The Secrets of Arbitration

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Every day Americans sign arbitration agreements without being aware of it. For too many, reading the fine print contained in a contract or terms of service is time consuming, hence, it’s passed over. But arbitration agreements are everywhere and every day consumers are waiving the right to have their day in court.

Commercial arbitration agreements are everywhere because they provide a unique advantage to corporate America–secrecy.

Arbitration removes the transparency of the courts and provides privacy protection for business. That’s because most arbitration proceedings are confidential- meaning the public can never truly know how a business operates when it comes to consumer wrongdoing. While the federal arbitration statute itself doesn’t require confidentiality, most agreements to arbitrate do.

There is one exception. Consumers who feel they have been wronged in an arbitration can appeal to the court to vacate the decision of an arbitrator. When that happens, anything included in court documents become public record. But for the thousands who don’t appeal to the courts, the arbitration proceeding and outcome aren’t for public consumption.

It’s difficult to comprehend how any lawmaker or judge could believe it’s okay for the consumer to be denied access to critical information about a company’s performance. Consumers rely on reputation to make decisions as to where they take their business. When that information is shielded, it becomes “buyer beware.”

Corporate America, of course, can hang their hat on the knowledge that their dirty laundry won’t get aired for all to see. Is it any wonder so many companies add arbitration clauses to their contracts and terms of service? They have every reason to do so, and no reason not to. No matter what the outcome their secrets are safe.

Imagine if arbitration was open to the public, just like a court proceeding, and the public and press could be in attendance. Surely, the number of forced arbitration clauses in consumer contracts would decrease. Proponents of arbitration claim the elimination of such proceedings would clog the courts but if you pore through court documents you’ll find plenty of lawsuits against arbitration decisions, arbitrators, and all things arbitration.

Settling consumer disputes behind closed doors is wrong. No matter who wins there is no winner because the transparency is shielded behind the fine print. And that’s just plain wrong.