As Congress once again attempts to pass legislation that would potentially nullify hundreds of millions of arbitration agreements in consumer contracts, they should carefully review the mounting evidence that verifies the benefits of arbitration.   

This week, the Searle Civil Justice Institute, a unit of the Northwestern University School of Law, released an independent study confirming that the 84-year old arbitration system remains a fair, inexpensive and unbiased option for millions of American consumers.

Undertaking one of the most comprehensive empirical research projects to date on the use of consumer arbitration, Searle analyzed hundreds of cases brought before the American Arbitration Association (AAA), a leading provider of arbitration services.  Unlike previous studies, which only looked at credit card arbitration cases, this study reviewed cases involving a wide array of goods and services across the economy.

Refuting the myth about arbitration’s price tag, the data reveals that consumers paid an average of only $96 in cases with claims of less than $10,000 and $219 for claims up to $75,000.

Not only is arbitration relatively inexpensive, the Searle study shows that it provides consumers a level playing field in dealing with businesses—even those businesses that regularly use arbitration to settle their consumer disputes.  Consumer claimants seem to fare just as well when dealing with businesses that had never previously been before an AAA arbitrator as those who were repeat customers.      

Most importantly, the Searle analysis demonstrates that arbitration provides consumers true access to justice.  In the cases it tracked, consumers won relief in more than 53 percent of the cases they filed, recovering an average of more than $19,250.  Additionally, AAA actively promotes consumer fairness by strictly enforcing their due process rules and refusing to administer arbitration in cases where businesses were repeat violators of the AAA’s protocol.  

Now that Searle has analyzed the cost and fairness of the arbitration system, it has announced that its next step is to examine how consumer cases are resolved in the courts.  That comparison data could add to the growing body of evidence showing that, for most consumers, arbitration is a better way to resolve disputes than being forced into court. 

The Searle analysis comes at a key time in the arbitration-versus-lawsuit debate.  

Over the past few sessions of Congress, those that favor more lawsuits, with the help of the American Association for Justice (formerly known as the Association of Trial Lawyers of America) have pushed bills that would effectively wipe out arbitration.

This includes the ironically named Arbitration Fairness Act, sponsored by Senator Russ Feingold (D-Wis.) and Congressman Hank Johnson (D-Ga.).  This bill would bring “fairness” to the arbitration system by invalidating all arbitration agreements in current consumer contracts and prohibiting future consumers from agreeing to arbitration up front.

The national trial lawyer lobby has said that eliminating arbitration is one of most important steps Congress can take.  But important for whom?  Consumers or the trial lawyers themselves? Continued...