A Spotify user who sued the company over accusations that Discovery Mode is a “modern form of payola” cannot pursue those claims in federal court, a judge says.
Genevieve Capolongo filed a widely-publicized class action last fall, claiming in her lawsuit that Spotify’s recommendation tools are a “deceptive pay-for-play” program that allows labels and artists to secretly pay to promote their music.
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But in a new ruling, a federal judge says there’s just one problem: All Spotify users waive any right to sue the company when they sign up for the service. Under the streamer’s terms of service, all disputes must instead be handled via private arbitration.
“The plaintiff argues that the arbitration agreement is unenforceable for several reasons,” Judge John G. Koeltl writes in a ruling obtained and first reported by Billboard. “None is persuasive.”
In her November complaint, Capolongo argued that she and other Spotify users believed that the company’s suggestions were based on real listening tastes, when in reality the company had chosen to “secretly sell those recommendations to the highest bidder.”
Discovery Mode, first unveiled in 2020, allows artists and labels to get boosted on Spotify in return for accepting reduced royalties. It was initially met with scrutiny, including a Congressional investigation, over its similarities to payola — the infamous historical practice of secretly paying radio stations for airplay. But it has since become a popular and widely accepted industry marketing tool around the release of new music.
Seeking to represent “millions” of other users, Capolongo argued that Discovery Mode violated the law because Spotify had failed to properly disclose it: “Without that specificity, users cannot distinguish between genuine personalization and covert advertising.” She also took aim at Spotify’s editorial playlists, like the hugely influential Today’s Top Hits and RapCaviar — arguing they, too, were secretly subject to pay-for-play.
At the time, Spotify called the accusations “nonsense,” claiming the lawsuit was “riddled with misunderstandings and inaccuracies” about Discovery Mode: “It doesn’t buy plays, it doesn’t affect editorial playlists, and it’s clearly disclosed in the app and on our website,” the company said in its response.
Capolongo’s case was one of several filed last year to claim that major labels are buying placement on Spotify to boost their artists. The high-profile lawsuit filed by Drake over Kendrick Lamar’s “Not Like Us” included accusations that Universal Music Group used bots and payments to juice the song’s popularity. Another case, filed by a rapper named RBX, claimed Spotify allowed “billions of fraudulent streams” that boosted the performance numbers of major stars.
But in Thursday’s ruling, Judge Koeltl said Capolongo’s allegations simply could not be filed as a federal class action, thanks to the user agreement that she herself had signed.
Spotify had provided her with “a conspicuous hyperlink” to its terms of service containing the arbitration agreement, the judge said. When those terms were later updated, he added, Capolongo “manifested her assent” to them by continuing to use and pay for the service. Her lawyers argued that the agreement was invalid for a variety of reasons, but the judge rejected that argument too.
Spotify is hardly alone in forcing fans to sign arbitration agreements, which are widely seen as a more business-friendly and cheaper alternative to litigation. Almost all modern services include such language in their terms of service, including StubHub — which recently won a similar ruling to escape a class action filed by angry Taylor Swift fans — and Live Nation, which is embroiled in a long-running lawsuit over its use of arbitration clauses.
