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Thursday, September 18, 2014

Ben-Shahar & Schneider Symposium Part VI: Lauren Willis

This is the sixth in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure Biographies for the first week's contributors can be found here.  The authors' introduction to the symposium can be found here.

WillisLauren Willis is Professor of Law at the Loyola Law School, Los Angeles. 

More than You Wanted to Know: The Good, The Bad, and The Ugly

The Good: Omri Ben-Shahar and Carl Schneider’s critique of the ability of mandated disclosure to directly equip consumers to make good complex choices in today’s marketplace is excellent. Consumers usually do not read, or if they read they usually do not understand, or if they understand they usually fail to use or even misuse mandated disclosures.

Moreover, many disclosures do affirmative harm. As I have explained elsewhere, disclosures are a sword with which disclosers disarm consumers into believing that the law protects them more than it does and a shield with which disclosers deflect consumer complaints when the transaction causes harm. Disclosures almost certainly impose regulatory opportunity costs, giving policymakers and consumer advocates illusory gains to point to when they go back to their constituencies. The costs of mandated disclosures are in many instances high, and those costs must be confronted.

While the explanations and arguments in the book are not novel, they are made more accessible to non-academic audiences than prior treatments and are put together in such a way that the sum is greater than its parts. Several passages in the book brilliantly capture points others have made, but not nearly so well. For example, at 74:

Few things make you feel less autonomous than studying a choice that hourly becomes more convoluted and confusing. You feel even less autonomous on realizing that you may never understand. And less autonomous still when you realize that the choice is essentially illusory. The kind of control over life’s choices that disclosurism seems to promise is an illusion.

The authors’ use of the choice between a treatment with a low chance of success but a low risk of death and a treatment with a high chance of success and a high risk of death to illuminate tradeoff difficulty (at 109) is very effective. Their explanation of the problem with anecdotal evidence – “[t]rouble stories, then, may tell us something about the numerator but not the denominator” (at 142) – is ingenious. And their photo of the 32-foot iTunes “scroll” perfectly captures the absurdity of this disclosure for a 99- cent transaction.

The book favorably and copiously cites my work, so perhaps I ought not criticize, but a review would be dull without The Bad:

As perhaps inevitable in a book hoping for popular consumption, the authors overstate their case, branding all mandated disclosure as useless or harmful. But disclosure is neither a panacea nor a poison.

MoreDisclosures intended not to help consumers make complex decisions but to nudge their behavior in a particular direction can work. “Contains peanuts” is a disclosure that likely saves lives. The relevant consumers are highly motivated, sellers have no reason to hide the disclosure, and the information is provided at a point in time and in a manner that makes it easy to use for most consumers. Graphic disclosures have been effective in reducing smoking abroad. A picture of a wilted cigarette next to the word “impotent” appears to be a sufficient turn-off. Unit pricing disclosures at grocery stores facilitates comparative price shopping. More people can and will shop for the cheapest peas when someone else has done the math, likely increasing price competition to the benefit of all who shop at that store. “Smart” disclosure of energy consumption reduces energy use substantially. When people can see in real time that their electricity use is spiking, they can identify which appliances are energy hogs and many scale back use.

Disclosure can also work in more circuitous ways. Some, such as securities disclosures, work through sophisticated third party intermediaries. Others may work because they facilitate competition. Prior to mandated disclosure, firms had no way to credibly compete on trans fat content. But after the mandate, firms were able to advertise “no trans fat” on the front of packages to garner market share, even if most consumers did not read the mandated Nutrition Facts label on package backs.

The trans fat disclosure story may hold another lesson as well. It may have provided a bridge to a ban on trans fat that would have been politically impossible without consumer awareness of the issue, driven by the marketing enabled by the mandated disclosure. In addition, the disclosure regime gave firms an incentive to adapt over time, time firms used to reconstitute products without trans fat and even to develop new seed crops that produce oils that replace trans fat. The imminent national ban on trans fat is thus much less painful for firms and consumers than it would have been without a period of mandated disclosure.

Of course, in each of these examples disclosures faced conditions conducive to efficacy. Cigarettes cause not only long-term health problems that people ignore, but also short-term impotence that grabs attention. The market for peas is structured so that a minority of consumers can likely create price competition, at least within pea product classes (organic peas, petite peas, organic petite peas). Securities transactions are lucrative enough to support third party intermediaries. Enough social awareness of diet and fat existed for consumers to take notice of “no transfat” marketing. But all this is the point: under some conditions disclosure improves welfare and the trick is to limit its use to those conditions, whether previously existing or created by regulation.

In the introduction, the authors assert that disclosure is a “fundamental failure” (at 12) because it “fails to achieve its ambitious goals” (at 6). But policymakers’ grand expectations cannot be the right metric. The authors then assert that “the relevant issue is whether this kind of regulation does more good than harm” (at 13, emphasis added). Social welfare is the right metric, but the costs and benefits of disclosure cannot be assessed devoid of context. “This kind of regulation” may often fail, for all the reasons the authors claim and more, but without a careful examination of the effects of any particular disclosure, the authors cannot conclude that any particular disclosure is a failure.

Recent research on the CARD Act brings this point home. The Act requires issuers to include in accountholders’ monthly statements a chart that states (a) the amount of interest they will save if they pay down their existing debt in 3 years rather than making only the minimum payment and (b) the amount they need to pay monthly so as to retire their debt in 3 years. This disclosure appears to cause more accountholders to increase than to decrease their monthly payments, and thus leads consumers to pay less interest than they would otherwise have paid. The benefits of the disclosure are not dramatic (affecting, at most. .5% of accountholders and saving, on average, only $24 per accountholder affected). But the costs of adding the disclosure to the monthly statement, even if it does crowd out other information, are likely to be even smaller. Whether the disclosure crowds out better regulation is a more difficult to question to answer, one that depends on identifying policies that would entail fewer costs and/or produce more of the benefit policymakers seek. As Ben-Shahar and Schneider recognize, identifying such alternative policies is a task beyond the scope of this book.

And what about The Ugly? There is none. The book is a delightful read, as anyone who knows the wit and charm of the authors will not be surprised to hear. It should be required reading for policymakers and for consumer and patient advocates who, through comfortable familiarity in addition to the political and practical pressures the authors describe as the driving forces behind the use of disclosure, have become overly enamored of the tool. The book is chock full of wonderfully accessible yet nuanced examples and spot-on accounts of human thinking and feeling. Sometimes the authors over-generalize their privileged male perspective (contrary to their assertion, not all academics think they are more productive than their colleagues; female and minority professors of both genders notoriously underestimate their contributions). But the writing is honest to the authors’ own experience throughout, overcoming another fantasy of the privileged – that because we can understand and use (or think we can understand and use) the disclosures we encounter, the disclosures are, or have the potential to be, efficacious for the population as a whole. Kudos, gentlemen, kudos.

September 18, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 17, 2014

Ben-Shahar & Schneider Symposium, Part V: Ethan Leib

This is the fifth in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure Biographies for the first week's contributors can be found here.  The authors' introduction to the symposium can be found here.

LeibEthan Leib is Professor of Law at Fordham Law School. He teaches in contracts, legislation, and regulation.  His most recent book, Friend v. Friend: Friendships and What, If Anything, the Law Should Do About Them (Oxford University Press), explores the costs and benefits of the legal recognition of and sensitivity to friendship.

 Is Omri Ben-Shahar a Duncan Kennedy in Disguise?  

I couldn’t help but feel that the thrust of the argument against mandated disclosure for consumers in Omri Ben-Shahar & Carl Schneider’s More Than You Wanted To Know was one I have come to associate with Duncan Kennedy’s argument against unconscionability doctrine in contract law: it is liberal apologism, a convenient “solution” that large corporations and their political shills can tolerate and accommodate – and one that distracts attention from real regulatory solutions that could actually help those we are feeding with a tool they almost surely can’t use well.  As with the crumb of unconscionability doctrine (and its meager remedies) which may divert regulators from more full-throated efforts to curb exploitation in consumer form contracts, mandating disclosure similarly seems like it might enable regulators to feel they are getting something done, all while failing to realize just how little piles of aggregated disclosures do for the average consumer or patient.  By removing from the menu an option (unconscionability or mandatory disclosure) that provides false comfort about our clean capitalist markets being one of nondomination and full information, we might have a chance at increasing the friction and conflict in our markets, which could lead to a regulatory revolution, solving the things that truly ail us in capitalist life.  This final step in the argument is what Kennedy took to outdo Arthur Leff’s basic criticisms of unconsionability

Morethan It may seem odd putting Ben-Shahar from Team L&E side-by-side with Kennedy from Team CLS.  But the morphological similarities of their arguments actually also help distill part of what doesn’t fully work about the argument: allowing the perfect to be an enemy of the good.  Abandoning the strategy of mandated disclosure may be throwing out the baby with the bathwater.  And if the political system is biased in favor of a certain class of disclosers and consumers that actually can make sense of the disclosures (one of Ben-Shahar & Schneider’s nice observations is that disclosure tends to have distributional consequences even among the class of consumers, favoring the rich and well-educated), it is hard to imagine that removing disclosure as a regulatory option will really open the pathway to stick it to the haves.

It is no doubt true – and one would be especially convinced after reading Ben-Shahar & Schneider’s well-executed book – that we have way too much mandated disclosure in our lives that disclosers, consumers, and politicians use badly.  But despite overwhelming evidence that disclosure does badly in lots of contexts, using lots of different metrics (consumer knowledge, retention of information, consumer protection, actual terms), it would seem useful to highlight one success story that could help be a benchmark for when disclosure is, after all, a useful response to a regulatory problem and can be done well.  The book spends most of its pages debunking failed strategies – but still leaves open the possibility that disclosure could really be different and productive in some areas.  One is left to wonder what might count for Ben-Shahar & Schneider as a success story.  We know for them it has to give the consumer information they can use to help structure her decision-making.  

My favorite example of a “disclosure” – though it is not properly in the mandatory category – that really seems to give the consumer very useful information about the limitations of the product she is buying (facilitating informed decision-making) is the relatively new practice among a series of travel websites to offer (often opt-out) travel insurance at check-out when a consumer purchases a nonrefundable fare.  This gives customers what Ryan Calo might call “visceral notice” that their fares will not be easily transferable or changeable – and that they will need to purchase insurance to get some of the benefits that airline tickets used to provide as a matter of course.  This is an effective way to let customers know about a new limitation to air travel; even when they don’t buy the insurance, they “get” that insurance is necessary for certain flexibility that was once included in the price of air travel.  By being presented with that (often opt-out) choice at checkout, customers’ reasonable expectations are reset.  The customer knows what she is getting.  More “visceral notice” of this form could be a productive future for mandated disclosure.

Yet even with one or two success stories Ben-Shahar & Schneider still have an important point to make: disclosures – even good ones – add up and inure the customer or patient to the whole lot of them.  (Apologies to the authors, but I just can’t use the preferred neologisms in the book: disclosee, disclosurite, disclosurism.)   Someone has to be curbing the proliferation or it is all static, the harder it is to hit the viscera.

