“Exceeds objective standards of fairness”

Well, that’s one way to describe an arbitration process that rules against the consumer 99.8% of the time. Not necessarily the most accurate way, though.

Of course, it’s perfectly fair for an arbitration company chosen by credit card companies to resolve disputes with cardholders to rule for the companies 99.8% of the time. The two-tenths of one percent win rate for consumers should be enough to convince any fair-minded person that the National Arbitration Forum is leaning over backwards to do the right thing.

The demand that consumers and workers waive their statutory rights and submit to the arbitration racket, and the courts’ decisions to enforce those agreements, are among the sleaziest victories of the “tort reform” movement.

There’s no mystery about how the racket works: since each victim is only in arbitration once, and the company is in arbitration constantly, and since either side can reject any given arbitrator, all the company has to do is maintain a blacklist of arbitrators who make unfavorable rulings and systematically exclude them. That eliminates the stubbornly honest ones and puts intolerable economic pressure on the rest. The National Arbitration Forum seems to have gone unusually far, for example by making awards without even allowing the victims to appear, and that could turn out to have been a mistake. But a company doesn’t need anything nearly so gross to make the system work in its favor.

This is the sort of “little guy screwed over by the big guys” story that voters will respond to. And it wouldn’t be hard to craft reform legislation: forbidding mandatory arbitration of civil rights claims, for example, and requiring that each arbitrator’s record of rulings (percentage for the customer or the employee) be made available to both sides.

Obama speechwriters, please copy.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com