In 1925, the Federal Arbitration Act was made law. This act provides that where parties agree to arbitrate, they do so in lieu of going to court. So, how does this affect you? Arbitration can be equitable for parties of comparable bargaining power, but increasingly arbitration clauses are part of consumer purchases and website transactions. The pervasiveness of these forced arbitration contracts has caused consumers to unwittingly give away one of their constitutional rights – the 7th Amendment’s right to trial by jury.
This means that if a person is injured in some fashion by a product or service covered by one of these arbitration clauses, he or she may be forced into private binding arbitration. This means loss of a public trial, including a jury and a neutral judge. It also eliminates the ability to appeal rulings to a higher court, and often may not allow for fact discovery.
Arbitration clauses are spreading into other facets of consumer life. The New York Times reports that one third of top consumer websites contain forced arbitration clauses. Earlier this year, General Mills attempted to assert forced arbitration clauses triggered by consumers downloading coupons or “liking” the company online. A torrent of advocates, the press, and ordinary consumers caused General Mills to beat a hasty retreat and retract its policy.
The pervasiveness of arbitration clauses in consumer contracts has led to measures pending in Congress, including the Arbitration Fairness Act, which seek to modify the Federal Arbitration Act in an attempt to give the right to trial back to consumers and workers. Legislation has not yet been brought to a vote. If this is an area that concerns you, contact your senator. Their job is to listen to and support constituents, and it’s our job to be vocal when we see a problem with the law.