But Ben-Shahar & Schneider do a little overselling of the “accumulation problem,” I think.  To be sure, if mandatory disclosures come at us from state, judicial, federal, and administrative law, it is hard to imagine that we can pare down disclosures just to the effective ones without overwhelming the customer or the patient.  But some focus in the world of mandated disclosure surely could be made at least within the federal system through the Office of Information and Regulatory Affairs (OIRA), which centralizes regulatory review in the Executive Branch.  Indeed, notwithstanding the beating Professor Cass Sunstein takes in some sections of the book, former Administrator Cass Sunstein issued several memoranda that sought to put the OIRA in a role that promoted smart disclosure and carefully weighing the costs and benefits of different forms of disclosure.  These are ultimately the real desiderata Ben-Shahar & Schneider support when they are not being purposefully provocative: weigh the costs and benefits of even smart disclosure.  Although I have recently been critical of the process Administrator Sunstein used to develop his “quasi-regulations” on smart disclosure and simplification in a forthcoming paper with Nestor Davidson (Regleprudence – at OIRA and Beyond, 103 Geo. L.J. (forthcoming 2015)), there is little doubt that Ben-Shahar & Schneider could be selling their ideas to the new Administrator at OIRA who might be able to make real headway on the “accumulation problem,” subjecting many administratively designed disclosure regimes to the crucible of cost-benefit analysis.

Ultimately, I understand why the authors’ years of study have soured them on mandated disclosure.  Their story is a dispiriting one: there are political economy problems, accumulation problems, cognitive bias problems, and innumeracy and illiteracy problems that all conspire to leave a reasonable person pessimistic about the future of mandated disclosure.  But there is no revolution here in the offing.  Best to focus on pointy-headed efforts at OIRA and clever visceral disclosures that get us in the gut.  

September 17, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (1) | TrackBack (0)

Ben-Shahar & Schneider Symposium, Part IV: Robert Hillman

This is the fourth in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure Biographies for the first week's contributors can be found here.  The authors' introduction to the symposium can be found here.

HillmanRobert Hillman is the Edwin H. Woodruff Professor of Law at Cornell University. 

Omri Ben-Shahar and Carl E. Schneider have written an important book.  In the first two parts of their book, they usefully gather and describe the myriad shortcomings of what they call "mandated disclosure" as a regulatory tool and helpfully explain why disclosure very often fails.  Following up on this analysis, in Part III Omri and Carl argue that mandated disclosure cannot be saved and "lawmakers should stop using it." (13)  The book certainly should give lawmakers pause before adopting new disclosure strategies. 

                  Omri and I have had many discussions on the merits or lack thereof of disclosure and we always agree to disagree.  Still, always interested in a robust exchange of ideas, Omri kindly suggested me as one of the reviewers of the book for this blog.  So it should be no surprise that what follows are some counterarguments that respond to assertions made in the book. I have already published my views of the importance of disclosure distinct from the question of whether anybody reads or understands disclosures, including  for efficiency, autonomy, corrective justice, and moral reasons.  See Robert A. Hillman and Maureen O'Rourke, Defending Disclosure in Software Licensing, 78 U. Chi. L. Rev. 95 (2011). So I will not duplicate those arguments here.

                  By way of introduction, although I agree with the authors that disclosure is far from a panacea for the various problems it is designed to treat, I fear that these two prominent scholars, perhaps in their zeal to make their case, have lost sight of the usefulness of disclosure in at least some circumstances and as at least one component of regulation to even the playing field between what they call disclosers and disclosees.  Perhaps more worrisome, in my view, they engage in serious overkill in their discussion of the so-called harms of disclosure.  In addition, although they leave little room for the use of disclosure--"[M]andated disclosure is so indiscriminately used with such unrealistic expectations and such unhappy results that it should be presumptively barred." (183)-- they are quite thin on how to rebut the presumption and what they propose as alternatives.  But before lawmakers largely abandon disclosure as a strategy, one would think they need to contemplate what will replace it.

                  I also worry that Omri and Carl's efforts to go for the jugular on disclosure causes them to lump all disclosures, whether disclosure of contract terms, medical releases, Miranda rights, food labels, campus crime reports, etc. etc., as falling into the same unproductive trap.  A more nuanced approach might have led the authors to see the wisdom of at least some disclosure strategies.  For example, are they really advocating that vendors of software should not be required to disclose the terms of their licenses to licensees?  "Sorry, Ms. Consumer, even though your software doesn't work one of our terms that we didn't have to show you is that you were licensing our software as is." (On page 118 the reader finds a nod to the possibility that some disclosures might work: "We have never argued * * * that all disclosures fail." But this admonition is buried in a landslide of condemnation contained in the book.)

                  In my limited space, I want to focus on Chapter 11's treatment of the harms of disclosure. I should reveal (after all, this is a piece about disclosure) that Omri and Carl open this chapter with a quote from Maureen O'Rourke and me to represent the folly of what they call "disclosurites".  We argued that disclosure is one necessary tool for regulating software contracts and wrote that "disclosure is * * *inexpensive and, at worst, harmless." Hillman and O'Rourke, Defending Disclosure, supra. (Maureen and I, as Reporters for the American Law Institute's "Principles of the Law of Software Contracts," heard repeatedly from software vendors and tech people that disclosing end user licensing agreements on the Internet would be relatively costless.) Omri and Carl use our quotation as a taking off point for the proposition that disclosure causes lots of harm.  I will also comment on Chapter 12's discussion of alternatives to disclosure.

Chapter 11: "At Worst, Harmless"

                  In what follows, I will comment on many of the "harms" of disclosure Omri and Carl present.  My goal is to present a more balanced view on whether disclosure is harmful, not to convince the reader one way or the other on the merits of disclosure in these settings.  Many of the issues demand a thorough empirical investigation before one can reach any conclusion.

"[W]e all spend uncounted hours dealing with disclosures, sometimes even reading them. * * * [A]ggregated,  'costless' is not the word that comes to mind."  (170)  But one of the authors' principal complaints about disclosure in many settings is that no one reads the boilerplate.  So it is hard to see how licensees are spending "uncounted hours dealing" with disclosures.  Omri and Carl devote several pages to a "Parable of Chris Consumer" (95-100) to point out the accumulation of disclosures people confront.  But to illustrate the harm wrought by the quantity of disclosures, they portray that Chris is reading them, which they acknowledge is "the reductio ad absurdum of the accumulation problem."  (101)

"Disclosure also undercuts against unconscionable contracts * * *.  [H]ow can you claim surprise if you got a PROMINENT DISCLOSURE in ALLCAPS and initialed it." (172)  The authors here invoke a warning I presented in my article, "Online Boilerplate: Would Mandatory Disclosure of E-Terms Backfire," 104 Mich. L. Rev. 837 (2006). But my conclusion was that the online environment affords consumers and especially watchdog groups easy access to terms (assuming they must be disclosed) who can "spread the word about unreasonable terms. * * * Even if disclosure backfires in the short term perhaps eventually the word will get out about a business's unsavory terms." 104 Mich. at 853, 856. So market forces, in conjunction with disclosure, may create a positive result.  In fact, as a general matter, I don't think Omri and Carl sufficiently contemplate how the new world of digital communication might affect disclosure laws for the better.

"[S]ome commentators believe police use Miranda to inveigle suspects into seeing the police as their friends." (173)  This seems rather weak evidence to build a case against the Miranda warnings.   Relatedly, Omri and Carl also venture that Web privacy notices "soothe[] consumers' privacy worries and builds trust in the firm * * *." (173)  The authors ignore the consumer uproar when Google and Facebook tried to enhance their right to collect personal data.

Omri and Carl assert that the Principles of the Law of Software Contracts' strategy of disclosure would mean that "the consumer would lose the right to withdraw from the contract" after opening the box and reading the terms. (174)  But after opening the box, licensees are even less likely to read the terms no less decide to return the software based on the content of the terms.  Further, Maureen and I heard lots of testimony concerning the difficulty of returning software after a licensee opens the box.  So the loss of this right, which is far from certain under the software contract principles, seems inconsequential.

"More information is not better if it is wrong, or misleadingly incomplete, or irrelevant * * *." (175)  This is true, of course, but the problem calls for a careful examination of which disclosures actually suffer from these infirmities, not for a blunderbuss approach of doing away with all disclosures.  For example, the information contained in the disclosure of an end user licensing agreement is not "wrong, or misleadingly incomplete," and it is highly relevant.

"[M]arginally useful medical disclosures can drive out necessary but unmandated information." (175)  The authors assert that because patients receive medical disclosures they lose sight of more important information concerning, for example, how to manage a chronic illness.  I am doubtful.

Sharing a few anecdotes, the authors rail against disclosure because it allows some consumer buyers and home purchasers to avoid transactions by invoking "disclosure technicalities." (177)  Perhaps some consumers do engage in this conduct, but we need to know how many consumers avoid transactions on justifiable grounds because of disclosures.

Chapter 12: "Beyond Disclosurism"

                  As already mentioned, Omri and Carl have made an important contribution to the disclosure debate by amassing and explaining the many problems of disclosure.  I recommend the book for this reason.  However, they seem to believe that their case is so strong that they do not have to worry too much about alternatives.  In fact, they call alternatives to disclosure "the wrong—indeed a bad—question." (183)  I am uncomfortable with that conclusion.

   Morethan                 Notwithstanding the 'bad question," Omri and Carl present some alternatives to mandated disclosure.  For example, the authors discuss the potential of intermediaries such as consultants and “information aggregators.”  (186)  However, they are not very enthusiastic about consultants as an option (“consultants can be unreliable” and they are often the disclosers themselves, “lack[ing] the incentive, patience, and reliability to evaluate and warn * * * of the fine print.”) (187) According to the authors, however, “information aggregators,” show more potential.  Such aggregators can gather information from “surveys and research, feedback and observation” without the need for mandated disclosure." (187-188) But in my view, the question is wide open as to whether consumers really would be better off by relying on aggregators.  The answer is probably that in some circumstances yes, and some no.  Further, although some aggregators may not gather their information as the result of mandated disclosure, the authors concede that others do.  For example, watchdog groups that monitor the terms of software end user license agreements can collect their information by accessing disclosed terms on the Internet.  In response, the authors remark that mandatory disclosure “to eager and sophisticated intermediaries seems much more sensible than the present system.” (188)  But at least in the software contract setting, what is the harm in allowing consumers to see the disclosures as well?

                  In the end, Omri and Carl turn to mandatory terms as a substitute for mandatory disclosure, although they are fully aware of the tradeoffs in pursuing this paternalistic policy.  Perhaps ultimately wary of such a solution, the authors retreat by discussing examples in which they believe no regulation is warranted at all. But they supply a curious example.  They mention Google and Facebook privacy policies as examples of terms that do not require regulation because users "seem not to feel degraded [by the loss of rights] or even to notice" the terms. (194)  But disclosure of the companies' privacy policies combined with the power of the Internet to get the word out about the loss of privacy under the terms caused both companies to change or at least to respond to the criticism of their privacy policies.


"More Than You Wanted to Know" is very successful in inventorying the plethora of mandated disclosure strategies and explaining why they are overused and problematic.  The book also usefully contemplates whether "mandatory disclosure can be saved," (118) although the authors conclude too readily that various strategies for doing so are also doomed to failure.  In my view, the book would be even more successful if the authors spent more time identifying  the kinds of disclosures that might work and considering how to improve current disclosure law, rather than condemning virtually all mandated disclosure.

September 17, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 16, 2014

Ben-Shahar & Schneider Symposium, Part III: Ryan Calo, Disclosure Is Dead, Long Live Disclosure!

This is the third in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure Biographies for the first week's contributors can be found here.  The authors' introduction to the symposium can be found here.

