Comments on: Another Reason to Avoid Arbitration Agreements with Big Financial Institutions http://www.nakedcapitalism.com/2007/07/another-reason-to-avoid-arbitration.html Sun, 22 Nov 2009 03:53:33 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: GeorgeNYC http://www.nakedcapitalism.com/2007/07/another-reason-to-avoid-arbitration.html#comment-273 GeorgeNYC Sun, 22 Jul 2007 11:33:00 +0000 http://www.nakedcapitalism.com/2007/07/another-reason-to-avoid-arbitration-agreements-with-big-financial-institutions/#comment-273 I am a lawyer who handles, among other things, reinsurance arbitrations. Without a doubt, it has its advantages is complicated commercial disputes between relatively equal players. <br/><br/>However, the thought of consumers, even those represented by counsel, being forced to arbitrate is simply ludicrous. <br/><br/>What is interesting is that the key here is the "private" nature of the dispute. Generally, the rules that are incorporated by these agreements require the disputes to be "confidential." Clearly,based ont he above (and my own experience to a certain extent) the issue is not the "process" but the informational deficiencies between the parties. I wonder if the results would be different if arbitrations, like court decisions, were allowed to be public records?<br/><br/>I think that this is a good example of "informational asymmetries." A truly efficient "market" result, to my understanding, would always require sufficient informational equality. Hence the enormous enforcement mechnism in place (the SEC) to police the supposedly "free" equity markets. Without the forced information flows, you could quickly lose confidence in the market. However, while capital enjoys such a government subsidized luxury, labor barely gets similar support. Unions aside, I wonder what would happen to emplyee bargaining power if wages were required to be publicly disclosed for all workers? Right now, as I apply for a job, I have only limited ability to know what the salary may be. I would suggest that eliminating that informational disadvantage would probably be more effective than unionization (which incorporate that feature) I am a lawyer who handles, among other things, reinsurance arbitrations. Without a doubt, it has its advantages is complicated commercial disputes between relatively equal players.

However, the thought of consumers, even those represented by counsel, being forced to arbitrate is simply ludicrous.

What is interesting is that the key here is the “private” nature of the dispute. Generally, the rules that are incorporated by these agreements require the disputes to be “confidential.” Clearly,based ont he above (and my own experience to a certain extent) the issue is not the “process” but the informational deficiencies between the parties. I wonder if the results would be different if arbitrations, like court decisions, were allowed to be public records?

I think that this is a good example of “informational asymmetries.” A truly efficient “market” result, to my understanding, would always require sufficient informational equality. Hence the enormous enforcement mechnism in place (the SEC) to police the supposedly “free” equity markets. Without the forced information flows, you could quickly lose confidence in the market. However, while capital enjoys such a government subsidized luxury, labor barely gets similar support. Unions aside, I wonder what would happen to emplyee bargaining power if wages were required to be publicly disclosed for all workers? Right now, as I apply for a job, I have only limited ability to know what the salary may be. I would suggest that eliminating that informational disadvantage would probably be more effective than unionization (which incorporate that feature)

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