How Dispute Resolution System Design Matters: An Organizational Analysis of Dispute Resolution Structures and Consumer Lemon Laws

Abstract

This study demonstrates how the structure of dispute resolution shapes the extent to which managerial and business values influence the meaning and implementation of consumer protection law, and consequently, the extent to which repeat players are advantaged. My analysis draws from, links, and contributes to two literatures that examine the relationship between organizational governance structures and law: neo-institutional studies of law and organizations and socio-legal studies of repeat players’ advantages in disputing. Specifically, I compare an instance where powerful state consumer protection laws are resolved in private dispute resolution forums funded by automobile manufacturers but operated by independent third-party organizations (California) with one where consumer disputes are resolved in public alternative dispute resolution processes run and administered by the state (Vermont). Through in-depth interviews and participant observation in the training programs that dispute resolution arbitrators undergo in each state, I show how different dispute resolution structures operating in California and Vermont give different meanings to substantially similar lemon laws. Although my data do not allow me to establish a causal relationship, they strongly suggest that the form of the dispute resolution structure, and how business and state actors construct the meaning of lemon laws through these structures, have critical implications for the effectiveness of consumer protection laws for consumers.