ARTICLES

929

VANDERBILT LAW REVIEW

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OLUME 73 MAY 2020 NUMBER 4

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ARTICLES

Theory of the Nudnik:

The Future of Consumer Activism and

What We Can Do to Stop It

Yonathan A. Arbel*

Roy Shapira**

How do consumers hold sellers accountable and enforce market norms?

This Article contributes to our understanding of consumer markets in three

ways. First, the Article identifies the role of a small subset of consumers—the

titular “nudniks”—as engines of market discipline. Nudniks are those who call

to complain, speak with managers, post online reviews, and file lawsuits.

Typified by an idiosyncratic utility function and certain unique personality

traits, nudniks pursue action where most consumers remain passive. Although

derided in courtrooms and the court of public opinion, we show that nudniks

* University of Alabama School of Law.

** Radzyner Law School, Interdisciplinary Center (“IDC”). We thank Ronen Avraham, Lisa

Bernstein, Matt Bruckner, Shahar Dillbary, Meirav Furth, Eric Goldman, Nancy Kim, Ronald

Krotozinsky, Stephen Laandsman, Ben McMichael, Colin Rule, Tony Sebok, Catherine Sharkey,

Steve Shavell, Rory Van Loo, and Eyal Zamir, as well as participants of conferences and workshops

at Berkeley, Chicago, DePaul, Emory, Haifa, IDC, Tel-Aviv, and Stanford for helpful comments

and discussions. McGavinn Brown, Bret Linley, Victoria Moffa, and Talya Yosphe provided

excellent research assistance. We collect examples of nudniks in action at our companion website,

Yonathan Arbel, Theory of the Nudnik, B

ATTLE FORMS (Feb. 1, 2019),

http://battleoftheforms.com/theory-of-the-nudnik/ [http://perma.cc/6GFS-JNTQ], and solicit

readers to contribute more examples.

930 VANDERBILT LAW REVIEW [Vol. 73:4:929

can solve consumer collective action problems, leading to broad market

improvements.

Second, the Article spotlights a disconcerting development: sellers’

growing usage of big data and predictive analytics allows them to identify

specific consumers as potential nudniks and then disarm or avoid selling to

them before they can draw attention to sellers’ misconduct. The Article therefore

captures an understudied problem with big data tools: sellers can use these tools

to shield themselves from market accountability.

Finally, the Article evaluates a menu of legal strategies that would

preserve the benefits of nudnik-based activism in light of these technological

developments. In the process, we revisit the conventional wisdom on the

desirability of form contracts, mandatory arbitration clauses, defamation law,

and standing doctrines.

NTRODUCTION ............................................................................... 931

HOW NUDNIKS AFFECT SELLER BEHAVIOR ......................... 935

A. Who Are the Nudniks? ............................................. 936

B. What Nudniks Do: Motivating Examples ................ 939

C. How Nudniks’ Activity Impacts Sellers ................... 944

1. Facilitating Introspection by Sellers ........... 945

2. Facilitating Legal and Reputational

Sanctions Against Sellers ............................. 947

D. Relation to the Extant Literature and

Limitations .............................................................. 950

1. From an “Informed Minority” to Nudniks ... 950

2. The Limits of Nudniks ................................. 957

II.

HOW SELLERS REACT TO NUDNIKS: THE FUTURE OF

CONSUMER ACTIVISM .......................................................... 959

A. Targeting Nudniks ................................................... 960

1. Identifying Nudniks ..................................... 962

2. Disarming Nudniks ...................................... 965

B. The Implications of Targeting Nudniks .................. 968

1. Diluting Legal Deterrence ............................ 969

2. Diluting Reputational Deterrence ............... 971

III.

HOW TO STOP THE FUTURE.................................................. 974

A. Why Legal Intervention Is Needed ........................... 975

B. Why Existing Modes of Intervention Are Less

Likely to Work .......................................................... 976

C. Proposed Solutions .................................................. 977

1. Lessons for Regulators ................................. 977

2. Lessons for Courts ........................................ 981

3. Lessons for Scholars ..................................... 984

2020] THEORY OF THE NUDNIK 931

D. On Optimizing (Rather than Maximizing) Nudnik

Behavior ................................................................... 985

ONCLUSION ................................................................................... 986

NTRODUCTION

Can consumers hold sellers accountable and enforce market

norms? This Article spotlights the disciplinary power of a small subset

of consumers, who we dub “nudniks.”

Nudniks are those consumers

who call to complain, complete satisfaction surveys, demand to speak

with managers, post detailed online reviews, and file lawsuits. They

usually have an innate sense of justice, atypical motivations, or an

idiosyncratic utility function, which leads them to pursue action in

situations where most consumers remain passive. In courtrooms and in

the court of public opinion, nudniks are often derided as petty and

vindictive. Yet through their actions, nudniks direct attention to seller

underperformance, leading to a variety of legal and reputational

sanctions in ways that complement, and sometimes substitute, direct

legal intervention. The much-maligned nudniks can therefore generate

positive spillovers that reverberate throughout the economy.

Sellers, however, do not remain passive. They have long tried to

minimize the legal and reputational risks posed by nudniks. The advent

of big data and predictive analytics provides sellers with a game

changer: the ability to identify which consumer is a potential nudnik

(that is, which consumer is likely to complain publicly and draw

attention to seller underperformance), before that consumer even sets

foot in their store. Sellers can then silently disarm nudniks or avoid

selling to them altogether. This development benefits sellers, as it

reduces the legal and reputational risks from nudniks. It may even

benefit nudniks themselves, to the extent sellers disarm them by

offering them preferential treatment. Yet the development poses a large

risk to the greater consumer body, as it deprives consumers of a

valuable source of information on seller misbehavior, thereby reducing

the effectiveness of market discipline.

This Article’s first contribution is to explore the role of the

nudniks as engines of market discipline that complement legal

institutions. Its second contribution is to shed light on sellers’ growing

technological ability to circumvent nudniks and dilute market

1. The word nudnik derives from Yiddish. It can be roughly translated to “busybody” or

“nag.” L

ION KOPPMAN & STEVE KOPPMAN, A TREASURY OF AMERICAN-JEWISH FOLKLORE 232 (First

Jason Anderson Inc. 1998) (1996) (defining a nudnik as a “pest, gossip, or busybody”); L

EO ROSTEN,

HE NEW JOYS OF YIDDISH 272 (Lawrence Bush ed., 2001) (defining a nudnik as “[a] pest, a nag,

an annoyer, a monumental bore”). For more on terminology, see infra Section I.A.

932 VANDERBILT LAW REVIEW [Vol. 73:4:929

discipline. The Article’s third contribution is to propose and evaluate

legal strategies that would protect the ability of nudniks to continue

generating valuable information on seller behavior.

To illustrate the nudnik phenomenon, consider the case of Ben

Edelman, a Harvard Business School professor. When Professor

Edelman ordered takeout from Sichuan Garden, a local Chinese

restaurant, he compared the prices on the receipt to the prices on the

online menu and discovered he was overcharged by $4. Annoyed,

Edelman sent a complaint through the restaurant’s website, which he

then followed with an email. The owner responded that although the

website was not regularly updated, the current prices were accurately

printed on the in-restaurant menus. Although the owner stated that he

would fix the error, the correspondence suggests that he did not offer

Edelman compensation for the overcharge.

In response, Edelman

demanded that he be compensated $12 for the mishap, citing a local

consumer protection law that trebles damages for unfair business

practices.

When the owner refused, Edelman complained to the

relevant regulator. Eventually the overcharging story reached local

media. The public response largely mocked Edelman’s insistence as

petty and privileged.

It failed to recognize the important public service

Edelman provided: namely, deterring overcharging. Nor did the public

appreciate the fact that one has to be idiosyncratic to provide such a

public good. The opportunity cost of the time Edelman spent

complaining dwarves the $12 he sought. If it were not for people like

Edelman who go to the trouble, restaurants would have a much easier

time systematically overcharging us all.

Whereas the legal literature has largely neglected the effects of

such nudnik-consumers,

commercial firms have long invested

2. Hilary Sargent, Ben Edelman, Harvard Business Professor, Goes to War over $4 Worth of

Chinese Food, B

OS. (Dec. 9, 2014), https://www.boston.com/culture/restaurants/2014/12/09/ben-

edelman-harvard-business-school-professor-goes-to-war-over-4-worth-of-chinese-food

[https://perma.cc/Y842-L7S5].

3. M

ASS. GEN. LAWS ch. 93A, § 9 (2019).

4. Elizabeth Barber, A Harvard Professor Launched an Epic Rant over an Extra $4 on his

Chinese Takeout Bill, T

IME (Dec. 10, 2014), http://time.com/3627282/harvard-professor-chinese-

takeout-ben-edelman/ [https://perma.cc/G3P6-RYRM].

5. On March 1, 2019, we put on our investigative reporter hats and called the restaurant to

inquire about the entrée pricing, and we found that the prices indicated on the website match

exactly those offered by the restaurant. Telephone interview with Victoria Moffa, Research

Assistant, Univ. of Ala. (Mar. 1, 2019).

6. To the extent that legal scholars have touched these issues, it was usually within the

context of how the haves assert their rights more than the have-nots. In other words, existing

treatments focus on how sociodemographic differences between those who complain and those that

do not suppress the voices and concerns of marginalized groups. See, e.g., Amy J. Schmitz, Access

to Consumer Remedies in the Squeaky Wheel System, 39 P

EPP. L. REV. 279 (2012); Lauren E. Willis,

Performance-Based Consumer Law, 82 U.

CHI. L. REV. 1309, 1326 (2015).

2020] THEORY OF THE NUDNIK 933

resources in identifying and minimizing their risks. Indeed, a rich

literature in marketing explores consumer complaining behavior and,

in particular, how to handle serial complainers.

In recent years, sellers

have enjoyed a breakthrough in their ability to target and disarm

nudniks. Rather than dealing with nudniks as they complain, sellers

can use big data and predictive analytics to identify which of their

consumers are nudniks long before the nudniks even buy from them.

The early identification allows sellers to effectively silence these

nudniks by offering preferential treatment or avoiding servicing them

altogether. In other words, new technological tools allow sellers to

dampen the flow of negative information to the market and reduce the

risk of legal and reputational sanctions.

In this sense, the Article dovetails with the burgeoning legal

literature on big data and personalized contracts. The existing

literature has focused either on the promise of tailoring services to each

consumer’s preferences or on concerns with privacy and

discrimination.

In other words, the scholarship focuses on efficiency

and fairness considerations as they affect the individual receiving

personalized treatment. In contrast, this Article focuses on third-party

effects. As we show, these tools are increasingly effective at allowing

firms to escape market accountability.

The Article proceeds in three parts. Part I explains who the

nudniks are, what they do, and how they can, in some cases, generate

significant social benefits. Drawing on a number of examples, we show

that nudniks can effectively solve some of the collective action problems

that plague consumer markets; they take action even when a cold cost-

benefit analysis counsels inaction. We note that some of the nudniks’

actions can be frivolous or focus on parochial interests and that more

research is needed to identify the exact conditions under which nudniks

provide the most value. Yet, drawing on studies in the consumer

complaining behavior literature, we show why the impact that nudniks

have on seller behavior cannot be dismissed as immaterial or

predominately negative. Rather, the existing evidence indicates that

nudniks impose considerable market discipline. Traditional theories of

7. See infra Part I. Note, for example, the calls in the marketing literature to study nudniks

so “that businesses could identify individuals with this proclivity and steer them away from their

establishments.” R

ICHARD L. OLIVER, SATISFACTION: A BEHAVIORAL PERSPECTIVE ON THE

CONSUMER 402 (2d ed. 2015).

8. See Gerhard Wagner & Horst Eidenmüller, Down by Algorithms? Siphoning Rents,

Exploiting Biases, and Shaping Preferences: Regulating the Dark Side of Personalized

Transactions, 86 U. C

HI. L. REV. 581 (2019); infra note 193.

934 VANDERBILT LAW REVIEW [Vol. 73:4:929

market discipline focus on consumers who read contracts.

But recent

empirical studies suggest that very few consumers actually read

contracts.

Thus, it will be productive for scholars and policymakers to

shift focus from those who read to those who complain. While serial

readers are almost mythical creatures, serial complainers are very real.

Part II switches attention from nudniks to the firms that deal

with them. This Part emphasizes the disconcerting development of

sellers’ ability to identify and target nudniks earlier in the transaction

process. The earlier targeting limits the positive spillovers from

nudniks’ complaints. Part II therefore dovetails with the longstanding

legal literature on private versus public resolution of disputes:

settlement versus trial, secrecy versus openness, and so on. While the

extant literature focuses on what happens when the consumer is in the

“claiming” stage (say, after she files her complaint), we show that new

technological tools allow sellers to dismiss the issue much earlier.

The

ability to dissolve potential conflicts earlier may save some

administrative costs, but it comes at the expense of legal and

reputational deterrence. When a dissatisfied consumer posts a detailed

review online, the information may be forever etched in the internet’s

memory, even if the consumer is later appeased. When the consumer

files a lawsuit, even if it is later settled, the filing leaves a public trail.

Prospective consumers and information intermediaries, such as

investigative reporters and consumer watchdogs, are able to pick up

these public indications of seller misbehavior and use them to inform

consumer decisions. By contrast, when the seller knows which

consumers are likely to post reviews and file complaints, and targets

these specific complainers before they even form their claims, this

aspect of reputational deterrence is undermined.

Part III develops legal strategies that would preserve nudnik-

based activism in light of these emerging technological threats. Unlike

most law and economics analyses, which invoke the prospect of

reputational deterrence as justification for scaling back legal

intervention, we argue that legal intervention may be required to

facilitate reputational deterrence. Permitting sellers to silence

complainers before their complaints reach the market weakens the

9. See, e.g., Alan Schwartz & Louis L. Wilde, Intervening in Markets on the Basis of Imperfect

Information: A Legal and Economic Analysis, 127 U.

PA. L. REV. 630 (1979) (arguing that a

minority of consumers who read can enforce market discipline).

10. See Ian Ayres & Alan Schwartz, The No-Reading Problem in Consumer Contract Law, 66

TAN. L. REV. 545 (2014). On the critiques of the Informed Minority Theory, see infra notes 87–

106.

11. For the “naming, blaming, claiming” typology, see William L.F. Felstiner et al., The

Emergence and Transformation of Disputes: Naming, Blaming, Claiming . . . , 15 LAW & SOC’Y

REV. 631 (1980).

2020] THEORY OF THE NUDNIK 935

functionality of the market for sellers’ reputations. This Part shows why

existing frameworks for regulating big data and scoring algorithms are

ill-equipped to deal with the particular problem of nudnik targeting. We

then sketch concrete strategies for judges, regulators, and legislators,

such as relaxing standing requirements, amending defamation laws, or

closing loopholes in the Consumer Review Fairness Act.

We conclude by reflecting on some of the broader lessons, such

as the underappreciated dangers of personalizing contracts. Bottom-up

market discipline is an essential part of functioning markets, yet it

remains understudied in the legal literature. We seek to highlight one

specific aspect of market discipline, namely, how it benefits from the

efforts of a small subset of consumers. This aspect makes market

discipline vulnerable to technologies that allow the accurate and early

targeting of these consumers.

HOW NUDNIKS AFFECT SELLER BEHAVIOR

What makes a certain consumer a nudnik? And what is it exactly

that nudniks do—how do they affect seller behavior? This Part defines

nudniks and clarifies the role they play in enabling consumer markets

to function effectively.

Section A defines nudniks by juxtaposing them with prototypical

consumers. Nudniks are unlike the majority of consumers, who remain

passive both before entering a transaction (e.g., not reading the terms

of the contract) and after it (e.g., not noticing seller underperformance

or noticing but doing nothing about it). Nudniks also differ from other

active consumers in that their activism does not come from shopping for

the best deal ex ante but rather from demanding that their

transactional expectations be met ex post.

To further underscore the

unique characteristics of nudniks, Section B provides motivating

examples of nudniks in action. Section C then categorizes the various

channels through which nudniks express their dissatisfaction with

sellers. Nudniks often voice their concerns about the seller publicly—

for example, by filing a lawsuit, posting a detailed negative review

online, or enlisting the help of the media. As a result, nudniks’ actions

draw the attention of other market players, setting a reputational

sanction in motion and deterring seller misbehavior. Section D homes

12. Consumer Review Fairness Act of 2016, Pub. L. No. 114-258, 130 Stat. 1355 (to be codified

at 15 U.S.C. § 45b).

13. Transactional expectations are the full set of expectations that consumers form about the

transaction. These expectations are informed by the contract, but also by seller representations,

advertisements, seller reputation, background knowledge, and life experience. See infra notes 112–

113 and accompanying text.

936 VANDERBILT LAW REVIEW [Vol. 73:4:929

in on the deterrence point by comparing our theory of the nudnik with

prevalent theories of market discipline and considering some of their

limitations. One key observation is that nudniks pressure sellers not

just to honor their contractual commitments but also to go beyond the

contract and meet supracontractual expectations.

A. Who Are the Nudniks?

What do we mean by “nudnik”? The term derives from Yiddish

and can be translated as “a bore, a nag, a jerk,” or a “busybody” and a

“pest.”

We chose this term for our purposes precisely because it is

relatively unfamiliar. The abovementioned familiar terms carry strong,

negative connotations, whereas we wish to employ “nudnik” as a

judgment-neutral description of a certain type of consumer: one who is

constantly active in vindicating violations of her transactional

expectations of the seller.

A nudnik is someone who demands to speak with the manager,

writes an angry letter to the editor, or brings a lawsuit over a torn pair

of pants that cost $40. More precisely, the definition of “nudnik” for our

purposes is two-pronged: (1) an active consumer, (2) who acts even when

a cold cost-benefit analysis suggests otherwise. Nudniks act even when

others conclude that “it’s not worth it” because they possess an

idiosyncratic utility function. Nudniks therefore belong to a broader

category that the socioeconomic literature dubs “willing punishers”:

individuals who are willing to incur personal costs in order to punish

others who misbehave.

Consider first the “active consumers” prong. Nudniks are unlike

the overwhelming majority of consumers, who regularly remain

passive.

These passivists—which is to say, most of us—engage with

14. KOPPMAN & KOPPMAN, supra note 1, at 232 (“[A] pest, gossip, or busybody.”); Nudnik,

IKTIONARY, https://en.wiktionary.org/wiki/nudnik (last visited May 7, 2020)

[https://perma.cc/NB7R-RTUS] (“[A] bore, a nag, a jerk.”). On the long line of terms from the “legal

Yiddish” family tree, see Alex Kozinski & Eugene Volokh, Lawsuit, Shmawsuit, 103 Y

ALE L.J. 463

(1993).

15. See Elinor Ostrom, Collective Action and the Evolution of Social Norms, 14 J.

ECON.

PERSP. 137, 142 (2000) (discussing how certain individuals are “willing punishers”: they engage in

costly sanctions to facilitate social control).

16. The marketing literature has long documented that most consumers remain passive.

LEON G. SCHIFFMAN & JOSEPH WISENBLIT, CONSUMER BEHAVIOR 421 (11th global ed. 2015)

(“Research indicates that only a few unsatisfied customers actually complain.”); T

ECH. ASSISTANCE

RESEARCH PROGRAMS, U.S. OFFICE OF CONSUMER AFFAIRS, CONSUMER COMPLAINT HANDLING IN

AMERICA: A FINAL REPORT (1979) [hereinafter TARP]; Stephen S. Tax & Stephen W. Brown,

Recovering and Learning from Service Failure, 40 M

GMT. REV. 75, 77 (1988) (finding that ninety

percent of consumers do not complain); Clay M. Voorhees et al., A Voice from the Silent Masses:

An Exploratory and Comparative Analysis of Noncomplainers, 34 J.

ACAD. MARKETING SCI. 514,

514 (2006) (“The majority of dissatisfied customers fail to complain.”).

2020] THEORY OF THE NUDNIK 937

the product and service only at a basic level, both ex ante (when

shopping) and ex post (when feeling dissatisfied with the service or

product). When problems arise—the contractor did not show up on time,

the fridge is less energy efficient than advertised, or the medical bill

includes an unidentified small charge—the passivists may not notice,

or may notice but do nothing about it. At most, the passivist will refrain

from buying the same product again, passive-aggressively mention to

the contractor that he was expected earlier, or note her disappointment

to her immediate surroundings. As one marketing textbook

summarizes: “Consumers do not do anything, in the main, in response

to consumption.”

Why are so few consumers active? Many factors contribute to

passivism, including the opportunity cost of spending time to complain,

conflict aversion, personality type, and ignorance about one’s rights.

Importantly, remaining a passive consumer and free riding others’

efforts is often the rational thing to do—another example of the well-

documented rational apathy phenomenon we see with voters and

investors.

After all, standing up for one’s rights comes at immediate

costs. It involves social discord and may require a considerable

investment of time and effort.

