Even as a lawyer, I often find myself mindlessly clicking an “I Agree” button on terms of service, use, etc. when I purchase music online or “agree” to use software which I have purchased. And I, like you, have received notices from services I already use – credit cards, online storage services, what have you – that notify me that the terms I originally agreed to have changed. Given the ubiquity of these things, I often don’t pay them much mind. Which is probably a mistake, because buried in these agreements you will often find mandatory arbitration clauses, which seriously restrict your rights if something goes wrong.

My Alternative Dispute Resolutions teacher in law school described arbitration as taking place “in the shadow of the law.” What he wanted to emphasize was that the decisions are confidential (unlike court decisions, which are available to the public), and that the decision-maker, while being informed by the laws on the books, was not bound to follow them. The upsides of arbitration are that it’s often a much quicker and cheaper process than taking a case to court, and the arbitrator is often selected from a group of people who have expertise in the area of dispute. 

However, it is time to ask: has arbitration become just another hammer for those who have power to beat down the everyday consumer?

Lina Khan, writing in the Washington Monthly, pretty definitively says, “yes.” After looking at several Supreme Court decisions upholding mandatory arbitration laws, she summarizes:

The decisions culminate a thirty-year trend during which the judiciary, including initially some prominent liberal jurists, has moved to eliminate courts as a means for ordinary Americans to uphold their rights against companies. The result is a world where corporations can evade accountability and effectively skirt swaths of law, pushing their growing power over their consumers and employees past a tipping point.


Hastily clicking through terms of service is now all it can take to surrender your rights to these companies. Once you do, your only path for recourse if you’re harmed by any one of them is “mandatory arbitration,” where the arbitrator is often chosen by the corporation you’re challenging, and any revelations about the company’s wrongdoing tend to be kept secret. Rather than band together under the light of the public courtroom, each individual has to work through the darkness of a private tribunal, alone, where arbitrators can interpret laws however they wish. Certain inalienable rights, the Court has ruled, are actually kind of alienable.

The trend is disturbing. A basic foundation of contracts law is that each party has an opportunity to bargain over the terms. But in today’s world we, as individuals, are often given the option of “take it or leave it.” If you want to use Facebook, or iTunes, or have a credit card or cell phone contract, then you likely have to agree to a mandatory arbitration clause. In short, if you want to participate in modern society, you will agree to mandatory arbitration. And trying to negotiate around these clauses will get you nowhere.

Adding to the problem is that big corporations can rake in millions or billions of dollars in profit by doing minimal harms to each individual customer, rendering it too expensive for any individual to bring a case. These situations, where a company can gain immense profit from doing a little bit of harm to each of its customers, have traditionally been brought as class action cases, also often banned by arbitration clauses. Which threatens to undermine our laws themselves: 


Bert Foer, president of the American Antitrust Institute, says that many sound antitrust cases no longer get heard, by a judge or an arbitrator, because of class-action bans. “The American Express decision cuts back the quantity of antitrust cases that can be brought [by private parties],” he says. “It takes away citizens’ rights.”


The greatest damage here isn’t to us as individuals. “Mandatory arbitration is a basic threat to our democracy,” says Deepak Gupta, who argued the 2011 AT&T case before the Supreme Court. “This isn’t about us all getting our $30 checks when a company has ripped us off. It’s about laws that Congress passes being enforceable. The Supreme Court is allowing corporations to overturn law made by people we elect.”

As consumer rights advocates, we here at Intelekia hope that the trend reverses. However, without significant congressional action, or a change in the composition of the Supreme Court, we don’t see that happening soon. We will continue to fight for the individual consumer, but we also know it’s an uphill battle.

— Raife Neuman