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Comment by tzs | Hacker News Reader

> Arbitration, just like plea deals, are an obviously terrible idea that is legal almost entirely because it reduces the cost of having trials.

Arbitration is legal because of freedom of contract.

There is nothing "obviously terrible" about arbitration per se. When it is included in a freely negotiated contract between parties of equal bargaining power it is hard to find anything wrong with it.

The problem is when the parties do not have anywhere near equal bargaining power.

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Arbitration is legal because of the Federal Arbitration Act of 1925. Before that, judges in the United States treated arbitration clauses as unenforceable despite freedom of contract. [1] It’s a bit odd that 80 years or so passed before consumer arbitration clauses suddenly became ubiquitous in the last decade, but nevertheless Congress could easily amend the law if it wanted to.

[1] https://scholarlycommons.law.case.edu/cgi/viewcontent.cgi?ar...

I mean, it's legal because no one has made a law against it. "Freedom of contract" isn't absolute - you can't sign yourself up as a slave. Consumer arbitration could be banned too.

I'm talking about consumer arbitration, which is as you say, inherently unbalanced. Yes, I'm sure there are situations where it's a good tool and I'm not saying ban arbitration completely, but right now we can see the damage from it being misapplied.

The ostensible reason for them is that "court is expensive"; if this were true, and impartial arbiters could be found, at the moment a lawsuit was required, both parties could agree to arbitration at that time: just because you are or have filed a lawsuit shouldn't suddenly mean that arbitration is more expensive or impossible.

That is, there is no benefit to agreeing to it at contract inception, if it were as stated: cheaper and impartial, i.e., a better court.

You can't really expect to maintain equal bargaining power when you're in the business of signing away your rights. I mean, what you've said makes sense if you only have one relationship with one other entity. If there are more parties involved, your loss of rights in one fair bargain may translate to a loss of fairness in another.

>Arbitration is legal because of freedom of contract.

Indentured servitude is just contracting. Do you think it should be legal too?

I think my point may have not been clear. I was responding to someone who offered a theory that it is legal because it reduces the cost of having trials. The implication is that it was decided at some point that we should allow it.

My point is that because it is implied by freedom of contract, it is by default legal until we decide to make it illegal.

> it is by default legal until we decide to make it illegal.

No, it's legal because of the Federal Arbitration Act passing in 1925. Prior to that, waiving of such rights "in advance by agreement" was explicitly disallowed, as SCOTUS determined in Insurance Company v. Morse (1874).

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