Purpose: This article explains, and recommend improvements for, the US system of Mandatory Arbitration (MA). MA is a parallel, privately-controlled justice system adjudicating hundreds of thousands of B2C disputes annually. Millions of US consumers have contractually agreed to MA, very often without even being aware of it. Once a consumer agrees to MA, s/he sacrifices a set of legal rights most take for granted, as detailed in the article. This shifting of rights, and of dispute-resolution process, signals an alteration in the post-purchase phase of the consumer decision process.
More specifically, this article addresses three key issues. First, it explains Mandatory Arbitration (MA) to an audience often not having a full appreciation of its import and impact. Second, it will explain how the MA contracting process ensures the vast majority of consumers become vulnerable consumers, ripe for exploitation. Third, this article will recommend ways to improve and reform the MA contracting process in ways specifically designed to reduce consumer vulnerability and improve societal outcomes.
Study Design: For this study, we employed an examination of (1) relevant US statutory law, (2) relevant US case law, focusing on US Supreme Court cases, (3) law review commentary, (4) empirical evidence on both the process and outcomes of mandatory arbitration, (5) commentary from other sources, such as US government agencies and watchdog groups, and (6) procedural documentation from arbitration agencies.
Findings: We make specific policy recommendations for the improvement of MA. These recommendations are in the areas of (1) Consumer awareness, (2) Consumer Choice (3) Selection of the arbitrators, (4) Arbitrator’s legal training, (5) Discovery, (6) Judicial review, (7) Class action, and (8) Elimination of MA in some circumstances.
Originality/Value: The value flows directly from the article’s stated Purpose. First, many do not have a solid understanding of MA, and are unaware of how pervasive it is in US commerce. Fewer still are aware of how MA strips consumers of their legal rights. We propose practical reforms to maintain the advantages of Mandatory Arbitration, while preserving the legal rights of consumers.
Article Classification; Viewpoint; General Review