Amazon's conditions of use contain arbitration clauses that bound purchasers
The Federal Court has ruled to stay a proposed class action lawsuit against Amazon in favour of arbitration, finding that the e-commerce giant entered into binding arbitration agreements with its purchasers.
In Difederico et al. v. Amazon.Com, Inc. et al., 2022 FC 1256, Stephanie Difederico brought a proposed class action lawsuit against Amazon, alleging that the e-commerce company committed criminal price-fixing in violation of the Competition Act through a competwetive pricing provision and a related fair pricing policy.
Difederico maintained accounts with both Amazon.ca and Amazon.com and purchased products through both accounts. Amazon.ca’s 2014 and 2022 terms and conditions for the use of its services contained dispute resolution and arbitration clauses, as well as choice-of-law clauses. Based on these arbitration agreements, Amazon filed a motion to stay the proposed class action in favour of arbitration.
The Federal Court noted that the Supreme Court of Canada has consistently held that courts should give effect to arbitration agreements absent any legislative intervention. There is also a well-settled policy in Canada that compliance with arbitration agreements is to be enforced by the courts to the extent that such agreements are not null, void, inoperative, or incapable of performance.
Amazon argued that the court had no residual discretion to refuse a stay in favour of arbitration. Difederico, on the other hand, contended that the court had the discretion to stay proceedings in the interests of justice. She further asserted that there was no contractual relationship on the dispute resolution clauses, that such clauses violated public policy by preventing access to justice, and the clauses were unconscionable.
Amazon argued that the provisions of the United Nations Foreign Arbitral Awards Convention (UNFAACA) should be applied in this case, as the convention covered disputes arising out of commercial legal relationships. Difederico asserted that her relationship with Amazon was not commercial – rather, when consumers purchased goods on Amazon, they were buying goods for consumption.
The Federal Court was of the view that the nature of Difederico’s claims had a uniquely commercial character. The court explained that her claims centered around allegations that Amazon had entered into commercial agreements with third-party sellers on its sites regarding the pricing of goods. These purported agreements were commercial transactions between business entities. While Difederico was indeed a consumer, the court found that her claims had a commercial foundation. Consequently, the enforcement of arbitration agreements under the UNFAACA should be applied.
In determining whether or not a stay should be granted, the court noted three requirements that must be satisfied – an arbitration agreement must be in place, Difederico’s claims must arguably fall within the scope of the arbitration agreement, and there must be no ground on which to deny the stay.
Arbitration agreement in place
The court categorically found that an arbitration agreement was in place. Difederico argued there was no binding arbitration agreement as she did not receive adequate notice of the dispute resolution terms.
The arbitration clauses expressly stated that, “any dispute or claim relating in any way to your use of any Amazon.ca Service, or to any products or services sold or distributed by Amazon.ca or through Amazon.ca Services will be resolved by binding arbitration, rather than in court.” The Federal Court found that these clauses were broad and covers all matters that pertain to purchases made on Amazon.ca, including Difederico’s claim in respect of her purchases.
No ground to refuse stay
Difederico raised a bona fide challenge to both the jurisdiction of the arbitrator and the validity of the arbitration agreement. The Federal Court explained that when the validity of an arbitration agreement or the jurisdiction of the arbitrator was challenged, the issue must be referred to the arbitrator under the principle of competence-competence.
Difederico argued that the arbitrator could not apply the Competition Act and instead the choice-of-law clause required the arbitrator to apply US law. She argued that this would prevent access to remedies for violations involving commerce in Canada. She also asserted that the cost of litigating the case in a US arbitration under US law without a class action would be prohibitive and the arbitration agreement would prohibit access to justice and, as a result, it was contrary to public policy and unconscionable.
An expert clarified that claims within the scope of an arbitration clause will be determined in accordance with the law giving rise to the claim. A choice-of-law clause would not prevent a tribunal from entertaining an antitrust or competition law claim and would not be an obstacle to the tribunal’s enforcement of Difederico’s Competition Act claims under the competition law of Canada. The Federal Court pointed out that in the absence of any conflict between Canadian and US public policy, the arbitrator would not hesitate to apply Canadian public policy in an arbitration.
The court ultimately rejected Difederico’s arguments and ruled that jurisdictional issues and questions on the validity of the arbitration agreement should be determined by the arbitrator. In addition, the court did not find any overriding public policy or unconscionability arguments to avoid arbitration in this case.