Arbitration has been used in the US for more than a century as a mechanism for quick and effective dispute resolution. The introduction of arbitration clauses into consumer contracts has been especially prevalent with the emergence of online services. The aim of this paper is to discuss advantages and disadvantages of binding arbitration from the point of view of consumers and businesses. The paper will also review Amazon’s conditions of use and outline limitations that consumers will encounter during arbitration proceedings.
Analysis
Amazon is global e-commerce giant headquartered in Seattle (Schneider, 2017). The company’s conditions of use detail rules that have to be followed by its customers who want to use e-commerce services. The conditions of use contain a section on dispute resolution and state that any claim related to the use of the company’s services has to be resolved “by binding arbitration, rather than in court” (Amazon, 2017, para. 11). The section is written in bold type, which makes it easier for the users of the company’s services to notice the arbitration agreement. It also informs the customers of their right to seek relief. Moreover, the section describes the process of starting an arbitration proceeding.
I have an Amazon seller account; therefore, I might encounter a situation in which it is suspended. If at the time of the suspension the account contains funds, I will have to inquire about a refund. However, if the e-retailer does not resolve the issue fairly, a need for arbitration will arise. Unfortunately, when opening the seller account three years ago, I agreed to the conditions of use, which specify that both parties “waive any right to a jury trial” (Amazon, 2017, para. 14). Another limitation specifies that Amazon will reimburse arbitration fees for claims that do not exceed $10, 000 (Amazon, 2017). The clause also prevents the company’s customers from pursuing a class-action lawsuit.
Binding arbitration clauses are faster than litigation, which benefits consumers. According to an article issued by the American Arbitration Association (AAA), the US court cases are, on average, by 12 months longer than cases resolved by arbitration (AAA, 2017). Moreover, resolving an issue by arbitration is usually cheaper than a court proceeding. In the period from 2011 to 2015, losses associated with a delay in resolution exceeded $13 billion, which amounts to $180 million per month (AAA, 2017). However, the amount of money that a customer can seek in arbitration is limited. Also, no appeals are allowed in arbitration, which makes a decision of an arbitrator final (Cortes, 2016). Another drawback of binding arbitration is a lack of transparency during arbitration hearings. There are also concerns over questionable objectivity of some arbitrators (Repa, n.d.). The most significant disadvantage of binding arbitration is that a customer loses their right to sue a business.
Businesses prefer binding arbitration because it helps them to avoid hostility, which is often present during litigations. Faster resolution of disputes prevents companies from losing direct economic opportunity costs. Moreover, businesses are allowed to choose an arbitrator with an experience in their industry (Terms Feed, n.d.). It can be argued that since not all consumers read terms of service, they are virtually forced into resolving their disputes with companies by arbitration. It is not an ethical practice; therefore, Congress has to enact relevant legislation prohibiting companies from driving their customers to waive the right to pursue a court action.
Conclusion
The paper has outlined benefits and drawbacks of binding arbitration for businesses and their customers. It has been argued that it is not fair to prevent people from pursuing litigation in court.
References
AAA. (2017). Measuring the costs of delays in dispute resolution.
Amazon. (2017). Conditions of use.Web.
Cortes, P. (2016). The new regulatory framework for consumer dispute resolution. New York, NY: Oxford University Press.
Repa, B. (n.d.). Arbitration pros and cons.
Schneider, L. (2017). Overview of Amazon.com’s history and workplace culture. Web.
Terms Feed. (n.d.). Arbitration clause in terms and conditions.