Our response to Professor Sovern’s article about arbitration opt-outs and so-called “dark patterns” prompted a reply in which he poses two “challenges”: (1) “prove that opt outs benefit consumers by telling us how many consumers opt out,” and (2) “get rid of the deadline [for opting out] and allow … consumers to opt out of arbitration when they know there’s a dispute.”
Regarding the first challenge, Professor Sovern claims that we “didn’t actually identify a single way in which arbitration opt out provisions benefit consumers,” other than to state that scores of courts have found arbitration opt outs to be “fair and enforceable” (a point he does not contest). But presenting consumers with a contract provision that is “fair” is a self-evident benefit and does not require further explanation. Indeed, how can Professor Sovern—who for years has opposed pre-dispute arbitration provisions in consumer contracts as “forced arbitration”—contend that providing consumers with an unconditional right to reject the arbitration provision does not benefit those consumers who prefer litigation to arbitration?
Ultimately, of course, all consumers benefit, since those who do not opt out are in a position to realize the many benefits that arbitration offers consumers. As the Supreme Court has recognized, Congress enacted the Federal Arbitration Act with “the needs of consumers … in mind” because “[t]he advantages of arbitration are many: it is usually cheaper and faster than litigation; it can have simpler procedural and evidentiary rules; it normally minimizes hostility and is less disruptive of ongoing and future business dealings among the parties; [and] it is often more flexible in regard to scheduling of times and places of hearings and discovery devices ….” As we have shown, statistics published by the CFPB itself after an exhaustive empirical study of consumer arbitration aptly illustrate this point: in arbitration, disputes are resolved in months, not years (at a fraction of the cost of litigation), and consumers in the cases studied by the CFPB obtained an average recovery of nearly $5,400 (166 times the average putative class member’s recovery of $32.35).
We typically do not know how many customers opt out of a client’s arbitration provision and would be precluded by the attorney-client privilege from disclosing that number in the few cases in which clients have told us the number. In any event, however, the “number” of consumers who opt out is not determinative, since not opting out does not mean (as Professor Sovern surmises) that the consumer did not read or understand the arbitration provision or the right to reject it. On the contrary, it could just as likely mean that the consumer concluded that arbitration is preferable to litigation and decided not to opt out. Most opt-out clauses give consumers 30, 45 or even 60 days to make that decision so they have time to consult with lawyers, family and/or friends.
Regarding the second challenge, Professor Sovern argues that companies should offer consumers the opportunity to arbitrate only after a dispute has arisen, not before. This is not the first time Professor Sovern has made that argument, and we previously refuted it at length. As we have explained, once a dispute has arisen, one side or the other (or both) will inevitably use the in terrorem threat of expensive and prolonged litigation as a negotiating tool—a tactic that is eliminated if the parties have agreed to arbitrate before the dispute has arisen. By contrast, pre-dispute arbitration agreements ensure that both parties are on the same page, regardless of the particulars of any dispute. That benefits consumers as much as it does companies, Professor Sovern.