Abstract

http://ssrn.com/abstract=1904545
 


 



Private Regulation of Consumer Arbitration


Christopher R. Drahozal


University of Kansas School of Law

Samantha Zyontz


Massachusetts Institute of Technology (MIT) - Sloan School of Management

August 3, 2011


Abstract:     
Arbitration providers, such as the American Arbitration Association (“AAA”) and JAMS, have promulgated due process protocols to regulate the fairness of consumer and employment arbitration agreements. A common criticism of these due process protocols, however, has been that they lack an enforcement mechanism. While arbitration providers state that they enforce the protocols by refusing to administer cases in which the arbitration agreement materially fails to comply with the relevant protocol, the private nature of arbitral dispute resolution makes it difficult to verify whether providers in fact refuse to administer such cases.

This article reports the results of the first empirical study of the AAA’s enforcement of its Consumer Due Process Protocol. We find that the AAA’s review of arbitration clauses for protocol compliance appears to be effective at identifying and responding to those clauses with protocol violations. During the time period studied, the AAA refused to administer a substantial number of cases (almost 10% of its total consumer caseload) that involved a protocol violation. Moreover, in response to AAA protocol compliance review, over 150 businesses have either waived problematic provisions or revised arbitration clauses to remove provisions that violated the Consumer Due Process Protocol.

Our findings support the proposition that private regulation by the AAA complements existing public regulation of the fairness of consumer arbitration clauses. Any consideration of the need for future legislative action should take into account the effectiveness of this private regulation. That said, we do not assert that private regulation alone - with no public regulatory backstop, such as through court oversight - suffices to ensure the fairness of consumer arbitration proceedings. Rather, we suggest ways that courts and policy makers could reinforce the AAA’s enforcement of the Consumer Due Process Protocol as well as ways the AAA could improve its own review process.

Number of Pages in PDF File: 54

Keywords: Arbitration, Dispute Resolution, Contracts, Private Regulation

JEL Classification: K12, K41

working papers series





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Date posted: August 4, 2011  

Suggested Citation

Drahozal, Christopher R. and Zyontz, Samantha, Private Regulation of Consumer Arbitration (August 3, 2011). Available at SSRN: http://ssrn.com/abstract=1904545 or http://dx.doi.org/10.2139/ssrn.1904545

Contact Information

Christopher R. Drahozal (Contact Author)
University of Kansas School of Law ( email )
Green Hall
1535 W. 15th Street
Lawrence, KS 66045-7577
United States
785-864-9239 (Phone)
785-864-5054 (Fax)
Samantha Zyontz
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States
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