Advocacy: Justice Restored-Ending Forced Arbitration Congressional Hearing
On February 11, 2021 the Antitrust, Commercial and Administrative Law Subcommittee of the Judiciary Committee in the House of Representatives held a hearing entitled, “Justice Restored: Ending Forced Arbitration.” Subcommittee Chairman David Cicilline (D-RI) called the hearing to provide support for the enactment of the Forced Arbitration Injustice Repeal Act (FAIR Act), which would prohibit the enforcement of forced arbitration clauses and class action waivers in consumer, employment and civil rights disputes and antitrust class actions. The hearing presented a compelling case for ensuring justice and accountability in the U.S. by eliminating the ability of wrongdoers to set up their own private, secret system of justice that favors corporate defendants.
The following witnesses testified:
Prof. Myriam Gilles of the Cardozo School of Law;
Gretchen Carlson, former host on Fox News, author and journalist;
Jacob Weiss, Founder and President of OJ Commerce;
G. Roger King, Senior Labor and Employment Counsel at the HR Policy Association
Prof. Gilles presented an overview of the unfairness and ineffectiveness of forced arbitration as an avenue for redress for consumers, workers, patients, minorities and underrepresented communities and small businesses. She cited studies showing the prevalence of forced arbitration clauses (e.g., 80% of workers in the U.S. will be affected by 2024) and the way they work to suppress claims by parties with less power and fewer resources. She explained that forced arbitration clauses are “buried in the fine print of take it or leave it contracts that require all disputes to be resolved in private one-on-one arbitrations.” What that means, she said, “is that if a company rips off its customers or employees, those customers or employees are essentially powerless to do anything about it. They can’t go to court. They can’t band together to bring a class action. They can’t even proceed as a group in arbitration.” Her conclusion: Forced arbitration is not an alternative dispute resolution mechanism; rather, it is a claim suppression device.
Gretchen Carlson focused her testimony on her personal story. In 2016, Ms. Carlson tried to sue her employer, Fox News, over Roger Ailes’ alleged sexually abusive behavior in the workplace. Ms. Carlson learned at the time that, because she had signed a contract with a forced arbitration clause buried in it, she could only proceed in a secret arbitration proceeding against the company where nobody would ever find out about what happened. She realized that forced arbitration was the way so many employers would hide workplace harassment and enable the misconduct to continue for years, sometimes decades. Ms. Carlson was eventually able to make her case public, and it was one of the catalysts for the “Me Too” movement that has allowed so many women to speak out about abuse.
Jacob Weiss’ company OJ Commerce is a mid-sized third-party seller on the Amazon.com marketplace. Jacob believes he is the victim of anti-competitive behavior by the mammoth corporation. But Mr. Weiss had to sign a contract with a forced arbitration clause and a class action waiver before he could sell on Amazon. That clause prevents him from joining together with other Amazon sellers in a class action lawsuit alleging violations of the antitrust laws. In other words, forced arbitration allows companies that abuse their market power to use that very power to insulate themselves from ever being called to account for their misconduct. COSAL sponsored Mr. Weiss’ testimony to highlight how antitrust violators take advantage of forced arbitration to get away with their crimes.
Because Mr. Weiss cannot bring Amazon to court, he has been involved in two arbitrations against the company over contract breaches that cost OJ Commerce substantial amounts of money. He explained that being forced into individual, secret arbitration against a company like Amazon puts small and mid-sized businesses at a severe disadvantage because the system is extremely expensive and Amazon purposely adds to the expense by adding delay during every step of the process, there is very little opportunity for discovery, you can’t find out what happened in similar cases involving other businesses but Amazon knows, and the arbitrators have large financial incentives to favor Amazon so they can get repeat business. According to Mr. Weiss, “For Amazon, this creates the perfect storm. Companies give up before they even start because they don’t have the budget for this expensive process.” He cited findings from the report on digital markets issued by the subcommittee: “Despite millions of businesses on Amazon’s website, despite Internet message boards teeming with thousands of complaints against Amazon, over a five-year period, there have been only 163 arbitrations against Amazon.” Mr. Weiss said the figure is “mind-blowing.”
Mr. Weiss concluded by saying,
“Small businesses are the lifeblood of the American economy. Historically, companies like OJ Commerce used the antitrust laws and court system to stop marketplace bullies like Amazon. Forced arbitration and class action waivers have replaced that with a system that allows Amazon to avoid facing justice.”
G. Roger King is a management side employment lawyer and, not surprisingly, was the sole witness in favor of forced arbitration clauses. His main points have been refuted by every independent study of forced arbitration and by court cases. His view: Arbitration is quicker, cheaper and easier than court. Workers and consumers do better in arbitration than in court. If we don’t have forced arbitration, the courts would be overloaded with cases. He even refuted Ms. Carlson’s testimony that what happens in arbitration cannot be disclosed.
Fortunately, each of the other witnesses were able to refute Mr. King’s testimony with facts and statistics. He had no response for Mr. Weiss, who testified that arbitration is more expensive than going to court because you have to pay for the arbitrator’s time and you have to pay very high arbitration fees. And Prof. Gilles called him out for using studies conducted by the biased Chamber of Commerce instead of studies by expert academics and independent think tanks.
The FAIR Act was introduced by Rep. Hank Johnson (D-GA) the same day as the hearing. It currently has over 165 cosponsors, and that number continues to grow. Support for the bill is limited to Democrats, mostly because of the stranglehold that the Chamber of Commerce continues to have over the Republican party. In truth, the right to a civil jury trial guaranteed under the 7th Amendment to the Constitution should be a bipartisan issue, but that’s not how it is.
We anticipate that the FAIR Act will pass the House of Representatives this year. A companion bill is expected to be introduced shortly in the Senate by Sen. Richard Blumenthal (D-CT). With the current requirement of 60 votes to pass most legislation in the Senate, it will be more difficult to pass the bill there. But COSAL and the FAIR Act coalition will continue to educate the public and policymakers until one day everyone will understand that forced arbitration benefits corporate wrongdoers at the expense of the rest of us.
