T-MOBILE touts itself as America’s mobile-phone “Uncarrier”, having vowed to shake up its industry with customer-friendly ideas like ditching annual service contracts. In January, though, a complaint was lodged with regulators alleging that the firm generated unauthorised fees by placing customers on services they hadn’t requested, such as handset-insurance plans.

In Britain, broadband providers stand accused of hitting customers with whopping cancellation fees, even when they move to an address outside the area of service. One study found the average early-termination fee to be £190 ($317).

Small-value disputes between consumers and companies over contract terms are a fact of life.

Ofcom, a British regulator, handles 70,000 telecoms complaints a year; how many are fought over or resolved without recourse to the regulator is anyone’s guess. Colin Rule of Modria, a dispute-resolution technology firm, reckons that 1-3% of e-commerce transactions worldwide generate a dispute (though many of those are between private buyers and sellers on online marketplaces).

How bust-ups are handled is evolving. Small-claims courts are ubiquitous, but, as the saying goes, you have to be “a lunatic or fanatic” to use them for a $100 claim. Recent years have seen the rise of the industry ombudsman, particularly in heavily regulated sectors like finance; and the growth of “alternative dispute-resolution” (ADR) bodies, which offer mediation, often online, in an effort to avoid disputes reaching court. “The emphasis is moving from judicial protection to building out-of-court structures that provide effective redress,” says Pablo Cortés of Leicester University.

Mr Rule reckons there are 130 outfits hawking dispute-resolution technology and related services. Resolver, a free-to-use website, provides details of thousands of companies’ dispute-handling systems and helps channel complaints to them. Other services batch identical customer claims, for instance over airline delays, and negotiate on their behalf as an informal class.

Class action or concealed clauses
 
There remain differences in approach, however. Consumer rights in Europe have grown steadily stronger, and ADR enjoys official support. America offers less encouragement of new approaches, and there the legal pendulum has swung away from the consumer towards business.

America is the home of the class-action lawsuit. Though this is a useful way to batch together lots of small, similar claims, businesses have long moaned that class actions are driven by fee-hungry lawyers rather than harmed consumers (who typically get only a small share of any settlement). Firms started to push back by adding into contracts, often deep in the small print, clauses that block participation in a class suit and make private arbitration binding in the event of a dispute. The Supreme Court has sided with this rearguard action. Today such clauses are the norm.

The corporate lawyers behind this shift argue that arbitration is cheaper, quicker and more flexible than court action, and that those who prevail get bigger payouts ($5,000 on average).

But there are problems with it. It is done behind closed doors; it sometimes costs a lot more than the basic filing fee ($200 and up); and arbitrators have an in-built bias towards corporate defendants, because they bring repeat business. Perhaps not surprisingly, then, arbitration is little-used. A New York Times investigation found that in 2010-14 only 505 consumers went to arbitration over a dispute of $2,500 or less (it’s not known how many saw it resolved to their satisfaction before reaching that stage). The leader in the field, the American Arbitration Association, handles just 2,000-3,000 consumer cases a year, compared with over 10,000 business-to-business cases.

Regulators are now pushing back. Having studied the issue, as required by the Dodd Frank act of 2010, the Consumer Financial Protection Bureau is likely to propose a rule which would ban class-action-blocking arbitration clauses in businesses the agency oversees, such as credit cards and payday loans. Business would challenge any such rule in court, says Alan Kaplinsky of Ballard Spahr, the lawyer who came up with the idea of arbitration clauses. They are “not a conspiracy”, as plaintiff lawyers contend, but “a way to level the playing field”, he argues. The problem is education, he says: consumers shy away from arbitration because they don’t understand the benefits.

Europe, where class actions are rare, has taken a different tack. Consumer-protection laws are generally stronger: arbitration clauses are not banned but courts have greatly restricted their use, and the customer can always sue as a last resort. A reasonableness test is applied to the fine print in contracts. Under Britain’s Consumer Rights Act, for instance, key terms, including price, can be subjected to a “fairness test” unless they are both written in plain language and displayed prominently. (Clarity alone used to be sufficient ground to claim exemption from the test.)

This more consumer-friendly stance did not just evolve in the courts but was to a large degree the result of a decision by the European Commission more than 20 years ago to make all small print subject to being examined and potentially overturned by the courts. This was set in stone in an EU directive of 1993. More directives have followed. The most recent, approved last year, gives a shot in the arm to ADR, by for instance forcing businesses to inform complaining customers of their dispute-resolution options, such as ombudsmen and private ADR services, and setting minimum standards for how these operate. Firms won’t be forced to sign up to an ADR scheme, but the hope is that most will feel obliged to do so as the directive takes hold. Consumer surveys point to much greater satisfaction with ADR than with courts.

Europe also leads the way in developing online mechanisms for mediating the millions of cross-border e-commerce disputes that arise each year. (One estimate puts their number at 750m.)

 Your Europe, an EU portal, will be launched in each of the bloc’s official languages later this month. This will serve as a hub to receive complaints. Firms operating in the EU will have to provide a link to it on their websites. “The aim is to hold your hand through the process, like TurboTax [a tax-return-filing software],” says Amy Schmitz of the University of Colorado.

For all these efforts, some cases will inevitably end up in court. Here, too, new thinking is percolating. In Britain there is growing political and judicial support for replacing the clunky small-claims courts with a new type of quasi-court, dubbed Her Majesty’s Online Court (HMOC). Each case would move through as many as three stages. Only at the third stage, if it could not be resolved by mediation and case officers, would it go before a judge.

This triage-before-trial approach would be easier and less costly than the current set-up: documents could be posted electronically, and cases brought without having to hire a lawyer.

HMOC is already being touted as a model for other countries. As one lawyer (who may soon have less work) puts it, most consumers would rather be faced with a clearer and cheaper process, and lose quickly, than a victory that is painful, protracted and pyrrhic.