Round 2: Facebook vs The American Arbitration Association

This is round 2 in our Worst Company In America contest, Facebook vs The American Arbitration Association. Their major crimes: The American Arbitration Association is the main supplier of kangaroo courts to companies who want to deprive consumers of most of their rights in the event of a legal dispute. Most contracts you sign with companies these days contain a mandatory arbitration clause. Facebook is a social networking site for yupsters that for a while was spying on all your purchases and selling the data to big big advertisers so they could sell you more ads. Which is the greater threat to our way of life? Choose!

PREVIOUSLY: Comcast vs Menu Foods
This is a post in our Worst Company In America 2008 series. Keep track of all the goings on at


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  1. bonzombiekitty says:

    Had to go with AAA on this one as facebook is entirely voluntary, getting a contract without an arbitration clause for many things (like buying a car) can be very difficult.

  2. ARP says:

    I don’t think the AAA is the source of the problem. They’re acting like a self-preserving business should- they side with the company that will pay them the most. The problem is that these companies intentionally take advantage of that conflict of interest to their advantage. Blame also lies with congress which allows this to happen. If you want ADR (alternative dispute resolution), that’s fine. But the ADR process needs to be fair.

  3. Bladefist says:

    @bonzombiekitty: I agree facebook is optional, and its unfortunate that they had to go corporate with it, but thats capitalism. The AAA is just nonsense

  4. Nighthawke says:

    AAA needs to be collared, leashed and muzzled. They are an out of control operation that needs to get it’s leash yanked and yanked HARD. They are by all rights, a court of law that essentially believes that they are outside the law and will make their own if necessary. The Fed needs to step in and stomp on them good.

  5. Steve Trachsel, Ace says:

    Oh boy, more irrational hatred of Arbitration, which is, if you didnt know, GOOD FOR CONSUMERS.

  6. Trai_Dep says:

    Facebook is optional and they backed the heck down when complaints mounted.

    AAA laughs at their ensuing outrage, shrugs and says, “Mediate this, lackey.” They’re absurdly biased in favor of those that pay their bills: abusive companies. No contest.

  7. Aphex242 says:

    @Tracy Ham and Eggs: …when?

  8. qwickone says:

    @ARP: yeah, but they pretend to be fair. I think that’s the real problem.

  9. Steve Trachsel, Ace says:

    @aphex242: always. It keeps prices lower, wages higher and lowers the cost to the complainant to bring action compared to court cost.

    Oh, and the rulings favor consumers almost exactly at the same percentage as regular court decisions.

    • Anonymous says:

      @Steve Trachsel, Ace:

      No, it does not. In fact, the opposite is true. Arbitration raises the cost of legal action because when corporations demand mandatory arbitration taxes paid to have true impartial courts in place simply go to waste.

      Also, there is no evidence that wages are kept higher, so you basically just made that one up.

      Finally, your last lie, the rulings almost never favor consumers, which is why corporate contracts almost always include an arbitration clause. Corporations love it!

      So nice try, but next time either do more research or be more honest.

  10. qwickone says:

    @Tracy Ham and Eggs: how do you figure??

  11. fluiddruid says:

    @Tracy Ham and Eggs: Arbitration is good for consumers?!

    1 – You are denied access to the legal system.
    2 – Your dispute is decided by someone who finds against consumers 95% of the time.
    3 – Fair arbitrators are worked out of the business by companies who will hire people who find for them most often.
    4 – Arbitration is generally mandatory based on your contract, and so many companies require this that it’s impossible to avoid (particularly in credit cards and financial services).

    So, explain to me… how is this “good for consumers”?

  12. starrion says:

    @Tracy Ham and Eggs: Irrational? Builders who put up shoddy homes and then ignore their customer because they can buy their way through kangaroo court? A process that levies fees in advance before you even have a chance to show damages? It’s AAA for the win!

  13. fluiddruid says:

    @Tracy Ham and Eggs: Please show me a cite that the legal system finds against consumers 95% of the time.


  14. Steve Trachsel, Ace says:

    @fluiddruid: your numbers are wrong.

