Arbitrations Protect Big Business from Class Actions, Not Each Other
An interesting article in the New York Times today posits that the real purpose of arbitration clauses is to protect businesses from the horrors of class action litigation. The study, authored by two Cornell and one New York University law professors, found that companies are more likely to exercise arbitration clauses against consumers, but not each other.
"If its a big, important contract, then you don't put in an arbitration clause," said Stephen H. Ware, a law professor at the University of Kansas. A dispute over a significant contract may call for the costlier but more thorough litigation process, he said, while smaller contracts with consumers do not.
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The research does not address the question of whether arbitration more often leads to results favoring consumers or whether the process benefits corporations. That is another hotly debated issue.
You can read the full article here.