Users who agree to the latest Xbox 360 update's terms of services forfeit their right to sue Microsoft.
After a bit of a shaky start, the most recent Xbox 360 update has finally gone live, introducing a wide variety of new features and giving users access to a massive collection of film and TV content. However, the new update does come with a somewhat devious catch.
A segment written in big, bold letters in the update's terms of service essentially state that Xbox 360 owners are forbidden from participating in any class action suits against Microsoft. Specific details can be found in section 18 for those versed in legalese, but for the most part, any dispute between a user (or users) and Microsoft can now only be handled privately out of court through arbitration. Anyone who wants to take Microsoft to task for problems, issues or mistakes with Xbox Live or the console itself will no longer be able to involve a judge or jury.
Previous class action suits against Microsoft caused the electronics giant to own up to major problems with Xbox Live and the Xbox 360, such as extending its warranties to cover console failures caused by the infamous E74 error, AKA "Red Ring of Death." By requiring future disputes be handled behind closed doors, it's entirely possible that Microsoft could use this new clause to brush any problems under the rug or offer little payout to consumers who dispute any issues with its services. Most often cases involving private arbitration aren't open to the public, and there's also very little in the way of reviewing an arbitrator's decision.
Sony and Electronic Arts enacted similar policies in its terms of service just this past September, primarily in an attempt to mitigate the impact of large lawsuits, such as the one that followed the massive breach of security Sony's PlayStation Network that cost Sony billions of dollars.
The new Xbox 360 terms of service only affect residents of the United States, so if you happen to live elsewhere in the world, you don't have anything to worry about right now. Those inside the US can file a dispute by filling out this form and mailing it in.