CaloRyanRyan Calo is an assistant professor of law at the University of Washington, where he co-directs the Tech Policy Lab, and an affiliate scholar at the Stanford Center for Internet and Society. 

Disclosure Is Dead, Long Live Disclosure!

Omri Ben-Shahar and Carl Schneider are careful, meticulous, and forceful in their critique of mandatory disclosure as a regulatory mechanism. And they are in a basic sense right. Mandatory disclosure really does operate as this “Lorelei, luring lawmakers on to the rocks of regulatory failure” (4). I thoroughly recommend their rich new book, even if one has already read the law review article from which it sprung, The Failure of Mandated Disclosure, 159 U. of Penn. L. Rev. 647 (2011)

What Ben-Shahar and Schneider are not, however, is dreamers. They take rigorous aim at mandatory disclosure in its present form, without really imagining how that form stands to evolve. 

More Than You Wanted to Know decimates mandatory disclosure by walking through its long history of failure. Everything the book says about notice is true. But now imagine for a moment a critique of hospitals from the 19th century with a similar structure—call it Worse Than the Cure: The Failure of American Hospitals. Here is the argument: Societies have used hospitals to sequester the sick for millennia. But the sick themselves continue to fare very poorly. We have tried to professionalize the staff; we have looked to specialization and statistics. Nothing works. Hospitals are places that the sick go to die, period.

How strange that feels. Where did our imaginary authors go wrong? Well, as late as the middle of the 1800s, medical professionals did not understand the role of hygiene in propagating disease. It took doctors like Oliver Wendell Holmes—father to the Supreme Court Justice—and the famed Florence Nightingale to popularize the idea that medical professionals wash their hands to prevent the spread of germs. Hospitals still face challenges around germs—staph infection, for instance. But of course modern hygiene practices revolutionized healthcare for the Industrial Age.

Morethan Today we live in a gee-whiz-bang world of information, an Information Age. And yet, when it comes to mandatory disclosure, we are using Guttenberg-era technology. The law expects plain, block text akin to how the Bible was printed in the 16th century. What innovation there is occurs at the margins. Ben-Shahar and Schneider discuss nutrition labels, icons, and light personalization as examples of notice innovation (121-37). These alternatives fail, or succeed only marginally; they, too, rely on conveying static information in words or its symbolic equivalent. 

What if critics of disclosure today are like the 19th century critics of hospitals? What if we are on the cusp of a revolution in the way governments and firms communicate with citizens and consumers? How would we know? Companies like Twitter and Google render navigable an endless sea of information, and yet they write privacy policies and terms of service in block text because that is what the law expects. Were its techniques to catch up to, say, Facebook’s Newsfeed, who can say what disclosure could be capable of?

I canvass the prospect of law dragging disclosure into the 21st century at length in my article Against Notice Skepticism in Privacy (and Elsewhere), 87 Notre Dame L. Rev. 1027 (2013). Why bother to revolutionize disclosure, though? Why risk another shipwreck? Well, there is a reason that lawmakers keep picking notice as a regulatory mechanism, and that is the paucity of alternatives. Caveat emptor. Command-and-control. There are real tradeoffs to regulating through elaborate rules. We might say of mandatory disclosure what Winston Churchill once said of democracy: notice is the worst form of regulation, except for all of the alternatives.

I read Ben-Shahar and Schneider to implicitly acknowledge this point. They conclude the book (185)—and especially the law review article—with a call for less disclosure and more “advice”:

Advice is (usually) not just simpler and shorter than disclosure—if offers a different kind of help. Successful advice does not teach fundamentals or facts. It answers the real question: how likely are you to be satisfied?

The distinction between disclosure and advice is, to my mind, thinner than the authors make out. I am reminded of the distinction Ed Rubin draws between “theoretical” and “practical” knowledge: like advice, practical knowledge takes information and applies it specifically to the consumer’s particular situation. Sometimes it takes a simple warning to keep the kids off of the electric fence; other times a much more elaborate education is needed to create in the citizen or consumer and accurate mental model of risk.

Could the government mandate advice? Maybe. Could firms automate advice with technology? Increasingly, yes. Advances in artificial intelligence such as IBM’s Watson suggest that, at least within the confines of specific domains like healthcare, software can meaningfully assist professionals and consumers alike in making difficult decisions. If IBM’s system can beat people at Jeopardy and diagnose cancer, maybe it can walk you through term versus universal life insurance.

Who knows? I could be just another note in the long song of the Lorelei. I deeply admire this important work by Ben-Shahar and Schneider and will refer to it again and again. 

September 16, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Ben-Shahar & Schneider Symposium, Part II: Steven Burton, Skepticism about Nondisclosure

This is the second in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure Biographies for the first week's contributors can be found here.  The authors' introduction to the symposium can be found here.

BurtonSteven J. Burton is the John F. Murray Professor of Law at the University of Iowa, where he currently teaches Contracts and a Seminar on Advanced Problems in Contract Law. 

I begin with a disclosure: I have been a skeptic about statutory disclosure requirements in my field, contract law, for many years.  In More than You Wanted to Know: The Failure of Mandatory Disclosure, Omri Ben-Shahar and Carl E. Schneider marshal an impressive array of empirical evidence, coupled with cost-benefit analysis, to argue that the costs of “mandatory” disclosure as such are substantial while the benefits are close to nil.  But their advocacy has not moved me to a conviction that mandatory disclosure laws generally should be repealed, as they conclude (p. 183).  In particular, certain disclosure requirements in contract law probably should be retained.

There are two reasons for my skepticism about their conclusion.  First, Ben-Shahar’s and Schneider’s arguments do not distinguish mandatory disclosures of various kinds.  Thus, Miranda warnings, informed consent to medical treatment, mandatory disclosure of contract terms,  and other mandatory disclosures, generally should fall for the same sufficient reasons. 

The problem, they argue, is that mandatory disclosures fail to achieve their singular goal—to lead “disclosees” to make good decisions about unfamiliar and complex choices when interacting with sophisticated parties (pp. 34-5, 54).  Such disclosures communicate hardly anything to disclosees. Such disclosures do not fit the way people organize their lives and make choices, cannot simplify complex ideas, and cannot overcome problems of illiteracy and inumerasy.  “Disclosurites,” as they call supporters of mandatory disclosure in various contexts, expect people to do something they cannot and rationally do not want to do.  And, they suggest, there is no way to cure these deficiencies.  

I think, however, that some disclosure requirements serve other goals, which Ben-Shahar and Schneider do not discuss.  Abolishing some such requirements would have legal consequences that others would not have.  Absent informed consent, for example, surgery probably would constitute a battery; however, repealing TILA would not have similar consequences.  I don’t know enough about disclosure requirements outside of contract law to say for sure.  But I would prefer that they had addressed the legal consequences of nondisclosure in various areas.

The second and similar reason for my skepticism is that, with respect to contract law, Ben-Shahar and Schneider do not distinguish common law disclosure requirements from statutory requirements, such as the unwieldy TILA.  In the common law context, disclosure of contract terms is necessary if parties are to be obligated in accordance with those terms.  Otherwise, disclosees do not meaningfully consent to the boilerplate terms of many kinds of contracts, especially consumer contracts.  Without meaningful consent, or some appropriate alternative basis of contract, disclosees should not be bound by those terms.  By contrast, no such consequence would follow from repealing statutory requirements.

Ben-Shahar and Schneider do not address the problem of obligation.  Again, they would do away with mandatory disclosure, as such, in almost all circumstances (p. 183).  They would, it appears, bind consumers to contract terms even when the consumer did not have an opportunity to look at them: They conclude, “[t]he right to read boilerplate before a purchase . . . can be discarded and only a few eccentrics will notice” (p. 194).  This goes beyond Judge Easterbrook’s controversial opinion in ProCD v. Zeidenberg.  That case requires that a party have access to the terms after a purchase and an opportunity to return the merchandise for a refund if the terms are unacceptable.  Ben-Shahar’s and Schneider’s data and arguments would apply as well to terms disclosed after a purchase.  They seem compelled by their own reasoning to endorse binding consumers to a merchant’s hidden terms.  The open door to abuse is evident.

MorethanLest this seem a strained reading of the book, consider their alternative.  Rather than mandating disclosure of information that consumers do not want, Ben-Shahar and Schneider would leave matters to the market. They believe that information intermediaries, like Consumers Union and numerous websites, will supply the information that consumers want, not more, not less (pp. 185-90).  And, they believe, mandatory disclosure is not needed for intermediaries to get the information they need to offer “advice” in the form of ratings, rankings, scores, grades, labels, warnings, and reviews.  People, they think, want opinions, not data (p. 185). 

Yes, but. . . .  Consumers and others surely should not be bound by hidden contract terms just because advice and opinions are available in the marketplace.  There would be no basis for an obligation to abide by such terms, even if the information market is more efficient than mandated disclosure: We do not have a general obligation to do the efficient thing.  Or would Ben-Shahar and Schneider endorse Karl Llewellyn’s view that consumers and others should be bound by the few dickered terms but not by the accompanying boilerplate?  I don’t know.  I don’t think so.  But I should know after reading this book.  I would prefer that they had addressed the problem of contractual obligation flowing from nondisclosure.

Ben-Shahar and Schneider might respond that worrying about obligation is idle nonsense when disclosure has so little effect.  Their focus, however, is on disclosure at the time of contract formation.  I suggest that obligations created at that time matter at the time for performance, when a dispute may arise.  A consumer, for example, then may complain to a merchant about something the consumer believes to be awry.  The merchant may point to the applicable term(s) in the contract.  If the terms were fair and available, and the merchant relies on them appropriately, the consumer may go away disappointed while accepting that she had taken a risk by not reviewing the terms beforehand.  If the terms were unavailable, however, the consumer is more likely to be angry.  She might feel with justification that she was being treated callously. 

And maybe she was.  She may continue by disputing, suing, and bad-mouthing the merchant, even when the merchant’s hidden terms were fair and fairly applied.  This would not be good for either, whether or not the merchant was dealing sharply.  If that were all there were to it, some merchants would disclose terms voluntarily.  If some would not, however, the consequences would not be good for other consumers and merchants, either.  The fabric of retail contracting would be frazzled.  So, there may well be an externality here that justifies requiring disclosure sufficient to create an obligation.

Obligations are not idle.  They have benefits, and the costs of omitting them could be significant.  Helping consumers make better decisions is not the only goal of disclosure requirements.  In my opinion, further analysis is in order.

I conclude that, in their zeal, Ben-Shahar and Schneider have overgeneralized. But this should not detract from the important contribution their book undoubtedly makes. They have brought together in one place much that had been scattered, and they have synthesized the data impressively.  That alone sheds much light on disclosure requirements in general.  I believe they have established that such requirements are not easy solutions to what often are complex problems. When it comes to repeal, however, each requirement should be considered carefully, one by one, especially with respect to goals it may pursue apart from helping disclosees to make more informed decisions.

September 16, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, September 15, 2014

Ben-Shahar & Schneider Symposium, Part I: Aditi Bagchi, Curiosity Makes the Cat

This is the first in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider,  More Than You Wanted to Know: The Failure of Mandated Disclosure.  Biographies for the first week's contributors can be found here.  The authors' introduction to the symposium can be found here.

BagchiAditi Bagchi teaches Contracts and Labor Law at the Fordham University School of Law, where she is an Associate Professor. 