The benefits of taking such action, by

contrast, are uncertain. The seller may not yield to the consumer’s

demands, and even if she does, the value of remedial action may not be

significant. In sum, the value of an uncertain replacement of a product

one complains about is often outweighed by the certain investment of

time and effort complaining.

For most of us, what Ben Edelman did defies logic. The

opportunity cost of the time that Professor Edelman—a well-paid

speaker and consultant

—spent corresponding with the restaurant

17. OLIVER, supra note 7, at 385; see also John W. Huppertz, Firms’ Complaint Handling

Policies and Consumer Complaint Voicing, 24 J.

CONSUMER MARKETING 428, 428 (2007).

18. See, e.g., Robin M. Kowalski, Complaints and Complaining: Functions, Antecedents, and

Consequences, 119 P

SYCHOL. BULL. 179 (1996) (examining how different personality types

experience the lodging of complaints); Marsha L. Richins, A Multivariate Analysis of Responses to

Dissatisfaction, 15 J.

ACAD. MARKETING SCI. 24 (1987).

19. On rational apathy among consumers, see William M. Landes & Richard A. Posner, The

Private Enforcement of Law, 4 J.

LEGAL STUD. 1, 33 (1975), and Roger Van den Bergh & Louis

Visscher, The Preventive Function of Collective Actions for Damages in Consumer Law, 1 E

RASMUS

L. REV. 5 (2008).

20. For a review of the marketing literature on the costs and benefits of complaints, see

Huppertz, supra note 17, at 429–30. To illustrate, in a study of 149 dissatisfied consumers who did

not complain, shortage of time was the leading professed reason for inaction. Voorhees et al., supra

note 16, at 519.

21. Huppertz, supra note 17, at 429–30.

22. See Biography, B

EN EDELMAN, http://www.benedelman.org/bio/ (last visited May 7, 2020)

[https://perma.cc/45ZJ-HW73]; CV of Benjamin G. Edelman, B

EN EDELMAN,

http://www.benedelman.org/cv.pdf (last visited May 7, 2020) [https://perma.cc/Z3JB-HR8V].

938 VANDERBILT LAW REVIEW [Vol. 73:4:929

was well in excess of the $12 he sought. For nudniks, however, spending

the time to assert their claim is simply the right and natural thing to

do.

This brings us to the second prong in the nudnik definition—

their unique makeup. These crusading consumers tend to share certain

values and innate personality traits. Studies in consumer psychology

find that certain consumers have traits that make them more “eager to

complain . . . while others . . . simply hate the idea of complaining.”

Some of the serial complainers are simply more assertive and

aggressive than the rest of us.

Others have a strong level of

“commitment,” meaning they hold certain things as extremely

important or, more concretely, have a strong innate belief that contracts

should be honored.

Still others operate on spite: they are more prone

than others to feel that a seller providing inferior service or a defective

product is disrespecting them. In all, nudniks are consumers who

possess what an economist might call an “idiosyncratic utility

function”:

they are not wired like the rest of the consumer body. For

most of us, spending hours fighting a $4 overcharge is not worth our

time; for nudniks, it comes instinctively—it is the “rational” thing to do.

Nudniks, then, are active. Yet not all active consumers are

nudniks. Within the category of active consumers, there are different

varieties.

Some consumers are active in the sense that they take time

to read and understand each term in the contract. These consumers are

active shoppers, comparing not just the price and quality of the good or

service, but also the terms of the transaction.

They will not fly with a

certain airline if it does not regularly compensate for delays and will

not go to car dealerships that do not offer warranties.

23. Min Gyung Kim et al., The Relationship Between Consumer Complaining Behavior and

Service Recovery: An Integrative Review, 22 I

NT’L. J. CONTEMP. HOSP. MGMT. 975, 978 (2010).

24. Richins, supra note 18, at 25 (“[C]onsumer assertiveness and aggression have recently

been recognized as correlates of complaint behavior.”).

25. See Nancy Stephens & Kevin P. Gwinner, Why Don’t Some People Complain? A Cognitive-

Emotive Process Model of Consumer Complaint Behavior, 26 J.

ACAD. MARKETING SCI. 172, 178

(1998).

26. See, e.g., Michael H. Riordan, Contracting in an Idiosyncratic Market, 14 B

ELL J. ECON.

338 (1983). To be sure, some nudniks may be motivated by material gains—compensation, future

discount, or “freebies”—but as the Edelman example illustrates, the value of the (private) gain

often pales in comparison to the effort required to earn it.

27. In a recent symposium on the future of private law, we offered a classification of various

consumer types and how they relate to consumer activism. See Yonathan A. Arbel & Roy Shapira,

Consumer Activism: From the Informed Minority to the Crusading Minority, 69 D

EPAUL L. REV.

(forthcoming 2020) (on file with authors).

28. Such “shoppers” are usually the focus of economic theories of search behavior. See, e.g.,

Sara Fisher Ellison, Price Search and Obfuscation: An Overview of the Theory and Empirics, in

ANDBOOK OF ECONOMICS RETAILING & DISTRIBUTION 287 (Emek Basker ed., 2016) (discussing

price search and its equilibrium effects).

2020] THEORY OF THE NUDNIK 939

Unlike these shoppers, nudniks do most of their work post-

consumption. Rather than focusing on shopping for better contracts,

nudniks focus on enforcement. Whenever they feel wronged, nudniks

fight back, even when other types of active and sophisticated consumers

would not bother. To be sure, there is bound to be some categorical

overlap: some nudniks are also sophisticated and shop aggressively

before they purchase. But many nudniks often choose a product based

on a superficial comparison, the way most passivists do. This cursory

shopping effort does not preclude the nudnik from exerting maximum

effort when the product fails to meet her expectations.

Nudniks are therefore part of the small subset of private

enforcers. A classic example here is class action plaintiffs (or, more

generally, “private attorneys general”),

who through their

enforcement action can generate market discipline. Private attorneys

general are, in a sense, bounty hunters: they pursue action only when

a cold cost-benefit analysis justifies it. If the costs of collecting their

bounty become high—think, for example, about the recent rise of

mandatory arbitration clauses and class action waivers

—bounty

hunters stop enforcing. Nudniks, by contrast, fight against seller

underperformance almost instinctively, even at a personal cost, because

it is “in their blood.” As such, nudniks can fill important gaps in legal

and market discipline.

B. What Nudniks Do: Motivating Examples

To provide some context for the nudnik phenomenon, let us

consider a few cases of nudniks in action and then highlight several

recurring themes.

Consider first the case of Hasan Syed, a Chicago businessman.

In 2013, British Airways lost Syed’s father’s luggage en route to Paris.

29. On acting based on violated expectations see infra note 112 and accompanying text; see

also Ayres & Schwartz, supra note 10, at 550–51 (noting that consumers often have a good grasp

of some of the terms that govern their relationship with sellers, even without reading their

contract). Note that sophistication often leads to negative spillovers and cross-subsidies from less

sophisticated consumers. See generally Peter A. Alces & Jason M. Hopkins, Carrying a Good Joke

Too Far, 83 C

HI.-KENT L. REV. 879, 890 (2008); Xavier Gabaix & David Laibson, Shrouded

Attributes, Consumer Myopia, and Information Suppression in Competitive Markets, 121 Q.J.

ECON. 505 (2006); Amy J. Schmitz, Remedy Realities in Business-to-Consumer Contracting, 58

RIZ. L. REV. 213, 238–39 (2016). With nudniks, by contrast, partly because the activity is done at

the enforcement stage, the possibility of positive spillovers (as in drawing others’ attention) is

greater.

30. See, e.g., Bryant Garth et al., The Institution of the Private Attorney General: Perspectives

from an Empirical Study of Class Action Litigation, 61 S.

CAL. L. REV. 353, 355 (1988).

31. See AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 349 (2011).

32. See Angry Traveler Pays Big Bucks for Tweet, CNN

MONEY, https://money.cnn.com/

video/news/2013/09/04/n-british-air-twitter-war-mclaughlin.cnnmoney/index.html (last visited

940 VANDERBILT LAW REVIEW [Vol. 73:4:929

Annoyed, Syed took his grievance to social media, where he tweeted the

following:

This otherwise common tweet had one uncommon twist: as seen

in the bottom left, the tweet was promoted by Syed. Syed paid Twitter

$1,000 to have this tweet and similar ones broadcasted to over seventy

thousand potential British Airways consumers.

In a short time, the

wide exposure of his tweets drew the attention of mass media outlets,

which exponentially increased the exposure. Syed’s efforts in airing his

grievances received their own term: “complaintvertising.”

His

guerrilla campaign bore fruit: British Airways located the luggage,

hand-delivered it to his dad in Paris, and issued a public apology.

Syed

declared victory,

while the company suffered substantial losses, and

its mishandling of Syed’s original claim is now studied by marketing

scholars and practitioners.

Similar tactics were used by Eugene Mirman, a comedian

annoyed with Time Warner Cable because they twice failed to show up

for their installation appointment. Like Syed, Mirman invested in

widely disseminating his grievances. He took out a full-page

advertisement in the New York Press, where he mocked the company’s

policy of failing to notify customers of rescheduled appointment times:

“Did Stalin ever call people before he arrested them and sent them to

May 7, 2019) [https://perma.cc/73JT-PVXK] (reporting that Syed acknowledged his tweet as an

ad).

33. Hasan Syed (@HVSVN), T

WITTER (Sept. 3, 2013, 3:46 PM), https://twitter.com/HVSVN/

status/375026963347304449 [https://perma.cc/X5FH-6ERR]; see also Kevin Foresti (@Kforesti),

WITTER (Sept. 4, 2013, 9:08 AM), https://twitter.com/Kforesti/status/375289284276006912

[https://perma.cc/PF7J-FXZN].

34. Jason King, Complaintvertising: Word of Mouth’s Evil Twin, H

UFFINGTON POST (Oct. 23,

2013, 1:14 PM), https://www.huffingtonpost.com/jason-king/complainvertising-word-of_b_4143073

[https://perma.cc/EZ8M-2NPV].

35. See Angry Traveler Pays Big Bucks for Tweet, supra note 32.

36. Hasan Syed (@HVSVN), T

WITTER (Sept. 3, 2013, 9:56 PM), https://twitter.com/HVSVN/

status/375120159477755904 [https://perma.cc/WRB6-5HVV].

37. See, e.g., Gisèlede Campos Ribeiro et al., The Determinants of Approval of Online

Consumer Revenge, 88 J.

BUSINESS RES. 212 (2018).

2020] THEORY OF THE NUDNIK 941

die in Siberian work camps? No! Why should Time Warner Cable have

a policy that is any different from Stalin’s?”

The Syed and Mirman examples showcase the idiosyncratic

utility function emblematic of nudniks. Both were willing to invest time,

effort, and valuable resources—at least $1,000 in Syed’s case—to widely

disseminate their dissatisfaction, even though such an outlay far

outweighs the remedy they sought (getting the bag back or having the

cable guy show up on time). Syed was perhaps motivated by spite. With

Mirman, the idiosyncratic utility function probably stemmed from the

unique private benefits he gets from complaining publicly: his strong

interest in publicity.

Others invest money to raise public awareness of

product and service issues because of their personal ideology. A case in

point is drywall pioneer and multimillionaire Phil Sokolof, who suffered

a heart attack at a young age and decided to spend millions on public

campaigns against the “McDonald’ses” of the world for using too much

fat in their products.

Public opinion polls showed that Sokolof’s

campaign got people to frequent the restaurants he targeted less and

eventually got the restaurants to change their products.

Not all nudniks have money to purchase ads in national

newspapers. Some air their grievances by singing. When country music

artist Dave Carroll was frustrated with United Airlines for mishandling

and breaking his favorite guitar, he wrote a song and uploaded it to

38. Eugene Mirman, My Letter to Time Warner Cable, EUGENE MIRMAN (May 25, 2011),

http://www.eugenemirman.com/news/2015/5/19/my-letter-to-time-warner-cable [https://perma.cc/

JQQ8-TLHM]. Mirman’s efforts attracted attention, as they were reported on in the media. See,

e.g., Megan Angelo, This Guy Just Took Out a Full Page Ad to Tell Time Warner How Much They

Suck, B

US. INSIDER (May 26, 2011, 3:46 PM), https://www.businessinsider.com/time-warner-cable-

eugene-mirman-ad-2011-5 [https://perma.cc/XZJ6-HCVC].

39. To be sure, the examples we use throughout this piece illustrate that there is no one

“classic” format of a nudnik: for some, the private benefits play a bigger role than for others. For

all of them, though, the cold cost-benefit calculation works differently than for most other

consumers.

40. Businessman Takes Out Ad Against Fast-Food Fat, D

ESERET NEWS (Apr. 5, 1990),

https://www.deseret.com/1990/4/5/18854935/businessman-takes-out-ad-against-fast-food-fat

[https://perma.cc/JT57-SPA4]; Marcella S. Kreiter, Group Accuses McDonald’s of ‘Poisoning’

America, U

NITED PRESS INT’L (Apr. 4, 1990), https://www.upi.com/Archives/1990/04/04/Group-

accuses-McDonalds-of-poisoning-America/3593639201600/ [https://perma.cc/NWB2-9UV7].

41. See Scott Hume, Fast-Food Faces Wary Public, A

DVERT. AGE, July 2, 1990, at 1 (noting

the decline in people willing to frequent these restaurants). Shortly after the aforementioned

public opinion polls, McDonald’s announced the switch from animal fat to vegetable oil for its fries.

For reviews of Sokolof’s campaign that include criticisms and objections, see Ronald J. Adams &

Kenneth M. Jennings, Media Advocacy: A Case Study of Philip Sokolof’s Cholesterol Awareness

Campaigns, 27 J.

CONSUMER AFF. 145 (1993), and Malcolm Gladwell, McDonald’s Broke My Heart,

EVISIONIST HIST., http://revisionisthistory.com/episodes/19-mcdonalds-broke-my-heart (last

visited May 7, 2020) [https://perma.cc/YD77-4JCC].

942 VANDERBILT LAW REVIEW [Vol. 73:4:929

YouTube.

His “United Breaks Guitars” song went viral, reaching

number one on the iTunes Music Store and earning over nineteen

million views as of this writing.

Here as well, mainstream media

picked up the story and widely publicized it. United suffered a huge

reputational hit; some estimated that the incident led to a ten percent

decline in its market capitalization.

Beyond compensating Carroll,

United reacted by committing to change its customer service policy, and

it now uses Carroll’s video in its internal trainings.

Nudniks who do not have deep pockets or a singing talent can

still go to great lengths to disseminate their claims through other

channels—for example, by enlisting the help of mass media. When

Philadelphians Diana and Jason Airoldi were frustrated with Comcast

for skirting appointments for six weeks, they called a local journalist.

The reporter ran a story about their travails and called the mother of

Comcast’s CEO to complain about her son’s company’s behavior.

The

paper followed up with an update when Comcast subsequently changed

its ways.

42. See United Breaks Guitars, DAVE CARROLL MUSIC, https://www.davecarrollmusic.com/

songwriting/united-breaks-guitars/?v=7516fd43adaa (last visited May 7, 2020) [https://perma.cc/

5GAV-4SXF].

43. See David Dunne, United Breaks Guitars, J

OSEPH L. ROTMAN SCH. MGMT.,

https://3gz8rn1ntxn33t9p221v8mlgtsq-wpengine.netdna-ssl.com/wp-content/uploads/United-

Breaks-Guitars-Case-Jan-11-10-21.pdf (last visited May 7, 2020) [https://perma.cc/9M42-PCVA]

(prepared by Dunne as a case study for in-class discussion).

44. See Eddie Wrenn, The Sweet Music of Revenge: Singer Pens YouTube Hit After United

Airlines Breaks His Guitar . . . and Shares Plunge 10%, D

AILY MAIL (July 24, 2009, 9:12 AM),

https://www.dailymail.co.uk/news/article-1201671/Singer-Dave-Carroll-pens-YouTube-hit-

United-Airlines-breaks-guitar—shares-plunge-10.html [https://perma.cc/3CEQ-5P85]; see also

Allison R. Soule, Fighting the Social Media Wildfire: How Crisis Communication Must Adapt to

Prevent from Fanning the Flames 35–49 (2010) (unpublished Master’s thesis, University of North

Carolina at Chapel Hill) (on file with authors) (detailing the sentiment in YouTube comments

about the United Airlines smashed guitar incident).

45. See Broken Guitar Song Gets Airline’s Attention, CBC

NEWS (July 8, 2009, 3:00 PM),

https://www.cbc.ca/news/entertainment/broken-guitar-song-gets-airline-s-attention-1.802741

[https://perma.cc/K8KX-S4AP]. Carroll’s is not the only case of a consumer holding sellers

accountable by singing. When Bank of America customers were frustrated with how the bank

stealthily delayed mortgage approvals, they posted a video of themselves singing a plea to hear

back. The musical plea was successful, and the bank issued a public apology, closed the loan, and

offered monetary compensation. See Christina Ng, Georgia Couple Pleads with Bank of America

in Music Video, ABC

NEWS (Dec. 16, 2011), https://abcnews.go.com/blogs/business/2011/12/

georgia-couple-pleads-with-bank-of-america-in-music-video/ [https://perma.cc/U837-V7NU].

46. See Ronnie Polaneczky, Bombast from Comcast?, P

HILA. INQUIRER (Feb. 7, 2015, 3:01

AM), https://www.philly.com/philly/news/20150208_Bombast_from_Comcast_.html [https://

perma.cc/ZVU3-8YVB].

47. Id.

48. See id.

2020] THEORY OF THE NUDNIK 943

All these examples (and others

) showcase four recurring

themes. We already highlighted the first one, namely, how nudniks

have idiosyncratic utility functions: they will take action even when the

costs far outweigh the immediate financial benefits. Second, because of

their idiosyncratic utility functions, nudniks tend to be repeat players.

Professor Edelman did not just target Sichuan Garden; according to

some reports, he had previously complained about various other

“misbehaving” restaurants in the Boston area.

Syed and Mirman

reportedly have a history of complaintvertising against various

companies.

Sokolof did not just spend $3 million on ads against

McDonald’s; he went on to campaign against other companies as well,

spending $15 million overall.

A third recurring theme, which is probably also attributed to

nudniks’ idiosyncratic makeups, is that they are quite often derided by

the public. To return to our opening example, Professor Edelman was

widely mocked for being petty, privileged, and ruthless.

Even

academics often refer to nudniks in pejorative terms, such as

49. At the risk of stating the obvious, we note that most nudniks’ efforts go unreported, as

their daily actions against underperforming sellers rarely receive widespread media attention. The

reader can probably summon ample examples from her own personal experience with nudniks in

her close and intermediate circles.

50. In one case, Edelman presented a discount coupon at a sushi restaurant, and when the

restaurant refused to honor it, he threatened that he would write to the Boston Licensing Board

to have their food and liquor licenses revoked. See Hilary Sargent, There’s More: Edelman Did this

Before, and Worse, B

OSTON.COM (Dec. 10, 2014), https://www.boston.com/culture/restaurants/

2014/12/10/theres-more-edelman-did-this-before-and-worse [https://perma.cc/KG96-NEPK].

51. See, e.g., Will Robinson, Bob’s Burgers Voice Actor Eugene Mirman Buys Newspaper Ad

to Bemoan Parking Ticket, E

NT. WKLY. (July 14, 2015, 12:00 PM), https://ew.com/article/

2015/07/14/bobs-burgers-eugene-mirman-parking-ticket/ [https://perma.cc/SBJ2-W923] (reporting

that Mirman used a full newspaper advertisement to publicize his disappointment in a $15 parking

ticket); Best Full Page Ad Ever, I

MGUR (July 12, 2015), https://imgur.com/xjrCG0E

[https://perma.cc/GL8Z-VCCD] (depicting Mirman’s complaint about an unreasonable $15 parking

ticket); Hasan Syed (@HVSVN), T

WITTER (Oct. 18, 2013, 4:07 PM),

https://twitter.com/HVSVN/status/391309476617154560 [https://perma.cc/5SXL-7LDR] (“Before

you use @Square Cash, read about their horrible customer service here bit.ly/nCcLxl.”).

52. Wolfgang Saxon, Phil Sokolof, 82, a Crusader Against Cholesterol, Is Dead, N.Y.

TIMES

(Apr. 17, 2004), https://www.nytimes.com/2004/04/17/us/phil-sokolof-82-a-crusader-against-

cholesterol-is-dead.html [https://perma.cc/5X4S-Q9CQ].

53. See Nathan J. Robinson, Stop Eviscerating the Harvard Professor Who Threatened to Sue

a Chinese Restaurant Over $4. He Has a Point., N

EW REPUBLIC (Dec. 13, 2014),

https://newrepublic.com/article/120558/ben-edelman-harvard-prof-angry-over-4-overcharge-has-

point [https://perma.cc/UB33-CP9T] (“By now even Ben Edelman thinks Ben Edelman is fairly

despicable. . . . The consensus is that he’s a cheap, entitled bully and that the immigrant

restaurant owner is a hapless victim.”).

