With all big companies seemingly colluding to update their terms of service at the same time recently to include something about “ARBITRATION” – can someone please explain what this Arbitration agreement is?
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It is primarily a way for companies to avoid a huge class action lawsuit (a lawsuit that goes beyond just one person suing a company to include every consumer in the same position suing the company). An arbitration clause means if you opt to use the company’s product and agree to their terms of service, you give up certain rights to file a lawsuit. Instead, your complaint goes through a special person called an arbitrator, who is supposed to listen to both sides of the story and make a binding decision on if any compensation/penalty is due.
In practice, arbitration clauses render class action lawsuits nearly impossible, which tilts the calculus for behaving badly strongly in favor of the company. Few people will pursue legal action against a company, and even if a handful do, it’ll be a lot cheaper to continue behaving badly and pay these few off than it would to lose a big class action lawsuit.
It’s actually even worse than it sounds. I have gone through arbitration. There are fees you have to pay to even submit your claim. The arbitrator is actually employed by an agency (there are a few), and the agency is selected *by the company you are filing against*, which obviously creates some clear conflicts of interest. If the arbitrator decides against you, you are then left with zero avenues for appeal through the regular justice system. It is a multilayered, anticonsumer scam.
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