Omri Ben-Shahar and Carl Schneider make a persuasive case that mandatory disclosure is no panacea for complex decisions.  We do not use much of the information we are given, nor would we make objectively superior decisions were we to try.  Since disclosure is expensive, though not for the state that requires it, we should not take on its costs with exaggerated expectation of benefit.  Some regulatory effort should be redirected to other methods, including mandatory regulation of conduct.

In the course of making these important points, Ben-Shahar and Schneider make other, harder claims.  Fundamentally, they boil down to the one in the title, i.e., mandatory disclosure gives us more than we want to know.  In particular, they claim “mandated disclosure is based on “false assumptions about what people think, do, and want.” (p.94) But the authors provide more evidence of what we do than evidence of what we think or want.  Revealed preferences about disclosure (preferences gleaned ex post from how we use it, or don’t) may diverge from both considered individual preferences and collective preferences about an aggregate state of affairs.

One of the interesting moves Ben-Shahar and Schneider make is to talk about mandatory disclosure as such, generalizing across contexts.  For example, their claims apply both to standard terms in consumer contracting and medical information relevant to patient decision-making.  It is useful, though, to distinguish between small and big decisions because distinct considerations bear on each.

Let us start with big decisions, such as whether to undergo a proposed medical treatment, or which mortgage or retirement plan to select.  Ben-Shahar and Schneider argue that people lack the ability and desire to process technical information relevant to these decisions.  We appropriately rely instead on advisers to direct us to the best treatment, mortgage or retirement plan.  Although the authors might be right about some of the political dynamics that best explain growth of mandatory disclosure in these areas, they do not consider one of the arguments that may best justify disclosure.

Our demand for information may be aspirational.  Because we see ourselves as agents directing our lives rather than passively experiencing them, we want to make the basic contour of our lives as much the product of our own agency as possible.  Yet we do not always act in accord with our reflective view of ourselves; we forfeit the chance to direct our lives in meaningful ways.  We want to know more about our bodies and what will happen to us than we can muster the will to learn.  Financial consumers infer from our responsibility for our choice of mortgage or retirement plan – responsibility that our systems of contract, employment, bankruptcy and social security impute to us – that we should acquire knowledge sufficient to exercise control prudently.  But we do not make it happen.

Ben-Shahar and Schneider observe that most people are unable to understand financial decision-making.  It seems likely, though, that we can understand enough to exercise better control than we do, but fail even to do that.  Maybe Ben-Shahar and Schneider are right that complexity and frequency of choice make it very hard to proceed through life as we aspire to do in principle.  Although they characterize this as rational conservation of energy, in light of my own reflective judgment that I should know more, my failure to do so should be regarded as just that.

Morethan Failure to exercise my own agency in a manner I endorse is a common moral failure, as human as the aspiration to agency itself.  But in this context, the state can make it marginally easier to avoid the shortfall by lowering the marginal cost of processing critical facts.  Exercising better judgment about a retirement plan need not entail, for example, acquiring the skill to predict which fund will perform best.  It can be enough to learn just enough about funds to be able to identify those that have characteristics suitable for someone with my retirement aims.  These characteristics may be reductive and legally defined.

Of course, I cannot report that individuals want more information; I am only suggesting some good reasons to think we might want it even though we don’t always use it.  It is difficult to show directly how people think about major decisions.  But consider a counterfactual: The information we are now provided about mortgages and funds is simply taken away.  Doctors cease to explain treatment options in detail.  Would we react to this change favorably?  Actually, we need not rely on the hypothetical.  Notwithstanding the evidence that people do not choose their health care plans or doctors with great care, they are told that henceforth they will be deprived of such choice.  Contrary to an aside in the book (p.63), people did seem to get quite upset at the prospect.

One might dismiss our preferences about information and choice as ill-considered because meeting them does not assure satisfaction of our preferences over concrete goods and services.  But why credit our preferences about the objects of choice over our considered preferences about the process of choice?  Our desire for information, derivative as it may be from our very self-conception, is no less worthy of satisfaction in its own right, even at a cost.

Ben-Shahar and Schneider mischaracterize the “autonomy” interest at issue and the discontent that drives mandatory disclosure. That studying disclosure is unpleasant and may even make us “feel” less autonomous (p. 74) does not imply that disclosure in fact undermines autonomy, because autonomy is not an emotional state.  Autonomy is served by making it easier for people to abide by their own regulative principles even where the principles are burdensome and we have a poor track record.  The principles of conduct we endorse upon reflection are the work-products of our capacity for practical reason.  We are not always adequately motivated by the judgments we make in that mode.  But those judgments about who we are and how we should live have special standing, even in the face of evidence that we are not quite what we aspire to be.

Ben-Shahar and Schneider may be right that information about products and services will only result in more efficient consumption if we know ourselves (p. 108).  But advocates of disclosure need not assume that we know ourselves as an empirical matter.  A liberal state should usually operate under a regulative presumption that each of us knows ourselves better than anyone else because we are in important ways of our own making, constituting ourselves by way of the values we endorse.  Because, for many of us, those values likely include a commitment to navigating important life decisions with understanding and deliberateness, our related preference for information to aid us in that effort should not be set aside lightly.

Because the best argument for disclosure sometimes lies in our self-understanding as choosing agents rather than our knowledge of ourselves as consumers or even patients, we can decline to defer to experts without suspecting that they are cheating or tricking us.  We vary on a range of dimensions implicated by big decisions – we value different aspects of physical experience, we have different levels of risk aversion, our financial aims reflect broader life projects.  Big decisions rely on and substantially impact fundamental features of ourselves.  Sometimes, we do not wish to put ourselves on auto-pilot even if we are less likely to hit a bump.

Other times we are okay with auto-pilot.  Turning to the small decisions (which cell-phone carrier?), it seems unlikely that our self-conceptions are very bound up with exercising judgment in a thoughtful way (though a case could be made, with respect to the totality of such decisions).  But there is an alternative way to conceptualize our preferences about information in the retail context too.

Boilerplate is usually more than any one of us wants to know about each of the transactions we enter.  But key to boilerplate is its uniformity and pervasiveness.  The terms that govern your transaction probably apply to me too; in fact, they govern most of us.  We collectively prefer that terms that govern our life are disclosed to us, even if most of us will not undertake to read those terms. We may not care much about particular terms but we do care about living in a society where legally binding rules are public.  Indeed, we have long required laws that govern us to be published, even though most of us do not read those either.

Disclosing standard terms to each of us effectively discloses terms to “us” as a political and economic community (though thinking of it this way may alter the form of disclosure we require).  Not only for instrumental reasons but also for reasons having to do with transparency, legitimacy and access, we want the rules by which we operate to be out there for us to jointly reference, evaluate and perhaps revise, by way of public discourse and politics.  The mandatory regulation that Ben-Shahar and Schneider recommend as occasional substitutes for disclosure can only come about once we, as a community, know the terms that we reject.

In other words, sometimes I really do want to know more.  And sometimes I don’t, but we do.

September 15, 2014 in Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, September 12, 2014

Introducing the Virtual Symposium on "More That You Wanted to Know"

We begin our upcoming virtual symposium with this introduction provided by the authors of the book that we are subjecting to strict scrutiny, Omri Ben-Shahar and Carl E. Schneider.

Morethan  MORE THAN YOU WANTED TO KNOW: The Failure of Mandated Disclosure 

When he famously wrote 100 years ago, “Sunlight is the best of disinfectants,” Justice Louis Brandeis began a century of disclosure law.  How do we protect borrowers and investors? Disclosure! How do we help patients choose safe treatments and good health plans? Disclosure! How do we regulate websites’ privacy policies? Disclosure!

In area after area, mandated disclosure is lawmakers’ favorite way to protect people facing unfamiliar challenges.  Truth in lending laws, informed consent, food labeling, conflicts-of-interests regulation, even Miranda warnings, all arose because lawmakers rightly worried that uninformed and inexperienced people might make disastrous choices.

Brandeis was wrong. True, these laws have a worthy goal – equipping us to make better decisions. But in sector after sector, studies steadily show that mandated disclosure has been almost as useless as it is ubiquitous. Financial crises have bred mandates for decades — the Securities Act of 1933, truth-in-lending laws in the 60s and 70s, Sarbanes-Oxley in 2002, and, after the 2008 crisis, the Dodd-Frank Act.  But each new crisis occurred despite the old elaborate disclosure requirements.

In our new book MORE THAN YOU WANTED TO KNOW: The Failure of Mandated Disclosure, we explain that mandated disclosure has become the regulatory default.  It is politically easy for legislatures and convenient for courts. 

Sunlight doesn’t disinfect because mandated disclosure is so ill-suited to address the problems it faces – and, in fact, can do more harm than good. Consider one of the most heroic efforts to get disclosure right. “Know Before You Owe” is a new regulation issued by the Consumer Financial Protection Bureau, the agency responsible to reform consumer credit markets. The Bureau recognized that people took bad mortgages because they misunderstood the terms. To prevent this, the Bureau heeded the Dodd-Frank mandate to promote “comprehension, comparison, and choice.” After much intelligent work, the Bureau has a new, simpler form that has done well in laboratory tests:

Bedsheet 1 Bedsheet 2





Gone are the tiny fonts and the overloaded lines of the old form (on right). The new form (on left) is a masterpiece of design, declaring the dawn of a new era of smart and simplified disclosure, designed by lawmakers schooled in decision sciences and cost-benefit analysis.

But mortgage disclosure has to work in the bank, not in the regulators’ lab. When borrowers arrive at a real-world loan closing, they will get the Bureau’s new form and almost 50 other disclosure forms about issues like insurance, taxation, privacy, security, fraud, and constitutional rights.  The new form is part of a stack more than 100 pages high, courtesy of many laws from many lawmakers over many years.  Nobody plows through all this. And no single agency has the authority to pare down the stack. 

Despite failures, disclosures are growing in number and in length. In health care, informed consent sheets now look like the fine print web users click “I Agree” to, thoughtlessly.  Just reviewing the privacy disclosures received in one year would take a well-educated fast reader 76 work days, for a national total of over 50 billion hours and a cost in readers’ time greater than Florida’s GDP. In banking law, to describe the many fees in a garden variety checking account, the average disclosure is twice as long (and quite as dismaying) as Romeo and Juliet (111 pages).

In internet commerce, if you want to buy an iTunes song you are told (as the law requires) to click the agreement to the disclosed terms.   Do you read before clicking?  Of course not.   Florencia Marotta-Wurgler and co-authors have showed that only one in a thousand software shoppers spend even one second on the terms page.  And if you do print out the iTunes terms, you confront 32 feet of print in 8-point font (See Ben-Shahar’s photo with the iTunes Scroll below).  Hard as you read, you can’t understand the words, what the clauses mean, or why they matter.

Omri 1

What about simplifying with just a few scores or letters, like A, B, and C grades for restaurant hygiene?  Alas, boiling complex data down to a manageable form usually eliminates or distorts relevant factors.  So a recent study by Daniel Ho at Stanford found that the volatility of restaurant cleanliness and the discretion given to inspectors make hygiene scores unreliable and even misleading – and do not detectably help public health.  There is almost no evidence that the simplest of all scores – the loan’s APR – has helped people make better loan decisions, and there is plenty of evidence that it didn’t. 

