In a string of recent opinions, the Supreme Court has made it harder for consumers to avoid arbitration clauses, even when businesses strategically insert provisions in them that effectively prevent consumers from being able to bring any claim in any forum.
Arbitration differs from litigation in ways that harm the interests of consumer antitrust plaintiffs. For example, arbitration limits discovery and has no meaningful appeals process. Furthermore, defendants use the terms in arbitration clauses to prevent class actions and to undercut the pro-plaintiff features of antitrust law, including mandatory treble damages, meaningful injunctive relief, recovery of attorneys’ fees, and a lengthy statute of limitations.
Antitrust authorities can address the problem of proliferating arbitration clauses. We argue that antitrust officials should condition merger approval on the merging parties’ agreement to not require arbitration of antitrust claims.
This Article presents an empirical study of the trade usage cases decided under the Uniform Commercial Code from 1970 to 2007. It then draws on the study’s findings to revisit the debate over the desirability of the trade usage component of the incorporation strategy—the interpretive approach that directs courts to look to course of dealing, course of performance, and usage of trade to interpret contracts and fill contractual gaps.
After presenting the study’s findings, the Article reexamines the core justifications for the strategy in light of them. It concludes that because the strategy is likely to increase both specification costs and interpretive error costs, and has particularly negative effects on contracts between large multi-agent firms as well as on the types of outsourcing contracts and contracts for innovation that are increasingly important parts of the modern economy, it should be abandoned in favor of a more formalist approach to contract interpretation, at least in contracts between businesses.