‘Red’ Alert: After Redbox, Is It Time to Revisit Your Online Terms of Service?

In this article, we discuss one of the more recent and interesting (or, depending on your perspective, exasperating) Federal trial court decisions looking at the enforceability of online terms of service, Wilson v. Redbox, why the case matters, key takeaways for your online business, and what it should be doing in response.

A brief re-cap, Wilson, a Redbox user (amazing to think it was not that long ago that we actually went to kiosks for our movies–what a hassle!) sued the popular DVD movie rental company under the Telephone Consumer Protection Act (47 U.S.C. § 227) for continuing to send automatic text messages to her phone despite her having opted out.

Redbox’s “Terms of Use” (represented by hyperlinks in both its kiosk and website checkout screens require mandatory arbitration of any disputes, and the company brought suit to enforce this provision in the Eastern District of Illinois.

The Federal trial court judge ultimately found the hyperlinks to Redbox’s Terms of Use and other disclosures were not “clearly and conspicuously” presented to Wilson and, for this and other reasons which I’ll get into below, ruled that the user did not have constructive notice and could not have assented to the Terms, even though she (on multiple occasions while renting) clicked the “Pay Now” buttons on both the kiosk and website screens.

Why Redbox matters

Without getting into the specifics of the trial judge’s reasoning, Redbox is important because, up until the decision, we had over the years been given, if not total clarity, at least a better idea of how “sign-in-wrap” agreements would be scrutinized and possibly enforced by several trial and circuit courts at the Federal level.

While Redbox is admittedly just a single decision (which will almost certainly be appealed) at the Federal district court level, the ruling up ends the reasoning behind many of these prior decisions, which practitioners like myself thought we could rely on when drafting and advising our clients on their online terms and conditions.

Key takeaways for e-commerce businesses: Don’t be Redbox

What are some important lessons from the Redbox decision for your e-commerce business or startup to apply. There are a few:

  • Avoid Hiding The Ball – If it’s one thing we take away from the recent line of cases (Barnes & Noble, Uber, Smile Direct Club, Flywheel Sports, etc.) delving into the issue of online terms and conditions— particularly in the consumer context—it’s that the more it looks like you as the website or app operator tried to bury the terms and conditions hyperlink, or disguise or divert the user’s attention from it, from the act of registration/ sign-in/checkout, the more that courts will contort themselves to rule in favor of the user and against the website or app operator. In the case of Redbox, the court noted both the admittedly poor positioning of the Terms of Service hyperlinks, as well as their font size, and even the color of the “prompt” and page background to determine that neither the kiosk or website presentation were “clear and conspicuous”.
  • Be Consistent – If your business is using different online or IOT platforms for its goods or services, make sure your registration/sign-in/check-out pages and your hyperlinked terms and conditions (and other disclosures, e.g., privacy policy, return policy, etc.) are not only up to date, but also substantially identical across platforms. While this wasn’t determinative in Redbox, I don’t think it helped. Their kiosk and website pages and U/X for each were pretty different looking. I think it opens you up to more “user confusion” arguments against enforceability from potential plaintiffs, as well as a lot of subjective, “look and feel”-type reasoning from judges, that your online business definitely wants to avoid.
  • Don’t get caught in “no man’s land” – I finally saw (Best Picture nominee) “1917” the other day and, for those of you unfamiliar with World War I or the term “no man’s land”, let’s just say it’s not a place you want to be caught in. The same goes for your online terms and conditions. Generally speaking, your terms and conditions stand a much better chance of being enforced if found to be a “click-wrap” agreement, as opposed to a “browsewrap” one. If your presentation is deemed by a court to fall somewhere in between (i.e., “no man’s land”), it runs the risk of being considered a “hybrid” agreement like in Redbox and then you are taking your chances with a Federal trial judge and it’s a coin toss. Whatever you may think of the “-wrap” legal analysis framework that the courts have come up with to interpret these things (and there are a lot of lawyers and legal scholars who don’t care for it), it is what it is and is likely here to stay.

To be sure, Redbox seems to add further uncertainty to an already iffy area of contract law. I get it; these cases are not easy, I get it, but do we really want judges acting as web experience designers? This is the direction these cases seem to be headed towards.

The Bottom Line

The good news is that the Redbox decision nonetheless does offer some best possible practices for e-commerce and other consumer-facing companies that use online terms and conditions and other agreements and disclosures on their websites and mobile apps.

The current COVID-19 lockdown and general Summer slowdown is an opportune period to really examine and re-evaluate your current (or planned) user registration/sign-in/checkout process and to make the necessary changes that would normally be put on the back burner or forgotten until it’s too late.

Photo courtesy of Dave King https://creativecommons.org/licenses/by-nc-sa/2.0/

Ben Bhandhusavee is the Managing Attorney for BHANDLAW, PLLC, a Phoenix business and technology law firm working with start-up companies, creative intellectual property, Internet and digital media matters, and complex corporate M&A and technology transactions.  Ben can be reached at (602) 222-5542 or by e-mail at bbhand@bhandlaw.com