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In ordinary words.
Everyone loses five dollars; nobody can afford to sue alone.
In legal terms.
Federal arbitration precedent often permits class-action waivers, although statutory exceptions apply.
Where it stops being legal.
This practice is not categorically legal. Applicable federal, state and local laws, disclosures, procedural protections and the specific facts can make particular conduct unlawful.
Legal authority / Start reading
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011)
Open cited reference ↗General U.S.-focused information. Cases and statutes may have jurisdiction-specific exceptions. This citation may be a general primer; verify the governing primary authority. Not legal advice.