If disclosures are so futile, why do lawmakers keep mandating them?  Because disclosure mandates look like easy solutions to hard problems.  When crises occur, lawmakers must act.  Regulation with bite provokes bitter battles (often stalemate); mandated disclosure wins sweet accord (near unanimity).  Mandated disclosure appeals to both liberals (personal autonomy and transparency) and conservatives (efficient markets).   And as one financier admitted, "I would rather disclose than be regulated."  

But disclosures are not just inept. They can be harmful. Disclosure mandates spare lawmakers the pain of enacting more effective but less popular reforms.  Disclosures help firms avoid liability, even when they act deceptively or dangerously. Disclosures can be inequitable, for complex language is likelier to be understood by those who are highly educated and to overwhelm and confuse those who aren’t. Mandated disclosures can crowd out better information (time spent “consenting” patients cannot be spent treating them). 

We are often asked what should replace mandated disclosure.  If it does not work, little is lost in abandoning it.  And if it cannot work, the rational response is not to search for another (doomed) panacea, but to bite the bullet and ask which social problems actually require regulation and what regulation might actually lessen the problem. We do not envy lawmakers the hard work of helping people cope with the modern consumer’s life.  But persisting in mandating disclosures is, as Samuel Johnson said of second marriages, the triumph of hope over experience.

Ben-Shahar is Leo and Eileen Herzel Professor of Law, University of Chicago.

Schneider is the Chauncey Stillman Professor of Law and Professor of Internal Medicine, University of Michigan.

September 12, 2014 in About this Blog, Books, Recent Scholarship, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, September 11, 2014

Introducing the Authors: More Than You Wanted to Know

Next week, we on the ContractsProf Blog will be hosting a virtual symposium on Omri Ben-Shahar & Carl Schneider's new book, More Than You Wanted to Know: The Failure of Mandated Disclosure.  
The symposium will feature contributions from Aditi Bagchi, Steven Burton, Ryan Calo, Robert Hillman, Nancy Kim, Ethan Leib and Lauren Willis, among others.  The first five will go up next week, followed by more the following week, with responses from the authors interspersed.

Tomorrow, we will post the authors' introduction to the symposium, which summarizes the argument of the book.  For now, we just introduce the authors themselves.  

Ormi 3Omri Ben-Shahar earned his PhD in Economics and SJD from Harvard in 1995 and his BA and LLB from the Hebrew University in 1990. Before coming to Chicago, he was the Kirkland & Ellis Professor of Law and Economics at the University of Michigan. Prior to that, he taught at Tel-Aviv University, was a member of Israel's Antitrust Court and clerked at the Supreme Court of Israel. He teaches contracts, sales, insurance Law,  consumer law, e-commerce, food and drug law, law and economics, and game theory and the law. He writes in the fields of contract law and consumer protection. Ben-Shahar is the Kearny Director of the Coase-Sandor Institute for Law and Economics, and the Editor of the Journal of Legal Studies. He is also the Co-Reporter with Oren Bar-Gill for the Restatement Third of Consumer Contracts.

A list of Professor Ben-Shahar's publications can be found here.

SchneiderCarl E. Schneider, the Chauncey Stillman Professor of Law and Professor of Internal Medicine, teaches courses on law and medicine, regulating research, property, the sociology and ethics of the legal profession, and writing briefs. His scholarship criticizes the dominant regulatory ideas in the law of medical ethics, particularly as they are applied to subjects like the relationship between doctor and patient, the use of advance directives, physician-assisted suicide, and human-subject research. His The Practice of Autonomy: Patients, Doctors, and Medical Decisions (Oxford University Press, 1998), which analyzes the malign effects of making patient autonomy the regulatory summum bonum, is an example of that project. Prof. Schneider is also the coauthor of two casebooks. With Marsha Garrison, he wrote The Law of Bioethics: Individual Autonomy and Social Regulation (West, 2009, second edition), a pioneering casebook in its subject. With Margaret F. Brinig, he wrote An Invitation to Family Law (West, 2007, third edition), an innovative family-law casebook. He recently served on the President's Bioethics Council and has been a visiting professor at Cambridge University, the University of Tokyo, Kyoto University, and the United States Air Force Academy.

A list of Professor Schneider's publications can be found here.

September 11, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 10, 2014

Upcoming Online Symposium: Margaret Jane Radin on Ben-Shahar & Schneider, More That You Wanted to Know

Ormi 3 SchneiderStarting next week we will be hosting an online symposium on the new book by Omri Ben-Shahar (left) and Carl E. Schneider (right), More Than You Wanted to Know: The Failure of Mandated Disclosure.  As is our wont, the symposium will consist of a fortnight's worth of commentary on the book, provided by contracts profs from around the county, and responses from the authors.  

In the meantime, we hope to whet our readers' appetities with this review of the book from Margaet Peggy Radin, author of  Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law, which was itself the subject of an online symposium here on the blog.  Radin's review has the provocative title: "Less Than I Wanted to Know: Why do Ben-Shahar and Schneider Attach Only 'Mandated' Disclosures?"  Here is the abstract from SSRN:

This essay responds to a new book by Omri Ben Shahar and Carl E. Schneider, entitled MORE THAN YOU WANTED TO KNOW: THE FAILURE OF MANDATED DISCLOSURE (Princeton, 2014). The book is an elaborate disclosure of why disclosure fails. It is hard to disagree with the fact that widespread deficits in consumer reading, understanding and decisionmaking undermine the efficacy of disclosures, and the book provides plenty of data to show this. But the authors do not much confront the fact that many mandates for disclosures are a response to what happens when firms are free to design their own fine print. The same consumer decisionmaking deficits the authors here elaborate exist when the disclosure (allegedly contractual) is created by private firms; and firms take advantage of those deficits. If mandated disclosure is abandoned, as the authors recommend, do the authors think recipients of bad boilerplate should just be on their own? The authors did not consider that question as part of their project in this book.


September 10, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, June 2, 2014

New in Print: Books, Part III

Stefan Grundmann, et al. (eds.), The Organizational Contract: From Exchange to Long-Term Network Cooperation in European Contract Law (Ashgate 2013)

  • Organizational ContractThis book introduces and develops the paradigm of the organisational contract in European contract law. Suggesting that a more radical distinction should be made between contracts which regulate single or spot exchanges and contracts that organize complex economic activities without creating a new legal entity, the book argues that this distinction goes beyond that between spot and relational contracts because it focuses on the organizational dimension of contracting and its governance features. Divided into six parts, the volume brings together a group of internationally renowned experts to examine the structure of long-term contractual cooperation; networks of contracts; knowledge exchange in long-term contractual cooperation; remedies and specific governance rules in long-term relationships; and the move towards legislation. The book will be of value to academics and researchers in the areas of private law, economic theory and sociology of law, and organizational theory. It will also be a useful resource for practitioners working in international contract law and international business transaction law.

  • Contents: Preface: Society of European Contract Law (SECOLA): Part I Overview: The contractual basis of long-term organization - the overall architecture, Stefan Grundmann, Fabrizio Cafaggi and Giuseppe Vettori. Part II The Structure of Long-Term Contractual Cooperation: Dissecting long-term contracts: a law and economics approach, Mireia Artigot i Golobardes and Fernando Gómez Pomar; Contractual networks, contract design, and contract interpretation: the case of credit cards, Clayton P. Gillette; The lion, the fox and the workplace: fundamental rights and the politics of long-term contractual relationships, Chantal Mak. Part III Network of Contracts: ‘And if I by Beelzebub cast out devils…’: an essay on the diabolics of network failure, Gunther Teubner; Contracts with network effects: is the time now right?, Roger Brownsword; Networks of contracts and competition law, Michael Martinek. Part IV Knowledge Exchange in Long-Term Contractual Cooperation: Good faith related duties of disclosure and a view on franchising, Massimo Bianca; Trade secrets vs skill and knowledge, Aurea Suñol; Long-term relationships: networks and exchange of knowledge in production and distribution contracts, Marco Gobbato. Part V Remedies and Specific Governance Rules in Long-Term Relationships: Contract remedies - a relational perspective, Yehuda Adar and Moshe Gelbard; Contract governance within corporate governance: a lesson from the global financial crisis, Florian Möslein. Part VI Towards Legislation?: The nemesis of European private law: contractual nexus as a legislative conundrum, Marc Amstutz; Towards a legal framework for transnational European networks?, Fabrizio Cafaggi and Stefan Grundmann; Index.

June 2, 2014 in Books, Recent Scholarship | Permalink | TrackBack (0)

Wednesday, May 28, 2014

New in Print: Books, Part II


Pile of Books

Two New Books from Hart Publishing

Contractual Indemnities
By Wayne Courtney

Promises of indemnity are found in many kinds of commercial contracts, not just contracts of insurance. This book examines the nature and effect of contractual indemnities outside the insurance context. It is the first work to provide a detailed account of the subject in English law.

The book presents a coherent theory of the promise of indemnity while also addressing important practical issues, such as the construction of contractual indemnities. The subject is approached from two perspectives. The foundations are laid by examining general principles applicable to indemnities in various forms. This covers the nature of indemnity promises; general principles of construction; the determination of scope; and the enforcement of indemnities. The approach then moves from the general to the specific, by examining separately particular forms of indemnity. Included among these are indemnities against liability to third parties, and indemnities against default or non-performance by third parties.

The book states English law but it draws upon a considerable amount of material from other common law jurisdictions, including Australia, Canada, New Zealand and Singapore. It will appeal to readers from those countries.

Courtney BookWayne Courtney is a Senior Lecturer in the Faculty of Law at the University of Sydney.

Please click here to view the table of contents for this book

April 2014   362pp   Hbk   9781849462907   RSP: £75 / US $150

Discount Price: £60 / US $120

Order Online in the US

If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please mention ref: ‘CONTRACTSPROFBLOG’ in the special instructions field. Please note that the discount will not be shown on your order but will be applied when your order is processed.

US website:

Order Online in the UK, EU and ROW

If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please type the reference ‘CONTRACTSPROFBLOG’ in the voucher code field and click ‘apply’.

UK, EU and ROW website:

Russia BookContract Law in Russia

By Maria Yefremova, Svetlana Yakovleva and Jane Henderson

The book explains Russian contract law in a form understandable to lawyers qualified in other countries, especially common law countries. The introduction gives a concise overview of the Russian legal system in general and contract law in particular as well as a brief insight into the history of contract law in Russia. Then the main concepts of Russian contract law are explained, using the conceptual framework of English contract law to make them accessible to someone not familiar with the codified Russian system.

The book not only considers the legislation regulating Russian contractual relations but also includes appropriate case law to show how the legislation is interpreted. The focus is on contract law in Russia as it actually operates, rather than merely the legislative texts, so that it will be directly relevant to legal practitioners and others who wish to acquire knowledge of the practical application of an important element of the Russian legal system, as well as those seeking an insight into the realities of codified law in action.

The target readership therefore includes legal practitioners who have to deal with Russian law, academics and students with an interest in Russian law, the law of contract and comparative civil law, as well as scholars of comparative legal systems and Russian area studies.

Maria Yefremova graduated cum laude from the Faculty of Law at the State University - Higher School of Economics in Moscow and is qualified to practise law in the Russian Federation. She also holds an LLM degree in Public International and European Union Law from the University of Amsterdam. Prior to establishing a legal practice with Svetlana Yakovleva, Maria worked for the Moscow office of White & Case LLC. Maria is currently  Corporate Legal Counsel at Level 3 Communications.

