On the surface, arbitration clauses look relatively benign. You might even think they offer a good way for the consumer to get a fair shake, since they don't require you to hire a lawyer. Consider this one:

"Any dispute or controversy arising out of or relating to the Agreement or its interpretation shall be settled exclusively and finally by arbitration ... in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce."

At least in comparison, that's pretty innocuous. But, in fact, it's the mandatory arbitration provision at the heart of a miscarriage of justice that's perverted our legal system for almost a decade. I've written in some detail before about the Hill v. Gateway case, one of a number of lawsuits brought against Gateway over a computer it shipped in 1995 with components that were not as advertised. But let's look briefly at how the arbitration clause worked in that case.

By the rules Gateway's arbitration language cited (which could only be obtained by writing an organization in France), each party had to pay a non-refundable fee of $2,000. So once the judge ruled that the terms Gateway snuck into the package with its computer were actually a valid contract, the only recourse open to the Hills would cost them more money than they could possibly hope to be awarded. While on-line discussions and articles in InfoWorld, PC World and other trade publications at the time confirmed that the system had been sold under false pretenses, Gateway went unpunished.

No matter how badly you've been treated and how legitimate your greviance, mandatory clauses block your access to the legal system. And, far more than Gateway's language, nowadays the sneakwrap terms are even more blatantly one-sided. Many arbitration clauses in many software EULAs and online service agreements give the company the right to take the consumer to court, but not vice versa. And we saw recently how one vendor's arbitration clause actually requires the consumer to pay company's staff $300 per hour to attend the arbitration proceedings. At least under the logic the judge applied to the Hill case, there is no reason why that term wouldn't be just as enforceable as he ruled Gateway's to be.

As we certainly know by now, though, judicial decisions that ignore consumer interests are just a part of the landscape we live in, particularly in this country. (Yes, in case you're wondering, Hill v. Gateway is a heavily-cited precedent by what I can only call the UCITA lobby in the Blizzard reverse engineering case.) What's worse, increasingly the fine print in the consumer agreements from the larger corporations in almost every industry includes mandatory arbitration clauses. Credit cards, insurances, mortgages, housing contractors, service contracts, and limited warranties for all kinds of goods come sneakwrapped with language where you give up your right to sue no matter what they do to you.

Since we obviously can't depend on the courts to prevent legal travesties like the Gateway case, how can we protect ourselves? The only way is to seek out those vendors that don't use mandatory arbitration clauses, and make our displeasure known to those who do. A very useful website in this regard is that of "Give Me Back My Rights" coalition, which contains a wealth of information about binding arbitration clauses along with tips on how to find car dealers and financial institutions that don't use them. For the more adventurous, see our "Battle of the Forms" discussion to learn how you can try fighting fire with fire.

Arbitration is a reasonable way to settle a dispute when both sides choose to enter the process voluntarily. But as Gateway demonstrated almost a decade ago, when only one side gets to do the choosing, it can be the worst sneakwrap of all.

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