On September 20, 2019, the United States House of Representatives passed the Forced Arbitration Injustice Repeal Act (“the FAIR Act”) by a vote of 225-186. First introduced to Congress in 2007, the bill would prohibit corporations from requiring consumers and employees to waive their rights to a jury trial, for any employment, consumer, antitrust or civil rights disputes, and instead resolve those disputes by binding arbitration.
What is forced arbitration?
Forced arbitration is the practice of contractually denying consumers the right to sue corporations in an independent court of law. These clauses enable large corporate wrongdoers to evade accountability when they break the law by privatizing dispute resolutions. Private arbitrators are often hired and paid for by the corporation, further skewing the scales of justice in the defendant corporation’s favor.
With a forced arbitration clause in place, a consumer’s only recourse is private arbitration, which significantly lacks all of the due process protections afforded by courts. Furthermore, upon the private arbitrator’s finding, there is no right to appeal.
How does the FAIR Act affect consumers?
Nearly all contractual agreements entered into by consumers include a forced arbitration clause that waives consumer rights, including but not limited to, cell phone agreements, credit card applications, cable contracts, and online retail transactions. Most consumers enter into these contractual agreements without ever realizing they have given up their right to sue in a public court if a dispute arises.
It is estimated that there are more than 800 million arbitration provisions hidden in contractual agreements in today’s marketplace; however, only 6,000 cases are pursued each year. The reason for such a significantly low number of claims pursued through arbitration clauses can be attributed to the lack of information provided to consumers to aid them in pursuing their claims. Corporations boast a success rate of 93% in arbitration disputes.
A study conducted by the American Association for Justice (AAJ), drawing on data from the two largest arbitration providers in the country, revealed that “Americans are more likely to be struck by lightning than win in forced arbitration.” The study also found that corporations which utilize arbitration clauses often face a very small number of claims. For example, from 2014-2018, Amazon, with 101 million Prime subscribers, faced only 15 arbitration cases and Walmart, with 275 million customers per week, faced only 2 arbitration cases.
The FAIR Act will prohibit corporations from forcing consumers to agree to arbitration and instead allow consumers to pursue their claims in court with due process protections and meaningful remedies. The bill would restore fundamental rights of workers and consumers seeking justice and accountability from corporations. For assistance with injuries involving consumer products, contact us.