Last year, four consumers who were parties to arbitration agreements in which the sole choice of forum for dispute resolution was the American Arbitration Association sued the company under the Sherman and Clayton Antitrust acts, the Arizona Constitution, and state antitrust and unfair and deceptive practices laws. They alleged monopolistic practices, and that “the AAA induces corporate entities to use it as their chosen arbitral forum by promulgating rules and providing arbitration results favorable to them (and therefore unfavorable to consumers), employing partial arbitrators, and offering below market pricing—which the AAA sustains by, among other things, underpaying its arbitrators, resulting in a sub-standard arbitral process).”
The AAA moved to dismiss. The Arizona federal district court this week held that the plaintiffs had adequately alleged the AAA’s monopoly power in the consumer market, and that the AAA’s alleged use of exclusive dealing clauses was sufficient to demonstrate anticompetitive conduct at the pleading stage. The court also rejected the argument that the AAA was protected from their claims based on arbitral immunity, and that the plaintiffs lacked antitrust standing.
As to the state deceptive practices act claims, the court found that the allegations of biased arbitrators and the cited statistics regarding outcomes were sufficient to raise a plausible inference of unfairness.
The action will now proceed to discovery.