    Source, citing Michael Delikat & Morris M. Kleiner, An Empirical Study of Dispute Resolution Mechanisms: Where Do Plaintiffs Better Vindicate Their Rights?, 58 DISPUTE RESOLUTION JOURNAL 56, 57-58 (2004); and Lewis L. Maltby, Private Justice: Employment Arbitration and Civil Rights, 30 COLUM. HUM. RTS. L. REV. 29, 45-48 (1998).

    California data shows that when consumers bring arbitration claims against businesses, the consumers prevail in 65.5% of cases that reach a decision. To compare, buyer plaintiffs litigating contract claims in the 75 largest American counties prevailed 61.5% of the time overall, and 60.9% of the time in cases decided by bench trials. When businesses bring arbitration claims against California consumers, the businesses prevail in 77.7% of cases that reach a decision. To compare, seller plaintiffs litigating contract cases in the largest 75 counties prevail 76.8% of the time overall and 78.9% of the time in cases decided by bench trial.

    These results show that the win rates for consumers and businesses bringing claims in arbitration are within just a few percentage points – and, sometimes, just fractions of a percentage point – of the win rates of individuals and businesses bringing contract claims in court.

  15. Buran says:

    @fluiddruid: Easy. Troll or shill.

  16. Jaysyn was banned for: says:

    @Tracy Ham and Eggs:

    Do you work for or have ever worked for an arbitrator or a company that used arbitration often?

  17. Steve Trachsel, Ace says:

    @Buran: yeah, Buran, Im a shill and a troll. Ive been posting on this site as long as you have, seems to me you are the troll who likes to cite fake laws.

  18. Jaysyn was banned for: says:


    I’d say shill, but then she’d (he’d?) be a submarine-shill because the poster in question has been here longer than I.

  19. fluiddruid says:

    “My” stats aren’t what you’re challenging – you’re challenging the study that the Consumerist posted. Look at my link (as posted in my prior comment):


    Do a search for arbitration on the Consumerist. Arbitration might be good for consumers – the problem is mandatory, binding arbitration. This is not at all good for consumers.

  20. Steve Trachsel, Ace says:

    @Jaysyn: Why should I answer? If I see the benefit in arbitration does that invalidate my assertion that its a good thing for consumers?

    To answer though, I do not work for an arbitrator, never have, and dont know anyone who does. I did put MBA into my contracts because it benefits me as a business owner and Ive been badly burned by a frivolous lawsuit. Until we have loser-pay laws in this country it is the only thing that prevents people from using the court system from bullying small businesses into settlements.

  21. Corydon says:

    I have no trouble with going with the majority today! The AAA sets up an inherent conflict of interest by accepting money from one of the interested parties in a dispute but not the other.

    In the kinds of disputes the AAA mediates, it’s not enough for justice to be done; it must be seen to be done as well, and the AAA undermines that. For all of its faults (and they are many), the American justice system at least offers some kind of transparency, openness and evenhandedness.

    Facebook, on the other hand, is not only a frivolous product with lots of competition, it’s also free.

    No question which company is more evil.

  22. Steve Trachsel, Ace says:

    @fluiddruid: you are citing a study by a group that doesnt hide its bias. Of course credit card cases are overwhelmingly decided in the cc companies favor, as they are with court cases. The CC companies dont bring the complaints unless they are actually owed money.

  23. AaronZ says:

    Even if arbitration is (I loath to say ‘good’) ok for the consumer, being *forced* into arbitration and giving up your right to the legal system is still crap. And frankly, you can show me statistics all day long – if it wasn’t in some way benificial to the companies, they wouldn’t be forcing it on us in the first place.

    It makes me think of casinos, the house edge is only like 2%, but that’s enough to make millions.

  24. Orv says:

    @Tracy Ham and Eggs: “Loser pays” would just intimidate people from bringing suits against large companies, even if they had a good case, because of the financial risk of losing. Can you imagine getting a bill for, say, Microsoft’s entire legal team?

  25. AceKicker says:

    This one seems to be an easy one for me. Arbatration has become the service industry’s Get Out of Jail Free card, and the AAA hasn’t done anything to stop it.