944 VANDERBILT LAW REVIEW [Vol. 73:4:929

“squawk[ers]”

or “terrorists.”

Notwithstanding this public derision,

a fourth recurring theme is that nudniks’ efforts tend to generate

positive spillovers that benefit the entire consumer body, including

those who mock them. In the abovementioned examples, the targeted

companies did not just compensate the specific nudnik, but also

apologized publicly and implemented policy changes.

To be sure, not all nudnik activities benefit other consumers.

Some nudniks raise frivolous complaints. Others voice legitimate

concerns but their voices do not echo enough to reach others and effect

change. To better understand when and how nudniks create positive

spillovers, we now move to categorizing nudniks’ various modes of

operation.

C. How Nudniks’ Activity Impacts Sellers

How do consumers react to seller failure? Lawyers naturally

tend to think about the aggrieved consumer’s legal options: Does she

have a case? Would the seller settle? Is the expected recovery likely to

offset the costs of filing a lawsuit? Outside the legal literature, however,

awaits an entire body called consumer complaining behavior (“CCB”)

literature, which studies how consumers respond to failure in ways

other than litigation.

When a consumer feels dissatisfied with her

purchase, she faces an action/no-action decision. Those that decide to

act face a second-level choice on how to act. Most act privately; that is,

they do not buy the product anymore.

They act without confronting

others. A small minority of dissatisfied consumers decides to act more

publicly and does confront others.

They then face a third-level choice:

either seek redress from the company directly, as in talking to the

manager, or air their grievances outside, as in notifying a regulator,

filing a lawsuit, or posting a negative review online.

54. See Jack Dart & Kim Freeman, Dissatisfaction Response Styles Among Clients of

Professional Accounting Firms, 29 J.

BUS. RES. 75, 75–76 (1994) (analogizing customer complaints

to “the firm, authorities, or media” to a “squawk”).

55. See S

CHIFFMAN & WISENBLIT, supra note 16, at 44. (“The Terrorists are customers who

have had negative experiences with the company and spread negative word-of-mouth. Companies

must take measures to get rid of terrorists.”).

56. Hirschman’s model of voice, exit, and loyalty is perhaps the most familiar to legal

scholars. See A

LBERT O. HIRSCHMAN, EXIT, VOICE, AND LOYALTY (1970). Other models are less

familiar to us but even more influential in the CCB literature. See, e.g., Ralph L. Day & E. Laird

Landon, Jr., Toward a Theory of Consumer Complaining Behavior, in

CONSUMER AND INDUSTRIAL

BUYING BEHAVIOR 425 (Arch G. Woodside et al. eds., 1977).

57. H

IRSCHMAN, supra note 56, at 30–43 (noting that in the consumer markets context, “exit”

is far more prevalent than “voice”).

58. See Kowalski, supra note 18; Richins, supra note 18.

2020] THEORY OF THE NUDNIK 945

The type of consumer response that generates the most positive

spillovers is airing one’s grievances publicly. Airing it out publicly

informs other consumers and helps them calculate their decisions. Yet

public confrontation requires much more effort than “[p]ersonal

boycotting,”

so most consumers avoid it. Nudniks, with their

idiosyncratic utility functions, do not. Most consumers stop at the first

level by deciding not to act. Many others halt at the second level by

deciding to act without confronting others. Nudniks, by contrast, do not

fear the confrontation and go all the way. As a byproduct, their actions

diffuse information about seller behavior and allow other consumers to

decide with whom they want to keep doing business and with whom

they do not.

1. Facilitating Introspection by Sellers

Albert Hirschman famously introduced the notions of “voice”

and “exit.”

Voicing dissatisfaction is not a nudnik-specific action.

Many of us passive consumers occasionally employ voice, as in telling

our waiter that the dish we ordered was not cooked to our liking. What

distinguishes nudniks (besides using their voices more frequently) is

that they are more likely to escalate their complaints up the

organization’s ladder. They do not stop at the bulwark of the front

desk.

Exit, the quintessential private action, is similarly not unique to

nudniks. Many passive consumers will stop purchasing from a seller

who disappointed them and will switch to a competitor. What separates

nudniks from passivists is the degree to which they are willing to go

when exiting. Most passive consumers would not exit in concentrated

markets, where there are few viable alternatives (and thus no

competitors to switch to).

Nudniks, with their unique convictions and

preferences, will. Consider for example Drew Weaver, a Coloradan who

was annoyed by his internet provider’s data overage charges. The fact

that Weaver did not have any viable alternatives in his area did not

59. See Claire P. Bolfing, How Do Customers Express Dissatisfaction and What Can Service

Marketers Do About It?, J.

SERVS. MARKETING, Spring 1989, at 5, 7.

60. See H

IRSCHMAN, supra note 56.

61. Amy Schmitz summarized the barriers to meaningful voice thusly: “Anger may fuel a

consumer’s initial e-mail, phone call, or negative online review, but consumers generally do not

follow up after receiving no reply or facing long hold times on customer service phone lines.”

Schmitz, supra note 29, at 233. Nudniks are more persistent in following up.

62. See, e.g., T. Randolph Beard et al., “Can You Hear Me Now?” Exit, Voice, and Loyalty

Under Increasing Competition, 58 J.L.

& ECON. 717, 718 (2015) (“Consumers’ discipline of firms is

thought to be least effective under monopoly and presumably increases in effectiveness as market

structure atomizes.”).

946 VANDERBILT LAW REVIEW [Vol. 73:4:929

stop him from making the principled decision to disconnect from

internet services altogether.

By escalating their voices (or exiting in unusual circumstances),

nudniks can lead to a change in the seller’s policies.

High-level

managers or owners are not always aware of failures in their own

organizations. The nudnik’s voice may alert top decisionmakers to

underperformance among lower-level employees, failures in product

lines, or changes in consumer preferences and market conditions.

these scenarios, nudniks are effectively providing free monitoring

services for sellers, which may in turn lead to meaningful introspection

and reform in seller practices. Indeed, marketing scholars have long

recognized the value (to sellers) of feedback that nudniks generate.

concrete example comes from Amazon’s Jeff Bezos, who made his email

address publicly available and actively monitors it, calling on

dissatisfied buyers to reach out directly to him and flush out problems

he may not be aware of in his giant organization.

In other words, nudniks’ loud voices can serve as a much-needed

wake-up call, which benefits the seller and, by extension, passive

buyers.

Still, all too often the problem is not that sellers inadvertently

underperform, but rather that they deliberately save costs by cutting

corners.

In these scenarios, keeping the complaint in-house would not

bring improvement in seller behavior. This is where the more potent

channels of nudnik behavior enter: airing grievances publicly.

63. See Jon Brodkin, Comcast Said He Used Too Much Data—So He Opted to Live Without

Home Internet,

ARSTECHNICA (Sept. 15, 2017, 8:41 AM), https://arstechnica.com/information-

technology/2017/09/a-comcast-data-cap-tale-unexplained-overage-drives-man-to-cancel-service/

[https://perma.cc/DXN9-MXL7].

64. To be sure, individual exit in itself may not be enough, but unusual and visible exit could

sometimes lead to a cascade of exits or a consumer boycott. See M

ONROE FRIEDMAN, CONSUMER

BOYCOTTS: EFFECTING CHANGE THROUGH THE MARKETPLACE AND THE MEDIA 1–21 (1999)

(discussing the basic mechanics of consumer boycotts).

65. See H

IRSCHMAN, supra note 56, at 31.

66. See, e.g., Kim et al., supra note 23, at 980 (“[S]ervice providers are advised to encourage

consumers to lodge complaints in order to have an opportunity to recover from the failure.”).

67. See Catherine Clifford, The Brilliant Business Lesson Behind the Emails Jeff Bezos Sends

to His Amazon Executives with a Single ‘?’, CNBC (May 7, 2018, 1:37 PM),

https://www.cnbc.com/2018/05/07/why-jeff-bezos-still-reads-the-emails-amazon-customers-send-

him.html [https://perma.cc/SC3A-EZM8] (“[T]he tech executive still has a customer-facing email

address at Amazon, because hearing from consumers helps him identify pain points.”). Another

example comes from Sheraton Hotels, which reportedly provided financial compensation to

consumers who voiced their concerns to the hotel’s managers. Stephanie Paterik, Sheraton Plans

to Burnish Image by Paying Guests for Bad Service, W

ALL STREET J. (Sept. 6, 2002, 12:07 AM),

https://www.wsj.com/articles/SB1031256929121917755 [https://perma.cc/YJG8-UNAR].

68. See O

LIVER, supra note 7, at 385 (summarizing work in marketing on how too often

management actually opts to “shield itself from the onus of complaint data”).

2020] THEORY OF THE NUDNIK 947

2. Facilitating Legal and Reputational Sanctions Against Sellers

Nudniks express their concerns publicly, and alert others in the

process, through four primary channels.

First, nudniks can litigate their grievances. Although every

consumer can file a lawsuit for breach, few do.

After all, most breaches

of consumer contracts involve sums that are too low to justify litigation.

As Judge Posner quipped, “only a lunatic or a fanatic sues for $30.”

solve this problem, commentators have proposed a litany of measures:

class actions, punitive damages, waiving fees, subsidizing legal

representation, shifting attorney’s fees to the winning party, changing

burdens of proof, and so on.

Yet each of these measures is too imperfect

or malleable to dramatically alter the cost-benefit analysis so that filing

small-yet-meritorious claims would become common. Nudniks, by

contrast, do not rely on these measures—they may invest in litigating

their claim out of their strong sense of principle, spite, or ideology,

disregarding the monetary cost-benefit calculation. Once nudniks file a

lawsuit, they are also the type of plaintiffs who will not readily accept

a settlement offer.

When nudniks air their grievances in public courtrooms, they

not only contribute to the development of decisional law and legal

deterrence, but also create a public record of seller behavior, thereby

contributing to better reputational deterrence. Litigating their claims,

even when small and seemingly petty, produces information about

seller behavior, which in turn helps other consumers decide from whom

they want to purchase.

69. See Carnegie v. Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004) (“The realistic

alternative to a class action is not 17 million individual suits, but zero individual suits.”).

70. Id.

71. See Yonathan A. Arbel, Adminization: Gatekeeping Consumer Contracts, 71 V

AND. L. REV.

121, 157–71 (2018) (reviewing initiatives designed to increase consumer participation).

72. See Julie Macfarlane, Why Do People Settle?, 46 M

CGILL L. J. 663 (2001) (highlighting

litigants’ nonfinancial motivations to reject settlements).

73. We come back to this point later, in Section II.B. The idea is that even if the media does

not report on any small-claim litigation, the mere filings of such lawsuits by nudniks create a

public database of seller misbehavior. Court documents allow investigative reporters to engage in

what they call “pattern-identifying.” See Roy Shapira, Law as Source: How the Legal System

Facilitates Investigative Journalism, 37 Y

ALE L. & POL’Y REV. 153, 210 (2018) [hereinafter Shapira,

Law as Source] (“We learned from interviews, tip sheets, and successful investigative projects, that

pattern-identifying is perhaps the most important way in which the legal system helps

investigative reporters.”). On the link between legal and reputational sanctions, see also Scott

Baker & Albert H. Choi, Reputation and Litigation: Why Costly Legal Sanctions Can Work Better

than Reputational Sanctions, 47 J.

LEGAL STUD. 45 (2018), and Roy Shapira, Reputation Through

Litigation: How the Legal System Shapes Behavior by Producing Information, 91 W

ASH. L. REV.

1193 (2016) [hereinafter Shapira, Reputation Through Litigation].

948 VANDERBILT LAW REVIEW [Vol. 73:4:929

Second, nudniks often enlist the help of the media. For example,

when a consumer named Liz found an unexpected charge for the safe in

her hotel room (supposedly to cover the costs of a warranty for the safe’s

content), she approached NBC and complained. “[I]t’s totally sneaky,”

she said, arguing that the hotel should have informed her of the charges

“up front.”

Her story led to a full-blown investigative report of hidden

fees in hotels.

Liz’s charges were reversed, many other consumers

were forewarned, and other hotels observed the reputational backlash

that such practices can create.

From a journalist’s perspective, such tips and stories provide a

valuable source of interesting stories about seller misconduct—an

“information subsid[y].”

Yet most dissatisfied consumers do not share

their stories with the media, either because they do not have the time

or do not wish to risk their privacy and potential confrontations with

disgruntled sellers. It often takes a nudnik to jumpstart media scrutiny.

A third potential venue for dissatisfied consumers is

complaining to the regulator.

In some circumstances, complaining to

the regulator can prove advantageous to the complainer, so even non-

nudniks engage in it. The Consumer Financial Protection Bureau

(“CFPB”), for example, collects consumer complaints, routes them to the

company, and then follows up to make sure the company responds

properly.

In many other instances, however, complaints to the

regulator do not result in private benefits to the consumer. The Federal

Trade Commission (“FTC”), for instance, explicitly informs consumers

74. See How to Avoid Hidden Hotel Fees, NBC4 WASH. (Feb. 8, 2019, 11:10 PM),

https://www.nbcwashington.com/on-air/as-seen-on/How-to-Avoid-Hidden-Hotel-Fees_Washington

-DC-505584862.html [https://perma.cc/9ZVA-8W2W].

75. Id.

76. Id.

77. For example, NBC4 Washington invites consumers to share issues with the promise that

“we are responding to EVERY consumer issue!” See Do You Have a Consumer Issue to Report? Tell

NBC4 Responds!, NBC4 WASH., https://www.nbcwashington.com/news/local/NBC4-Responds-

Consumer-Complaint-IssueReport-Susan-Hogan-378873701.html (last updated Dec. 12, 2019,

10:49 AM) [https://perma.cc/49FV-THLG]. On the “information subsidies” term and its relevance,

see Shapira, Law as Source, supra note 73, at 166–67, explaining that “information subsidies” are

“stories provided to newsrooms by insiders, public relations departments, think tanks, NGOs, and

the like.”

78. The argument in this paragraph can extend to “private regulators,” such as the Better

Business Bureau, which collects as many as 800,000 complaints annually. See US BBB 2018

Statistics, B

ETTER BUSINESS BUREAU, https://www.bbb.org/globalassets/local-bbbs/council-

113/media/complaint-stats/2018/us-bbb-2018-statistics-complaints.pdf (last visited May 7, 2020)

[https://perma.cc/WM48-CYCY]. For more on private handling of complaints, see Rory Van Loo,

The Corporation as Courthouse, 33 Y

ALE J. ON REG. 547 (2016).

79. See Learn How the Complaint Process Works, C

ONSUMER FIN. PROTECTION BUREAU,

https://www.consumerfinance.gov/complaint/process/ (last visited May 7, 2020) [https://perma.cc/

N9RB-UJGS] (“We’ll forward your complaint and any documents you provide to the company and

work to get a response from them.”).

2020] THEORY OF THE NUDNIK 949

that it “cannot resolve individual consumer complaints.”

Complaining

under these conditions is costly to the complainer. So most consumers

do not invest the time in complaining, even though complaining would

be beneficial for society by facilitating better-informed regulations,

helping the regulator warn other market participants, and shaming

underperforming sellers.

It takes consumers with idiosyncratic utility

functions—nudniks—to initiate such privately costly yet socially

beneficial complaints.

Finally, nudniks engage in the production and dissemination of

peer-to-peer reputational information.

Consumers increasingly rely on

online customer reviews when making purchasing decisions.

Consumers often do read and engage with other consumers’ reviews,

unlike the fine print.

Yet most consumers who are dissatisfied with

their purchases do not share their dissatisfaction online. One study, for

example, estimates that only fifteen in a thousand consumers produce

reviews.

Of these reviewers, only a handful include a detailed

description of what exactly went wrong, thus making most reviews

minimally informative.

The upshot, again, is that an important

. See

Submit a Consumer Complaint to the FTC

, FED. TRADE COMMISSION,

https://www.ftc.gov/faq/consumer-protection/submit-consumer-complaint-ftc (last visited May 7,

2020) [https://perma.cc/6WFA-NBWL]; see also Rory Van Loo, The Missing Regulatory State:

Monitoring Businesses in an Age of Surveillance, 72 VAND. L. REV. 1563 (2019).

81. For a discussion about regulators’ increased reliance on publicizing complaints online, see

Nathan Cortez, Regulation by Database, 89 U. COLO. L. REV. 1 (2018).

82. See Yonathan A. Arbel, Reputation Failure: The Limits of Market Discipline in Consumer

Markets, 54 W

AKE FOREST L. REV. 1239, 1254–55 (2019) (“While everyone benefits from having

this public resource, producers of reputational information are not directly compensated for their

contributions.”); Shmuel I. Becher & Tal Z. Zarsky, E-Contract Doctrine 2.0: Standard Form

Contracting in the Age of Online User Participation, 14 M

ICH. TELECOMM. TECH. L. REV. 303, 316–

20 (2008) (“[L]ate recognition of biased [contractual] terms will not change the vendors’ actions

vis-à-vis other consumers—unless the information concerning the transaction flows from the

aggrieved consumer to the ex ante consumers contemplating a transaction with the same vendor.”).

83. See Michael Anderson & Jeremy Magruder, Learning from the Crowd: Regression

Discontinuity Estimates of the Effects of an Online Review Database, 122 E

CON. J. 957, 983 (2012).

84. See, e.g., How Online Reviews Influence Sales, S

PIEGEL RES. CTR. 2,

https://spiegel.medill.northwestern.edu/_pdf/Spiegel_Online%20Review_eBook_Jun2017_FINAL.

pdf (last visited May 7, 2020) [https://perma.cc/Z7WZ-L3NV] (reporting that nearly ninety-five

percent of shoppers read reviews before shopping); Local Consumer Review Summary 2019,

RIGHT LOCAL (Dec. 11, 2019), https://www.brightlocal.com/research/local-consumer-review-

survey/ [https://perma.cc/J4Z3-BJ94] (putting that number at eighty-two percent of shoppers who

read reviews when considering shopping at local businesses).

85. See Eric T. Anderson & Duncan I. Simester, Reviews Without a Purchase: Low Ratings,

Loyal Customers, and Deception, 51 J.

MARKETING RES. 249, 251 (2014).

86. See, e.g., Wayne R. Barnes, The Good, the Bad, and the Ugly of Online Reviews: The

Trouble with Trolls and a Role for Contract Law After the Consumer Review Fairness Act, 53 G

L. REV. 549, 553–54 (2019) (illustrating the difficulty of distinguishing between helpful (factual)

and unhelpful (“uninhibited, over-the-top hyperbole”) reviews); Max Woolf, A Statistical Analysis

of 1.2 Million Amazon Reviews, M

AX WOOLF’S BLOG (June 17, 2014), http://minimaxir.com/2014/

950 VANDERBILT LAW REVIEW [Vol. 73:4:929

mechanism of market governance—online reviews—is carried by the

efforts of a small subset of consumers who are willing to incur the costs:

nudniks.

To be sure, these channels of voicing dissatisfaction are

disparate: some, such as litigation, require much higher private and

social costs than others, such as posting reviews online. We group them

together here to underscore one crucial yet underappreciated point: the

overwhelming majority of consumers do not engage with any of these

channels. To the extent that these channels carry information on seller

behavior, it is largely through the work of a small subset of consumers—

nudniks.

* * *

Through all these channels of voicing dissatisfaction, nudniks

are an engine of market discipline. If restaurants can systematically

overcharge $4 without anyone contesting such a practice, they have

little incentive to reform. Nudniks, through various modes of action,

make restaurants pay for illicit practices. Nudniks hold sellers

accountable, thereby potentially benefiting the broader, mostly passive

consumer body. Our claim is not that every nudnik’s complaint

necessarily produces value, but rather that some do. Nudnik-type

activism is therefore an important, understudied aspect of market

discipline.

D. Relation to the Extant Literature and Limitations

To further shed light on nudniks’ contribution, this Section

juxtaposes nudnik-driven activism with other theories of market

discipline, such as the informed minority theory and the reputational

discipline theory. This Section then highlights several limitations of

nudnik-based activism.

1. From an “Informed Minority” to Nudniks

Perhaps the most influential theory of market discipline has

been Alan Schwartz and Louis Wilde’s “informed minority theory.”

The theory concedes that many consumers are too uninformed and

06/reviewing-reviews/ [https://perma.cc/5F8C-3G5G] (finding that only ten percent of reviews

studied had a minimum of ten helpfulness data points).

87. See Schwartz & Wilde, supra note 9. On the theory’s influence, see R. Ted Cruz & Jeffrey

J. Hinck, Not My Brother’s Keeper: The Inability of an Informed Minority to Correct for Imperfect

Information, 47 H

ASTINGS L.J. 635, 647–48 (1996).

