Sony asks customers to waive right to collective redress

Collective redress refers to a scheme where many people in a similar situation participate in a law suit against one company or organisation over an alleged breach of the law.

The software giant has prompted PSN users to sign new terms and conditions on the service, prohibiting those that do not sign from using it, according to a report by technology news website The Register.

The terms include a new clause that asks users to waive their right to collective redress and requires the users to try to resolve the issue with an arbitrator in the first instance. PSN allows PlayStation 3 users to log in and download games, films and other media and play games against other users live.

"Any dispute resolution proceedings, whether in arbitration or court, will be conducted only on an individual basis and not in a class or representative action or as a named or unnamed member in a class, consolidated, representative or private attorney general legal action, unless both you and the Sony entity with which you have a dispute specifically agree to do so in writing following initiation of the arbitration," a copy of the contract changes (21-page / 160KB PDF) on the Sony Online Entertainment Network website said.

The provision does not include those users who are members of a class action lawsuit that was filed prior to or before 20 August, the contract said. PSN users have to write to Sony's legal department requesting to have their rights to collective redress reinstated with 30 days of accepting the company's agreement, it said.

Collective redress is less common in the UK than in the US, where class action suits are common. Contract law expert Raini Zambelli of Pinsent Masons, the law firm behind Out-Law.com, said that UK courts may not allow Sony to limit consumers' action in this way.

"Any such term may contravene the Unfair Contract Terms Act (UCTA), which is the guardian of consumer rights when dealing with suppliers," Zambelli said.

Under the UCTA a term will be unfair if it unreasonably seeks to limit the supplier’s liability for the consequences arising from having themselves breached the contract. If a term is found to be unfair then it will not be binding on the consumer. So, a supplier seeking to rely on a clause that excludes their exposure to a representative action would have to convince the court that clause was reasonable.

Zambelli said that it might be possible for PSN users to bring a representative action in the UK if, as a group, they can establish that they share the same interest in an action.  Having their personal details exposed may be sufficient to link those PSN users together as sharing the same interest.  If Sony unreasonably sought to exclude their right to bring a representative action, the clause would not be upheld by the courts, she said.

In April Sony admitted that more than 77 million customers registered with the PlayStation Network (PSN) may have had their personal details stolen. The company turned off its PSN and music streaming service Qriocity on 20 April after discovering an "external intrusion" into the information stored on its databases.

Information stolen was users' name, address, country, email address, birthday and their username and password login for the PSN.

Sony was sued by PSN users in a class action lawsuit following the data loss and could cost the company billions of dollars, according to a BBC report.

Class action lawsuits are common in the US, where lawyers will earn large fees for organising many similarly-affected people into bringing proceedings against organisations.

Under the Civil Procedure Rules (CPRs) of England and Wales, a person can bring a representative claim against an organisation on behalf of others if those others share "the same interest in a claim" as the representative. The CPRs set out the framework for litigation in England and Wales.

Under English contract law companies that want to form the basis of a contract must provide notice of their terms and conditions to those who they wish to enter into agreements with. A contract is only formed if an offer is said to have been made and accepted along with 'consideration'. Consideration refers to legal bargaining whereby there is an exchange of something of value, usually a fee, for what is being offered.

"The cursory nature of online terms and conditions make it more likely that a court would require more significant notice of an oppressive contract term, such as one requiring consumers to sacrifice their right to litigate," said Zambelli.