Op-Eds

Arbitration Isn’t The Problem

1 Comment

 

English: First 4 digits of a credit card

 

Jessica Silver-Greenberg and Robert Gebeloff of the New York Times claim to have discovered “a far-reaching power play orchestrated by American corporations” (“Arbitration Everywhere, Stacking the Deck of Justice,” October 31). They’re missing the forest for the trees. Arbitration is not the problem.

Corporate preference for private arbitration instead of litigation in government courts is nothing new. The twist in the Times expose is that arbitration clauses have evolved to make it more difficult for dissatisfied customers to band together and bring particular types of suits: “Class actions” in which numerous complaints are bundled together, reducing the plaintiffs’ costs and resulting in huge potential aggregated damage awards.

In recent years, arbitration clauses have begun specifying individual arbitration. Corporate attorneys know that most customers won’t spend hundreds or thousands of dollars arbitrating $10 complaints. If the complaints can’t be aggregated, they’re not worth pursuing from a financial standpoint. A win for the corporations, a loss for consumers whose complaints don’t pass the financial test.

What Silver-Greenberg and Gebeloff leave out are two important consumer tools: Information and choice.

Their story opens with reference to “a clause that most customers probably miss” on “page 5 of a credit card contract.”

The reason most customers probably miss that clause is that most customers don’t bother to read contracts pertaining to small-money matters, or have them reviewed by attorneys, before signing them. That’s a choice. So is the decision to sign something one hasn’t read.

The Times piece quotes F. Paul Bland Jr. of Public Justice, a “national consumer advocate group.” Bland claims that “[c]orporations are allowed to strip people of their constitutional right to go to court.” No, people are allowed to voluntarily waive their right to go to court, in return for valuable considerations. If they do so from voluntary ignorance, that’s their fault and no one else’s.

It’s not that complicated:

If you don’t want to commit to arbitration in general, or to individual arbitration in particular, don’t sign contracts committing yourself to those things.

If you consider reading and understanding a contract before you sign it to be too much work, don’t complain when your decision to remain ignorant comes back to bite you.

If you really, really want something, but the only way to get it is to accept an arbitration clause, then make your choice. Do without that thing or to accept the clause. Nobody owes you a smart phone or a credit card or whatever. Take the deal or don’t take the deal. Don’t blame arbitration itself, which is as good in some cases, and better in most, than resort to government courts. Remember, it was government that made the corporations so powerful in the first place.

Thomas L. Knapp is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

PUBLICATION/CITATION HISTORY