disputes be settled via one-on-one arbitration.

Companies have been crafty about getting consumers to enter into such contacts. Credit card companies and mobile phone companies embed them in their standard contract language. In 2008 fast food chain Whataburger put signs in its locations telling consumers that by coming into the restaurants they automatically agree to use arbitration to settle disputes with the company.

Brian Fitzpatrick, a law professor at Vanderbilt, says requiring consumers to agree to class-action waivers in arbitration clauses will effectively shield corporations from offering any meaningful damages, even when they're in the wrong. 'This is a problem because a lot of these consumer fraud claims have only small damages associated with them,' Fitzpatrick says. 'if you can't bring these claims as class actions, you won't be able to bring them at all. (What lawyer will take a case worth $20?) This means companies will be able to escape all liability for many consumer frauds.'

When asked what a consumer should do, Richard Daynard, Northeastern Distinguished Professor of Law, responded, 'A smart consumer would actually not buy General Mills products.'