> Despite the ubiquity of arbitration, consumers rarely use it. Wells
Fargo’s near 3.5 million fraudulent accounts is an illuminating
example. Using mandatory arbitration in its adhesion contracts, Wells
Fargo managed to keep arbitration claims low despite the wide-spread
fraudulent scheme. In reality, Wells Fargo only faced 250 consumer
arbitration claims between 2009 and the first half of 2017 (Economic
Policy Institute, 2017). A similar story exists for AT&T that has the
largest consumer base in its sector with more than 150 million
wireless subscribers, most, if not all, of whom are subject to
arbitration. In the first three months of 2019, only 111 AT&T
customers resolved their disputes with the company in arbitration (AAA
Consumer Report Q1, American Arbitration Association, 2019).
As to the "airing embarrassing stuff in public filings", we also know companies protect their public image. The customer (or their lawyer) may use the threat of a lawsuit, which will make the issue public, as leverage to get the company to resolve the issue.
A confidential arbitration clause removes this form of leverage.
> forcing millions of dollars of legal preparation
Venmo's terms allow taking an issue to small claims. It's only for larger issues - and class action issues - where binding arbitration is required. So of course these are the ones that are more likely to require "millions of dollars of legal preparation."
Just like how Wells Fargo could engage in widespread fraud without worrying about the millions of dollars it would have cost to lose a class action suit.
> the extra eyes don’t hurt
There are fewer eyes in the mandatory arbitration process than in the public court system. The latter is public (more eyes) and has a more extensive appeals system (more eyes).
Given how companies really want their customers and employees to switch to binding arbitration, I don't trust binding arbitration as being fair.
Consider the following, from https://www.emerald.com/insight/content/doi/10.1108/IJCMA-10... :
> Despite the ubiquity of arbitration, consumers rarely use it. Wells Fargo’s near 3.5 million fraudulent accounts is an illuminating example. Using mandatory arbitration in its adhesion contracts, Wells Fargo managed to keep arbitration claims low despite the wide-spread fraudulent scheme. In reality, Wells Fargo only faced 250 consumer arbitration claims between 2009 and the first half of 2017 (Economic Policy Institute, 2017). A similar story exists for AT&T that has the largest consumer base in its sector with more than 150 million wireless subscribers, most, if not all, of whom are subject to arbitration. In the first three months of 2019, only 111 AT&T customers resolved their disputes with the company in arbitration (AAA Consumer Report Q1, American Arbitration Association, 2019).
As to the "airing embarrassing stuff in public filings", we also know companies protect their public image. The customer (or their lawyer) may use the threat of a lawsuit, which will make the issue public, as leverage to get the company to resolve the issue.
A confidential arbitration clause removes this form of leverage.
> forcing millions of dollars of legal preparation
Venmo's terms allow taking an issue to small claims. It's only for larger issues - and class action issues - where binding arbitration is required. So of course these are the ones that are more likely to require "millions of dollars of legal preparation."
Just like how Wells Fargo could engage in widespread fraud without worrying about the millions of dollars it would have cost to lose a class action suit.
> the extra eyes don’t hurt
There are fewer eyes in the mandatory arbitration process than in the public court system. The latter is public (more eyes) and has a more extensive appeals system (more eyes).