What Makes a Consumer? Mandatory Arbitration Clauses and Free Digital Services in Canada

By Milosevic, Theodore | University of Toronto Faculty of Law Review, Fall 2016 | Go to article overview

What Makes a Consumer? Mandatory Arbitration Clauses and Free Digital Services in Canada


Milosevic, Theodore, University of Toronto Faculty of Law Review


I INTRODUCTION

The enforceability of mandatory arbitration clauses and class action waivers in standard-form contracts is an issue that invokes core legal concerns such as access to justice, transparency, and fairness in the legal process. Canada has developed a reputation as an overwhelmingly "arbitration friendly" (1) jurisdiction, in which mandatory arbitration clauses have been enforced in the absence of any clear legislative language precluding such clauses. However, in Seidel v TELUS Communications Inc, (2) the Supreme Court of Canada adopted a less deferential stance towards mandatory arbitration clauses, focusing on broad legislative intent as opposed to strict legislative language in determining whether to enforce a mandatory arbitration clause. In cases where a court cannot ascertain a clear legislative intent to confer a statutory right to a trial in court, such as in the case of Murphy v Amway Canada Corporation, (3) claims predominantly remain arbitrable.

This judicial approach to the enforceability of mandatory arbitration clauses has provided greater clarity for claims falling under the ambit of Canadian provincial consumer protection legislation, which, in many cases, explicitly or implicitly addresses forced arbitration. A previously unconsidered aspect of this landscape concerns mandatory arbitration clauses in standard-form contracts for the provision of free-to-use digital services such as social media and networking services. The growth of the internet and increasing digital connectivity have allowed for the development of new business models, some of which do not require monetary payment in exchange for use of the service. The relationship between users and suppliers of these free digital services bears many similarities to that of a traditional consumer relationship in which money is exchanged, but the clear lack of monetary payment may, in some minds, differentiate these relationships from those covered by consumer protection statutes, unless otherwise stated.

It appears, from the very limited jurisprudence on the matter, that provincial consumer protection statutes may be read in such a way that they only cover transactions in which the consumer pays for goods or services. As such, the free nature of many digital services may preclude the users of these services from any legal rights afforded to traditional consumers, including the right to pursue their claims in court despite agreements that include a mandatory arbitration clause and class action waiver. This may strike some as a significant problem, while others may consider the presence of monetary payment as vital to the formation of a consumer contract.

This paper will aim to provide a roadmap of possible avenues through which the Canadian legal system can approach the issue of arbitration clauses in standard-form contracts for the provision of free digital services. As such, it will be structured in five parts. First, it will discuss the general nature of mandatory arbitration clauses in standard-form contracts, highlighting issues raised in the debate regarding the merits and drawbacks of arbitration relative to litigation and class action claims specifically. Second, it will provide an overview of the current state of Canadian law regarding the enforceability of mandatory arbitration clauses in standard-form contracts. Third, it will identify the present gap in Canadian legislation and jurisprudence related to the enforceability of arbitration clauses in standard-form contracts for free digital services, while also addressing why this gap is a problem. This section will focus on relevant consumer protection legislation in British Columbia and Ontario to narrow the lens of analysis. British Columbia and Ontario were selected given their particular importance to Canada in terms of population (4) and economic activity, (5) and because they are both common law provinces. Fourth, this paper will outline possible solutions, both judicial and legislative in nature, to the problem at hand. …

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