It Just Got Easier to Sue Failed Kickstarter Campaigns for a Refund
Kickstarter has decided to update its famously laissez-faire attitude when it comes to protecting donors who have pledged more than $1 billion through the company over the years. The new terms state that a successfully funded campaign that fails to produce "rewards," i.e. the product, may have to "return remaining funds." If not, they could be "subject to legal action by backers."
Backers could previously sue campaign creators, but rarely did so. The new rules, which go into effect on October 19th, make the potential for a lawsuit more explicit (check out the differences here).
The amended TOS says that by backing a project, donors are entering into a "contract" with creators. Kickstarter then lists all the things a creator has to do if a product does not materialize, including "offer to return any remaining funds." If creators fails to bring the contract to the "best possible conclusion," the "legal action" part kicks in.
Below is a screenshot of the relevant change. As you can see, Kickstarter is very careful to note that "Kickstarter is not a part of this contract." Much like Airbnb hosts paying taxes or UberX lowering prices, the potential cost trickles down the sharing economy.
If you missed the part about Kickstarter not being responsible, the company also clarified its limited liability clause:
Kickstarter insists that changes to its terms of service are entirely unrelated to the new FTC rule around refunds from online retailers, which also happened to be announced last week, telling TechCrunch:
"Our Terms update has been in the works for months and was driven by a longterm effort to make everything about them straightforward and clear."
The inclement legal climate would make any crowdfunding company wary. The FTC has been discussing updating that refund rule for seven years, reports The Daily Dot:
The new name, according to the Federal Register, is the Mail, Internet, or Telephone Order Merchandise Rule. It "prohibits sellers from soliciting mail, Internet, or telephone order sales unless they have a reasonable basis to expect that they can ship the ordered merchandise within the time stated on the solicitation or, if no time is stated, within 30 days."
The FTC's new amendments to the decades-old regulation "permit refunds and refund notices by any means at least as fast and reliable as first class mail" and "require sellers to process any third-party credit card refunds [within] seven working days."
Then there's the lawsuit filed by Washington State Attorney General Bob Ferguson against a company called Altius Management for failing to deliver on promises to Kickstarter donors.
Sorry, benevolent backers, there is still no legal recourse for accidentally making rich people richer.
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