2020] THEORY OF THE NUDNIK 951

insufficiently sophisticated to fend for themselves. This does not mean,

however, that markets should be regulated. Schwartz and Wilde argued

that as long as a minority of consumers reads and negotiates contract

terms, contracts will reflect the preferences of most consumers,

including those who do not read the fine print.

The idea is that if the

minority is sufficiently large to surpass a critical mass, then firms will

find it worthwhile to compete over this segment of the market. And

because firms tend to offer standard form contracts, the only way a firm

can win the hearts of the informed minority segment is by offering

better terms across the board.

The informed minority theory quickly

gained prominence, becoming the lynchpin of economic analyses of

consumer law.

Yet in recent years there has been a growing realization that the

assumptions underlying the theory may be unrealistic. A growing body

of research shows that the number of consumers who read the fine

print, at least in online contracts, is so small that it is unlikely to reach

a critical mass.

This is not surprising—reading contracts is a time-

intensive activity that people dislike, with uncertain and often

marginal benefits.

Further, in recent decades there has been a steady

increase in the volume and length of contracts and disclosures, making

reading and comprehending almost impossible.

Accordingly, many

88. See Schwartz & Wilde, supra note 9, at 638 (“The presence of at least some consumer

search in a market creates the possibility of a ‘pecuniary externality’: persons who search

sometimes protect nonsearchers from overreaching firms.”).

89. See George L. Priest, A Theory of the Consumer Product Warranty, 90 Y

ALE L.J. 1297,

1347 (“If a small group of consumers reads warranties and selects among products according to

warranty content, manufacturers may be forced to draft warranties responsive to the group’s

preferences, even though the large majority of consumers generally neglect warranty terms.”).

90. See Cruz & Hinck, supra note 87; Eyal Zamir, Contract Law and Theory: Three Views of

the Cathedral, 81

U. CHI. L. REV. 2077, 2102 n.77 (2014) (compiling references).

91. See, e.g., Yannis Bakos et al., Does Anyone Read the Fine Print? Consumer Attention to

Standard-Form Contracts, 43 J.

LEGAL STUD. 1, 4 (2014) (“We find that the fraction of consumers

who read such contracts is so small that it is unlikely that an informed minority alone is shaping

software license terms.”). We elaborate on the flaws of the informed minority theory in Arbel &

Shapira, supra note 27.

92. See Omri Ben-Shahar, The Myth of the ‘Opportunity to Read’ in Contract Law, 5 E

UR.

REV. CONT. L. 1, 15 (2009) (discussing the burdens of reading and how not reading is actually the

rational decision); Yonathan A. Arbel & Andrew Toler, All-Caps 4 (Ala. Working Paper Series

3519630, 2019), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3519630 [https://perma.cc/

WDB2-P27D] (discussing ways to make reading terms and conditions more bearable). Even the

use of conspicuous formatting to highlight terms does not seem to improve matters for consumers.

See Ben-Shahar, supra (finding, in a series of experiments, that capitalization of key clauses in

consumer contracts fails to improve consumer outcomes).

93. See O

MRI BEN-SHAHAR & CARL E. SCHNEIDER, MORE THAN YOU WANTED TO KNOW: THE

FAILURE OF MANDATED DISCLOSURE 94–101 (2014) (discussing the “accumulation problem” of

disclosures and how they “compete with each other for people’s time and attention”); W

ENDY

WAGNER ET AL., INCOMPREHENSIBLE! 49 (2019) (“[I]n some cases the law even encourages sellers

to be more incomprehensible, rather than less.”).

952 VANDERBILT LAW REVIEW [Vol. 73:4:929

have abandoned the informed minority theory.

Even Schwartz himself

seems to concede it is unrealistic.

A related prominent theory is the reputational discipline theory.

This theory holds that sellers will sometimes perform even beyond the

letter of the contract in order to build their reputation and brand

name.

On this view, one-sided clauses give the firm the power—but

not the obligation—to perform the contract in a self-serving way. Firms

have incentives to go beyond the contract and often do.

While we agree

that reputational considerations shape seller behavior, the reputational

discipline theory is too simplistic, resting on unrealistic assumptions of

consumer learning and consumer sharing.

The theory sweeps critical

issues under the rug: How is it exactly that quality reputational

information emerges? Who creates it? Who widely disseminates it?

Quality reputation information is, in a sense, a public good.

Private

players often do not have the right incentives (or ability) to create and

disseminate this public good.

100

As a result, reputational information is

too often unreliable; the market overreacts to certain types of seller

misbehavior and underreacts to others.

101

In sum, there is a vacuum in theories of bottom-up market

discipline. Both prevalent theories—informed minority and

94. See BRIAN H. BIX, CONTRACT LAW: RULES, THEORY, AND CONTEXT 52 (2012) (“Electronic

contracting has raised doctrinal and practical problems that were not resolved well by existing

law.”);

Zamir, supra note 90, at 2102–03 (“Outside of the law-and-economics community, most

people would quite confidently say . . . that hardly a soul reads standard-form contracts.”).

95. See Ayres & Schwartz, supra note 10, at 552 (“[T]he state should jettison the disclosure

project of making all terms accessible to consumers with the expectation that consumers can read

the entire document.”).

96. See Lucian A. Bebchuk & Richard A. Posner, One-Sided Contracts in Competitive

Consumer Markets, 104 M

ICH. L. REV. 827, 827–28 (2006) (“A seller concerned about its reputation

can be expected to treat consumers better than is required by the letter of the contract.”); Jason

Scott Johnston, The Return of Bargain: An Economic Theory of How Standard-Form Contracts

Enable Cooperative Negotiation between Businesses and Consumers, 104 M

ICH. L. REV. 857, 858

(2006) (“[A] firm will often provide benefits . . . beyond those that its standard form obligates it to

provide . . . . Firms do this because they have an interest in building and maintaining cooperative,

value-enhancing relationships with their customers.”).

97. See Shmuel I. Becher & Tal Z. Zarsky, Minding the Gap, 51 C

ONN. L. REV. 69, 90–91

(2019) (explaining that firms often account for characteristics like consumer power, emotion, and

sophistication when determining whether to go beyond the terms of a contract).

98. Others have criticized the reputational discipline theory on other grounds, such as

fairness. See, e.g., Eyal Zamir & Yuval Farkash, Standard Form Contracts: Empirical Studies,

Normative Implications, and the Fragmentation of Legal Scholarship, 12 J

ERUSALEM REV. LEGAL

STUD. 137, 162–67 (2015) (warning, for a number of reasons, against an entire reliance on the

reputational discipline theory).

99. See Shapira, Reputation Through Litigation, supra note 73, at 1211.

100. Id.

101. See generally Arbel, supra note 82, at 1286–87 (noting that informational distortions can

lead companies to either overreact or underreact to certain feedback); Shapira, Reputation

Through Litigation, supra note 73, at 1203–11.

2020] THEORY OF THE NUDNIK 953

reputational discipline—suffer from key theoretical and empirical

flaws. The theory of nudnik-based activism, by contrast, escapes these

flaws. Nudniks’ unique makeup and modes of operation make them a

more robust vector of market discipline for the following four reasons.

First, nudnik-based activism does not require a critical mass of

active consumers to effect change in seller behavior. One nudnik may

be enough. In the informed minority theory, the mechanism that brings

about change is market competition over the purses of active

consumers. The theory therefore requires a critical mass of comparison

shoppers, or else it would not be worthwhile for sellers to compete over

them.

102

One comparison shopper electing to purchase elsewhere is not

enough. With nudniks, by contrast, the mechanisms that bring about

change are reputational and legal. In today’s interconnected world, a

single nudnik’s squawk can reach numerous other consumers and

convince them to take their business elsewhere.

103

The threat of

reputational sanctions, in turn, makes sellers change their behavior ex

ante.

104

YouTube allowed a single man—Dave Carroll—to call the

mighty United Airlines to order. Twitter helped another—Hassan

Syed—make British Airways apologize and change their practices.

To be sure, one nudnik will not always be enough. In fact,

sometimes even several nudniks and their repeated public complaints

may not be enough to solve market pathologies. Our claim here is more

modest: sellers care about their reputation and realize that one

complaining consumer may be enough to put reputational sanctions in

motion. Indeed, this is a recurring theme among marketing scholars

and reputation practitioners: beware of the single active consumer.

105

102. See Florencia Marotta-Wurgler, Does Contract Disclosure Matter?, 168 J. INSTITUTIONAL

THEORETICAL ECON. 94, 98 (2012) (“If this critical mass of comparison shoppers exists, disclosure

will be effective in sufficiently competitive markets, because sellers will have an incentive to satisfy

the informed buyers.”).

103. See Franklin G. Snyder & Ann M. Mirabito, The Death of Contracts, 52 D

UQ. L. REV. 345,

395 (2014) (“[A] handful of disgruntled consumers can seriously affect [firms’] reputations and

their businesses.”).

104. Nudniks’ complaints may also generate nonreputational disciplinary effects, such as

creating psychological pressures on sellers. See Mark Seidenfeld, Cognitive Loafing, Social

Conformity, and Judicial Review of Agency Rulemaking, 87 C

ORNELL L. REV. 486, 509–10 (2002)

(reviewing psychological studies on workers that demonstrate the significant demoralizing effects

of complaints).

105. See Chrysanthos Dellarocas, Reputation Mechanisms, in 1 H

ANDBOOKS IN INFORMATION

SYSTEMS: ECONOMICS AND INFORMATION SYSTEMS 629, 639 (Terrence Hendershott ed., 2006)

(explaining that, in some circumstances, “even a single negative rating on a seller’s feedback

history reveals the fact that the seller is not honest”); Corné Dijkmans et al., A Stage to Engage:

Social Media Use and Corporate Reputation, 47 T

OURISM MGMT. 58, 59 (2015) (“Even a single

unhappy customer can cause reputational damage via social media platforms . . . .”); No Online

Customer Reviews Means BIG Problems in 2017, F

AN & FUEl, https://fanandfuel.com/no-online-

customer-reviews-means-big-problems-2017/ (last visited May 7, 2020) [https://perma.cc/G74A-

954 VANDERBILT LAW REVIEW [Vol. 73:4:929

As one reputation management firm puts it: “[E]ven a single upset

individual can wreak havoc on your business—unless you catch the

problem early and do something about it.”

106

A second key distinction that makes nudnik-based activism

more robust is that nudniks do not engage in monetary cost-benefit

analysis. Other types of active consumers (such as comparison

shoppers) would be active only if they deem it worthwhile. Therefore,

the prevalence of “readers” in a given market is largely a function of

outside circumstances, such as the length and complexity of contracts,

or the feasibility of negotiating ex ante with sellers. When contract

length and complexity increases, as they have in the digital age, fewer

consumers will read.

107

The nudnik’s crusade, by contrast, is relatively

immune to the rising costs of activism.

The rise of the digital age therefore did not harm nudniks’ ability

to effect change but, in fact, increased it. Changes in the information

environment—the rise of the internet and, in particular, social media—

made nudniks potentially more impactful by boosting their signals.

108

Nudniks have always noticed being overcharged, but now, they can post

a negative review online about it and reach a broad audience.

109

Everyone searching for that seller in the future may find the nudnik’s

complaint that the seller fails to honor contractual obligations. What

may once have been an ephemeral signal is now etched forever in the

internet’s memory. It is not a coincidence that big business is often

behind campaigns for a “right to be forgotten.”

110

Third, nudnik-based activism generates more spillovers. One

comparison shopper who reads through a contract does not make other

shoppers more sophisticated. By contrast, one nudnik who goes public

with her concerns can reduce the costs to other consumers of becoming

informed about a seller’s competence and integrity. She allows other

LZVE] (finding in a survey that thirty-five percent of respondents might avoid a product on the

basis of a single negative review).

106. Online Reputation Management, B

ERNSTEIN CRISIS MGMT.,

https://www.bernsteincrisismanagement.com/portfolio-item/online-crisis-and-issues-

management/ (last visited May 7, 2020) [https://perma.cc/UX5H-PKGE].

107. B

EN-SHAHAR & SCHNEIDER, supra note 93, at 94–101.

108. See, e.g., Barnes, supra note 86, at 562 (“The reviews also increase consumers’ power over

the businesses they support.”); Becher & Zarsky, supra note 82, at 321–33 (discussing the flow of

information between customers and potential customers).

109. At the same time, the abundance of information nowadays may sometimes limit the

visibility of any individual signal.

110. See Amy Gesenhues, The Inevitable Happened: First Company Provides “Right to Be

Forgotten” Removal Service, S

EARCH ENGINE LAND (June 25, 2014, 12:01 AM),

https://searchengineland.com/reputation-vip-online-management-firm-launches-site-assist-

googles-forget-form-194998 [https://perma.cc/4ED6-B7VS] (explaining that Google has entered the

business of helping peoples’ online activity be forgotten).

2020] THEORY OF THE NUDNIK 955

consumers to notice that they too were overcharged and may push them

to complain. By going through the takeout receipt and comparing it to

the prices on the restaurant’s website, the nudnik reduces the costs of

becoming active for other consumers.

Finally, nudniks impact seller behavior not just by making sure

sellers honor their contractual obligations, but also by pushing sellers

to go beyond the contract. According to the informed minority theory, a

small subset of consumers pushes sellers to offer better contracts to

everyone. With nudniks, by contrast, a small subset of consumers

pushes sellers to perform better, regardless of sellers’ contractual

obligations. Nudniks frequently assert transactional expectations: the

rights they believe they should have.

111

The marketing literature has

long recognized the importance of consumer expectations, as captured

by the influential expectancy disconfirmation theory.

112

According to

this theory, consumers often operate based on their expectations from

the transaction, and these expectations are not necessarily based on the

specific contract in question. Expectations rather come from consumers’

experience with similar transactions, their general sense of fairness,

and market norms.

113

Importantly for our purposes, when a “regular”

(read: passive) dissatisfied consumer finds out that there is a mismatch

between her (violated) expectations and what is owed to her according

to the contract, she often gives up the fight. Nudniks do not.

To return to our example of the NBC story on a hotel charging

for a safe in the room: the hotel explicitly stipulated that a charge would

be imposed to cover a warranty on the safe.

114

The hotel was therefore

111. See Bebchuk & Posner, supra note 96, at 830 (“The expected cost of the term to the buyer

must be discounted by the likelihood that reputational considerations will induce the seller to treat

the buyer fairly even when such treatment is not contractually required.”); Johnston, supra note

96, at 877 (explaining how consumer expectation can sometimes affect a seller’s probability of

expanding the terms of a contract); see also Clayton P. Gillette, Rolling Contracts as an Agency

Problem, 2004 W

IS. L. REV. 679, 722 (explaining that, when a consumer does not read a contract,

a court might determine that “[s]ome terms may be sufficiently salient or evince a sufficient

identity of interests between readers and nonreaders that market mechanisms largely internalize

the interests of nonreading buyers”).

112. See Rolph E. Anderson, Consumer Dissatisfaction: The Effect of Disconfirmed Expectancy

on Perceived Product Performance, 10 J.

MARKETING RES. 38, 43 (1973) (determining that, because

some might overestimate technology or innovation, “consumers may have unrealistically high

expectations for product performance even without the added boost of promotional claims”); see

also Andrew Dahl & Jimmy Peltier, A Historical Review and Future Research Agenda for the Field

of Consumer Satisfaction, Dissatisfaction, & Complaining Behavior, 28 J.

CONSUMER

SATISFACTION, DISSATISFACTION & COMPLAINING BEHAV. 5, 5 (2015) (noting that the expectancy

disconfirmation theory is a “predominant theoretical approach”).

113. Legal scholars have recently become aware of, and accommodated, the expectation

disconfirmation theory. See, e.g., Ayres & Schwartz, supra note 10, at 551 (using the phrase “term

optimism” to explain that, for several reasons, “consumers expect a contract to contain more

favorable terms than it actually provides”).

114. See discussion supra note 74 and accompanying text.

956 VANDERBILT LAW REVIEW [Vol. 73:4:929

seemingly not in breach of any contractual obligation. Nevertheless, it

breached Liz’s expectations. Liz felt that hotels should not behave this

way, so she shared her complaints with the media and ignited a

reputational fallout. A much more famous and consequential example

came in 2017, when United Airlines evicted a paying passenger from

the flight to accommodate another passenger.

115

Even though the

airline company’s contract stipulated it could deboard the passenger,

United Airlines stakeholders found the harsh treatment uncalled for

and unfair. The incident led to a swift and significant decline in

passengers’ willingness to fly United.

116

The entire airline industry took

notice, and the industry practices changed.

117

In all these examples, what separates nudnik-based activism

from other forms of market discipline is the mechanism of change.

Nudniks create a legal and reputational risk for sellers. Sellers who

narrowly adhere to their contractual obligations may win in the

courtroom but lose in the court of public opinion. Nudnik-driven

reputational effects are sometimes enough to push firms to conform to

consumers’ transactional expectations.

118

Legal scholars should therefore shift from focusing on

consumers’ reading behavior to focusing on consumers’ complaining

behavior. Instead of an informed minority theory, we offer the theory of

the nudnik—a sort of “crusading minority.” Firms that anticipate the

existence of nudniks are more likely to observe their contractual

commitments ex post and invest in quality control and customer service

ex ante. To reiterate, such bottom-up market discipline can occur even

without a critical mass of consumers reading and comprehending

115. See Erin McCann, United’s Apologies: A Timeline, N.Y. TIMES (Apr. 14, 2017),

https://www.nytimes.com/2017/04/14/business/united-airlines-passenger-doctor.html [https://

perma.cc/R7FM-B7GT]; Christina Zdanowicz & Emanuella Grinberg, Passenger Dragged Off

Overbooked United Flight, CNN (Apr. 10, 2018), https://www.cnn.com/2017/04/10/travel/

passenger-removed-united-flight-trnd/index.html [https://perma.cc/D2DE-NKXH] (explaining

that the passenger paid for his ticket, refused to give up his seat, and was subsequently removed

from the plane—rather forcefully).

116. See, e.g., Kevin Quealy, How Much Would You Put Up With to Avoid United Airlines?,

N.Y.

TIMES (Apr. 17, 2017), https://www.nytimes.com/2017/04/17/upshot/how-much-would-people-

put-up-with-to-avoid—united-airlines.html [https://perma.cc/H297-CW4S] (presenting survey-

based evidence that shows those with knowledge of the removal incident avoided United Airlines).

117. See Stacey Leasca, This Is How Likely It Is That You’ll Get Bumped from a Flight, T

RAVEL

& LEISURE (Nov. 17, 2017), https://www.travelandleisure.com/airlines-airports/airlines-bumping-

passengers-less [https://perma.cc/C5AY-E8KE] (“Since the incident, major airlines — not just

United — have changed their policies for overbooking.”).

118. The incident led to a marked decrease in the rate of bumping passengers, from 0.62 per

10,000 to 0.44, the lowest rate in decades. Airline Bumping Rate Lowest in Decades, U.S.

DEP’T

TRANSP. (Sep. 7, 2017), https://www.transportation.gov/briefing-room/dot6417 [https://perma.cc/

GV8M-KVWS].

2020] THEORY OF THE NUDNIK 957

contracts. All that is needed is (1) some consumers with nudnik-style

personality traits and (2) sellers who care about their reputations.

2. The Limits of Nudniks

As we have noted, not all nudnik activities create positive value.

Some complaints are petty and frivolous, exacting costs instead of

exposing real issues. To evaluate nudniks’ overall social impact, one

should consider both the benefits and the costs of nudniks’ actions. And

while we cannot offer an exact quantification of the two sides of the

equation, we offer here suggestive evidence based on a synthesis of the

marketing literature, which could inform how we design future

research or think of potential policy implications.

Perhaps the biggest potential limitation of nudnik-based

activism is that nudniks’ concerns and expectations are not always

aligned with the concerns of other (less idiosyncratic) consumers. To the

extent that nudniks complain about petty, inconsequential things, it is

unlikely that their complaints will effect meaningful positive change in

seller behavior. In other words, the concern is that nudniks will force

sellers to focus too much on things that only nudniks care about. This

concern, however, seems limited in practice. The CCB literature offers

several indications that most nudniks operate in what we would call

“good faith” and that their complaints seemingly implicate broader

consumer interests. For example, if nudniks complain about things only

nudniks care about, we would expect little correlation between product

quality and complaints. In reality, however, various studies show that

consumer complaining behavior is inversely related to product

quality.

119

That is, when the quality of the product is higher, consumers

complain less, and vice versa. This finding suggests that nudnik

activism is tied to actual defects in a product that are relevant to the

broader consumer body.

Another related concern is that nudniks complain for selfish

motivations, to get “freebies” and “comps,” or to simply “troll” for

attention. Here as well, empirical evidence casts doubt on the scope of

the problem: serial complainers who raise an issue are more likely

(compared with passive consumers) to become repeat, loyal customers

if sellers learn from their mistakes and resolve the issue.

120

This

119. See Beard et al., supra note 62, at 741 (claiming that, within the telephone industry,

“observed levels of changes in quality . . . are negatively and statistically significantly related to

complaint levels”); Silke J. Forbes, The Effect of Service Quality and Expectations on Customer

Complaints, 56 J.