Svetlana Yakovleva graduated cum laude from the Faculty of Law at the State University - Higher School of Economics in Moscow and is qualified to practise law in the Russian Federation. She holds an LLM degree in Law and Economics from the Erasmus University, Rotterdam and the University of Hamburg (EMLE). Svetlana worked for the Moscow office of Debevoise & Plimpton LLP, then established and ran a legal practice with Maria Yefremova. She now holds the position of Legal and Compliance Officer at Allianz Global Assistance Russia.

Jane Henderson is Senior Lecturer in Law at the Dickson Poon School of Law, King's College London, a member of King's Russia Institute and an Adjunct Professor at the University of Notre Dame (USA) in England.

Please click here to view the table of contents for this book

May 2014   326pp   Pbk   9781849462990   RSP: £25 / US $50

Discount Price: £20 / US $40

Order Online in the US

If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please mention ref: ‘CONTRACTSPROFBLOG’ in the special instructions field. Please note that the discount will not be shown on your order but will be applied when your order is processed.

US website:

Order Online in the UK, EU and ROW

If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please type the reference ‘CONTRACTSPROFBLOG’ in the voucher code field and click ‘apply’.

UK, EU and ROW website:

If you have any questions please contact Hart Publishing

Hart Publishing Ltd, 16C Worcester Place, Oxford, OX1 2JW

Telephone Number: 01865 517 530 Fax Number: 01865 510 710

Website:   Hart Publishing Ltd. is registered in England No. 3307205

May 28, 2014 in Books, Recent Scholarship | Permalink | TrackBack (0)

New in Print: Books, Part I

This week on New in Print, we are highlighting recent book-length publications on contracts law, and we have a bit of a backlog, so it may take several posts.

We want to start with a book that will be the subject of an online symposium in the Fall:

Disclosure BookOmri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure (Princeton, 2014)

Perhaps no kind of regulation is more common or less useful than mandated disclosure--requiring one party to a transaction to give the other information. It is the iTunes terms you assent to, the doctor's consent form you sign, the pile of papers you get with your mortgage. Reading the terms, the form, and the papers is supposed to equip you to choose your purchase, your treatment, and your loan well. More Than You Wanted to Know surveys the evidence and finds that mandated disclosure rarely works. But how could it? Who reads these disclosures? Who understands them? Who uses them to make better choices?

Omri Ben-Shahar and Carl Schneider put the regulatory problem in human terms. Most people find disclosures complex, obscure, and dull. Most people make choices by stripping information away, not layering it on. Most people find they can safely ignore most disclosures and that they lack the literacy to analyze them anyway. And so many disclosures are mandated that nobody could heed them all. Nor can all this be changed by simpler forms in plainer English, since complex things cannot be made simple by better writing. Furthermore, disclosure is a lawmakers' panacea, so they keep issuing new mandates and expanding old ones, often instead of taking on the hard work of writing regulations with bite.

Timely and provocative, More Than You Wanted to Know takes on the form of regulation we encounter daily and asks why we must encounter it at all.

Omri Ben-Shahar is the Leo and Eileen Herzel Professor of Law at the University of Chicago. His books includeBoilerplate: The Foundation of Market ContractsCarl E. Schneider is the Chauncey Stillman Professor of Law and professor of medicine at the University of Michigan. His books include The Practice of Autonomy: Patients, Doctors, and Medical Decisions.


"Ben-Shahar and Schneider have written what for a long time will be the definitive work on regulations that require sellers of goods and services to provide information about their products that sellers will not voluntarily provide but that the regulators believe will help the consumers to make intelligent choices. Apparently these 'mandated disclosures' are ignored by the vast majority of consumers. The authors are unrelievedly negative about the efficacy of mandated disclosures. They are right to be. Their analysis is clear, comprehensive, and convincing."--Judge Richard A. Posner, United States Court of Appeals for the Seventh Circuit

"I read this book with rapt attention. It is magnificent. Ben-Shahar and Schneider have done a masterful job of setting out their case clearly, plainly, and persuasively."--Tom Baker, University of Pennsylvania

"Ben-Shahar and Schneider present a compelling argument. They contend that mandated disclosure is a policy failure that is not easily remedied."--Zev J. Eigen, Northwestern University

"Significant and original. The research is prodigious. I am not aware of another treatment of disclosure that crosses disciplinary lines to this extent, and the analysis is all the more worthwhile for it. Ben-Shahar and Schneider show how disclosures have become pervasive in our society yet are largely ignored and misunderstood."--Clayton Gillette, New York University

Table of Contents:

Preface ix
Part I - The Ubiquity of Mandated Disclosure 1
Chapter 1 Introduction 3
Chapter 2 Complex Decisions, Complex Disclosures 14
Chapter 3 The Failure of Mandated Disclosure 33
Part I - Why Disclosures Fail 55
Chapter 4 "Whatever": The Psychology of Mandated Disclosure 59
Chapter 5 Reading Disclosures 79
Chapter 6 The Quantity Question 94
Chapter 7 From Disclosure to Decision 107
Part III - Can Mandated Disclosure Be Saved? 119
Chapter 8 Make It Simple? 121
Chapter 9 The Politics of Disclosure 138
Chapter 10 Producing Disclosures 151
Chapter 11 At Worst, Harmless? 169
Chapter 12 Conclusion: Beyond Disclosurism 183
Notes 197
Index 225

May 28, 2014 in Books, Recent Scholarship | Permalink | TrackBack (0)

Tuesday, May 27, 2014

Author Meets Reader Salon on Wrap Contracts

Law and Society Association's Annual Meeting is only a few days away.  There will be an Author Meets Reader Salon on my book, WRAP CONTRACTS on Friday, 5/30, 8:15am-10:00am in the Duluth Room. Shubha Ghosh (Wisconsin), Danielle Kie Hart (Southwestern) and Juliet Moringiello (Widener) will be joining me in what promises to be a lively discussion about those pesky clickboxes and pop-ups on your screens.  If you are attending the meeting, please stop by and join us!  

May 27, 2014 in Books, Conferences, Contract Profs, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, May 8, 2014

New in Print: The Law of Contract Damages

Hart Publishing is delighted to give you information about their latest title

The Law of Contract Damages

By Adam Kramer

Kramer, DamagesThis is the first work to concentrate solely on damages for breach of contract and provides the most comprehensive and detailed treatment of the subject to date. Written by a commercial barrister and academic for both practitioners and scholars, this text explores the familiar principles and the more recent developments of those principles. To assist understanding and practicality, much of the book is arranged by reference to the type of the complaint (such as the mis-provision of services, the non-payment of money, or the temporary loss of use of property), rather than by the more traditional subject-matter specialisms (eg sale of goods, charterparties, surveyor's negligence). Tort decisions are drawn on to the extent that the applicable principles are the same as or usefully similar to those in contract, and there is also detailed coverage of many practically important but often neglected areas, such as damages for lost management time and the proper evidential approach to proving lost profits.

Adam Kramer is a Barrister at 3 Verulam Buildings and a former lecturer at the Universities of Durham and Oxford.

Please click here to view the table of contents for this book

April 2014   648pp   Hbk   9781849464079  RSP: £95 / US $190

Discount Price: £76 / US $152

Hart Publishing is delighted to offer you 20% discount.

Order Online in the US

If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please mention ref: ‘CONTRACTSPROFBLOG’ in the special instructions field. Please note that the discount will not be shown on your order but will be applied when your order is processed.

US website:

Order Online in the UK, EU and ROW

If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please type the reference ‘CONTRACTSPROFBLOG’ in the voucher code field and click ‘apply’.

UK, EU and ROW website:

If you have any questions please contact Hart Publishing

Hart Publishing Ltd, 16C Worcester Place, Oxford, OX1 2JW

Telephone Number: 01865 517 530 Fax Number: 01865 510 710

Website:   Hart Publishing Ltd. is registered in England No. 3307205

May 8, 2014 in Books, Recent Scholarship | Permalink | TrackBack (0)

Wednesday, March 5, 2014

New in Print from Carolina Academic Press

Nygren & KatzCarolyn J. Nygren & Howard E. Katz, Starting Off Right in Contracts (2d Ed. 2014)

To do their best on the final exam, students need a strategy to approach the course material efficiently and to organize it in a logical manner. This book gives students that and more. In chapters on contract formation, defenses, breach and remedies, and multi-issue fact patterns, the authors show students how to answer sample questions, use a step-by-step method that will improve their ability to analyze contracts problems, and effectively demonstrate their knowledge to the professor.

Charles Calleros & Stephen Gerst, Contracts: An Electronic Text: Cases, Text & Problems (2013 ed.)

Contracts: Cases, Text, and Problems is an electronic casebook available in PDF format. The 2013 edition is updated to July 2013.

Calleros & GerstCreated initially for a four-unit Contracts course at ASU, Professor Calleros designed Contracts: Cases, Text, and Problems as an "open-source" textbook. Other professors of contract law are invited to become “co-authors” by tailoring the book to their own courses. As an open-source book, professors can add, delete, or replace material as dictated by their own teaching styles and points of emphasis. Contracts offers professors a unique and innovative way to teach students in an up-to-date way, with easily customized material, and without being forced to buy multiple books and supplements.

Most topics in the book present material in the fashion in which new associates typically address an assignment in a law office: they (1) consult a secondary source or an expert within the firm for general background information and to identify issues and authority {the book provides treatise-style background information on most topics before diving into the main cases}, (2) associates then study specific decisions on point in the relevant jurisdiction {the book presents plenty of case law, as is customary with any "casebook"}, and (3) they apply their newly synthesized knowledge of the law to the facts of a new dispute or other problem presented to them {the book provides many more exercises and practice exams than the standard casebook, including a fair number of drafting exercises}. The book thus includes the written equivalent of a combination of introductory lecture, case method, and problem method.

To combat the high cost of casebooks, the 509-page book is available at a very modest price for permanent download of any of the electronic formats. Each purchaser is permitted to download the purchased file on any computer or electronic device used exclusively by that purchaser. Purchasers agree not to transfer files to others or to allow others to use their files.

The book analyzes selected provisions of the Restatement (Second) of Contracts but does not reproduce it in its entirety, to avoid advancing the common student practice of treating the Restatement like a collection of statutes. It reproduces most of articles 1 and 2 of the UCC as enacted in Arizona, to better illustrate the nature of the UCC as a uniform code that is adopted and codified by individual state legislatures.

March 5, 2014 in Books, Recent Scholarship | Permalink | TrackBack (0)

Thursday, February 27, 2014

Margaret Jane Radin responds

Readers of this blog will remember that last year we hosted a lively symposium on Margaret Jane Radin's book, Boilerplate:  The Fine Print, Vanishing Rights, and the Rule of Law.

Others entered into the discussion in different avenues, including Omri Ben-Shahar with his essay reviewing Radin's book.  Margaret Jane Radin responds to Ben-Shahar's essay here.

The debate about mass consumer form contracts is far from over....


February 27, 2014 in Books, Miscellaneous, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, January 17, 2014

A Lesson in Relational Contracts from James Joyce

JoyceThe main character of James Joyce's short story, "A Mother" (beginning on p, 103 of the link), is a naturally pale woman with  an unbending manner who made few friends at school.  She became Mrs. Kearney out of spite, Joyce tells us, when her friends began to loosen their tongues regarding her impending spinsterhood.  Hoppy Holohan had been attempting for nearly a month to arrange a series of concerts for the Eire Abu Society, but he had no success until he came across Mrs. Kearney, who then "arranged everything."  

