The Federal Court of Australia (“Court”), in its decision in Dialogue Consulting Private Limited v. Instagram Inc. [2020] FCA 1846 dated December 22, 2020, considered the legality of the arbitration clause contained in Instagram’s terms of use (“Terms”), finding that the clause was enforceable and not void on grounds of unfairness or statutory unconscionability, as alleged by the applicant.  

The applicant, Dialogue Consulting Private Limited (“Dialogue”), is a start-up based in Australia that allows users to schedule the posting of marketing content on Instagram and Facebook. Instagram Inc. (“Instagram”) alleged that Dialogue was in breach of its Terms and suspended Dialogue’s access to the platform, as it unauthorisedly accessed and collected data relating to users from Instagram’s platform, including user posts and related media, in a process known as ‘scraping’.  Dialogue initiated legal proceedings in the Court for its access to the platform to be restored. After a period of 12 (twelve) months, Instagram sought to rely on an arbitration clause in its Terms to refer certain claims of the dispute to arbitration in California and stay proceedings in the Court. 

Dialogue argued against the referral to arbitration on the grounds that the arbitration clause was not enforceable as Instagram’s Terms did not constitute a valid, binding agreement between Dialogue and Instagram. The Court held that the Terms, and the arbitration clause contained within, constitute a valid and enforceable agreement. The Court found that (i) Instagram met the requirements of a valid contract by providing a hyperlink to the Terms on the sign in page to the platform, (ii) the hyperlink provided constructive notice of the Terms in a manner that enabled a reasonably prudent person to read them if they desired to, and (iii) the hyperlink was conspicuous and provided reasonable notice to a user that by clicking the ‘sign in’ button, they would be manifesting assent to the Terms, irrespective of whether they had actually reviewed such Terms.

With respect to Dialogue’s allegation that the arbitration clause contained in the Terms was ‘unfair’ and ‘unconscionable’ under Australian Consumer Law, the Court found that the arbitration clause was deemed to be reasonably necessary to protect Instagram’s legitimate interests in avoiding litigation across multiple jurisdictions. 

However, the Court held Instagram had deliberately and intentionally waived its right to arbitration by participating in the Court proceedings for a lengthy period of time, and not asserting its arbitration rights as defence. The Court further observed that with Instagram having a detailed understanding of its Terms, it is likely to have been aware of the arbitration clause and deliberately chosen not to rely on it. Accordingly, the Court dismissed Instagram’s stay application. 

Please find a copy of the Court’s decision here.

This update has been contributed by Suchita Ambadipudi (Partner) and Pranav Pillai (Associate).

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