(In)justice for all: the case against arbitration clauses in consumer contracts

The case against consumer arbitrationLast month our mail carrier delivered to our home a slim envelope from Comcast, our cable television service provider.

The envelope contained an “Arbitration Notice”. Printed on glossy stock, the Notice was covered with oddly formatted text–entire paragraphs blazed across both sides in full caps, some in bold, others not, and all of it justified–enough to produce either a full-blown seizure or a blinding headache. (And no doubt calculated to discourage careful reading.)

This notice advised us about a new provision in our subscriber agreement, which we had 30 days to opt out of if we chose.

Here’s the gist of the new provision, translated into English:

Any dispute that we happened to have with Comcast would now need to be resolved by an arbitrator instead of in court by a judge. We would only have one year in which to pursue a claim (without mentioning of course that in the absence of this provision, applicable state or federal law probably gives us a lot more time than that to file a claim in court). We would also have no right to gang up on poor Comcast by bringing a class action with other subscribers. Although the arbitration would be held in an unspecified location that promised to be “convenient” for us, and while Comcast would be responsible for advancing to us all arbitration filing fees and the arbitrator’s costs and expenses (if we asked nicely in writing first), we would have to reimburse Comcast if we lost. (Comcast omitted telling us that in a court we would only have to pay a filing fee to the clerk, that taxpayers already cover the judge’s salary, and, if we lost in court here in Massachusetts, we wouldn’t have to reimburse Comcast a dime.)

Now I ask you, is that any way to treat a consumer?

We elected to opt out, but it made me wonder how many consumers would understand the consequences of opting in. And unfortunately mandatory arbitration clauses in consumer agreements are increasingly common.

For a well-written polemic on why this is a bad thing–not just for consumers but for the rule of law and our legal traditions–read “The Future of Consumer Law in the United States — Hello Arbitration, Bye-bye Courts, So-long Consumer Protection” (for the abstract and the link to the PDF download).

Apart from the obvious arguments against mandatory arbitration provisions in consumer agreements — questions about their fairness; their coercive, take-it-or-leave-it nature; the disparity in power between the consumer and company; the privatization of dispute resolution; the lack of judicial review; allegations that the system is weighted against the consumer; and the fact that the average consumer simply doesn’t understand these provisions — this article also warns of the implications such provisions hold for the American justice system and the further development of consumer law jurisprudence:

The common law is the system that America has adopted and developed over the centuries for ensuring the law stays current with rapidly changing social and economic conditions. As Justice Harlan F. Stone noted, “If one were to attempt to write a history of the law in the United States, it would largely be an account of the means by which the common-law system has been able to make progress through a period of rapid social and economic change.” The American judiciary is much more than just a check on the legislative and executive branches of government. It is an independent branch of government, often looking out for the rights of those who lack the power or influence to receive the attention of our elected representatives. The American common law tradition is an essential part of the development and continuation of consumer protection; arbitration destroys it.

While no doubt Big Business saves money with this end-run around the legal system, it fails to anticipate a different kind of loss: the impact on customer relations. It always seems to be the companies with the weakest track record for dependable customer service that insist on these one-sided arbitration provisions. Instead of paying their legal teams huge sums of money to craft these impenetrable clauses, they should work harder to improve services and products and train their customer service representatives to respond better to customer issues.

In other words, why not insist on customer-centered business practices and work harder to drastically reduce the underlying causes of litigation in the first place?

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