Forced arbitration clauses can be anticompetitive ^87%

The Hidden Threat to Competition: Forced Arbitration Clauses

When companies add fine print to their contracts, it's often overlooked by consumers who are eager to get on with the business at hand. But one type of clause has the potential to undermine competition and stifle innovation: forced arbitration clauses.

What Are Forced Arbitration Clauses?

Forced arbitration clauses are provisions in contracts that require customers or employees to resolve disputes through private arbitration rather than going to court. This means that if a customer is dissatisfied with a product or service, they can't take their complaint to the courts. Instead, they're forced to participate in a private process that's often biased towards the company.

The Problem with Forced Arbitration

The problem with forced arbitration clauses is that they can be anticompetitive. When companies are able to avoid accountability through private arbitration, it creates an uneven playing field for competitors. Companies that don't have these clauses may find themselves at a disadvantage if their customers or employees end up in court.

How Forced Arbitration Hurts Consumers

Forced arbitration clauses can also hurt consumers directly. By restricting access to the courts, companies are able to avoid accountability and hide behind complex procedures. This means that consumers may not be able to get redress for genuine grievances, such as faulty products or discriminatory practices.

• Lack of transparency: Forced arbitration clauses often require customers to waive their right to a public trial, making it difficult to see how disputes are being resolved.
• Unfair procedures: Private arbitrators may have conflicts of interest or be biased towards the company, leading to unfair outcomes for consumers.
• Limited recourse: If a customer is unhappy with an arbitration decision, they often can't appeal to a higher court.

The Broader Implications

Forced arbitration clauses are not just a problem for individual customers. They also undermine competition and innovation by allowing companies to avoid accountability. When companies know that they won't be held accountable for their actions, they're more likely to engage in questionable practices. This can lead to a decrease in the quality of goods and services, as well as a reduction in consumer choice.

Conclusion

Forced arbitration clauses may seem like an innocuous provision in contracts, but they have the potential to undermine competition and stifle innovation. By restricting access to the courts and creating an uneven playing field for competitors, these clauses can harm consumers directly and erode trust in businesses. It's time for policymakers to take a closer look at forced arbitration clauses and consider legislation that would prevent companies from using them to avoid accountability.