Arbitration reaches a new level

posted on:
January 8, 2003

Jere Beasley

Last month, the U.S. Congress passed a bill to ban mandatory, binding arbitration clauses from automobile dealer franchise agreements. This legislation was a top priority of the National Automobile Dealers Association (NADA) for the last four years. Repeatedly, the car manufacturers, using all of their power, blocked the bill. However, the dealers’ provisions were quietly attached to a bill authorizing the U.S. Justice Department’s programs. Apparently, no one in Congress opposing the measure caught this slick parliamentary maneuver.

The result of passing this measure is that car dealers will now be able to avoid arbitration in their disputes with the Fords and GMs of the world. Yet in Alabama, the dealers require consumers to sign a mandatory, binding arbitration agreement to buy a car!

NADA has contended for years that the automobile manufacturers that compel dealers to accept mandatory, binding arbitration for dispute resolution can circumvent the rights that dealers have won through state franchise laws. As we all know, Alabama has a very good statute that protects Alabama automobile manufacturers. It involves a jury trial.

The hypocrisy of this Congressional action is astounding! Car dealers in Alabama require all of their customers to sign mandatory, binding arbitration agreements. If the customer refuses, the dealer won’t sell them a car. Now dealers are saying that dealers should not be forced into arbitration in their disputes with the powerful automobile manufacturers because the playing field isn’t level.

Alabama consumers should be up in arms over this latest development. The auto dealers will continue to force their customers to accept arbitration and give up their constitutional rights. It is also the best evidence of why arbitration is bad for consumers.

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