where academia meets practice in business education

If you enjoy Cheerios, Betty Crocker, Pillsbury, Green Giant, Wheaties, and other food products of General Mills Inc., you received an Easter gift this weekend!

Namely, the company announced that you now possess the legal right to file a lawsuit if you find broken glass, vermin, or other inappropriate substances in your food packages.

Didn’t you always possess the legal right to sue the firm under such circumstances? On the one hand, if you had simply walked into a store and purchased a product off the shelf, you would have indeed possessed this right.

But on the other hand, if you had downloaded a coupon from the General Mills web site, indicated that you “liked” the company on its Facebook page, or otherwise participated in any of its social media and marketing programs, you had forfeited your right to file a lawsuit.

Why? Because of a (perfectly legal, though ethically questionable) policy known as “forced arbitration.” In certain industries, the policy is considered a common industry practice.

For instance, when a customer opens an investment brokerage account with a stock trader, the “fine print” in the agreement (i.e. the tiny print that few customers ever read) usually includes a “forced arbitration” clause. Each customer, knowingly or unknowingly, surrenders the right to file lawsuits by simply agreeing to open an account.

The financial services industry, in fact, has often been accused of creating arbitration processes that are unfairly biased in favor of firms and against customers. And yet, in that industry, the practice remains a common one.

General Mills recently decided to embed the same policy in the “fine print” that is listed in a remote corner of its web site. Similar policies are often included in the “End User License Agreement” (or EULA) screens that must be “accepted” in order to install software on computers, tablets, and smart phones.

But public advocates blew the whistle on the General Mills policy, and last weekend, the company publicly apologized to its customers and rescinded the terms.

If not for the rescission, though, would a court have permitted the policy to stand? In other words, would a customer who “liked” Cheerios on Facebook, and who then purchased a cereal box containing broken glass, have actually been prohibited from filing a lawsuit?

In the case of General Mills, that can now be considered a moot question. But if General Mills was tempted to implement a “forced arbitration” policy, other organizations will doubtlessly do so as well.

If you were Ken Powell, the Chief Executive Officer of General Mills, under what circumstances (if any) would you consider reinstituting the “forced arbitration” policy?

%d bloggers like this: