Ending a binding arbitration is a recent corporate decision taken by Amazon, the e-commerce, digital streaming, cloud computing, and artificial intelligence company. However, the declaration was a rather short one and all they wanted to convey was – sue us. When the declaration regarding the abandonment of binding arbitration as a step to settle customer disputes was made, the tech industry was forced to sit up and take note of the fact. Hidden arbitration clauses are considered as legal protection against lawsuits in an industry. From that point of view, Amazon’s decision to suddenly put an end to this and allow the customers to sue them has surprised many. What might have been the reason behind this? Find out.
What Exactly Is Binding Arbitration?
Talking about settling disputes out of court, binding arbitration might be considered the most popular one. According to the American Bar Association, binding arbitration is known to be a private procedure in which the parties in dispute have no objection if one or many individuals can pass their judgment on the dispute after taking evidence as well as hearing arguments into account.
Binding arbitration is different from mediation. Here, a neutral arbitrator has the authority of a judge and can deliver a decision that’s final and binding. This kind of arbitration is somewhat similar to a trial where the focus is on evidence and statements. However, the process is more streamlined. The rules of evidence are not as strict as what one experiences in a state court.
What Happens When You Buy a Product?
Suppose you buy a cell phone. You receive a fine print along with it, that has a particular section which states that you can’t file a lawsuit against the company and you have to take help from a neutral arbitrator in case any dispute arises. When you are purchasing a cell phone from that company, you give your confirmation to this clause. A majority of the buyers do not know about this until they get entangled in a dispute with the company.
Reasons Why Amazon Opted for Arbitration Standards to Resolve Disputes
The two major reasons why Amazon and other companies adopted arbitration standards to settle disputes are cost and ease. Binding arbitration has been in use for over a century now. However, in the practical scenario, the modern use actually started in the 80s and the 90s decade of the 20th century when the Federal Arbitration Act went through an expansion.
This decision equipped large corporate houses with substantial authority to push customer and employee disputes away from the unpredictability and cost of federal and state courts, driving them towards the arbitration process. In simple words, arbitration costs are much less. Moreover, corporates find arbitration more predictable than court cases. Aside from that, the entire process is conducted in private and kept under wraps so that the customers remain unaware of the issues.
What Made Amazon Shift from the Process Even After Using it for Decades?
The representatives of Amazon have preferred not to talk about this, nor did they respond to any inquiry on this topic. But legal experts are speculating a lot about this. As per a report published by The New York Times. Amazon has faced arbitration claims that have gone up to 75,000. These claims were regarding Alexa devices that recorded customers without any permission. Amazon has rubbished the claims. But getting involved in arbitration with so many disputes in line can prove to be more costly than lawsuits.
What’s the Next Step? It’s time for the legal teams of several companies are going to keep a close watch on how things proceed for Amazon. Consumer attorneys can adopt clever and aggressive steps against the companies, but Amazon and companies that follow suit would prefer to take the case to court.