This is key, I think. The argument that antireformers are reluctant to make, but that is the foundation of their points, is that consumers can’t be trusted to choose whether or not to accept binding arbitration clauses.

`(b) No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of–

`(1) an employment, consumer, or franchise dispute;

As one can see, this does exactly what Shelley says it doesn’t do, “prohibit[s] ALL consumers, even the fully informed ones, from choosing binding arbitration” in advance.

No, I am not wrong. Not unless you can specifically show me the text that states that the act eliminates binding arbitration. Joel did not mention anything about pre-dispute. I did not respond on anything about pre-dispute. You modified the context.

I will not address your other statement until you apologize for editing my comment, and remove the edits.

However, feel free to respond in comments in my space Ted, and ask your questions there. I won’t edit your comments.

Shelley still hasn’t addressed the arguments in favor of mandatory arbitration clauses or explained why the market can’t be trusted to resolve this issue without legislation to eliminate consumer choice.

That’s not what the Arbitration Fairness Act is doing, Joel. People can still choose to have their conflicts resolved via binding arbitration. The Act doesn’t impact on this.

Cindy, for the sake of argument, let’s just assume that most consumers are in the dark regarding the conseqences of signing contracts with binding arbitration. I’m not sure that this is true, but it’s surely possible.

Is passing a law prohibiting ALL consumers, even the fully informed ones, from choosing binding arbitration the proper remedy?

This is like using a buzz-saw to untie one’s shoes. Why unnecessarily limit the rights of fully informed consumers when more sensible legislation is available, such as disclosure laws, for example, or maybe attorney consultation requirements? I know here in Texas the consumer rights laws operate in a similar fashion, so such isn’t unheard of, and to the extent that a person “knows” he or she won’t want a trial he or she can gain the benefit of eliminating a vendor’s potential hazard.

“And, Do consumers ‘face a risk of being sued?’ Yes, they do.”

Cindy, I didn’t ask whether consumers faced a risk of “being sued.” I specifically asked whether consumers faced a risk tha a corporate-plaintiff would “use the legal system to extort millions.” See above. That’s the risk that is being hedged by arbitration clauses, and why companies, by and large, are the ones primarily using them.

It seems to me that there ought to be a business opportunity for large corporations with a large number of small customers: offer the same product with and without binding arbitration clauses in the contract, with a price premium for the latter. This would allow the company to buy an insurance policy (or otherwise hedge their risk with investments) against lawsuits with the rates being directly related to the number of consumers who pay for their right to sue. Why this doesn’t exist in the marketplace isn’t exactly clear (though I can think of some plausible reasons).

The fact that all the large corporate entities in a particular market tend to have these clauses in their consumer contracts (cell phones, credit cards, the list goes on…) really shouldn’t come as a surprise. The market forces them to do so–quite effectively! If a competitor lowers prices by introducing mandatory binding arbitration, then the others in the market must either find another way to lower prices or add the same sort of clauses to their contracts.

This is not a big enough issue for most consumers because we do not think about such things most of the time. We sign contracts without reading them, without the advice of counsel, and/or without the necessary legal knowledge to know what’s enforceable and what isn’t. Given that most people will never have the need or desire to sue anyone, it’s easy to see why we silently sign away our right to do so for cheaper products.

Saying that consumers “want” mandatory binding arbitration clauses probably isn’t disingenuous, but it is certainly more than a little glib. Consumers want lower prices, and creative contracting gives producers a way to come at them. That most consumers are probably better off with less lawsuits generally is a strong point in favor of these clauses, but that it does so at the expense of rights that are enshrined in our most holy of political documents must also be expected to rankle some folks. This is especially true considering the take-it-or-leave-it “choice” that consumers have.

I’m a free market sort of guy, so I’m not recommending government action against these clauses. But we shouldn’t be surprised that the folks that are opposed to them are pushing for regulation, it is, after all, the political arena where vocal minorities can effect the changes they cannot acquire in the marketplace (where larger or more vocal efforts are probably required). All that being said, I’m not convinced that some regulations protecting both sides in arbitrations aren’t necessary (conflicts of interest? appearances of (im)propriety? transparency? standards of evidence? etc.), though perhaps they already exist.