She did so because she desired that her daughter, Kathleen, perform as accompanist at the Society's concerts.  Once Mr. Holohan approached her, Mrs. Kearney "entered heart and soul into the details of the enterprise, advised and dissuaded: and finally a contract was drawn up by which Kathleen was to receive eight guineas for her services as accompanist at the four grand concerts." 

The relationship sours as soon as the concerts begin.  Wednesday's concert is poorly attended.  Thursday's concert is better attended, but the audience "behaved indecorously, as if the concert were an informal dress rehearsal."  Moreover, as Mrs. Kearney noted, and Mr. Holohan conceded, "the artistes" were not good. But the real conflict arose over a decision by the "Cometty" of the Society to reduce the number of concerts from four to three.  Mrs. Kearney attempted to protest to Mr. Holohan that any such decision did not alter the contract, and her daughter would be paid for all four concerts.  

 We none of us can help our natures, and Mrs. Kearney's frosty and haughty disposition, coupled with Mr. Holohan's well-intentioned ineptitude combine to form the equivalent of Chekhov's gun introduced in Act I which must be fired in Act III.  When Mrs. Kearney threatens that her daughter be paid in advance or she will not perform in the final contract, Mr. Holohan attempts to disclaim all authority and refers her to the elusive Mr. Fitzpatrick.  

One Mr. O 'Madden Burke was to write a notice of the concert for The Freeman.  Joyce describes him as "a suave, elderly man who balanced his imposing body, when at rest, upon a large silk umbrella. His magniloquent western name was the moral umbrella upon which he balanced the fine problem of his finances. He was widely respected."  After a few rounds of haggling over Ms. Kearney's pay, Mr. O 'Madden Burke declared that "Ms. Kathleen Kearney's musical career was ended in Dublin."

There are dangers in insisting that contractual promises are irrevocable.  

January 17, 2014 in Books, Commentary | Permalink | Comments (0) | TrackBack (0)

Friday, November 22, 2013

Wrap Contracts Symposium, Part VII: Theresa Amato

This is the seventh in a series of posts on Nancy Kim's Wrap Contracts: Foundations and Ramifications (Oxford UP 2013). 


Our seventh guest blogger, Theresa Amato, is the executive director Citizen Works which she started with Ralph Nader in 2001. After earning her degrees from Harvard University and the New York University School of Law, where she was a Root-Tilden Scholar, Amato clerked in the Southern District of New York for the Honorable Robert W. Sweet. She was a consultant to the Lawyers Committee for Human Rights (Human Rights First) and wrote an influential human rights report on child canecutters in Haiti and the Dominican Republic. She then became the youngest litigator at Public Citizen Litigation Group, where she was the Director of the Freedom of Information Clearinghouse in Washington D.C.  In 1993, Amato founded the nationally-recognized, Illinois-based Citizen Advocacy Center and served as its executive director for eight years. She currently serves as its Board President.  Most recently, she has launched Fair to reform the fine print in standard form contracts.  In 2009, The New Press (New York) published her book, Grand Illusion: The Myth of Voter Choice in a Two-Party Tyranny.  She also appears prominently in the Sundance-selected and Academy Awards short-listed documentary “An Unreasonable Man.”  

Nancy Kim

“Yes,” writes Professor Nancy S. Kim. “As strange as it may seem, under contract law you can legally bind yourself without knowing it.”

Contract law experts nod in accord, some in resignation or with ennui.  Non-lawyers are instead completely shocked when I describe this reality.   They have no idea that by visiting a website, sending an email, tweeting or posting, or any of these now common, everyday acts that they are giving consent to use those services and are therefore binding themselves to the various “terms of use” – even if they may have only “constructive” and not actual notice of them. 

In her valuable book, Wrap Contracts, Foundations and Ramifications, Professor Kim does a service to all by explaining how courts enforce these online contracts “where consumers have no intent of entering into a contract.”  She points out that “[t]he requirement of manifestation of consent seems to be subsumed in wrap contract cases with the issue of notice.”  As a result, “the nondrafting party does not actually need to either receive notice or understand or intend the meaning attributed by the courts to a particular action.”

Court decisions to date have favored corporate vendors over consumers whose actual online navigating experience using these products and services covered by “wrap contracts” is given insufficient acknowledgement.  No consumer wants to fill out an online form only to be then told to click somewhere else to find buried terms of use, thereby putting at risk the time they have spent entering data to confirm the transaction.    Nonetheless, as Kim concludes:

courts have constructed consent in an entirely unreasonable fashion by twisting doctrinal rules, conjuring up notice, inferring action from inaction, and blithely ignoring the central role of intent in contracts.  They engage in this hocus pocus in order to enforce transactions that they believe provide a net benefit to society.

These “wrap contracts” consumers often unknowingly “agree” to may be buried in the hyperlinks and are not merely proprietary instructions for how to use the product or service.  As Professor Kim explains,   consumers are not only under affirmative obligations in these “wrap contracts,” they may be subject to a smorgasbord of rights-reducing language.   Exclusive jurisdiction, forced arbitration, waived class actions, and the vendor’s one-way reserved rights to change the terms whenever it wants to are aggressive consumer rights reducers, often eviscerating decades of public policy and legal decisions that have afforded consumers their rights.  In some cases, consumers are agreeing to muzzle themselves from complaining about the product or service.  Fine print contracts may not only strip mine the legal rights of consumers, but they can also take or “steal” their property and privacy. 

Wrap ContractsThank you, Professor Kim for spelling it out for all to read.  Not only do consumers not need a pen to sign on a dotted line, or in some cases even a button to click that one “agrees” to terms certainly not read, but “wrap contracts” take it even further.  Consumers don’t even need to know they are agreeing, much less to what set of terms.  Nonetheless, “wrap contracts,” now often “multi-wrap contracts,” as Professor Kim notes, “by their form, permit companies to impose more objectionable terms than paper contracts of adhesion.”

When people begin to understand how their rights are treated in the “wrap contract” rabbit hole, this offends sensibilities.  For those not attuned to the “degradation of consent,” so aptly explained in Professor Margaret Jane Radin’s book Boilerplate, The Fine Print, Vanishing Rights, and The Rule of Law, this sort of contract peonage is not only unwelcome, it runs counter to everything the non-drafting parties think of as fair play. 

Professor Kim’s use of the term “crook provisions” should not be understated and aligns with popular sentiment when consumers are fully informed of this state of affairs.  Companies now grant themselves the right to “appropriate” -- once known otherwise as “stealing” or, charitably, “taking”-- from consumers for no payment.  They then turn around and make a profit on what heretofore we would have considered the possessions of the consumer, e.g. their content, images, personal information and shopping habits. 

As Professor Kim explains:  “a crook provision anticipates no such offensive action by the consumer and has no direct relationship with the product or services offered by the company.  It is simply an attempt to sneak an entitlement from the user without payment, either in terms of money or goodwill.”     Indeed.

So where is the counteraction to this outright mugging of consumer rights and property?  The ubiquity of these contracts has masked the reality of their potential to do serious harm to consumers such that consumers are not even aware of the magnitude of the problem.   

Kim notes that “What we call something matters.” I agree, and after reading her parade of horrible online scenarios in Chapter 10, “Contracts in Wonderland,” and just how far afield these “wrap contracts” are from the fundamental principles of contract law, I started thinking of new labels for these “wrap contracts” and their innocuous, almost blasé sounding, “terms of use.”  

For lack of a better term at the moment, I think we should nonetheless stop calling them “contracts” and start treating them as the equivalent of “online asbestos.”  Like asbestos in its heyday, manufacturers and service providers use “wrap contracts” everywhere.  They have properties that facilitate commerce but that does not mean that they are not toxic and dangerous for those exposed to them. 

Moreover, like asbestos, some of the dangers will not necessarily emerge for decades when content thieves and data aggregators use consumer information to the detriment of the consumers.  Perhaps due attention will be paid when the content providers, i.e. the consumers/users, begin to realize they cannot expunge those posts from their teens or more uncensored moments that now prevent them from getting hired or getting credit.   Or perhaps regulators will begin to pay sufficient attention to the one-sided misappropriations when serious amounts of data are compromised by those with criminal intent (already it is happening) and with frequency for millions of users.

The question is, how long will it take for U.S.  regulation and the courts to catch up to the need to ban or strictly limit the use of these offensive sword and crook provisions? For asbestos it took at least half a century, while manufacturers whined the whole way about regulation even as they knew for decades of its dangers much as “wrap contract” apologists do now.  No, these “contracts” may not kill you, but they can make your life miserable and we would all breathe better if consumers were treated more fairly. 

Though “online asbestos” may sound hyperbolic in academic circles, there needs to be a massive push back on behalf of consumers – for the nomenclature does matter.  “Terms of use” and “wrap contracts” sound far too innocuous when we know that people do not realize they are being exposed to, and through buried notices alone “agreeing” to, the dangerous loss of their rights and the theft of their property.   To get organized, as we at Fair Contracts educate about and encourage, the tide will not turn until people are fully aware of what happens when they alight on a website.  Ubiquity, harmonization of users, inertia, facility, consumer biases, are all operating to the detriment of consumers and to the advantage of corporate profit seekers.

Professor Kim’s doctrinal adjustments (“a duty to draft reasonably; replacing blanket assents with specific assent; considering contract function when apply existing doctrinal rules, and reinvigorating unconscionability”) are a very solid start, though they are only a beginning.  In some cases, such as replacing blanket assent with specific assents, the proposed remedy may only devolve into the Pavlovian clicking response now exercised by consumers with routine oblivion to the consequences, believing they have little choice if they want the product or service behind the click.  

Courts should be helping consumers enforce their intent, not creating doctrinal chaos as Kim writes by reciting, “law that originates from the paper-based contracting world to this brave new digitally based world when they might be better off acknowledging the difference that contract form and function make to the reasonable expectations of the parties.”  The courts have instead largely given corporations a judicial pass thus far and Professor Kim’s rebalancing of burdens (from the nondrafting party to the drafting party) is the least that they could begin to impose to adjust the invocation of the judicial force of the state.

I think we should be asking for much more on behalf of consumers and could take cues from other countries with more advanced notions of consumer protection and data privacy.  Not only should legislators, regulators and courts protect consumers from exposure to online asbestos by outright banning, or at minimum reforming, many of these harmful provisions, but corporations who have taken rights from consumers should also be required to begin remediation efforts – immediately.  These corporations can start by returning the misappropriated property and other stolen goods to their rightful owners.      

[Posted, on Theresa Amato's behalf, by JT]


November 22, 2013 in Books, Commentary, Recent Scholarship, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, November 21, 2013

Wrap Contracts Symposium, Part VI: Eric Zacks on Deciphering the Function of Form in Wrap Contracts

This is the sixth in a series of posts on Nancy Kim's Wrap Contracts: Foundations and Ramifications (Oxford UP 2013).   Our sixth guest blogger, Eric Zacks, is an Assistant Professor of Law at Wayne State University Law School. 

Deciphering the Function of Form in Wrap Contracts 

Zacks-webForm and function collide again and again in Professor Kim’s engaging Wrap Contracts. As Kim explains, the wrap contract’s form is deeply connected to its function, and her description and devastating critique of these varying forms illuminate the complexities of how we interact with, and are affected by, such contracts. She argues that the form ought to reflect the function of the wrap contract so that users better understand the nature of the contract. In this comment, I seek to address the ways form may already reflect function, albeit not in the manner that Kim necessarily would prefer.