INDUS. ECON. 190 (2008) (providing empirical data based on complaints in the

airline industry).

120. See TARP, supra note 16, at 64 (finding that “profits increase as the percentage of

satisfactorily resolved complaints increases”); Amy K. Smith & Ruth Bolton, An Experimental

958 VANDERBILT LAW REVIEW [Vol. 73:4:929

suggests a certain degree of good faith on the side of nudniks. Similarly,

another finding in the literature is that serial complainers are not only

more likely to complain against firms that behave badly, but also more

likely to compliment firms that behave well.

121

We read these studies as

suggesting that, on average, nudnik-consumers are simply the more

active version of the majority of passive consumers: they notice and

confront more readily, but they notice and confront real issues.

Instead of depicting nudniks as merely trolls who are out for

revenge or “comps,” the existing evidence suggests that many of them

are consumers who deeply care about how they are being treated.

But there is a broader point in play here. Our assessment of

nudniks’ social impact should be detached from our judgment of

nudniks’ motivations. All too often the court of public opinion tends to

focus on nudniks’ “weird” motivations and portray nudniks as vengeful

and petty. Even academics and judges treat nudniks as “freeloaders,”

“fraudulent returners,” and “peer-induced esteem-seekers.”

122

Yet the

fact that a nudnik has some selfish motivations does not mean she

cannot advance the broader good.

123

True, some nudniks may be seeking

revenge, attempting to receive material compensation, looking for

validation from others, or acting out of a sense of entitlement. Absent

such motivations, however, very few consumers would act when

dissatisfied, and sellers could continue to systematically overcharge

and underperform, assured of no negative consequences. These atypical

motivations help nudniks break out from consumers’ rational apathy.

We should therefore judge nudniks’ behavior based on the outputs—do

they push firms to meet other consumers’ expectations?—rather than

the inputs.

Further, even when some nudniks sound false alarms, several

mechanisms tend to screen frivolous nudnik complaints and highlight

worthwhile ones. Judges screen the merits of legal complaints.

Investigative reporters follow up on tips from nudniks only if the story

Investigation of Service Failure and Recovery: Paradox or Peril?, 1 J. SERV. RES. 65, 77 (1998)

(finding that, when complaints are addressed well, “excellent service recoveries can lead to

increased customer satisfaction and repatronage intentions”); Voorhees et al., supra note 16, at

523 (illustrating that complainers with “satisfactory recovery” were substantially likely to become

repeat purchasers).

121. See Arbel, supra note 82, at 1265–67 (documenting the high share of positive reviews on

Amazon and other platforms).

122. Kate L. Reynolds & Lloyd C. Harris, When Service Failure is Not Service Failure: An

Exploration of the Forms and Motives of “Illegitimate” Customer Complaining, 19 J.

SERVS.

MARKETING 321, 325 (2005); see also Barnes, supra note 86, at 603–04 (calling consumers who

write emotional and nonfactual negative reviews “trolls”).

123. See A

DAM SMITH, THE WEALTH OF NATIONS 9–10 (Jonathan B. Wight ed., Harriman

House 2007) (1776) (“It is not from the benevolence of the butcher, the brewer, or the baker, that

we expect our dinner, but from their regard to their own interest.”).

2020] THEORY OF THE NUDNIK 959

represents a wide pattern of seller misbehavior. And fellow consumers

discount baseless negative online reviews. The fact that other

consumers are passive does not mean that they are clueless. The other

consumers can infer, based on their own experience and common sense,

whether a nudnik’s complaint raises a valid problem that is indicative

of the seller’s behavior. If a nudnik frivolously complains about Amazon

not shipping items fast enough, other consumers can rely on their own

good experience with Amazon and discount the claim.

* * *

To be sure, much more research on the nudnik phenomenon is

needed. Our discussion thus far has focused on the overall impact of

nudniks, and we have cited some evidence suggesting that the net effect

is likely beneficial. Ideally, we would want further research that goes

beyond the “on average” claims and delves into the cross-sectional

variation—identifying the circumstances under which nudniks are

most or least likely to generate positive contributions.

124

Yet the

existing examples and studies already indicate that some nudniks do

contribute to meaningful market discipline, thereby positively affecting

other consumers. At a minimum, then, the existing evidence suggests

that we cannot dismiss outright the role that nudniks play in affecting

seller behavior. The gaps left by other modes of market discipline leave

ample room for these active, idiosyncratic consumers to provide an

important public service.

II.

HOW SELLERS REACT TO NUDNIKS:

HE FUTURE OF CONSUMER ACTIVISM

Thus far we have focused on one side of the equation—namely,

how nudniks fight underperforming sellers and hold them accountable.

But sellers do not remain passive. It is therefore time to switch focus to

how sellers fight back. More accurately, we must ask: How do sellers

reduce the legal and reputational risks posed by nudniks?

While the nudnik phenomenon has remained understudied in

the legal literature, the firms that face nudniks viscerally understand

their importance. Firms have long invested resources in attempts to

channel nudniks’ complaints to less visible backchannels or mollify

124. Another promising avenue for future research comes from potential concerns about the

equality aspects of nudnik activities. One could claim, for example, that nudniks “enjoy

disproportionate power due to social or economic status.” Schmitz, supra note 6, at 280. We

elaborate in Arbel & Shapira, supra note 27, at 22.

960 VANDERBILT LAW REVIEW [Vol. 73:4:929

them with preferential treatment.

125

But in recent years, technological

advancements have started disrupting the balance of power between

sellers and nudniks. Sellers are increasingly enjoying access to big data

and predictive analytics tools that will allow them to effectively silence

nudniks.

126

The equilibrium is changing.

We used to think of market discipline as a process whereby

buyers choose the firm they want to buy from. Yet in today’s world,

sellers can increasingly choose the customers they want to sell to. Put

differently, economic analysis has traditionally assumed that only

sellers have a reputation to protect; but in today’s environment, buyers

have reputations too. As this Part details, firms evaluate potential

buyers in multiple ways, including their propensities to complain and

publicly confront the underperforming seller.

Companies now store troves of data on consumer behavior at the

individual level. Using widely available consumer scores, predictive

analytics, and machine learning, sellers can make sense of all the data

and predict future consumer behavior. Critically, these algorithms can

predict certain personality traits in each consumer, including the traits

that make a consumer a nudnik.

127

Section A details how sellers can use

these tools to identify nudniks before they walk into their stores. These

sellers can then either avoid selling to nudniks or silence them before

they draw public attention to seller misconduct. Section B explains why

the new technological ability to locate and silence a nudnik early, before

she even forms her claim, is a game-changer. Timing matters: the

earlier a seller can identify and silence a nudnik, the more likely it is

that the seller reduces the risk of legal and reputational sanctions, and

the less likely other consumers are to enjoy the positive spillovers from

nudnik behavior.

A. Targeting Nudniks

Nudniks pose a reputational and legal threat to sellers, and so

sellers have strong incentives to separate nudniks from non-nudniks

and then placate nudniks before they publicly air their grievances. The

question, then, is not whether sellers have the will but whether they

have the way to target nudniks. In recent years, firms have increasingly

125. See, e.g., Barnes, supra note 86, at 554–55 (noting that firms attempt to include

nondisparagement clauses in consumer contracts).

126. Predictive analytics refers here to models that allow businesses to make sense of big data

and use it to their advantage. See generally Dennis Hirsch, Predictive Analytics Law and Policy: A

New Field Emerges, 14 I/S:

J.L. & POL’Y FOR INFO. SOC’Y 1, 1 (2017).

127. See Ariel Porat & Lior Jacob Strahilevitz, Personalizing Default Rules and Disclosure

with Big Data, 112 M

ICH. L. REV. 1417, 1434–38 (2014) (explaining that firms throughout different

industries are collecting data to better classify the behaviors and personalities of their consumers).

2020] THEORY OF THE NUDNIK 961

gained access to new forms of big data—information on each consumer’s

past interactions with one’s own company as well as with other sellers—

and to predictive analytics tools: models that predict each consumer’s

proclivity to act publicly when dissatisfied.

128

Connecting the dots is

straightforward: we have ample reason to believe that sellers will use

the newfound technological capabilities to reduce and contain the

nudnik-based risks.

To be sure, finding smoking-gun evidence on such nudnik-

targeting practices is difficult. This is probably by design: firms do not

shout from the rooftops that they can identify and disarm nudniks, but

rather treat their use of big data as proprietary information and shield

it with trade secret protections.

129

As a result, targeting practices

“remain a mystery to consumers”

130

and are understudied by

researchers.

131

In this Section, we nevertheless document various

indications that piece together a picture of sellers gradually improving

their nudnik-circumventing abilities: identifying who is a nudnik and

who is not (Section II.A.1) and then disarming them (Section II.A.2). We

should be careful not to overstate our claim; it is hard to evaluate the

scope of these practices given their secretive nature. What we can offer

are suggestive indications of emerging trends. At the same time, we

should not discount these indications: at a minimum, they suggest an

early trend and a near-future trajectory. After all, firms’ usage of

consumer scores, big data, and predictive analytics to target nudniks is

only likely to increase in the coming years.

132

128. Id.

129. See id. at 1435; Brenda Reddix-Smalls, Credit Scoring and Trade Secrecy: An Algorithmic

Quagmire or How the Lack of Transparency in Complex Financial Models Scuttled the Finance

Market, 12 U.C.

DAVIS BUS. L.J. 87, 117–18 (2011) (explaining that, with credit score

computations, companies can often protect their algorithmic practices through trade secret

theory); Van Loo, supra note 78, at 601 (“[B]ehind a veil of trade secrecy corporations’ dispute

systems exploit market failures and use unequal rules of procedure.”).

130. Amy J. Schmitz, Secret Consumer Scores and Segmentations: Separating “Haves” from

“Have-Nots,” 2014 MICH. ST. L. REV. 1411, 1427; see Max N. Helveston, Consumer Protection in the

Age of Big Data, 93 W

ASH. U. L. REV. 859, 864 (2016) (“For the vast majority of lines of insurance,

there is essentially nothing limiting the amount of data that insurers can collect about individuals

and very little controlling their use of consumers’ personal information.”).

131. See Moshe Davidow, Organizational Responses to Customer Complaints: What Works and

What Doesn’t, 5 J.

SERV. RES. 225, 225 (2003) (“Unfortunately, with all of that complaining, the

implications of customer complaint behavior for organizations have been examined far less often.”);

Torben Hansen et al., How Retailers Handle Complaint Management, 22 J.

CONSUMER

SATISFACTION, DISSATISFACTION & COMPLAINING BEHAV. 1, 1 (2009) (“While many studies have

investigated the complaint process from the consumer side, those from the side of business are few

and far between.”).

132. See Helveston, supra note 130, at 880 (noting that, in the insurance industry, use of

evolving technologies will continue to increase, along with the list of potentially concerning

implications).

962 VANDERBILT LAW REVIEW [Vol. 73:4:929

1. Identifying Nudniks

Sellers nowadays have highly specific data on each consumer’s

past dealings and her personality traits, which they can turn into

predictions about future behavior. Specifically, sellers can identify each

consumer’s tendency to be a nudnik. This is hardly trivial. Prior to

recent advances in information technologies, recoding each consumer’s

past interactions with one’s own firm was costly, and the data was not

readily available (because it was stored in hard-to-search paper

records). Nowadays, firms can easily purchase from data brokers all the

information they want about consumers’ past interactions with other

sellers.

133

Using this data, firms can predict whether a given consumer

is a nudnik before that consumer even sets foot in their store. Sellers

are already tracking consumers along three nudnik-relevant

dimensions: their past complaining behavior, their likelihood to

complain in the future, and the impact that their complaint is likely to

have on others.

First, customer relation management (“CRM”) software allows

sellers to log information on each interaction with each customer,

including the volume and valence of past complaints:

134

How many

complaints did the customer file? How detailed or negative were the

complaints? How many items did the customer return to the store? The

minute a customer contacts them, sellers therefore know all relevant

information on the customer’s tendencies, including how “serial” of a

complainer she is.

135

As one report puts it, firms use such data to decide

“whether a customer is routed promptly to an attentive service agent or

relegated to an overflow call center.”

136

It is hard to overstate how

advanced CRM tools have revolutionized the way that sellers handle

buyers; it suffices to note that it is a $30 billion industry.

137

133. See discussion infra notes 141–145 and accompanying text.

134. See Bang Nguyen, The Dark Side of Customer Relationship Management: Exploring the

Underlying Reasons for Pitfalls, Exploitation and Unfairness, 19 J.

DATABASE MARKETING &

CUSTOMER STRATEGY MGMT. 56, 58 (2012) (“[B]y adopting new technologies and the Internet, firms

have enabled CRM schemes to flourish. Using emails, social media, for example, Facebook pages,

YouTube and Twitter, and blogs, the communication directed towards potential customers can now

be customised at an individual level.”); Van Loo, supra note 78, at 564 (“When a consumer reaches

out about a dispute, computer algorithms typically analyze all relevant internal and external

information available to estimate two main variables: behavior and net worth.”).

135. Van Loo, supra note 78, at 564–65.

136. Natasha Singer, Secret E-Scores Chart Consumers’ Buying Power, N.Y.

TIMES (Aug. 18,

2012), https://www.nytimes.com/2012/08/19/business/electronic-scores-rank-consumers-by-

potential-value.html [https://perma.cc/N5UM-4U4R].

137. See Shanhong Liu, Customer Relationship Management Software Market Revenues

Worldwide from 2015 to 2022 (In Millions of U.S. Dollars), S

TATISTA (Jan. 14, 2020),

https://www.statista.com/statistics/605933/worldwide-customer-relationship-management-

market-forecast/ [https://perma.cc/Q2JU-JNHH].

2020] THEORY OF THE NUDNIK 963

Importantly, consumer data increasingly encompass more than

just the consumer’s interactions with the specific seller in question.

“Data brokers” now collect and trade consumer data between sellers.

138

As the FTC has reported, these brokers collect thousands of different

types of information per consumer—not just purchase history, but also

“intimate details of consumers’ financial, social, and personal lives.”

139

It is a small step from here to identifying nudniks: if you know who is

likely to post glowing reviews, you also know who is likely to post

scathing ones.

140

Historically, sophisticated targeting techniques were available

only to the largest retailers (because costs were prohibitive). Now, the

increased availability of (and competition among) third-party data

brokers reduces the costs of consumer targeting so that more and more

sellers are likely to use it.

Second, beyond having access to better information about each

consumer’s past behavior, sellers now have access to better predictions

about each consumer’s future behavior. Today, America’s consumers

are being scored on a variety of metrics—well beyond the famous credit

score—by a multitude of firms that analyze data from a great variety of

sources.

141

Sellers can use these scores to customize their treatment of

individual customers. “Customer churn models” accurately predict the

probability that a given customer would be dissatisfied and abandon

the business.

142

Customer lifetime value (“CLV”) scores predict not just

the probability that a given customer will make a purchase, but also

“the likelihood a person will . . . bad-mouth a company.”

143

Other

138. See generally Schmitz, supra note 130, at 1419–33 (explaining the growth in the data

broker industry and how these brokers utilize consumer data).

139. Id. at 1413; see E

DITH RAMIREZ ET AL., FED. TRADE COMM’N, DATA BROKERS: A CALL FOR

TRANSPARENCY AND ACCOUNTABILITY I-Ix (2014), http://www.ftc.gov/system/files/documents/

reports/data-brokers-call-transparency-accountability-report-federal-trade-commission-may-

014/140527databrokerreport.pdf [https://perma.cc/R6R9-GEW9].

140. See Helveston, supra note 130, at 878 (showing that the insurance industry uses big data

and predictive analytics not just in marketing, but also in claim management).

141. See P

AM DIXON & ROBERT GELLMAN, THE SCORING OF AMERICA: HOW SECRET CONSUMER

SCORES THREATEN YOUR PRIVACY AND YOUR FUTURE 6–10 (2014),

http://www.worldprivacyforum.org/wp-content/uploads/2014/04/WPF_Scoring_of_America_

April2014_fs.pdf [https://perma.cc/KK5H-4DHF].

142. See Abdelrahim Kasem Ahmad et al., Customer Churn Prediction in Telecom Using

Machine Learning in Big Data Platform, 6 J.

BIG DATA 28, 34 (2019); Anupam Kundu, Machine

Learning Powered Churn Analysis for Modern Day Business Leaders, T

OWARDS DATA SCI. (Oct. 24,

2018), https://towardsdatascience.com/machine-learning-powered-churn-analysis-for-modern-

day-business-leaders-ad2177e1cb0d [https://perma.cc/TGB2-UGYR] (explaining churn and its

effect on business management).

143. Khadeeja Safdar, On Hold for 45 Minutes? It Might Be Your Secret Customer Score, W

ALL

ST. J. (Nov. 1, 2018, 11:04 AM), https://www.wsj.com/articles/on-hold-for-45-minutes-it-might-be-

your-secret-customer-score-1541084656 [https://perma.cc/NUS6-NF4L]; see also Kundu, supra

note 142 (describing how a predictive churn model can impact CLV).

964 VANDERBILT LAW REVIEW [Vol. 73:4:929

metrics predict the likelihood that a given consumer will return

items.

144

The proliferation and growing sophistication of these scores

allows firms to target nudniks more accurately than ever before.

Finally, beyond assessing how likely a given consumer is to

publicly voice her frustration, sellers nowadays can also predict how

strong and far the nudnik’s cry will echo. The FTC found that

companies today track each consumer’s social influence scores, based

on the number of followers on social media and other metrics.

145

Cross-

referencing this information with information collected from online

review platforms such as Yelp and Airbnb allows data collectors to

obtain a rich profile of each consumer and their propensity to

complain.

146

Data-analysis providers then openly sell their proprietary

technology to use the data to identify who is a “fan” of a given seller or

service,

147

who is likely to complain, and how influential the complaint

is going to be.

148

Sellers can use these scores to assess the reputational

risk posed by each consumer. In other words, sellers can not only

identify which consumers are likely to make waves about company

failures but also predict how tall those waves will be.

144. Khadeeja Safdar, How Your Returns Are Used Against You at Best Buy, Other Retailers,

ALL STREET J. (Mar. 13, 2018, 5:30 AM), https://www.wsj.com/articles/how-your-returns-are-

used-against-you-at-best-buy-other-retailers-1520933400 [https://perma.cc/3PN5-NJG7].

145. See What Information Do Data Brokers Have on Consumers, and How Do They Use It?:

Hearing Before the S. Comm. on Commerce, Sci., & Transp., 113th Cong. 66–72 (2013) (statement

of Jessica Rich, Director, Bureau of Consumer Protection, Federal Trade Commission); R

AMIREZ,

supra note 139, at 31 (explaining how data brokers convert analyses into various marketing scores

for consumers).

146. See, e.g., Jure Leskovec, Web Data: Amazon Reviews, S

TAN. NETWORK ANALYSIS PROJECT,

https://snap.stanford.edu/data/web-Amazon.html (last visited May 7, 2020) [https://perma.cc/

WZ56-7NFS] (compiling a dataset that tracks Amazon reviews over a period of eighteen years). It

is telling that, on more than one occasion, academic researchers managed to use such open

databases to build software that identifies negative reviews and engages with them. See, e.g., Yu-

Han Chen & John Merrick, Real Time Yelp Reviews Analysis and Response Solutions for

Restaurant Owners, D

ATA SCI. ACAD. BLOG (Sep. 29, 2017), https://nycdatascience.com/

blog/student-works/real-time-yelp-reviews-analysis-response-solutions-restaurant-owners/

[https://perma.cc/L6SV-FEB6] (building a bot that identifies negative reviews in Yelp and

responds to them); see also Karen Robson et al., Making Sense of Online Consumer Reviews: A

Methodology, 55 I

NT’L J. MKT. RES. 521 (2013) (doing the same for negative reviews in Apple’s App

Store).

147. See, e.g., Sys. & Method for Managing Advertising Intelligence and Customer Relations

Management Data, U.S. Patent Application No. 20130218640 (filed Aug. 22, 2013).

148. Schmitz, supra note 130, at 1430–32. For an early account, see E

D KELLER & JON BERRY,

HE INFLUENTIALS (2003) (explaining how a small group of influential Americans affect the

decisions of others). For a real-world example, see How to Find and Source the Best Influencers for

Your Brand, O

BVIOUSLY, https://www.obvious.ly/en/platform-identification (last visited May 7,

2020) [https://perma.cc/2QLP-LZAB] (assisting firms in identifying social media “micro-

influencers”).

2020] THEORY OF THE NUDNIK 965

These emerging technological capabilities allow firms not just to

identify nudniks early but also to disarm them effectively, an issue that

we turn to now.

2. Disarming Nudniks

A seller who identifies a nudnik would want to minimize the

nudnik’s impact as quickly as possible.

