Will Mass Arbitration Soon Face a Reckoning? | Opinion

As the populist realignment reshaping American politics continues to reverberate, many on the Right are considering new policy avenues for further vitiating conservatives' historical, but rapidly fraying, alliance with Big Business. Some have rediscovered the prudence of sound antitrust enforcement, and others have tried to bolster conservative support for private-sector labor unions. An additional, and perhaps more abstruse, area of potential "realignment"-friendly policy reform, which few on the Right have touched upon other than Tyranny, Inc. author Sohrab Ahmari, is mass arbitration.

Alternative dispute resolution has long been viewed favorably by swaths of the legal academy and business world, and mass arbitration has now culminated its "long march" through corporate America. A whopping 81 of the Fortune 100 companies now put affirmative language in their contractual agreements mandating that consumers file grievances not in a court of law, but with a private arbitrator. These arbitrators, by definition, are not bound by the well-developed doctrines and legal precedents of federal and state judiciaries. Most customers, moreover, have no clue about the language contained in the boilerplate contracts they sign, inviting ethical scrutiny and concern about the power dynamics inherent in business-consumer relationships. In sum, there are nearly a billion separate consumer arbitration agreements now in existence.

Interestingly, it seems that no one is particularly happy with this current arrangement—certainly not consumers, but not Big Business either.

Although Big Business was initially responsible for the rise of mass arbitration, corporate America has now been hoisted on its own petard. Consider the example of Uber, which in 2020 adopted a patently illegal policy of canceling UberEats delivery fees only for black-owned restaurants. Over 31,000 separate UberEats customers issued arbitration demands, but this replacement for traditional class-action litigation is simply not well-equipped for handling such a caseload. After Uber went to a traditional court of law to try to escape liability for $92 million in arbitration fees, a New York state court bluntly pointed out the irony: "While Uber is trying to avoid paying the arbitration fees associated with 31,000 nearly identical cases, it made the business decision to preclude class, collective, or representative claims in its arbitration agreement with its consumers."

Uber is hardly the only such corporation to recently reap what it has itself sowed, when it comes to mass arbitration. Indeed, technology companies in general are often the worst offenders. Earlier this month, an Illinois federal judge ordered Samsung to dish out $4 million in individual arbitration fees to account for the nearly 36,000 customers who recently alleged the electronics giant illegally collected biometric data from them. Samsung, just like Uber, had been trying to weasel its way out of paying for the very arbitration proceedings that its own customer contracts had mandated. Thankfully, Senior Judge Harry D. Leinenweber swatted down the South Korean electronics juggernaut's baseless attempt to evade an arbitration bill. But talk about unintended consequences.

On the other end of the spectrum, many Big Business-skeptical populists on the Right now decry private arbitration tribunals. These tribunals, the populist Ahmari argued in a recent column, are structured such that "corporations set the rules, and the expenses raise an insurmountable barrier to justice" for consumers. Many consumer advocates have long sounded a similar alarm. The National Association of Consumer Advocates argues on its website, for instance: "The widespread use of forced arbitration clauses in take-it-or-leave-it corporate contracts deny untold numbers of people the fundamental right to go before a judge and jury when they are wronged."

Simply put, corporate America is increasingly not seeking a mere alternative resolution process with arbitration; rather, as the Uber and Samsung examples powerfully demonstrate, Big Business is increasingly trying to preclude accountability outright. The result is a broken system: Consumers who have been wronged cannot meaningfully pursue justice, and corporate America is left groaning under the weight and cost of the very arbitration it once universally promoted.

Something clearly has to change. The straightforward solution, which should appeal to both Big Business and consumers alike, is to re-democratize and re-politicize that which should have never been privatized (at least on this scale) in the first instance: resolution of the myriad disputes between businesses and customers that have existed since time immemorial.

Given the mutual desirability of amending the status quo, perhaps Big Business and consumer advocate groups can reach an agreeable, Pareto-optimizing grand bargain to wind down mass arbitration without political intervention. But direct political intervention could prove to be easier. Democrats in Congress, joined by populist-leaning Republican Rep. Matt Gaetz of Florida, have in recent years made a push for the Forced Arbitration Injustice Repeal (FAIR) Act. That sweeping legislation would broadly illegalize all pre-dispute forced arbitration agreements in America. That is a heavy-handed and perhaps slightly over-inclusive remedy, to be sure, but such legislation is popular. And Gaetz may be the one most in touch with GOP voters on this issue: According to a 2019 Hart Research survey, a higher percentage of Republican voters (87%) than Democratic voters (83%) actually support comprehensive legislation to crack down on forced arbitration agreements, such as the FAIR Act.

Other "realignment" issues, such as antitrust and supply chain reshoring, tend to preoccupy political economy wonks. But it might turn out that ending the mass arbitration shell game is the next policy area ripe for bipartisan reform.

Josh Hammer is Newsweek senior editor-at-large, host of "The Josh Hammer Show," a syndicated columnist, and a research fellow with the Edmund Burke Foundation. Subscribe here for "The Josh Hammer Report," a Newsweek newsletter. X: @josh_hammer.

The views expressed in this article are the writer's own.