    Facebook is a free service that gets your information. Disingenuous, sure. But I have a hard time singling them out from thousands upon thousands of other sites that do just the same, and you have no obligation to go to any of them.

  26. sleze69 says:

    Facebook really has no place on this list.

  27. Rectilinear Propagation says:

    @sleze69: Well, there was this:[]
    coupled with the fact that they make it difficult to delete accounts.

    However, I must agree that this is a one sided match.

  28. Angryrider says:

    Arbitration clauses suck. So if I get hurt by some buttmunch’s wrongdoing, I don’t get to sue, and the case is decided by a “neutral” third party of someone’s choosing?!

  29. IrisMR says:

    Well, facebook is just a dumb fad like Myspace. It will go away by itself soon enough.

  30. Alex Chasick says:

    @Tracy Ham and Eggs: I did put MBA into my contracts because it benefits me as a business owner and Ive been badly burned by a frivolous lawsuit.

    There it is. I don’t automatically think that everything that’s good for a business is necessarily bad for a consumer, but mandatory arbitration is. This site is admittedly biased toward the consumer, and arbitration is bad for consumers, despite your assertions to the contrary, so how would you expect the commenters to react?

    Regardless of the percentage of times that an arbitrator finds against a consumer, the arbitration process is unsuited for consumer transactions. Off the top of my head, here’s why: Arbitration is often more expensive than a lawsuit when you factor in the costs of paying an arbitrator (as opposed to a judge or jury, who are paid by taxpayers or constrained by law to appear), traveling to an inconvenient venue (such as the company’s headquarters or place of incorporation), and reduced judgment. Arbitration’s supporters bill it as being quicker and more efficient, but this is in exchange for waiving valuable legal rights, such as the right to full (or even any) discovery, the right to form a class for a class action (clearly a pro-business, anti-consumer provision), and the right to appeal a judgment. This is almost always coupled with a secretive, unrecorded arbitration hearing (which may benefit a consumer who is revealing private or embarrassing information, but seems more likely to shield companies with defective products from having people find out about the defects). And of course, even if none of this were true and arbitration was a completely fair, open, and wonderful alternative to litigation, it’s still bad that companies force consumers to agree to arbitrate when they do business (and I don’t buy the argument that you’re not being forced to get a cellphone, car, etc. Arbitration clauses appear in employment applications and job contracts, property leases, and insurance and bank agreements).

    I’d be happy to provide cites for the following, although a little time spent tooling around Lexis would do just as well.

  31. ludwigk says:

    Arbitration Clauses are ‘Good for the Consumer’ in the same way that really, really, shitty car/health insurance is ‘Good for the Consumer’.

    Look, I’m saving all this money with low, low premiums, but if I ever NEED the insurance, it will be practically useless to me.

    Are the marginal savings to everyone ‘worth it’ by comparison to the one individual whose life is ruined by the results of arbitration?

  32. Buran says:

    @Tracy Ham and Eggs: Uh, I don’t think so. Who’s the one who’s denying clear facts about how arbitration is a screw job?

  33. thesilentnight says:

    Can’t vote :(. Where’s the window?

  34. DeafChick says:

    Arbitration is evil.

    Let’s not forgot the rape situation with Halliburton subsidiary KBR and their victims.

  35. spinachdip says:

    @Orv: Yeah, yikes, a “loser pays” system is about as chilling as chilling effects get. People who claim the tort system is out of control and Americans are overly litigious are either full of shit or simply man-bites-dog’d.

  36. fluiddruid says:

    @Tracy Ham and Eggs: I would still like to see a cite showing that 95% of credit card companies’ lawsuits are settled in their favor.

  37. Bladefist says:

    @Tracy Ham and Eggs: You pose some interesting studies. I think the blame is not so much the AAA, but the companies who make you sign your rights over to the AAA. The AAA itself might not be that corrupt. It’s hard to tell. As a word of advice, I have learned here there are certain people you dont respond to, *cough* buran *cough* becaues these un-named people, ahem, are impossible to argue with.

  38. rewinditback says:

    Just an FYI. It appears as though the voting system that was chosen allows for multiple votes. Might want to take that into consideration when choosing a vote tallying system – aka find something that tracks unique ip per vote.