149

Sellers have always employed

a wide array of disarming tactics, such as settling outside the

courthouse, delivering private apologies,

150

or offering complimentary

services.

151

But here as well, big data and predictive analytics are

transforming nudnik-disarming tactics. They are doing so along three

key dimensions: selective remedies, muffling, and avoiding selling to (or

gagging) nudniks to begin with.

Offering selective remedies to dissatisfied consumers is hardly a

new practice, but technological tools make the practice much more

granular and effective. In a sense, selective remedies are a form of ex

post discrimination: if two buyers were wronged, and one of them is

identified as assertive while the other is not, then sellers will go to

greater lengths to appease the former.

152

New technologies allow sellers

not only to better identify whom to appease, but also how to appease

them. Predictive analytics and CRM software tell sellers whether the

dissatisfied consumer who has a propensity to fight is after money,

validation, replacement, or an apology. Sellers can then tailor the

remedy to this specific consumer, without changing their practices

toward other consumers. It is telling that firms today spend more effort

on resolving social media complaints than they do on offline complaints;

149. See Sébastien Mena et al., On the Forgetting of Corporate Irresponsibility, 41 ACAD.

MGMT. REV. 720, 725 (2016) (noting that following failures, firms engage in “forgetting” tactics,

trying to make their stakeholders discount what happened, including by silencing those who keep

reminding others of the failure).

150. See Yonathan A. Arbel & Yotam Kaplan, Tort Reform Through the Backdoor: A Critique

of Law and Apologies, 90 S.

CAL. L. REV. 1199 (2017) (explaining how privileged apologies have

been used to limit victims’ recovery and shield injurers from liability).

151. See Schmitz, supra note 6, at 280–82 (describing the industry practice of offering

complainers preferential treatment in “debt, insurance, and other business-to-consumer”

contexts). Sellers can also respond to troublesome consumers by playing hardball, as in denying

service and charging higher rates.

152. See, e.g., Becher & Zarsky, supra note 97, at 90–91; Johnston, supra note 96 (providing

an economic theory for how standard-form contracts enable cooperative negotiation). In Becher &

Zarsky’s account, sellers offer selective remedies to retain the complaining customer and project a

good image toward noncomplaining customers. In other words, they focus on how sellers earn

reputation credit points, while we focus on how sellers avoid reputational sanctions.

966 VANDERBILT LAW REVIEW [Vol. 73:4:929

the former comes with greater reputational risk.

153

Further, in the past,

decisions on who and how to appease were crude: if a customer was a

known celebrity or an opinion leader, that customer would get special

treatment. Nowadays, firms can offer a more effective sliding scale,

tailoring their specific treatment to the type of influence the customer

might have based on various customer scores.

154

We can see evidence of such tailored preferential treatment in

the work of third-party providers who offer firms an “influencer

strategy,” which means ranking consumers based on their influence on

others and prioritizing those with more influence.

155

Recent

documentaries on the Fyre music festival showed how the organizers

offered ticket-buyers different housing options based on each buyer’s

social media scores: “influencers” were offered villas, while “followers”

were offered huts.

156

A second channel for minimizing nudniks’ effects is drowning

out their voices. This, essentially, is the service that many reputation-

management firms sell: increasing the volume of irrelevant or positive

content in order to drown out negative content.

157

By overwhelming

consumers with irrelevant information, reputation-management firms

reduce the chances that any valuable information produced by nudniks

will be seen or used. After all, for most users, page eight of Google

153. Mike Maughan, Why Angry Consumers Should Head to Instagram When It Is Time to

Make a Complaint, CNBC (Jan. 27, 2019, 9:00 AM), https://www.cnbc.com/2019/01/25/for-angry-

consumers-instagram-complaints-gets-the-quickest-results.html [https://perma.cc/QWJ8-7WBD].

154. COUNCIL OF ECON. ADVISORS, EXEC. OFFICE OF THE PRESIDENT, BIG DATA AND

DIFFERENTIAL PRICING, 8–13 (2015), https://obamawhitehouse.archives.gov/sites/default/files/

whitehouse_files/docs/Big_Data_Report_Nonembargo_v2.pdf [https://perma.cc/VPX3-VZUQ]

(noting that big data shifted price and terms differentiation from broad demographics proxies to

personal indicators).

155. The Scrunch company, for example, advises firms to:

[E]nsure that your influencer/s always receive the premium service. For example, if

you’re an airline you wouldn’t seat your influencers in economy or premium economy.

They should be seated up front in first class with all the bells and whistles. If their

experience is amazing, then the content they share with their community will be

amazing!

Georgia Mee, How to Give Influencers an A+ Experience and Why It’s Important, S

CRUNCH,

https://www.scrunch.com/blog/give-influencers-a-great-experience# (last visited May 7, 2020)

[https://perma.cc/84G8-L4GC].

156. E.g., F

YRE: THE GREATEST PARTY THAT NEVER HAPPENED (Netflix 2019).

157. See Phil Lockwood, Turn a Negative Into Positive—Online Ratings, Reviews, and Your

Business—Plus: 10 Common Questions Answered, D

ISTILL AGENCY (Oct. 23, 2017, 5:51 AM),

https://www.distillagency.com/blog/turn-negative-into-positive-online-ratings-reviews-business

[https://perma.cc/MGL2-Y5FY] (encouraging clients to “[g]et more positive [online] reviews to

drown out the negative”); see also Van Loo, supra note 78, at 583 (noting firms’ usage of “fake

review mills,” meant to overwhelm online review sites with positive reviews).

2020] THEORY OF THE NUDNIK 967

search results is where information goes to die.

158

While the first

channel, selective remedies, is meant to convince nudniks not to

disseminate damning information in the first place, the second channel,

muffling of consumers’ voices, is meant as damage control once the

nudnik has already publicly voiced frustration.

Lastly, and perhaps most potently, sellers can now use

personalized contracts to either limit the consumer’s ability to purchase

from them or to complain after the purchase.

159

Before the rise in

identification technologies, firms had to use blunt tools that applied to

all consumers. For example, firms could install a forced arbitration

clause in their form contracts to limit the reputational effects of public

dispute resolution.

160

But adopting such provisions may, in itself, cause

a reputational backlash. A timely example comes from the legal sector,

where law students publicly battled law firms that adopted mandatory

arbitration provisions, getting the firms to reverse course.

161

Another

timely example is gag clauses in form contracts, which limit every

consumer’s ability to post negative reviews about the business. Yet

these provisions, too, are salient and may cause a backlash. Indeed,

after one business installed a gag clause requiring that consumers who

post negative reviews pay $2,500, Congress intervened and enacted the

Consumer Review Fairness Act,

162

which invalidates such clauses.

163

It is therefore much better for firms to keep their nudnik-

avoidance tactics under the radar by using them on a case-by-case basis.

One strategy would be to avoid engaging with nudniks to begin with.

To illustrate the dynamics, consider how on Airbnb, the online vacation

rentals marketplace, some hosts apparently refuse to rent their houses

to certain guests based on these guests’ propensity to write negative

158. This practice goes hand in hand with firms’ efforts to push right-to-be-forgotten laws,

which would allow them to remove unfavorable records entirely. See Gesenhues, supra note 110

(explaining the business model of addressing consumer removal requests).

159. It is beyond the scope of this Article to analyze, in full, the reasons why consumers would

not try to masquerade as nudniks. In short, we note that sellers can disarm nudniks by treating

them negatively, as in refusing service or charging a higher price.

160. See Beth Davis, Mandatory Arbitration Agreements in Long-Term Care Contracts: How

to Protect the Rights of Seniors in Washington, 35 S

EATTLE U. L. REV. 213, 214 (2011) (explaining

the impact of arbitration agreements on stifling public outrage); Roy Shapira, Mandatory

Arbitration and the Market for Reputation, 99 B.U.

L. REV. 873 (2019) (outlining the debate

surrounding mandatory arbitration and reputation).

161. See R

OY SHAPIRA, LAW AND REPUTATION: HOW THE LEGAL SYSTEM SHAPES BEHAVIOR BY

PRODUCING INFORMATION (forthcoming 2020).

162. H.R.

REP. NO. 114-731, at 5–6 (2016).

163. Consumer Review Fairness Act of 2016, Pub. L. No. 114-258, 130 Stat. 1355 (to be codified

at 15 U.S.C. § 45b). We come back to the Act, and point out an important loophole in it, infra Part

III.

968 VANDERBILT LAW REVIEW [Vol. 73:4:929

reviews.

164

A Forbes commentator summed it up nicely: “I, like many

other in-the-know hosts, tend to dig into Airbnb to see a guest’s past

posted reviews. If I see nothing but bitterness and complaining, they’re

a hard pass.”

165

Given that the overwhelming majority of Airbnb guests

refrain from writing a detailed negative review (even when one is

merited),

166

the ability of hosts to avoid the few that do post reviews

decreases the informativeness of reviews. Similar dynamics have been

in play in offline contexts, such as doctors avoiding litigious patients

167

or landlords avoiding litigious tenants.

168

B. The Implications of Targeting Nudniks

There is nothing new about sellers exerting effort to silence

buyers who could publicly challenge them. Think, for example, about

the prevalence of confidential settlements, which some view as

defendant firms bribing plaintiffs to not warn others. Why does it

matter, then, that sellers have recently gotten better at targeting

nudniks? If sellers would have eventually paid nudniks off even without

big data tools, why does it matter that they can now identify and pay

them off much earlier? This Section shows that timing matters. The

earlier sellers can identify and disarm nudniks, the fewer positive

spillovers nudniks generate. Earlier interventions limit not only the

effectiveness of legal deterrence but also the effectiveness of

reputational deterrence.

164. AirReview, CHROME WEB STORE, https://chrome.google.com/webstore/detail/airreview/

plkdnpjpnhhnmigmekaocdfokkmebdnm?hl=en-US (last visited May 7, 2020) [https://perma.cc/

ZU4J-54UZ]; see, e.g., Annet3176, Airreview - a Little Helpful Extension to Screen Guests,

IRHOSTS F., https://airhostsforum.com/t/airreview-a-little-helpful-extension-to-screen-guests/

30341 (last visited May 7, 2020) [https://perma.cc/X3JN-69YQ] (“I use it and find it helpful.”).

165. Seth Porges, All Airbnb Hosts Should Use This Chrome Extension for Screening Guests,

ORBES (July 27, 2017, 12:50 PM), https://www.forbes.com/sites/sethporges/2017/07/27/all-airbnb-

hosts-should-use-this-chrome-extension-for-screening-guests/#4c4c9a5d4081 [https://perma.cc/

FA9V-PKLB]; see also u/IamWoe, Best Hosts, What Would You Love to See in a Message?, R

EDDIT

(Mar. 30, 2019), https://www.reddit.com/r/AirBnB/comments/b7e37i/best_hosts_what_would_you_

love_to_see_in_a_message/ejr6p1l/ [https://perma.cc/8V2E-TKPY] (discussing how owners use

AirReview to screen potential tenants).

166. See Georgios Zervas et al., A First Look at Online Reputation on Airbnb, Where Every

Stay is Above Average (Apr. 12, 2015) (unpublished manuscript), https://papers.ssrn.com/

sol3/papers.cfm?abstract_id=2554500 [https://perma.cc/F7SS-VTJ4] (finding that the majority of

reviews are positive, even for properties that are of lower quality, as judged by their reviews on

another platform).

167. See Rachel Emma Silverman, Database for Doctors Tracks Litigious Patients, W

ALL ST.

J. (Mar. 5, 2004, 12:01 AM), https://www.wsj.com/articles/SB107844497811447118 [https://

perma.cc/B9M7-KQN8]. This particular database has since been shut down.

168. See Esme Caramello & Nora Mahlberg, Combating Tenant Blacklisting Based on Housing

Court Records: A Survey of Approaches, 2017 C

LEARINGHOUSE REV. 1 (detailing the practice of

tenant-screening bureaus, which collect housing court data and sell them to landlords).

2020] THEORY OF THE NUDNIK 969

1. Diluting Legal Deterrence

By using technology to identify and disarm nudniks early,

sellers can significantly dilute legal deterrence.

To see why, let us first consider the benchmark: namely, legal

deterrence before big data. Firms have always had incentives to pay

handsomely to settle a nudnik’s claim in exchange for the nudnik’s

commitment to confidentiality. Indeed, most cases settle secretly, with

the parties stipulating to keep the details of their dispute private.

169

Legal scholars were quick to note the divergence of private and public

interests here: both parties have incentives to handle their disputes in

ways that limit public access to information.

170

Defendants are willing

to pay more for a confidentiality provision to save themselves the risk

of adverse publicity and exposure to subsequent class actions.

Consumer plaintiffs anticipate defendants’ willingness to pay for

secrecy and use it as a bargaining chip. A plaintiff who receives a

generous offer may be inclined to accept it because she does not factor

in the loss of positive spillovers. That is, at this point she may not care

whether relevant information becomes available to third parties.

171

Yet, in a world without big data, confidential settlements could

still generate deterrence.

172

One reason is that the plaintiff who

complains first, and exposes a certain defect, may be able to extract a

hefty settlement amount from the defendant company. Say a nudnik-

plaintiff has exposed a practice of overcharging takeaway purchases by

$4 each. The plaintiff anticipates that the overcharge has been

occurring over one month and that each day the restaurant services one

hundred takeaway orders. The plaintiff therefore anticipates that the

defendant restaurant had been overcharging other customers to the

tune of $12,000 collectively. The other customers are currently not

aware that they were overcharged, and the restaurant would like to

keep it that way. If the nudnik drives a hard bargain, she should be able

to reach a large settlement, well beyond the harm of $4 and up to

169. See Jon Bauer, Buying Witness Silence: Evidence-Suppressing Settlements and Lawyers’

Ethics, 87 O

R. L. REV. 481, 491 nn.16–19 (2008) (compiling references); Erik S. Knutsen, Keeping

Settlements Secret, 37 F

LA. ST. U. L. REV. 945, 946 n.1 (2010) (same).

170. See Steven Shavell, The Fundamental Divergence Between the Private and the Social

Motive to Use the Legal System, 26 J.

LEGAL STUD. 575, 605 (1997) (describing settlement as a

means of securing privacy and maintaining secrecy at the expense of social goals); Wendy Wagner,

When All Else Fails: Regulating Risky Products Through Tort Litigation, 95 G

EO. L.J. 693, 709–

10 nn.71–74 (2007) (compiling references that address privacy through settlement).

171. See Shapira, Law as Source, supra note 73, at 204 (outlining the conflicting interests

when looking at settlement as a remedy).

172. See generally Saul Levmore & Frank Fagan, Semi-Confidential Settlements in Civil,

Criminal, and Sexual Assault Cases, 103 C

ORNELL L. REV. 311 (2018) (exploring how, under

certain conditions, even confidential (or semi-confidential) settlements can generate deterrence).

970 VANDERBILT LAW REVIEW [Vol. 73:4:929

$12,000. That settlement, in itself, approaches a sanction that is

sufficiently large to deter overcharging. As a result, even though the

other customers were not informed, such settlements save them from

additional overcharging in the future.

173

The ability of plaintiffs to extract rents depends, however, on

when they settle. Deterrence through confidential settlements happens

only when the nudnik-plaintiff can assess defendants’ exposure to

liability for other plaintiffs (and thus know how hard a bargain to

drive). When firms target nudniks early, they reduce the likelihood that

the first plaintiff accurately perceives the number of other victims or

the extent of harms done to them.

174

The seller can avoid selling to the

nudnik altogether. The seller can sell to the nudnik but offer

preferential treatment ex ante, so that the nudnik is not dissatisfied

with her purchase. If a nudnik is dissatisfied, the seller can offer a

quick, full refund and better treatment ex post, before the nudnik

escalates her complaint into a lawsuit. And even if a nudnik files a

lawsuit, the seller can settle early, before the lawsuit reaches the

discovery stage. Although the nudnik does not need discovery to tell her

she was wronged, she often needs discovery to tell her how many others

were wronged and whether the misbehavior in question was an isolated

mistake or an ongoing practice. Further, because sellers often keep

early targeting practices secret,

175

the nudnik does not know why or

when in the process she was targeted and does not know whether she

is the lone complainer or just the first. As a result, the nudnik is less

likely to extract rents from sellers and produce deterrence.

176

There is a broader point here. Legal scholars and policymakers

are constantly engaged in the policy debate of private versus public

resolution of disputes: settlement versus trial, confidentiality versus

openness, mandatory arbitration versus litigation, and so on.

177

But all

these debates may become moot if potential defendants can silence

potential plaintiffs early. To use the classic naming-blaming-claiming

typology,

178

the extant literature focuses on what happens after

grievances evolve into lawsuits in the post-claiming stages. In contrast,

we highlight the ability of companies to interject earlier, before the

173. Id.

174. Id. at 353.

175. See Porat & Strahilevitz, supra note 127, at 1434–38 (noting the secrecy around big data

practices).

176. It also helps that the seller is able to tell the complaining buyer: “You are the only one

who has experienced problems with the product! You must have done something wrong.”

177. See, e.g., Bauer, supra note 169, at 493–94 nn.27–31 (compiling references); Jack H.

Friedenthal, Secrecy in Civil Litigation: Discovery and Party Agreements, 9 J.L.

& POL’Y 67, 67–68

n.1 (2000) (same).

178. See Felstiner et al., supra note 11.

2020] THEORY OF THE NUDNIK 971

aggrieved party files a lawsuit, in the pre-claiming—and sometimes

even pre-blaming—stages. Scholars have warned that when claims are

funneled into private and confidential channels of resolution, we lose

some of the deterrent effect

179

as well as the development of a vibrant

body of law to guide future behavior.

180

The same logic applies when the

injured parties have not even formed their claims to begin with. In fact,

the logic applies more forcefully, if only because settling before claiming

reduces not just legal deterrence but also reputational deterrence.

2. Diluting Reputational Deterrence

One way to build a good reputation is by investing in offering

higher quality products and better customer service. Another

(nonexclusive) way is to invest in appearance management.

181

When

technological changes make investing in appearances more effective,

they crowd out incentives to invest in the actual product and service.

Drowning out bad reviews has roughly the same effect as not having

bad reviews written about you at all.

182

The ability to silence nudniks early in the process significantly

reduces a firm’s exposure to reputational risk through two key conduits:

online reviews and litigation.

Consider online reviews first. Only a small subset of consumers

bother to write detailed reviews that spotlight the negative aspects of a

product or service.

183

If—as in the Airbnb example—sellers can avoid

selling to these detailed-review-writing buyers (or sell them a better

product or service), then seller failures become invisible to the market.

Next, consider the much less intuitive channel of litigation. If

sellers can target nudniks early and settle any claims these nudniks

might have before they file lawsuits, sellers will significantly reduce not

just legal risk but also reputational risk. This is because litigation and

179. See, e.g., David Luban, Settlements and the Erosion of the Public Realm, 83 GEO. L. REV.

2619, 2649–50 (1995) (outlining this particular problem through a discussion of product liability

claims); Jillian Smith, Secret Settlements: What You Don’t Know Can Kill You!, 2004 M

ICH. ST. L.

REV. 237.

180. See, e.g., Elizabeth Chamblee Burch, Securities Class Actions as Pragmatic Ex Post

Regulation, 43 G

A. L. REV. 63, 117–18 (2008) (exploring deterrence-based critiques to arbitration);

Lynn M. LoPucki, Delaware’s Fall: The Arbitration Bylaws Scenario, in C

AN DELAWARE BE

DETHRONED?: EVALUATING DELAWARE’S DOMINANCE IN CORPORATE LAW 35, 51 (Stephen M.

Bainbridge et al. eds., 2018) (articulating the state of arbitration bylaws in Delaware law).

181. See generally Benjamin Klein & Keith Leffler, The Role of Market Forces in Assuring

Contractual Performance, 89 J.

POL. ECON. 615 (1981) (describing how reputational considerations

can ensure contractual performance).

182. Note that competitive pressures would not necessarily push firms toward investing in

actual quality and away from appearance management. In fact, the opposite is more likely to

happen. See G

EORGE A. AKERLOF & ROBERT J. SHILLER, PHISHING FOR PHOOLS (2015).

183. See Woolf, supra note 86.

972 VANDERBILT LAW REVIEW [Vol. 73:4:929

reputation are interconnected. What happens in the courtroom trickles

out and affects the court of public opinion.

184

A short primer on reputation through litigation is in order.

Litigation affects sellers’ behavior not just directly, by forcing them to

compensate aggrieved customers, but also indirectly, by producing

information on how the sellers behaved.

185

To the extent that

information produced during litigation becomes public, it affects the

way that outside observers treat the defendant seller. Litigation affects

the seller’s reputation through various channels: revelation, diffusion,

certification, and attribution of information.

186

A firm’s ability to target

potential plaintiffs early, before they even become plaintiffs, distorts

the operation of all those channels.

187

Take revelation, for example. Litigation can affect reputations

by extracting damning information about the sellers that market

players were not privy to.

