and then not being able to rely on them anyway…
Dialogue v Instagram: Instagram’s failed attempt to force social media start-up into arbitration
- the arbitration clause was void as an unfair contract term;
- the arbitration clause was void as unconscionable; or
- Instagram had waived its right to arbitrate because it participated in the Federal Court proceedings for a full 12 months before seeking to rely on the arbitration clause.
Dialogue was successful only in its last argument.
What are the different types of internet contracts?
In the course of the judgment, the Court also endorsed the categorisation of internet contracts into the one of 'clickwrap', ‘sign-in wrap’, and 'browsewrap':
- Sign-in wrap occurs where users are notified of terms that are available by way of a hyperlink, and are required to click a button, or sign in, in order to access the site. This is the category that Instagram’s sign-in page fell into in this case and such terms are usually enforceable.
Was the arbitration clause an unfair contract term?
Dialogue argued that the arbitration clause was unfair within the meaning of s24 of the Australian Consumer Law (ACL). While provisions in standard term contracts have previously been found unfair under the ACL (see Federal Court declares terms in standard form loan contracts to be unfair), the Court rejected Dialogue’s argument for the following reasons:
- The arbitration agreement did not cause a significant imbalance in the parties’ rights and obligations as:
- it was transparent because the clause in question was highlighted in its own box at the top of the terms and so Instagram had taken special steps to bring the clause to a user’s attention;
- either party could invoke the arbitration clause;
- there was a meaningful relationship between the clause and the protection of Instagram’s interests which was reasonably foreseeable at the time of the contract; and
- the opt-out clause, even though inconveniently requiring Dialogue to opt out in writing to Instagram’s head office within 30 days, was fair.
- The arbitration clause was reasonably necessary to protect Instagram’s legitimate interests at the time the contract was formed. Instagram’s desire to avoid litigation in multiple jurisdictions, given its global operations, was a legitimate business interest worthy of protection through the clause. It also provided a more efficient way for Instagram to handle disputes with users, another legitimate interest worthy of protection.
Was the arbitration clause statutorily unconscionable?
Dialogue argued that the inclusion of the arbitration clause would be unconscionable, and accordingly a breach of section 21 of the ACL. In support of this claim it advanced many of the same arguments it had used to support its unfair contract terms point. The Court dealt with these arguments in a similar manner. While the Court commented that Dialogue may have raised legitimate concerns in their arguments, these concerns did not meet the required standard for unconscionability under the ACL.
Did Instagram waive its right to arbitration?
Despite finding that the clause was a valid part of the agreement between Dialogue and Instagram, it ultimately decided that that Instagram had deliberately, or intentionally, waived its arbitration right and would have to conduct the proceeding in Australia. This was because:
- Instagram had chosen to participate in the proceedings for a lengthy period, including by lodging defences which did not assert its arbitration rights;
- it was possible Instagram had decided not to invoke the arbitration clause in order to avoid splitting the dispute between two continents and types of adjudication as some of Dialogue’s claims would not have been subject to the arbitration clause; and
With regard to the ‘no waiver’ clause, this in part turned on the specific drafting which was limited to omissions. The Court found Instagram’s actions went well beyond pure omissions and accordingly could amount to a waiver notwithstanding the clause. The Court also indicated that such a contractual term could not prevent the application of equitable principles which determine whether a waiver has occurred.
What about Instagram’s reservation of rights?
Instagram sought to rely on the following statement in a letter from its lawyers to Dialogue’s, “[Instagram] expressly reserve all rights, including in relation to jurisdiction, venue and service.” The Court found this letter failed to reserve Instagram’s right to arbitration for the following reasons:
- there was no reference to arbitration in the letter;
This serves as a reminder when drafting such letters to be as specific as possible on what rights are being reserved, and that even a carefully worded letter cannot make up for conduct which is inconsistent with such a reservation of rights.
Where to now for Dialogue’s internet contracts case?
The interim injunction preventing Instagram from suspending Dialogue’s access to their platform was been extended pending the outcome of arguments regarding Dialogue’s conduct and Instagram’s suspension of its access.
For more on screen scraping, see our article Screen Scraping: Legal or Not? on the joint OAIC and ICO investigation into Clearview Inc’s collection and use of scraped data.
Authors: Lesley Sutton, Mark Ferguson, Kristen Stanton