  39. rewinditback says:

    odd – just tried once more for good measure, and it denied the count of this vote. Though, it did let me vote three times.

  40. chilled says:

    AAA vs Facebook ? Isn’t this how political polls get their desired bout Hitler vs Mother Theresa!!

  41. cyclade says:

    @Corydon: Actually, under typical procedures I’ve been involved with, all parties equally share the aribitrator’s fees. This may, of course, be different based on the parties’ contract. I’ve litigated commercial (b2b) cases in both aribtration proceedings and “traditional” litigation. Almost universally, the arbitrators tend to have some relevant business law background and take the matters much more seriously than “regular” judges who: (1) are generally understaffed and over-docketed (resulting in a potential glacial pace for your case); (2) probably aren’t experts in commercial law and/or “real world” business applications; and (3) have to deal with massive criminal caseloads in addition to civil cases. The deck is stacked against the “little guy” in court the same way as it is in arbitration because of the traps for the unwary. If it’s a significant amount of money at stake, hire a lawyer. But if you don’t want to, be sure to read the relevant rules (of civil procedure and evidence in your jurisdiction — or the American Arbitration Assoc.) before you bring your claim.

  42. Rectilinear Propagation says:

    @rewinditback: Blocking any cookies?

  43. karan1003 says:

    @ARP: @ARP:

    So is Facebook. It’s selling advertisers space to make more money. In other words, it’s acting optimally.

  44. deadlizard says:

    Not a hard choice. Facebook couldn’t even beat MySpace in a face-to-face crappy online app contest.

  45. muddgirl says:

    You forgot that Facebook has deep ties to the CIA, who think it has serious potential for datamining, etc.

    But yeah, I still voted for the other guy.

  46. Two For Two!


  47. pigeonpenelope says:

    This is easy.. the American Arbitration Association is my vote for worst. Facebook may have made a bad decision but AAA does worse.

  48. nequam says:

    Is there a person who reads the Consumerist who understands what the AAA is/does? Damning the AAA is like complaining about your cable provider because there is nothing good to watch on TV. Or blaming the local movie theater because Hollywood is not making good movies. Or blaming your grocery store because you don’t like carrots. Or blaming Consumerist because somebody insulted you in a comment.

    The AAA is an organization that allows arbitration to happen between parties who agree to arbitrate. If a corporation misuses arbitration in the consumer context, it is the corporation’s fault, not AAA’s.

  49. john42 says:

    American Arbitration Association. Best justice money can buy.

  50. nequam says:

    The results of this poll have given me the same stomach upset as when I see a poll showing that the majority of Americans do not accept evolution.

  51. starrion says:

    “The results of this poll have given me the same stomach upset as when I see a poll showing that the majority of Americans do not accept evolution.”

    Perhaps you should have that looked at. Walking into a supposedly “unbiased” arbitration where the arbitor knows that a judgement against the corporation would result in no further work would give me something worse. AAA is generating this perception themselves by letting the corporations use arbitration to avoid the consequences of their behavior. Sell a defective or dangerous product? No problem, as long as the consumer can’t sue you.

  52. Rectilinear Propagation says:

    The AAA is an organization that allows arbitration to happen between parties who agree to arbitrate. If a corporation misuses arbitration in the consumer context, it is the corporation’s fault, not AAA’s.

    @nequam: Would corporations even be able to abuse it if the arbitrators were actually fair?

  53. Beerad says:

    @Tracy Ham and Eggs: You’re right of course, but don’t expect to convince anyone. I gave up arguing about arbitration when it became obvious that everyone was just going to swallow Consumerist’s bias and misinformation on the subject hook, line, and sinker. As numerous posters have demonstrated, few people really understand how AAA actually works and “arbitration” is a convenient scapegoat for the CC companies and utilities that most people are actually angry at.

    Just save your energy for a battle you might be able to sway people on. (No, this does not include discussions of receipt-checking or showing ID to use a credit card). Trust me, you’ll be happier.

  54. MauriceReeves says:

    AAA all the way. What a bunch of schmucks.

  55. lawstud says:

    Plaintiffs lose some 97-98% of Arbitration Courts. Never agree to these kangaroo courts.