188

The classic example here is internal email

communications exposed during discovery that show the seller

knowingly skirted safety concerns and later engaged in a cover-up. Yet

if a firm manages to settle the nudnik’s claim earlier, chances are it will

escape discovery and will not be forced to disclose electronic

communications.

Another common effect of litigation concerns the diffusion of

damning information. For reputational sanctions to be meaningful, the

revealed information has to be widely diffused, so as to reach a critical

mass of stakeholders that will take their business elsewhere.

189

This is

usually achieved via media coverage. In a separate project, one of us

showed that litigation shapes the frequency and tenor of media

coverage.

190

For example, content analysis of the Pulitzer Prize–

winning investigative projects over the past twenty years reveals that

over half relied heavily on “legal sources” such as regulatory

investigation reports and court documents.

191

184. See Shapira, supra note 160, at 887–89 (describing four ways in which litigation affects

reputation).

185. See Shapira, Reputation through Litigation, supra note 73; Roy Shapira, A Reputational

Theory of Corporate Law, 26 S

TAN. L. & POL’Y REV. 1, 7 (2015).

186. See Shapira, supra note 160, at 885–88.

187. Id. We elaborate here only on two channels (revelation and diffusion) for considerations

of brevity and scope. For the other two channels (attribution and certification), see id.

188. Shapira, supra note 185, at 13.

189. Shapira, supra note 160, at 886.

190. See Shapira, Law as Source, supra note 73, at 173–76.

191. Id. at 186–92. There exist multiple reasons for investigative reporters’ reliance on legal

sources. Litigation feeds journalists so-called “information subsidies”: court documents reduce the

costs to journalists of covering a story about product defects or bad customer service. Id. at 166–

67. They provide information that is well-documented and detailed, contains good quotes from

internal company documents, and is libel-proof. Id. at 173–75.

2020] THEORY OF THE NUDNIK 973

Thus, if sellers are able to disarm nudniks before they form their

claims and file them in court (or complain to a regulator), they greatly

reduce the risk of media scrutiny. Interviews with reporters reveal a

common practice of what they call “pattern-identifying”: searching legal

databases to discover how many claims were filed with respect to the

issue they are investigating.

192

Identifying such patterns has spurred

many investigative reports; yet in a world where no paper trail is

created—because no claim was filed—the ability of reporters to locate

and uncover stories of seller misconduct is significantly hampered. Put

differently, litigation is an important source of media stories on seller

misconduct. Without litigation, the ability of the media to hold sellers

accountable falters.

* * *

In recent years, legal scholars have started exploring the

negative aspects of big data tools that are used to segment buyers. Yet

the existing accounts focus on privacy, fairness, equality, and due

process in the context of effects on specific customers.

193

This Part has

shifted the focus from how personalization affects justice and efficiency

toward targeted consumers to how personalization affects market forces

overall.

To illustrate some of the implications of nudnik-circumventing

technologies, we can simply recast the informed minority model.

Schwartz and Wilde explicitly stipulated that their model of market

discipline rests on the assumption that firms cannot distinguish

between searching and nonsearching consumers (what is known as a

“pooling” equilibrium).

194

But while pooling may have been a realistic

equilibrium forty years ago when Schwartz and Wilde penned their

model, nowadays, when each consumer carries her own reputation

score, sellers can and increasingly do treat consumers differently. As a

result, the rest of us passive consumers, who do not search in advance

192. Id. at 210.

193. See Schmitz, supra note 130, at 1415–18 (suggesting that big data tools allow firms to

discriminate in ways that perpetuate stereotypes and aggravate the rift between haves and have-

nots); Van Loo, supra note 78, at 577 (warning about unfair process and inequalities in firms’

internal dispute resolution practices); see, e.g., Kate Crawford & Jason Schultz, Big Data and Due

Process: Toward a Framework to Redress Predictive Privacy Harms, 55 B.C.

L. REV. 93, 96–109

(2014) (voicing privacy concerns over predictive analytics).

194. See Schwartz & Wilde, supra note 9, at 663 (noting that if firms would be able to separate

searchers and nonsearchers, they would “exploit nonsearchers by charging them higher prices or

providing them with lower quality products and services than would be offered to comparison

shoppers”).

974 VANDERBILT LAW REVIEW [Vol. 73:4:929

or enforce after the fact, are worse off. Is there a way to stop this

development?

III.

HOW TO STOP THE FUTURE

Part I highlighted the important role that a small minority of

crusading consumers can play in holding sellers accountable. Yet Part

II provided reasons for pessimism: technological advancements in the

collection and analysis of consumer behavior data could eventually

allow sellers to curtail the role that nudniks play. Even if one

recognizes, as we do, that nudnik behavior is not always socially

beneficial, one should still be concerned with the prospect of sellers

avoiding or silencing nudniks wholesale. Sellers have incentives to

block not just the “bad” nudniks but also—indeed even more so—the

“good” ones, those who bring real issues with seller behavior to light. In

other words, there is reason to worry about the future of consumer

activism.

195

It is time to turn our attention to whether it is possible to

forestall the nudniks’ extinction.

Section A explains why some intervention is needed, despite

what other accounts of market discipline advocate. While previous

accounts view reputation as a justification to scale back legal

intervention, we focus on how legal intervention is needed to facilitate

a well-functioning market for reputation.

196

Section B argues that

existing proposals to regulate big data tools are ill-equipped to deal with

the unique problems that nudnik targeting generates. Section C

sketches potential legislative, regulatory, and judicial solutions. The

solutions fall into one of two categories: (1) buck the trend of nudnik

targeting to preserve nudnik-based market discipline; or (2) ramp up

legal channels of consumer protection to compensate for sellers’

takeover of this channel of market discipline. Section D clarifies that,

across all these solutions, our aim is not to maximize nudnik activity

but rather to optimize it. Not all nudnik-based activism generates social

benefits. Accordingly, our aim should be to facilitate value-creating

nudnik actions while minimizing value-destroying nudnik actions.

195. The only reason not to worry about the trend of sellers gaining proficiency in identifying

and disarming nudniks is if you believe that the market currently systematically overdeters

sellers. If this is the case, letting sellers curtail market discipline would merely bring us back to

normal.

196. See Arbel, supra note 82, at 1287–1303 (offering reputation-by-regulation as a systematic

way to use legal institutions to foster the creation and creation of reputational information);

Shapira, Law as Source, supra note 73, at 200; Shapira, Reputation Through Litigation, supra note

73, at 1238.

2020] THEORY OF THE NUDNIK 975

A. Why Legal Intervention Is Needed

Legal scholars have long recognized that reputation matters in

consumer markets. Yet existing accounts usually invoke reputation as

a justification for scaling back legal intervention. A classic example is

the Lucian Bebchuk and Richard Posner model, which states that

sellers mindful of their reputations will treat buyers fairly, often going

beyond what is legally required.

197

Many scholars have suggested that

the argument applies even more forcefully to the sharing economy, in

which reputational information is readily available, and, therefore, top-

down regulation is often superfluous.

198

Under these assumptions, the

need for legal intervention is minimal, as reputational concerns

supposedly carry the burden of deterrence on their own.

In contrast, we argue that legal intervention is needed to protect

the market for reputation. The creation of reputational information

hinges on buyers noticing seller misconduct and diffusing that

information to other buyers. If sellers can intercept the production of

reputational information, they will be able to evade reputational

discipline.

One basic difference in the underlying assumptions drives these

stark differences between our model’s legal implications and existing

models’ legal implications. In existing accounts, only sellers have a

reputation to protect; in our account, buyers have reputations too.

Existing accounts did not—and could not, given the time when they

were written—factor in the technological developments that allow

sellers to track buyers’ behavior and assign a score to each of us. Yet in

today’s world, sellers can readily purchase information telling them

which consumer is likely to go on a crusade, share embarrassing

information, and complain to the regulator.

The ability to assign a reputation score to each consumer

changes the equilibrium. In the old models, buyers are the ones deciding

from whom to purchase; in our model, sellers decide to whom they want

to sell. As a result, sellers that care about their reputation do not have

197. Bebchuk & Posner, supra note 96, at 831–33.

198. See, e.g., A

RUN SUNDARARAJAN, THE SHARING ECONOMY: THE END OF EMPLOYMENT AND

THE

RISE OF CROWD-BASED CAPITALISM 138 (2016) (“Eventually, peer-to-peer platforms may

provide a basis upon which society can develop more rational, ethical, and participatory models of

regulation.”); Benjamin G. Edelman & Damien Geradin, Efficiencies and Regulatory Shortcuts:

How Should We Regulate Companies Like Airbnb and Uber?, 19 S

TAN. TECH. L. REV. 293, 300

(2016) (describing how service providers can better assess customers when reputational evidence

is readily available); Adam Thierer et al., How the Internet, the Sharing Economy, and

Reputational Feedback Mechanisms Solve the “Lemons Problem,” 70 U.

MIAMI L. REV. 830 (2015).

For the economists’ perspective, see, for example, Alex Tabarrok & Tyler Cowen, The End of

Asymmetric Information, C

ATO UNBOUND (Apr. 6, 2015), https://www.cato-unbound.org/2015/04/

06/alex-tabarrok-tyler-cowen/end-asymmetric-information [https://perma.cc/MHZ2-X26Z].

976 VANDERBILT LAW REVIEW [Vol. 73:4:929

to invest as much in treating all consumers nicely; they can instead

invest in treating a small subset of consumers nicely (or, worse, avoiding

them altogether). The upshot is straightforward: recognizing the

importance of reputation does not justify scaling back legal intervention

across the board. In fact, it may justify adding new forms of legal

intervention.

199

B. Why Existing Modes of Intervention Are Less Likely to Work

Legal scholars and policymakers have recently started turning

their attention to big data and predictive algorithms, proposing

solutions for potential dangers. Yet neither the proposed changes nor

the existing legal tools are well equipped to deal with the specific

nudnik-targeting problem we highlight here. This is because existing

accounts focus on the dangers of opaque, unequal, and unfair treatment

of the targeted consumers.

200

We, by contrast, highlight the

fundamentally different problem of third-party effects on nontargeted

consumers.

A recent White House report exemplifies the conventional

worries: big data and predictive analytics, the report notes, “may

facilitate discrimination against protected groups,” thus taking

“advantage of unwary consumers.”

201

Accordingly, the report proposes

(1) using existing antidiscrimination laws to tackle the unfair

treatment of historically disadvantaged groups, and (2) increasing

transparency to inform consumers of how sellers are treating them

differently.

202

But nudniks are not a protected class. The existing

antidiscrimination laws ban discrimination based on factors such as

race, gender, or sexual orientation.

203

These laws do not ban

discrimination based on proclivity to complain. Relying on existing

antidiscrimination laws will therefore not solve the nudnik-targeting

199. See Arbel, supra note 82, at 1287–1303 (advocating “Reputation-by-Regulation”—the use

of law to preserve and harness the power of reputation); Shapira, Law as Source, supra note 73,

at 200–01 (arguing for a more cautious approach to scaling back legal intervention). To be clear,

not all of our proposals involve greater regulatory interventions. We focus on the type of

intervention (pro- or anti-reputation creation) rather than the size of intervention (more or less

regulation).

200. See, e.g., C

ATHY O’NEIL, WEAPONS OF MATH DESTRUCTION: HOW BIG DATA INCREASES

INEQUALITY AND THREATENS DEMOCRACY 8 (2016) (on the inequality problem); FRANK PASQUALE,

THE BLACK BOX SOCIETY: THE SECRET ALGORITHMS THAT CONTROL MONEY AND INFORMATION 9

(2015) (on the opacity problem). But see Arbel, supra note 71, at 174 (noting that opaqueness can

be a virtue as it allows agencies to design gaming-proof interventions).

201. COUNCIL OF ECON. ADVISORS, supra note 154, at 16.

202. Id.

203. Helveston, supra note 130, at 875.

2020] THEORY OF THE NUDNIK 977

problem. Nor are nudniks “unwary consumers.” More sunlight will not

necessarily disinfect nudnik-targeting practices because the problem is

not one of information. The assumption behind disclosure solutions is

that the target audience would resist the disclosed practice once they

become aware of it. But if sellers disarm nudniks by offering them better

treatment, nudniks have no reason to flag such behavior. Disclosure

would not work either.

Addressing the nudnik-targeting problem will therefore require

some creative thinking on the part of legislators, regulators, and

judges.

204

The next Section proposes some initial counterintuitive

strategies.

C. Proposed Solutions

Banning outright the use of big data and predictive analytics is

infeasible and makes little sense, as these tools can offer benefits not

just to sellers but also to consumers.

205

The goal is to find a way to limit

the use of nudnik-targeting technologies that limit the production and

propagation of useful information. Section III.C.1 highlights the legal

tools that regulators can employ, while Section III.C.2 focuses on how

judges can reinterpret longstanding doctrines to mitigate the effects of

nudnik targeting. The choice between the different methods we offer

should depend on one’s assessment of the severity of nudnik targeting

at a given point in time and in a given market. After all, the nudnik-

targeting trend is in its early stages, so we are aiming at a moving

target. This is where Section III.C.3 comes in, which is directed at

scholars and sketches ways in which the nudnik perspective can inform

future research.

1. Lessons for Regulators

On paper, regulators already have the tools to deal with the

dangers of nudnik targeting. Section 5(a) of the Federal Trade

Commission Act prohibits unfair, deceptive, or abusive practices

(“UDAP”). The section and its equivalents at the state level grant wide

authority to numerous regulators (trade commissioners, consumer

protection agencies, and so on) to pursue big data practices that they

204. See Becher & Zarsky, supra note 97, at 75 (“[C]ounter-intuitively, policy makers should

add firms’ lenient conduct to the growing list of firms’ suspicious behaviors.”).

205. See Helveston, supra note 130, at 864–65.

978 VANDERBILT LAW REVIEW [Vol. 73:4:929

perceive as harming consumers.

206

Yet applying the UDAP standard to

nudnik-targeting practices is far from straightforward.

207

To find nudnik-targeting practices unfair, regulators will have

to show that the targeting is “likely to cause substantial injury to

consumers,” which cannot be avoided or is not offset by other benefits.

208

Yet sellers could readily find commercial justifications for their

targeting practices. If sellers charge nudniks a higher price, they can

rationalize it based on the nudnik’s propensity to consume more

customer service resources. If sellers offer nudniks preferential

treatment, they can present it as catering to the nudnik’s special

needs.

209

And when sellers avoid nudniks to begin with, their practices

may be too opaque for someone on the outside to notice.

It is perhaps better to think of nudnik targeting as “deceptive”

toward other consumers: when sellers target buyers who are likely to

notice and share damning information about them, they maintain a

factually inaccurate brand image by silencing justified criticisms.

210

reiterate, the problem here is not between the contractual parties, but

rather with third parties: the broad societal interest in having a well-

functioning market for seller reputation. Recognizing nudnik targeting

as “deceptive” would therefore require creative interpretation.

Fortunately, Congress has recently provided a blueprint for the

proper balance between protecting the information flow and preserving

freedom of contract: the Consumer Review Fairness Act of 2016

(“CRFA”).

211

The CRFA voids provisions in form contracts that restrict

206. See Dee Pridgen, The Dynamic Duo of Consumer Protection: State and Private

Enforcement of Unfair and Deceptive Trade Practices Laws, 81 A

NTITRUST L.J. 911, 914 (2017)

(reviewing equivalents at the state level).

207. Compare Matthew A. Bruckner, The Promise and Perils of Algorithmic Lenders’ Use of

Big Data, 93 C

HI.-KENT L. REV. 3, 43–47 (2018) (discussing difficulties with regulating big data

under the ‘unfairness’ standard), with Dennis D. Hirsch, That’s Unfair! Or Is it? Big Data,

Discrimination and the FTC’s Unfairness Authority, 103 K

Y. L.J. 345, 347–48 (2014) (calling for

the regulation of big data on the basis of UDAP legislation).

208. 12 U.S.C. § 5531(c)(1)(a) (2012); see also N

AT’L CONSUMER LAW CENTER, UNFAIR AND

DECEPTIVE ACTS AND PRACTICES § 4.3.2.2 (9th ed. 2016) (“[A]n act or practice must cause or be

‘likely to cause’ substantial injury to consumers.”).

209. The nudniks themselves may believe that they deserve the preferential treatment for

being more active than other consumers.

210. Note, for example, how the law deals carefully with advertising that rests on consumer

endorsements. 16 C.F.R. § 255.2 (2019).

211. Consumer Review Fairness Act of 2016, Pub. L. No. 114-258, 130 Stat. 1355 (to be codified

at 15 U.S.C. § 45b). As of now, three states have enacted similar laws: C

AL. CIV. CODE § 1670.8

(West 2020); 815 I

LL. COMP. STAT. 505/2UUU (2019); MD. CODE ANN., COM. LAW § 14-1325

(LexisNexis 2020). A similar bill is also pending: New York A5718, T

RACKBILL,

https://trackbill.com/bill/new-york-assembly-bill-5718-prohibits-the-use-of-non-disparagement-

clauses-in-consumer-contracts/1391172/ (last visited May 7, 2020) [https://perma.cc/K3AE-MPT8].

On CRFA and its limitations, see generally Eric Goldman, Understanding the Consumer Review

Fairness Act of 2016, 24 M

ICH. TELECOMM. & TECH. L. REV. 1 (2017).

2020] THEORY OF THE NUDNIK 979

the consumer’s ability to review the seller’s services.

212

Congress

declared the use of such provisions an unfair and deceptive act,

213

and

the FTC recently showed a willingness to enforce the CRFA

vigorously.

214

The stated rationale behind the CRFA is protecting information

flow.

215

Congress noted: “The consequences of these non-disparagement

clauses are far ranging. . . . [They] distort public reviews of a

business . . . thus harming consumers who rely on such reviews.”

216

The

same rationale, we argue, should apply to nudnik-targeting practices.

When a seller avoids interacting with a consumer based on the

consumer’s propensity to complain, or when a seller “bribes” consumers

who are more inclined to post negative reviews before they do so (or

shortly after, in an attempt to have the review removed), the seller is

clearly distorting information flow. From our vantage point, the CRFA

reflects Congress’s view on the proper balance between freedom of

contract and the market for reputation, and regulators at the state and

federal levels should view the act as a rallying call to start more strictly

regulating practices that impede the information flow.

There is a counterintuitive point at play when discussing the

effectiveness of CRFA-like interventions. The CRFA as currently

construed contains a loophole. It prohibits gag orders only in form

contracts.

217

This reflects the traditional thinking that consumers fare

worse in standard form contracts and better in personal contracts.

218

Yet, as we noted in this Article, the personal, algorithmic tailoring of

contracts can actually make things worse for consumers as a group. If a

212. § 2, 130 Stat. at 1355 (to be codified at 15 U.S.C. § 45b(b)(1)).

213. § 2, 130 Stat. at 1357 (to be codified at 15 U.S.C. § 45b(d)(1)).

214. In 2018, for instance, the FTC acted against a seller that sold workshops and asked

buyers to sign an agreement limiting their ability to post negative reviews on the workshop.

Complaint for Permanent Injunction and Other Equitable Relief, FTC v. Sellers Playbook, Inc.,

No. 0:18-cv-02207-DWF-TNL (D. Minn. July 7, 2018) https://www.ftc.gov/system/files/documents/

cases/sellers_playbook_complaint.pdf [https://perma.cc/W572-3P2P]. The case was later settled,

with the company required to pay $20.8 million and suspend the sales of business coaching. Press

Release, Fed. Trade Comm’n, Defendants in Sellers Playbook Get-Rich Scheme Settle with FTC

and Minnesota (Dec. 3, 2018), https://www.ftc.gov/news-events/press-releases/2018/12/defendants-

sellers-playbook-get-rich-scheme-settle-ftc-minnesota [https://perma.cc/338Z-Z3VW].

215. H.R.

REP. NO. 114-731, at 5 (2016); see also Eric Goldman, An Assessment of the Consumer

Review Freedom Act of 2015 (Santa Clara Univ. Sch. of Law Legal Studies Research Paper Series,

Working Paper No. 2-15, 2015), https://ssrn.com/abstract=2686021 [https://perma.cc/6X88-DQFG]

(discussing the reason for and likely impact of the Consumer Review Freedom Act).

216. S.

REP. NO. 114-175, at 2 (2015).

217. Section (a)(3)(A) to the Act defines “form contract” as “a contract with standardized

terms.” § 2, 130 Stat. at 1355 (to be codified at 15 U.S.C. § 45b(a)(3)(A)). The legislation in the

three states that adopted similar legislation does not contain this restriction. See laws cited supra

note 211; see also Goldman, supra note 211, at 10–15 (discussing the gaps left in the CRFA).

218. See, e.g., K

ARL N. LLEWELLYN, THE COMMON LAW TRADITION: DECIDING APPEALS 370–71

(1960) (discussing the lack of any real specific assent to boiler-plate form contracts).

