October 29, 2002
Assistant General Counsel
National Arbitration Forum
P.O. Box 50919
Minneapolis, MN 55405-0191
Dear Mr. Maurer:
Consumers Union’s (CU), publisher of Consumer Reports, is in possession of an August 5, 2002 letter from the National Arbitration Forum (NAF) under your signature, sent to the U.S. Public Interest Research Group. We are disturbed at what appears in your letter to be a distortion of Consumers Union’s position on mandatory, binding arbitration. We are sending this letter to make crystal clear CU’s position on mandatory, binding arbitration and want this to serve as the official declaration of our current organizational position on arbitration.
We note that your letter never attempts to distinguish between voluntary arbitration and mandatory binding arbitration. Consumers Union supports alternative dispute resolution, including arbitration, but only when it is voluntarily agreed upon by both parties after a dispute has arisen. This means that we oppose all contracts of adhesion or take-it-or-leave-it contracts that give consumers little or no choice in whether to accept an arbitration clause. These mandatory pre-dispute binding arbitration clauses, which have proliferated in consumer contracts over the past decade, have the effect of denying consumers the opportunity to evaluate whether arbitration is suitable for the dispute after the dispute arises and the stakes are known. They prevent consumers from choosing their preferred forum for resolving disputes – including the choice to go to court. We oppose this removal of choices from consumers.
We ask that you correct any representations you have made to clients, associates, consumers, or anyone else, that purport to state any other position as the position of Consumers Union or of our publication, Consumer Reports.
The paragraph in your letter of greatest concern is the following:
Consumer advocates agree. Consumer Reports magazine observes, “Arbitration can help consumers settle their disputes faster and cheaper than by litigation.” Consumer Reports, August 1999, p. 64. Consumer Reports Law Book states that consumers should “insist” on inserting on inserting a future-dispute arbitration clause in contracts if the vendor has not done so already.
The purported quote from Consumer Reports is missing a key opening phrase, as well as being taken out of context. The article from August 1999 actually says, “When it works well, however, arbitration can help consumers settle their disputes faster and cheaper than by litigation.” That sentence comes directly after a paragraph describing the unfortunate ordeal experienced by a mobile home owner who was forced to take legal action because the two halves of his mobile home didn’t match up. The previous paragraph says this:
To his dismay, a clause buried in the fine print of his purchase agreement required that any dispute about the purchase be settled through binding arbitration. Instead of paying a simple $65 fee to file a claim at his local courthouse, Crawford was told he’d have to pay $2000 to initiate an arbitration process and make a six-hour round trip to the arbitration’s office in Addison, AL. ‘Before I bought this home,’ he says, ‘I never heard the word ‘arbitration’ – didn’t have a clue what it meant.’ Now Crawford is challenging the legality of the contract provision that bars him from having his suit heard before a judge and jury.
Indeed, the title of the article reads: “The Arbitration Trap. How Consumers Pay for ‘Low Cost’ Justice.” Anyone reading the title of this article would conclude that it is not an endorsement of arbitration. We can’t help reading your letter as a distortion of the theme of the article to make it appear as though Consumer Reports magazine has endorsed arbitration of all kinds, including mandatory arbitration.
As for the Consumer Reports Law Book, we assume you are referring to the 1994 volume. Your letter appears to misquote the book and distort the spirit of this consumer guide, which says the following about arbitration:
“Most business contracts are entered into with the best intentions, but somewhere down the road one of the parties may become unhappy with the contract or its performance. Anticipate this by including a clause in the contract that requires disputes to be settled through arbitration.”
It goes on to name AAA (the American Arbitration Association) as a place to start, but adds:
“AAA is not for everyone because its procedures require a minimum filing fee of $300; if your dispute involves only $500, you should probably consider another organization that conducts arbitration. Check the Yellow Pages under Arbitration for such an organization in your community.”(1)
We wish to make several points here:
1. The Consumer Reports Law Book was written in 1994 as a guide to consumer empowerment. It is clearly not reflective of current position, which is clearly articulated in the attached formal policy formulated in 1997 that appears on our website at consumersunion.org. This evolution of our position was reinforced in several subsequent Consumer Reports articles, the August 1999 piece which you quote in your letter and an additional piece in May 2000 entitled “Give up your right to sue?”
2. Second, we have reviewed the 1994 Consumer Reports Law Book’s sections on arbitration, pages 364-5 and 384, and can find no use of the word “insist”, as your letter states, in describing how consumers should pursue arbitration clauses. If you are looking at another section of the book, please point that out.
3. Your letter excludes the caveats mentioned in the book related to the cost of arbitrating a claim that are mentioned above.
4. Finally, even if the 1994 Consumer Reports Law Book could be read as an endorsement of arbitration clauses, it is 8 years old, and it does not reflect the current position of Consumers Union or Consumer Reports. A review of our website or an accurate reading of the August 1999 (or May 2000) article would have indicated to any honest reader that Consumer Reports opposes mandatory arbitration clauses and finds them, in fact, to be against the interests of consumers.
As indicated above, we feel the NAF letter misstates Consumers Union’s and Consumer Reports position on arbitration. We therefore ask that you immediately take steps to correct these distortions and cease immediately sending letters that mischaracterize our position.
Consumers Union West Coast Regional Office
Consumers Union Washington DC Office
Cc: Edward Anderson, Esq
National Arbitration Forum
(1) These fees were current in 1994, however the AAA fee schedule has changed since the date the Consumer Reports Law Book was published.