Arbitration clauses that force consumers into one-on-one negotiations with large companies are all the rage with corporations—and apparently the Supreme Court.  Recently, a lower court rejected these clauses, deciding that they make it effectively impossible for small businesses to pursue antitrust claims against larger corporations. Now, in a move that suggests even more bad news for consumers, the Supreme Court has decided to review that ruling.  

In Italian Colors Restaurant v. American Express Travel Related Servs. Co., the Second Circuit stressed that enforcing antitrust laws through private lawsuits was strongly in the best interest of the public. What’s more, it asserted that this public interest should not and cannot be thwarted by the private agreements that arbitration represents, as such a move would grant corporations partial immunity from liability for antitrust violations. The ruling also threw cold water on the idea that arbitration is somehow more cost-effective—in this case, it would have cost nearly $1,000,000 to arbitrate an antitrust claim worth only $5,000!  With that in mind, the lower court held that the forced arbitration clause violated antitrust law for the simple reason that a small business owner would find it economically unfeasible to pursue a claim one-on-one. The Second Circuit wisely saw the error and danger in this approach—unless smaller companies can effectively lodge complaints against larger corporations we would once again be on the road to an economy dominated by monopolies.

However, the Surpreme Court may be on its way to undermining the Second Circuit’s ruling and the antitrust practices that protect consumers against everything from price-fixing to unfair employment rules.  Since the Supreme Court’s shameful 2011 decision in AT&T v. Concepcion, the lower courts have broadly construed the case in ways harmful to the everyday consumer.  According to the lower courts, it is entirely immaterial whether the costs of an individual arbitration claim dwarf the costs of taking it to the courts.  The extension of Concepcion has become so absurd that at least one circuit court concluded that, “even if [the consumer] cannot effectively prosecute his claim in an individual arbitration that procedure is his only remedy, illusory or not.”   In other words, under the Supreme Court’s current thinking, the private process of arbitration does not even have to be fair as long as both parties—in this case a small business and a multinational corporation—agree to that completely illusory and cost prohibitive process ahead of time. 

With the Supreme Court’s slavish deference to corporate arbitration clauses in recent years, the decision to hear the American Express case may portend another opportunity to erode consumer rights and enshrine a one-on-one, private system of “justice,” regardless of how that system might dismantle other key consumer protections that are vital in keeping our economy fair and free.