The Corporate Scam of Forced Arbitration
Companies have weaponized forced arbitration to escape accountability and screw over consumers.
By Georgia Parke and Alec Opperman, More Perfect Union
When John and Georgia McGinty suffered a car crash in an Uber whose driver ran a red light, they sued the company for the financial, physical, and emotional toll the accident had on them, including life-threatening injuries.
Uber cooperated with the Pennsylvania couple’s lawyers for nearly a year. Then it abruptly decided to force the case to arbitration — because the McGintys had previously accepted the company’s terms of service for their UberEats account.
Hidden in the fine print of subscriptions for everything from streaming services to food delivery apps are “arbitration clauses” that waive users’ right to sue in court. Any disputes or legal actions against the company are to be pursued through a third-party arbitrator, usually appointed by the company itself. No jury or judge is involved.
“If you were to read about arbitration in a textbook, you might think this is great for consumers, it's faster, it's cheaper, and they'll be able to get a fair adjudication to the results by a professional in the field,” Michael Shapiro, the McGintys’ lawyer, told More Perfect Union. “But that just is not how it plays out in reality for several reasons.”
By having people sign their rights away up front, corporations can escape lengthy and expensive legal processes in favor of a confidential arbitration by their chosen referee. What’s more, arbitration clauses can be buried not just in “terms and conditions” but in warranties, privacy policies, and user manuals — and like the McGintys, most people would likely have no idea they’ve ever agreed to one.
The McGintys’ case is just one example of multi-billion dollar corporations utilizing arbitration to evade liability and reputational damage. In another instance, Disney tried to force arbitration when a man sued over his wife’s death due to an allergic reaction at DisneyWorld — because he had previously created a Disney+ account. Airbnb tried it when someone was murdered at one of their properties and Wayfair after the company shipped customers furniture infested with bed bugs.
In other words, companies have found a legal way to get around consumers’ pesky constitutional rights and shield themselves from accountability — monetary or otherwise — in the case of their negligence. Arbitration also allows corporations to avoid making public the results of discovery and avoid the backlash that would come with it.
“If it's secret, you don't get any bad publicity, the public is not going to punish you,” Jeff Sovern, a University of Maryland professor of consumer protection law, told More Perfect Union. “It's not going to boycott your product if you just keep doing it because the public may never know about it.”
To find out what companies are sneaking into their terms and conditions — and what the rest of us stand to lose if they continue to get away with it — watch our full video here.