Mark Lennihan AP
Amazon was involved in 163 arbitration agreements with its third-party sellers from 2014 to 2019—less than 30 cases per year for 2.5 million sellers.
Some new statistics from the nation’s leading tech firms on arbitration serve as evidence for an argument that critics of the practice have long contended: that forced arbitration clauses in consumer and employment contracts build barriers to disputing the conduct of large companies.
The data, submitted by the tech firms themselves in response to questions from the House Antitrust Subcommittee, are believed to be the first time such arbitration statistics have been provided publicly. They show that a trivial number of employees, customers, and contractors bother to pursue arbitration against the likes of Facebook, Google, Amazon, and Apple. Google contractors, for example, initiated a grand total of three arbitration claims between January 1, 2014 and September 1, 2019, less than one per year. Google employees submitted only 11 arbitration claims during that time period.
Since the Supreme Court blessed the expansion of forced arbitration clauses and restricted the ability of employees or consumers to band together in class-action lawsuits, opponents have insisted that this would immunize businesses from having to grant restitution over grievances. Aside from the arbitration process being seen as corporate-friendly, claimants with small-dollar disputes would be highly unlikely to slog through a protracted arbitration process over a relatively low amount of money.
Deepak Gupta and Lina Khan described arbitration in 2017 as a wealth transfer, a legal means for businesses to sidestep the law and the payouts it might otherwise be forced to distribute. “By both suppressing claims and yielding outcomes less favorable to workers and consumers, arbitration most likely transfers wealth upwards,” Gupta and Khan wrote.
The tech giants’ statistical disclosures seem to bear this out.
Apple, rare among large companies, does not include an arbitration clause in its consumer terms of service, or in contracts with app developers. However, it does have an employee arbitration clause, though it includes an opt-out opportunity. Since June 2016, when the clause was first implemented, only two Apple employees have pursued arbitration, according to the company’s responses to the committee. Both of those cases involved wrongful termination. Apple did not provide information about arbitration claims for its contractors.
Google did not explain the nature of the 14 arbitration cases involving employees and contractors between 2014 and 2019, nor did it provide any information at all on the claims, if any, lodged by its commercial partners.
Facebook includes arbitration clauses in its commercial terms of service and in contracts with its employees. For employees, only 5 arbitration proceedings have been initiated since 2014; for commercial partners, there have been none. The employee cases involved false representation, discrimination, retaliation, harassment, state wage law violations, failure to provide reasonable accommodations, and a failure to engage in interactive processes.
Employees at Google and Facebook may now get some relief from this system, as both companies have bowed to employee pressure and dropped their arbitration clauses, at least in the case of sexual harassment claims. Revealingly, they did not do the same for commercial contracts with partner firms.
Amazon disclosed a larger number of arbitration cases involving customers, contractors, vendors, and third-party sellers in the Amazon Marketplace. The last group, consisting of the 2.5 million sellers on Amazon, comprises the largest employment-related class barred (by the courts) from using the courts for complaints. The ban reinforces the company’s private legal system, a maze of rules and regulations placed on third-party sellers that can lead to debilitating suspensions and real hardships.
According to the response to the questions for the record, Amazon was involved in 163 arbitration agreements with its third-party sellers from 2014 to 2019. This is still less than 30 cases per year for 2.5 million sellers. The majority of these cases, 100 of them to be precise, involved Amazon allegedly withholding seller funds or inventory. Account closure or suspension accounted for 22 cases, and reimbursement for lost or damaged inventory another 16. The rest of the cases involved unauthorized fund transfers, patent infringement or counterfeit sales by other sellers, challenges to customer refunds, restrictions on product listings, shipping charge disputes, and challenges to patent infringement complaints.
Amazon also disclosed 24 arbitration cases with customers since 2014, 33 cases with contractors (mostly over wage and hour or unfair competition laws), and 16 vendor cases.
“Amazon’s recent response to Congress clearly demonstrates that its mandatory arbitration clause is extremely effective in quashing potential meritorious claims that might be brought against the company,” says Shaoul Sussman, a legal fellow with the Institute for Local Self-Reliance. “The effectiveness of the clause is confirmed by the staggeringly low number of arbitration proceedings to which Amazon was a party in the last five years.”
Analysis from consumer rights group Radvocate released earlier this month indicates that consumer arbitration claims take on average nine months to resolve, and that most cases get settled privately and in secret. The total number of consumer claims resolved through arbitration across the entire economy in the third quarter of 2019 was 1,483—a new high but also a relatively small amount in a nation of over 330 million.
The lengthy timeframe for disputes adds to the barriers arbitration places on consumers and employees. As Judith Resnik has written, “Although hundreds of millions of consumers and employees are obliged to use arbitration as their remedy, almost none do so—rendering arbitration not a vindication but an unconstitutional evisceration of statutory and common law rights.”
This is especially true among the tech giants, where arbitration frameworks are leveraged to reinforce market power. When Amazon third-party sellers or vendors have no outlet for disputes, they must abide by Amazon’s mercurial governing systems. The same goes for Google’s and Facebook’s employees, contractors, and commercial partners. A system with a mostly unattainable “alternative” dispute mechanism doesn’t afford much opportunity for any individuals in contact with the tech giants to assert their rights.
The number of arbitration agreements has only grown in the past several years; Amtrak riders now have them stamped on their tickets. By disclosing how few Americans avail themselves of these options, the tech giants have offered powerful testimony as to why the system just doesn’t work.
