Congress may ban dealer-mandated arbitration
Congress may ban dealer-mandated arbitration
Automotive News | March 5, 2008 - 10:00 am EST
WASHINGTON — Auto dealers celebrated a lobbying victory in 2002 when they got Congress and President Bush to ban mandatory binding arbitration of disputes arising from their franchise agreements with automakers. Now comes the hangover.
Spurred by consumer groups, lawmakers have introduced a bill that would prohibit dealers from requiring customers to accept binding arbitration to settle disagreements over sales or lease deals.
“This legislation would connect the chain from manufacturers to dealers and from dealers to consumers,” Rep. Linda Sanchez, D-Calif., said when she introduced the bill last month. Sanchez heads the House Judiciary Committee’s subcommittee on commercial and administrative law.
The subcommittee plans a hearing on the bill Thursday, March 6, said Michael Torra, Sanchez’s chief of staff.
Many consumer groups want to ban mandatory binding arbitration in transactions and contracts by all kinds of businesses. They say most people don’t realize they are giving up their rights to sue when they sign such contracts. Other proposed bills would impose that broader ban.
But “a piecemeal strategy” may be necessary to reach that goal, said David Arkush, director of Congress Watch, a division of the consumer group Public Citizen. If dealer lobbyists “sit this one out” and the bill prohibiting mandatory arbitration in vehicle contracts becomes law, a broad ban may be easier to achieve, Arkush argues.
The National Automobile Dealers Association is neutral on the Sanchez bill, said David Hyatt, the association’s chief public affairs officer. NADA considered passage of the ban on automaker-mandated arbitration “critical” to the well-being of the franchise system, he said. To oppose the latest bill would be “inconsistent,” he added.
But the American International Automobile Dealers Association, which represents import-brand dealers, opposes the bill. AIADA President Cody Lusk said the bill would further burden “our already-overwhelmed legal system.”
Proponents of arbitration say it is a better way than litigation to settle disputes. Arbitration saves time and money and bases decisions on factual criteria instead of emotional courtroom arguments, advocates say.
Even if Sanchez’s bill becomes law, a dealer and a customer could agree voluntarily to arbitration of disputes.
NADA’s neutrality does not prevent state or metropolitan dealer associations from taking a position on the bill, industry officials say.
