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July 12, 2007

Public Citizen Urges Support for the Arbitration Fairness Act of 2007

Statement of Joan Claybrook, President, Public Citizen*

On behalf of Public Citizen, I am very pleased to support this groundbreaking bill, the Arbitration Fairness Act. I also want to thank Senator Russ Feingold and Representative Hank Johnson for all of their efforts. Public Citizen is committed to passing this much-needed legislation and proud to stand with these outstanding legislators.

With mandatory predispute arbitration privatizing our civil justice system – a system we fought a revolution for – fairness in the marketplace is undermined and consumers are denied any remedy for fraud and deception. The insertion by business entities of arbitration clauses in everyday contracts forces individuals to forgo their right to a court or jury if dangerous products, services or workplaces harm them.  

Let me be blunt. Privatizing justice benefits big corporate interests like national banks and insurance companies but does not help ordinary people. Corporations have figured out that simply by inserting an arbitration clause in contracts for everyday consumer goods and services or employment, they can usually evade accountability for any harm they cause or laws they break – laws meant to protect consumers and employees from the misuse and abuse of corporate power in the marketplace.

How? First, the contracts are take-it-or-leave-it, so individuals have no choice but to accept the arbitration clause if they want the product, service or job, even if they are required by law to buy the service, as is the case with auto insurance, or required by life’s uncertainties to purchase a much-needed service like health insurance.

Second, the lack of any meaningful independent review of arbitration decisions creates a climate ripe for abuse. The arbitration process is secretive and, of course, the courts have little involvement. Companies impose arbitration on consumers to keep their corporate misbehavior hidden from the piercing sunlight of our public civil justice court system. 

Third, arbitration companies are beholden to big corporate players for repeat business, which creates a bias. They do not bite the hand that feeds them. For example, public data show that in the portfolio of one California arbitrator who ruled in 532 cases, 526 were in favor of business – a mere 1.14 percent for the ordinary consumer. 

Fourth, arbitration is costly: The more you play, the more you pay, which denies justice to many who cannot afford to play on an already uneven field. 

The Arbitration Fairness Act of 2007 would change that terrible anti-consumer landscape. If we are to have any hope of restraining powerful corporate interests from abusing their overwhelming market power to the detriment of individuals, families, workers and whole communities, it must change. We cannot simply trust companies to do the right thing.

Let us not forget our history. It took more than a century for the United States to develop consumer protections and other laws that hold corporations accountable when they harm individuals or otherwise abuse their power in the marketplace. It’s time to stop the erosion of our hard-won protections and our civil justice system. 

It’s time to enact the Arbitration Fairness Act and roll back the damage being done to our rights and liberties for the sake of profit.

* Delivered at a press conference on July 12, 2007.

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