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"The Current State of Consumer Arbitration"



Ted Frank (with co-author Ohio State lawprof Sarah Rudolph Cole) has a new paper out at AEI on the hot subject, likely to be the target of a push by litigation advocates in Congress next year. Summary:

In 2007, the advocacy group Public Citizen issued a scathing report attacking the consumer arbitration process. This report, coinciding with more than a dozen pending antiarbitration bills in Congress, as well as lawsuits against National Arbitration Forum and credit card companies, provided support to many antiarbitration advocates' claims that consumer arbitration is bad for the "little guy," a conclusion repeated with little scrutiny by stories in Business Week and on Good Morning America. Academics and arbitral organizations responded quickly, providing arguments and statistics that suggest significant difficulties with Public Citizen's analysis of the available empirical evidence. Although problems with consumer arbitration exist, our review of the available empirical evidence suggests that claims by Public Citizen and others that consumer arbitration is inherently unfair to consumers are overstated.

In writing this article, we reviewed the available empirical evidence about consumer arbitration. We did not consider empirical findings related to employment arbitration because the two processes are different in many ways. More important, perhaps, analysis of employment arbitration data is probably no longer necessary to provide insight about consumer arbitration. California's requirement that various arbitral organizations collect data about their California consumer arbitration cases provides a rich resource from which to draw conclusions about the benefits and drawbacks of consumer arbitration. Public Citizen utilized this rich resource of consumer arbitration data in preparing its report on consumer arbitration. Public Citizen's analysis of the California data, which appeared to reveal many potential concerns about consumer arbitration, is, however, only one of a number of analyses of that data.

Our analysis of the Public Citizen report and evidence collected in California and elsewhere reveals different, and more positive, conclusions about the state of consumer arbitration.

See also Ted's post at Overlawyered.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.