As in industries utilizing paper consumer contracts, competition among businesses that employ wrap contracts demands that they develop a nuanced understanding of how the non-drafting parties and judges interact with contracts. For example, we should not be surprised by contracts that induce deference to the contract as written from the non-drafting parties. To that end, the prevalence of particular wrap contract features, such as the use of multiple hyperlinks to obtain the text of a license or lengthy and complex terms, are unsurprising because they make it more unlikely that non-drafters will try to (or actually) understand the content of the contract. Similarly, delivering the product prior to, or simultaneously with, the “execution” of the contract through the use of shrinkwrap or delaying the opportunity to review contract terms until the website user has sunk time and energy into filling out an order form, deter contract term detection or review and reflect drafters’ sophisticated understanding of individual decision-making processes.

Wrap contracts presumably also could be designed to make the adjudicator comfortable with enforcing the contract as written against the non-drafting party. The “click-through” on a website is a powerful device because it lends itself nicely to a particular counterfactual analysis that “but for” the click, the customer would not have been bound. Because the customer did click, adjudicators typically conclude that she should be held responsible for the terms of the contract. Importantly, this adjudicative response is triggered even though, as Kim notes, “adherents to these contracts to these contracts are typically oblivious to what they have done,” suggesting that the click triggers a psychological response similar to contracts with a more passive means of acceptance (such as simple disclosure of terms).  

Kim’s metaphors of the shield, sword, and crook to explain the different functions of the wrap contracts (Chapter 5) also are helpful because they can help identify the underlying motivation for certain provisions. By understanding whether the primary function of the contract is to protect the drafting party (the “shield”), obtain better transaction terms (the “shield”), or seek benefits beyond the scope of the transaction (the “crook”), we may then speculate as to which form of a wrap contract makes sense from the drafter’s perspective.

Wrap Contracts

If, however, the goal is to prevent the use of the software in a particular manner, then the form of contract as it appears to the adjudicator may be more important than a contract form that deters returns. Accordingly, the contract form may emphasize notice of the terms, if not outright acceptance. I suspect that a “click-through” box may help in this regard, although the blatancy of wrongful or inappropriate use, particularly of free software, may not require an additional volitional act on the part of the user (such as explicit assent to the contract) to convince an adjudicator to enforce the contract as written. The courts, as noted in Kim’s book, typically find notice of non-negotiated terms to be sufficient when such wrongful use has occurred.

Lastly, if the goal is to use the contract as a crook, then a contract that requires a more active acceptance of the contract terms (such as clicking “I agree”) may be preferable from the drafter’s perspective. By being able to point to the specific act of the click and a “better” assent, a drafting party may be better able to extract property rights unrelated to the transaction under adjudicative scrutiny.  The extraction of the property rights by the drafting party may appear wrongful to the adjudicator, but counterfactual analysis surrounding the “explicit” assent to the contract may point to a different result.

With respect to the metaphors described above, I do question whether the distinction between shield and sword holds up sufficiently in many cases. License agreements containing shields and license agreements containing swords essentially provide the user with a restricted license, and the difference between the two types is a bit unclear. For example, Kim describes the restrictions on copying and transferring software discussed in ProCD, Inc. v. Zeidenberg as a shield and the restriction on reverse engineering discussed in Davidson & Associates v. Jung as a sword. As each can be described as a shield protecting the licensor from unfair or undesired business practices or a sword preventing the licensee from exercising certain rights, it may be simpler to divide the world of wrap contract provisions into defensive (those that manage business risks related to the license or transaction) and offensive (those that extract rights unrelated to the license or transaction). In any event, the specific categorization does not undercut Kim’s more significant conclusion that the use of shield and sword provisions has enabled the use of crook provisions.

It also would be interesting to know whether these different contract goals and functions do, as an empirical matter, affect the form chosen by the drafting party as described above.  Of course, the judicial slide towards “notice that terms exist” as “consent” noted in Wrap Contracts could somewhat obviate the need for such planning, and the multiple goals of the drafting party also are not necessarily mutually exclusive. Wrap Contracts provides us with a welcome exploration into the connection between form and function in these ubiquitous contracts and suggests how understanding this connection can help us address problematic contracting practices in this still-developing context.  

[Posted, on Eric Zacks' behalf, by JT]

November 21, 2013 in Books, Commentary, Recent Scholarship, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wrap Contracts Symposium, Part V: Michael Rustad on Reforming Wrap Contracts

This is the fifth in a series of posts on Nancy Kim's Wrap Contracts: Foundations and Ramifications (Oxford UP 2013).   Our fifth guest blogger, Michael Rustad, is the Thomas F. Lambert, Jr. Professor of Law and Co-Director of the Intellectual Property Law Concentration at Suffolk University Law School. 

Reforming Wrap Contracts

MrustadIn her insightful new book, Nancy Kim contends that “wrap contracts” take the form of a traditional contract but constitute a “coercive contracting environment.” (Nancy S. Kim, Wrap Contracts: Foundations and Ramifications 1-3 (Oxford University Press, 2013)). Professor Kim contends that the problem with “wrap contracts” is “their aggressive terms.” (Id. at 4.)  My Suffolk University Law School research team, focusing on contracting practices in social media websites, found strong empirical support for Professor Kim’s argument that wrap contracts are overly aggressive and in need of law reform.  My own empirical work with a team at Suffolk University Law School has uncovered a growing number of social networking sites incorporating mandatory arbitration and anti-class action waivers. (Michael L. Rustad, Richard Buckingham, Diane  D’Angelo, and Kathryn Durlacher, An Empirical Study of Predispute Mandatory Arbitration Clauses in Social Media Terms of Service Agreements, 34 University of Arkansas Law Review 1 (2012) (Symposium Issue on ADR in Cyberspace)). 

By incorporating predispute mandatory arbitration clauses into their terms of service, a growing number of social networking sites (SNSs) are divesting consumers of their rights to civil recourse against providers who violate their privacy, commit torts, or infringe their intellectual property rights. SNS users around the world are required to agree to predispute mandatory arbitration as a condition of joining social networking communities. Consumers who enter into “clickwrap” or “browsewrap” terms of service agreements waive their right to a jury trial, discovery, and appeal, without reasonable notice that they are waiving these important rights. American consumers might be surprised that they have agreed to litigate in Mumbai, Hong Kong, or the People’s Republic of China when they clicked agreement to SNS terms of use.  These mandatory arbitration agreements incorporated in terms of use are essentially an anti-remedy because the cost of arbitration will usually exceed the amount at stake.  Requiring consumers to arbitrate in a far-off forum functions is an absolute immunity from liability because the cost and inconvenience of pursuing arbitration will far exceed the damages that could be recovered if they prevail.

Wrap ContractsThe most pernicious of the waivers are those against joining class actions. In our study of predispute mandatory arbitration agreements in social media wrap contracts, we found eleven of the thirty-seven arbitration clauses preclude consumers from initiating or joining class actions. Class action waivers have the practical effect of denying justice to a large number of consumers by divesting them of the right to join with other aggrieved social media users to pursue relief under state consumer law.  Many of the first generation lawsuits against SNSs were class actions or collective proceedings because the damages for any one individual user were too small to make the lawsuit cost-justified. Immunity breeds irresponsibility in the information-age economy, where an increasing number of companies are divesting consumers of any civil recourse by including class action waivers in their terms of service.

The creators of SNS and other wrap contracts are overly aggressive about including anti-class action waivers, in large part, because the U.S. Supreme Court routinely upholds predispute mandatory arbitration clauses and anti-class action waivers.  In a 5-4 decision, AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), the U.S. Supreme Court held that the Federal Arbitration Act preempted California’s use of state unconscionability law to render class action waivers unenforceable.   Let’s be clear about what Concepcion means for ordinary consumers.  With these rulings, the Court is padlocking the courthouse door to elderly nursing home patients harmed by neglectful caretakers.  Keep in mind that the typical nursing home resident or his caretaker has probably not even read the arbitration clause buried on page 20 or deeper into an admissions contract.  What this means is that if your Mother or Grandmother suffers septic shock from decubitus ulcers caused by neglect, her estate will have no recovery because no lawyer in her right mind will take a case where mandatory arbitration and its running partner, class action waivers are in play.  Trial lawyers do not take nursing home cases to arbitration because of the perception that arbitrators will give lower awards for non-economic damages and almost never award punitive damages.  In my informal survey of attorneys specializing in nursing home neglect, I have been unable to find a single case where a trial lawyer represented a nursing home patient in arbitration.       The Court’s decisions are, in effect, a federal takeover of arbitration, preventing the states and private plaintiffs from challenging one-sided and oppressive consumer arbitration clauses on grounds of unconscionability.  When wrap contracts couple mandatory arbitration clauses with class-action waivers they essentially create a liability-free zone in cyberspace.  Class action waivers preclude Internet users from filing a class action or even joining an existing one. This de facto immunity shields social networking sites from class actions for violations of privacy, contract, tort, or intellectual property rights that would otherwise be recognized in federal and state courts.

Social networking sites that combine mandatory arbitration with anti-class action waivers ensure that these powerful entities will not be accountable for failing to secure and safeguard their users' sensitive personally identifiable information. Social media sites can use the names, likenesses, and personal information of their users with impunity. Consumer class actions are often the only practical alternative in securing legal representation under the contingency fee system in cases where actual compensatory damages are small or nominal. Class actions enable litigants with slight monetary damages claims to combine actions in a representative action.  Without class actions, social networking sites are effectively immunized from the judicial process and may continue unfair practices with impunity.

Professor Nancy Kim’s suggested law reform to police overly aggressive terms in webwraps would be to tip the doctrine of unconscionability on its head.  Her proposed reform for webwraps would presume that these standard forms are unconscionable, except if validated by legislative decree or if there were meaningful alternatives in the marketplace. (Id. at 248).  However, even a revivified unconscionability doctrine will be preempted by the U.S. Supreme Court’s current reading of the Federal Arbitration Act. (“FAA”).  Congress must act to prohibit predispute mandatory arbitration and class action waivers in all types of wrap contracts.  In the end, U.S. companies would benefit from mandatory terms constraining or cabining wrap contracts. 

The golden age of the broad enforcement of U.S. style wrap contracts will end soon because of the increasingly flattened world where U.S. companies license content to European consumers. In Germany, consumers associations have successfully challenged the terms of CompuServe, AOL, and Microsoft: the first was subject to a default judgment; the other two agreed to a binding cease-and-desist declaration. All three American companies have entered into settlements in which they agreed to change their marketing practices. When it comes to consumer rights for wrap contracts, the U.S. is like Mars—and Europe is like Venus.  Europe rejects freedom of contract in consumer transactions, recognizing that this is a legal fiction in non-negotiated standard form contracts. The European Commission takes the position that, even if a consumer assents to an abusive term, it is unenforceable as a matter of law, and European consumers, unlike their American counterparts, cannot be hauled into distant forums and be divested of mandatory consumer protection.  Professor Kim has done a superb job in identifying the problem with wrap contracts, but her solution falls short of addressing problems such as predispute mandatory arbitration and anti-class action waivers.

[Posted, on Michael Rustad's behalf, by JT]

November 21, 2013 in Books, Commentary, Recent Scholarship, Web/Tech | Permalink | Comments (0) | TrackBack (0)