Beware the Fine Print: Consumer Arbitration as Legal and Regulatory Retrenchment

• In Event: Financial Systems and Social Citizenship in American Political Economy

Abstract

Consumers in the U.S. sign millions of arbitration clauses every year, in which they sign away their right to sue corporations in a court of law and submit to a private system of arbitration instead. While the proliferation of mandatory arbitration provisions as part of the “terms of service” for a wide array of consumer products has increasingly come to light in recent years, much less visible is the extent to which this shift to private arbitration has for decades been forwarded by businesses and their allies in government seeking a way to avoid both costly litigation and regulation. Yet despite that conservatives have clearly recognized consumer arbitration’s potential as a tool for anti-litigation reform since the 1970s, scholars interested tort reform, consumer protection, the regulatory state, and the resurgent power of the private corporate and business sector barely mention it.

This paper examines the political and legal origins of the expansive use of consumer arbitration in the U.S. I argue that while arbitration is often overlooked as part of the conservative anti-litigation, deregulatory agenda, arbitration as practiced today profoundly constricts access to courts and dilutes the regulatory state. Beginning in the 1970s, arbitration enjoyed support from a coalition of conservatives and liberals inspired by the relatively nonpartisan goal of unburdening an increasingly overworked judiciary by utilizing a more efficient, less costly, and less adversarial mechanism of dispute resolution. But as its value as a litigation suppression device became clear, conservatives—in Congress, on the Supreme Court, and in the private sector—capitalized on consumer arbitration as central to the 1990s tort reform agenda. And where efforts at legislative tort reform have struggled, diverting consumer disputes to arbitration has more than picked up the slack. By examining the development and conservative institutional conversion of arbitration over the past 50 years, I argue that consumer arbitration has become a shield for corporate liability, a mechanism of deregulation, and a waiver of substantive rights for consumers. In short, consumer arbitration—as part of a broader sphere of mandatory arbitration that has come to dominate everything from the workplace to the securities industry—is a signature piece of political and legal retrenchment, and an overlooked way in which democracy’s reach through its regulatory state has been narrowed and fundamentally usurped by private power.

Author

• Sarah Staszak, Princeton University