980 VANDERBILT LAW REVIEW [Vol. 73:4:929

seller personalizes its contracts to include gag clauses only when selling

to nudniks, such personalization may meet the letter of the law, but

doing so will manipulate the integrity of information flow and thus

violate the spirit of CRFA.

Beyond assuring that sellers do not block consumers from

sharing information, regulators can also generate information that

would contribute to the development of seller reputation, which will

allow the market discipline itself.

219

The CFPB may have provided a

blueprint for such regulation through reputation when it assembled a

database that provides relatively fine-grained data, including

individual complaints about banks and the consumer’s narrative about

their negative experiences with the bank.

220

Another step that

regulators could take is to investigate consumer complaints more

frequently and seriously.

221

If sellers can block the most persistent

complainers, regulators should compensate by making it easier for less

persistent complainers to be heard.

Regulators could also opt to enhance the legal channels of

consumer activism to compensate for sellers’ growing ability to distort

the reputational channels. For example, several state laws employ

consumers as private attorneys general, allowing them to bring action

against sellers’ violations

222

or awarding treble damages and attorney

fees to successful plaintiffs.

223

219. Some private initiatives, such as consumer reports, also create and disseminate

reputational information. But they are subject to potential conflicts of interest with advertisers

and reviewed firms. See David Adam Friedman, Do We Need Help Using Yelp? Regulating

Advertising on Mediated Reputation Systems, 51 U.

MICH. J.L. REFORM 97 (2017); Van Loo, supra

note 78, at 583–84 (describing the shortcomings of privately run websites for consumer reporting).

220. Consumer Complaint Database, C

ONSUMER FIN. PROTECTION BUREAU,

https://www.consumerfinance.gov/data-research/consumer-complaints/ (last visited May 7, 2020)

[https://perma.cc/QN29-A87D]. For criticism of this database, see Patrick Lunsford, Allegations

Ain’t Facts: CFPB Unleashes Credit Card Complaint Database, F

ORBES (Jun. 19, 2012, 11:51 AM),

https://www.forbes.com/sites/insidearm/2012/06/19/allegations-aint-facts-cfpb-unleashes-credit-

card-complaint-database/#2436143d461d [https://perma.cc/7SW3-UJZH]. Other examples come

from the FTC, Consumer Sentinel Network Data Book, F

ED. TRADE COMMISSION (2019),

https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-

2019/consumer_sentinel_network_data_book_2019.pdf [https://perma.cc/89N2-AQT3], and the

Department of Transportation, Air Travel Consumer Reports for 2019,

U.S. DEP’T TRANSP. (2019),

https://cms8.dot.gov/airconsumer/air-travel-consumer-reports-2019 [https://perma.cc/V658-4479].

221. See Van Loo, supra note 78, at 597–98 (proposing two different ways for regulators to

improve their investigations—integrating data from various reporting sources to create more

comprehensive software and improving methods for investigating complaints submitted to them

directly).

222. See, e.g., M

ICH. COMP. LAWS § 445.911(2) (2019); N.J. STAT. ANN. § 56:8-2.12 (West 2020);

R. REV. STAT. § 646.150 (2019); Henry N. Butler & Joshua D. Wright, Are State Consumer

Protection Acts Really Little-FTC Acts?, 63 F

LA. L. REV. 163 (2011).

223. See Victor E. Schwartz & Cary Silverman, Common-Sense Construction of Consumer

Protection Acts, 54 U.

KAN. L. REV. 1, 23–27 (2005) (outlining the different approaches states have

taken for awarding treble damages or attorney fees).

2020] THEORY OF THE NUDNIK 981

2. Lessons for Courts

Judges aware of the dangers of nudnik targeting can reinterpret

statutes and doctrines in ways that forestall nudniks’ extinction. Our

discussion of how regulators’ might interpret FTCA or CRFA applies to

judges as well. Judges can also strike out gag clauses and other limits

on sharing reviews through open-ended doctrines such as

unconscionability and public policy.

224

Indeed, Eric Goldman has

claimed that the CRFA merely mirrors an organic development that

was already underway in state courts, which were using existing

doctrinal tools to protect information flows.

225

Armed with a better understanding of serial complainers and

their role in the market, courts can also reevaluate longstanding

doctrines such as standing and de minimis. To understand how the

theory of the nudnik relates to standing, think about the 2016 Supreme

Court case of Spokeo, Inc. v. Robins.

226

There, Robins discovered that an

online database described him as employed, wealthy, and married,

whereas he was actually unemployed, not well-off, and single.

227

Robins

sued under the Fair Credit Reporting Act (“FCRA”), on the ground that

the website presented a consumer report without following “reasonable

procedures to assure maximum possible accuracy.”

228

The Supreme

Court reversed the decision of the U.S. Court of Appeals for the Ninth

Circuit, noting that the “bare” procedural violation was not concrete

enough to provide Robins with standing.

229

Other courts quickly

followed the Spokeo ruling, rejecting numerous consumer actions in the

process.

230

The analysis presented in this Article suggests that the broad

application of the Spokeo standard to nudniks may be problematic, if

only for these two reasons.

231

First, for nudniks, being falsely presented

224. Lucille M. Ponte, Protecting Brand Image or Gaming the System? Consumer “Gag”

Contracts in an Age of Crowdsourced Ratings and Reviews, 7 W

M. & MARY BUS. L. REV. 59, 101–

40 (2016).

225. Goldman, supra note 211, at 8–9.

226. 136 S. Ct. 1540 (2016).

227. Id. at 1546.

228. 15 U.S.C. § 1681e(b) (2012); Spokeo, 136 S. Ct. at 1545–46.

229. Spokeo, 136 S. Ct. at 1549. Spokeo applies to federal courts, while many consumer law

disputes arise in state courts. Still, we use it here to illustrate the dynamics in place when courts

evaluate nudnik-type litigation.

230. See Attias v. CareFirst, Inc., 199 F. Supp. 3d 193, 197 (D.D.C. 2016), rev’d, 865 F.3d 620

(D.C. Cir. 2017) (denying a privacy claim for lack of particular harm in a breach of an insurance

company’s database which exposed the records of over one million consumers).

231. Beyond the two specific reasons provided above the line, we note a general flaw in the

Spokeo reasoning: to the extent that the treatment a consumer receives depends on the data

available about this consumer online, wrong information on the consumer (even if supposedly

982 VANDERBILT LAW REVIEW [Vol. 73:4:929

as affluent, or being overcharged by $4, is a concrete injury. In that

sense, nudniks are eggshell consumers.

232

Second, applying Spokeo

broadly also blocks an important channel (litigation) through which

nudniks effectively warn other consumers about seller misbehavior. By

going through the trouble of litigating a $4 overcharge or a false

representation as wealthy, nudniks generate positive externalities:

creating a public record of past misconduct and deterring future

misconduct (the reputation-through-litigation argument).

One could counter by arguing that denying standing for the

“petty claims” of nudniks is necessary to clear the docket for more

meaningful, meritorious claims by others. Yet such reasoning

misjudges how consumer dynamics work. Most of us would not go

through the trouble of comparing prices on the delivery receipt to those

on the website and therefore would not even notice the overcharge.

Without nudniks voicing their concerns publicly, other consumers

would not reach the blaming stage (i.e., they would not notice something

amiss with the seller), or they would not reach the claiming stage (i.e.,

they would notice but not pursue it).

We do not call for a radical departure from standing doctrine.

Our proposal is more modest: when assessing the question of standing,

courts should be aware of the nudnik’s special psychological makeup

and the potential for broad market improvements that their seemingly

petty claims can generate.

233

These underappreciated benefits are

relevant especially in cases in which the plaintiff fights a seller’s

practice that affects many other (silent) consumers.

Similar reasoning applies to judicial interpretation of the de

minimis doctrine. Again, it is best illustrated by a concrete case of a

nudnik in action: Troester v. Starbucks.

234

There, a barista sued

favorable) may distort the quality of treatment she receives in opaque ways. Robins v. Spokeo,

Inc., 867 F.3d 1108, 1117 (9th Cir. 2017).

232. The facts in Spokeo vividly illustrate the point: for many of us, being described as affluent

and married is not particularly harmful. Id. Yet to the specific nudnik in question, these wrongful

misstatements may have actually been harmful.

233. Some courts have already found creative ways to avoid the Spokeo ruling. In one case, a

consumer complained about robo-calling, in violation of the Telephone Consumer Protection Act,

which regulates unwanted calls to consumers. Mey v. Got Warranty, Inc., 193 F. Supp. 3d 641, 643

(N.D.W. Va. 2016); see 47 U.S.C. § 227(b)(1)(A) (2012). The court found that the consumer did

suffer a concrete injury, because—beyond any harm to privacy—the calls intruded on his phone

“capacity,” draining it of electricity and consuming its prepaid minutes. Mey, 193 F. Supp. 3d at

644–46.

234. Troester v. Starbucks Corp., 421 P.3d 1114 (2018). Note that this case involves activism

in the employment contract context, rather than the consumer context. For similar examples from

the consumer context, see, for example, Skaff v. Meridien North America Beverly Hills, LLC, 506

F.3d 832 (9th Cir. 2007), ruling that a misleading promise of a usable shower for disabled person

staying in a hotel was de minimis, and Harris v. Time, Inc., 237 Cal. Rptr. 584 (Cal. Ct. App. 1987),

ruling that a misleading promise of a free watch in return for opening an envelope was de minimis.

2020] THEORY OF THE NUDNIK 983

Starbucks under the federal Fair Labor Standards Act for failing to

count the roughly four minutes it took him to clock out and finish

locking up the store.

235

The district court rejected the lawsuit, reasoning

that four minutes is a trifling matter that fails to pass the de minimis

threshold.

236

Here as well, recognizing the social benefits of nudnik activism

highlights two problems: (1) for nudniks, being systematically

underpaid by four minutes is hardly a trifling matter (the “eggshell”

point); (2) more importantly, the issue is not the harm done to this

particular employee (the nudnik), but the much more consequential

harm done to all other (passive) employees. A simple, back-of-the-

envelope calculation helps demonstrate this harm: Starbucks employs

roughly 209,000 employees in the United States.

237

Say that only one in

ten closes the store. This translates to four minutes per night for 20,900

employees, or 508,566 hours annually. Even if all these employees earn

minimum wage ($7.25 hourly), the overall amount implicated in four-

minute overcharging would be, conservatively, $3,687,108 annually. In

that sense, a nudnik plaintiff operates similarly to a class action, that

is, it draws attention to the harm done to a collective body of similarly

injured passivists.

238

By denying nudniks the possibility of publicly

fighting firms over four minutes, we reduce the likelihood that others

will learn about such corporate misbehavior. Courts should recognize

There is a broader point in play here: the phenomenon of nudniks is not limited to the consumer

markets context. It appears in labor markets, as we just saw. Counterintuitively, it also appears

in financial markets, as Kastiel and Nili document. Kobi Kastiel & Yaron Nili, The Giant Shadow

of Corporate Gadflies (Univ. of Wis. Legal Studies Research Paper No. 1523, 2020),

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3520214 [https://perma.cc/784S-XC4W].

235. Troester, 421 P.3d at 1116–17.

236. Id. at 1117. On appeal, the Ninth Circuit referred the issue to the California Supreme

Court. Id. The California court ultimately found for Troester but based its decision on a state-

specific legal issue, namely, that California does not incorporate the de minimis doctrine. Id. at

1125.

237. Starbucks, Annual Report (Form 10-K) (Nov. 15, 2019), https://s22.q4cdn.com/

869488222/files/doc_financials/2019/2019-Annual-Report.pdf [https://perma.cc/23KF-39NF]

(stating that in the United States, Starbucks employs approximately 218,000 people, with 209,000

of them working in company-owned stores).

238. One could claim that we do not need nudnik-driven litigation in such cases, as the class

action mechanism will be enough to deter firm misbehavior. There are, however, many gaps left

by the limitations of class actions. See J. Maria Glover, Disappearing Claims and the Erosion of

Substantive Law, 124 Y

ALE L.J. 3052, 3066 (2015) (explaining the inability of arbitration to

address class actions); Linda S. Mullenix, Ending Class Actions as We Know Them: Rethinking the

American Class Action, 64 E

MORY L.J. 399, 413–17 (2014) (discussing the general shortcomings of

class action lawsuits). In particular, the wave of mandatory arbitration clauses that ban class

actions severely limits the effectiveness of class actions, rendering nudnik-based individual

litigation even more important in drawing others’ attention to seller misbehavior. Shapira, supra

note 160.

984 VANDERBILT LAW REVIEW [Vol. 73:4:929

these dynamics and apply the de minimis doctrine cautiously when the

issue in question involves a practice that is relevant to many others.

239

Finally, and perhaps most contentiously, judges who are aware

of the dangers of nudnik targeting should interpret defamation law

narrowly. If a small subset of consumers drives the diffusion of damning

information on seller behavior, then sellers have incentives and

resources to target this small subset by bringing defamation lawsuits.

240

In a separate paper, one of us advocated for consumer reviews to enjoy

a safe haven from defamation law.

241

The argument is that even if some

reviewers exaggerate or outright lie, the intended audience can account

for this possibility when reading reviews.

242

In contrast, if a review is

never even written (because of the chilling effect of being sued in

defamation), audiences cannot evaluate it on the merits.

243

When we

add on top of that argument the notions developed here—about how

consumers that write detailed negative reviews typically belong to a

small group of “serial” complainers, who have personality traits that

make them identifiable in advance by companies—the case for

protecting reviewers is augmented. Judges should look at consumer

reviews as “issues of public interest” worthy of stronger protection

under the evolving standard of New York Times Co. v. Sullivan.

244

3. Lessons for Scholars

This Article highlights the need to shift focus from studying

consumer reading behavior to studying consumer complaining

behavior. Consumer law scholars have traditionally ignored the

insights of the CCB literature and dismissed (or sometimes treated with

hostility) the phenomenon of serial complainers. Yet in today’s world,

serial complainers are much more relevant and impactful than serial

readers. The first lesson for scholars therefore concerns the need to

239. For a treatment of the potential concern with opening the “floodgates of litigation,” see

Marin K. Levy, Judging the Flood of Litigation, 80 U.

CHI. L. REV. 1007 (2013).

240. See Eric Goldman, The Regulation of Reputational Information, in T

HE NEXT DIGITAL

DECADE: ESSAYS ON THE FUTURE OF THE INTERNET 293, 298 (Berin Szoka & Adam Marcus eds.,

2010)

(“[N]umerous individuals have been sued for posting negative online reviews.”).

241. See Arbel, supra note 82, at 1299–1301.

242. For arguments from the other side, namely, on how businesses should be protected from

irate consumers who write negative reviews, see Barnes, supra note 86, and Lori A. Roberts,

Brawling with the Consumer Review Site Bully, 84 U.

CIN. L. REV. 633 (2016).

243. See Yonathan A. Arbel & Murat Mungan, The Case Against Expanding Defamation Law,

71 A

LA. L. REV. 453 (2019) (studying the audience effects of defamation law); see also Daniel Hemel

& Ariel Porat,

Free Speech and Cheap Talk, 11 J. LEGAL ANALYSIS 46, 61–65 (2019) (analyzing the

deterrence effect of defamation law on “speakers who choose not to make true statements because

of the extant liability regime”).

244. 376 U.S. 254 (1964).

2020] THEORY OF THE NUDNIK 985

study the effects of nudnik behavior: Under what conditions do nudniks

generate positive or negative effects on seller behavior? Once we

identify the areas where nudniks hold sellers to account (and those

where they do not), we can rethink the scope and design of legal

intervention.

The second lesson for scholars concerns the promise and perils

of personalized contracts. Consumer law scholars have traditionally

viewed standard form contracts unfavorably and personalized contracts

favorably: the former rest on compulsion with thin consumer consent,

while the latter come from mutual negotiations, or so the story goes.

245

Against this background, it was intuitive for scholars to view the

increasing trend of personalizing contracts favorably.

246

Yet our

analysis suggests that personalized does not necessarily mean better.

Sellers can algorithmically match each consumer with a bespoke

combination of price and terms, based not just on the consumer’s

willingness to pay but also on the consumer’s willingness to share

damning information about the seller. Such personalized contracts may

not feature much negotiation and comprehension, and, critically, may

hinder the effectiveness of reputational discipline. In other words, the

high levels of tailoring may not lead to better contract terms ex ante

and may actually lead to worse enforcement of seller underperformance

ex post. Personalization comes with underappreciated risks.

D. On Optimizing (Rather than Maximizing) Nudnik Behavior

The theory of the nudnik also suggests the limits of nudnik-

based activism. Some nudniks clearly champion issues of little public

interest or merit. When firms respond to such claims, they incur costs

(and pass these costs on to other consumers). Dedicating scarce judicial

or regulatory resources to frivolous nudnik actions similarly wastes

social resources.

Our proposals in this Section should be read with this limitation

in mind. Our purpose is not to maximize nudnik action, but rather to

optimize it. Some forms of nudnik-based activism are important and

critical to market discipline, while others are unhelpful at best. But

245. See LLEWELLYN, supra note 218, at 362–71 (comparing the act of signing a form contract

to “lay[ing] [one’s] head into the mouth of a lion”).

246. See, e.g., Omri Ben-Shahar & Ariel Porat, Personalizing Mandatory Rules in Contract

Law, 86 U.

CHI. L. REV. 255, 256–57 (2019) (arguing that personalized protections in consumer

contracts can be efficient); Christoph Busch, Implementing Personalized Law: Personalized

Disclosures in Consumer Law and Data Privacy Law, 86 U.

CHI. L. REV. 309 (2019) (highlighting

the promise of personalized disclosures in consumer contracts); Porat & Strahilevitz, supra note

127, at 1453–54 (proposing personalized default rules and confronting potential objections to such

proposals).

986 VANDERBILT LAW REVIEW [Vol. 73:4:929

until future research deciphers which is which, allowing sellers to

disarm nudnik-based activism wholesale is a bad idea. Regardless of

what one thinks about the optimal level of nudnik-based activism, one

should not allow sellers to be the judge.

Take for example our discussion of lessons to judges. Our claim

here is not that all nudnik-based lawsuits should be welcome; rather it

is that judges should resist the natural tendency to look at nudnik-

based lawsuits as vexatious. We claim that the current formulations of

doctrines such as standing or de minimis make them too crude of a tool

to distinguish between positive- and negative-value nudnik actions. As

long as the lawsuit implicates a seller behavior that is applicable to

many other consumers, courts should be more open to the possibility of

letting the lawsuit proceed and screen for frivolous lawsuits in later

stages, perhaps with the benefit of discovery. It is instinctive for judges,

like the rest of us, to view nudniks as petty and vindictive. It is much

less instinctive to consider the positive externalities they provide and

the link between nudnik behavior and market discipline. If nudniks

disappear, market discipline will suffer, and the vacuum will force

courts to delve more deeply into the terms of contracts—a mission many

courts and judges have been avoiding. Allowing nudnik lawsuits to

proceed would not necessarily increase court congestion; it may actually

alleviate it ex ante.

ONCLUSION

Nudniks are an important yet overlooked part of the market

ecosystem. They have unique personality traits that make them pursue

action whenever sellers underperform. Nudniks notice seller

misbehavior that most consumers would not notice. Nudniks publicly

confront sellers who underperform when most consumers would not

bother. Under certain circumstances, nudniks become the engine of

market discipline, solving the consumer collective action problem.

This Article’s first contribution is in drawing our attention to the

understudied phenomenon of nudniks. Understanding the

phenomenon—how nudniks operate and when their actions are more or

less likely to generate positive spillovers—is key for understanding

consumer governance, especially in a world where consumers do not

read or understand contracts.

Yet this form of consumer activism via nudniks is under

increasing threat. The Article’s second contribution is exploring the

trend of sellers increasingly obtaining data and technologies that will

eventually allow them to identify nudniks and silence them before they

2020] THEORY OF THE NUDNIK 987

voice their concerns publicly. Such a development can radically change

the balance of power between sellers and buyers.

While more empirical work is needed, particularly on the

conditions that make nudnik activity most valuable, “leaving things to

the market” is a very deliberate policy choice with important

consequences. One does not have to believe that all (or even most)

nudnik activity is beneficial to see that letting sellers silence nudniks

wholesale may result in worse seller performance. One way of making

sure that you are not called out for underperforming is investing in the

quality of your product; another way is investing in silencing those who

may call you out. When sellers find it easier to invest in appearance

management than in quality controls, consumers are worse off.

This is where the Article’s third contribution comes in: outlining

strategies to counter the attack on nudniks and facilitate well-

functioning reputation markets. In the process, we get to reevaluate

longstanding debates; for example, we discuss why personalized

contracts may actually leave consumers worse off than form contracts.

Nudniks also generate costs and big data technologies also come

with benefits, but we highlight here the more understudied sides: the

benefits that nudniks generate and the costs of big data. Without

nudniks, market discipline suffers.