Mandatory arbitration clauses are mainstream and can be found buried in the fine print of virtually any consumer agreement. By virtue of buying a product or service, consumers are forced without warning to give up their right to go to court if they are harmed by the company providing the service or goods. For example, cell phone companies may obtain their customer's consent to arbitration through fine print clauses that assume consent when a cell phone is turned on and used by the consumer. Unfortunately, these tactics work in our current legal environment. No longer does a consumer even need to sign a contract to waive their constitutional right to go to court. Why is this important? In arbitration, there is no publicly accountable judge, jury, or right to an appeal. The arbitrators are not made to follow the facts or the law, and there is no public review of decisions to ensure the arbitrator got it right. Moreover, contracts typically name the arbitration firm that must be employed. That arbitration firm is typically one preferred by, if not beholden to, the company. In fact, these arbitrators have an incentive to favor the company, as they want to continue to be given repeat business by them.
Most importantly for corporate America, arbitration is now being used to legitimize broad class action arbitration waivers in all types of consumer agreements. The practical effect is that companies now use forced arbitration clauses to eliminate the ability of consumers to band together, which is often the only means for consumers to vindicate their rights. Arbitration is quite simply a "get-out-of-jail-free card" for corporate America.
General Mills, the maker of iconic food brands such as Cheerios and Betty Crocker, recently sought to cash in on the windfall that is arbitration. It quietly added new terms to its website that required consumers downloading coupons, "joining its online communities" (i.e. liking it on Facebook), participating in sweepstakes and other promotions, and interacting with General Mills in a variety of other ways to agree to arbitration in lieu of suing the company in the event of a dispute. Those terms, which were quickly exposed by The New York Times, were widely debated and berated by consumers on social media last week. Consumer advocates from across the country joined in by organizing a letter writing campaign to Congress. And, in a stunning about-face that took place over only a few days, the industry giant announced the withdraw of its controversial plan to make consumers give up their right to sue it. Public sentiment was so strong that General Mills had no choice other than to beat a hasty retreat and let consumers know that their voice was heard and their rights would not be eliminated.
American consumers should be proud. No legal argument against arbitration has ever been this effective. The U.S. Supreme Court on the other hand should take note of what it has created. Unfortunately, its cases over the past decade have emboldened corporate America to pull these types of "fast-ones" on the public at large. Leaving, poor publicity as one of the few and, perhaps, the best weapon against forced arbitration.
Unfortunately, General Mills still does not get it, claiming on its website "arbitration clauses don't cause anyone to waive a valid legal claim. They only specify a cost-effective means of resolving such matters. At no time was anyone ever precluded from suing us by purchasing one of our products at a store or liking one of our Facebook pages. That was either a mischaracterization - or just very misunderstood." To the contrary, General Mills -- your tactics were very much "understood" by your consumers.
Our thanks to the New York Times for breaking the story and the thousands of advocates that so enthusiastically banded together to act swiftly and protect the rights of millions of consumers to obtain a jury trial, when necessary. --- Now, Congress it's your turn.