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How mass arbitration could negatively impact a company

On Behalf of | Sep 1, 2021 | Mediation & Arbitration

Businesses in Kentucky and all over the nation take measures to protect the company. This means having the fine print included in any business dealing include language that will help protect the business if an issue arises. One way to do that is to include arbitration language. It is very common for businesses to require disputes to be resolved through arbitration; however, this measure could be harmful to a company if consumers group together and file actions against the company.

Mass arbitration

Recently, the strategy of mass arbitration has been used against major companies. While arbitration can provide quick and individualized resolutions for consumers with valid dispute, many argue that it prevents some consumers from ever reaching a fair resolution because it simply protects the company.

Therefore, some consumers have taken steps to swamp companies with mass filings for arbitration claims. Doing so has required major companies to deal with each and every claim, costing them more money than expected. Additionally, it has resulted in some companies, such as Amazon, to remove mandatory arbitration provisions from their terms, as mass arbitration has had a negative impact on them.

Arbitration benefits

Reasons to include arbitration terms are to benefit the corporation. To begin, it creates an effective way to resolve a dispute. It helps the parties avoid court. Finally, it creates privacy, as arbitration is not public. Thus, companies can privately resolve complaints. However, when consumers are not happy with the result, this could lead to certain actions taken, such as mass arbitration, which could negative impact the company.

No matter the reason for including arbitration clauses, a business should fully understand what it means. Additionally, it is imperative to consider the measures that could be taken to address any negative impacts arbitration might have on the company.