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These are my comments from an earlier thread on this story:

IANAL, but arbitration clauses are standard in contracts[1] at least in the United States. Arbitration is generally seen as preferred because suing people in court is actually very expensive for the plaintiff, the defendant, and the court system.

In Sony's favor, Sony excluded small claims. So for pretty much everyone this arbitration clause is meaningless. The limit for small claims is in the thousands of dollars depending on state [2]. The circumstances where Sony would be liable for more than a few thousand to a single consumer would have to be pretty extraordinary. And yes, this includes losses due to identity theft. Although the expenses due to fraud can be high, the out of pocket damages to the individual are generally very low. As of 2006 the average out of pocket expenses were about $422 and on a downward trend [3]. Keep in mind that the federal government limits liability for credit card fraud to only $50 in the United States [4]. And most credit card companies actually limit the liability to $0. The actual costs of fraud end up getting absorbed by businesses as the financial institutions try to unwind the transactions as best it can.

Also in Sony's favor, Sony did not choose to use the arbitration clause to set an onerous jurisdiction. Sony could have said all arbitration needed to take place in a specific city in the middle of nowhere. Sony didn't even pick the location of its headquarters; you can pick any jurisdiction. Most arbitration clauses I've seen set a jurisdiction that favors the contract writer, so I'd say this puts Sony in a decent light for not doing the same.

Likewise, Sony does not cap damages awarded through arbitration. It could have easily set the maximum damages to some amount that would make arbitration a non-starter compared to small claims.

If you really wanted to find fault with Sony's particular arbitration clause, it would be that neither side can appeal the decision of the arbitration panel to a higher court. But keep in mind this cuts both ways, and it really isn't unusual. It is even endorsed in the United States.

I should also note that arbitration clauses can be voided if the panel can be proven to be biased. So this isn't necessarily a license for Sony to circumvent the law, at least against a well funded opponent. And anyone with the balls to sue Sony for any serious amount of money would be a well funded opponent.

NB. I understand arbitration clauses such as this may not be legal in some countries such as Germany. Whether that is good or bad I can't say. I'm sure the Germans thought it was good, though.

[1] http://en.wikipedia.org/wiki/Arbitration_clause

[2] http://www.nolo.com/legal-encyclopedia/small-claims-suits-ho...

[3] http://www.bbbonline.org/idtheft/safetyquiz.asp

[4] http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre04.shtm

Ok, but Sony is still trying to block class action lawsuits. There are now millions of PSN users who are signing away their right to participate in and benefit from such an action if Sony is abusive or careless again.

That is a good thing. Judging from past results, rather than anti-business rhetoric, the only people who usually benefit from class action suits are lawyers. Many plaintiffs in class action suits end up with a few dollars or even just coupons while the lawyers get rich.

ADDED: Responding to a comment I read further down the stack; as for "punishing the company", in reality you are only "punishing" those who buy from them since they will just increase the price to cover the expected cost of dealing with suits.

If a suit wasn't expected, so they hadn't built it into the price, or other companies were keeping their prices low enough that they couldn't raise their prices, it might actually hit their stock price or dividends. Since, from comments from many PlayStation owners suggest neither is the case, my point that class action suits will just benefit lawyers and raise prices for PS users stands.

Hilarious that you talk about "anti-business" rhetoric and then respond with gems like:

>as for "punishing the company", in reality you are only "punishing" those who buy from them since they will just increase the price to cover the expected cost of dealing with suits.

Well, I guess there's nothing we can ever do to a company then! Wouldn't want them to raise prices.

It's not about "punishing", it's about incentive to get them to take their customer's privacy seriously.

If they would actually protect their customer's data well, they wouldn't get sued for security breaches in the first place.

While 100% security is impossible, they only need to secure their data so they can't get sued for neglecting to secure it enough.

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