The American Arbitration Association (AAA) has released its first infographic on mass arbitration, highlighting the significant threat it poses to consumer-facing companies, particularly in the gaming sector. In 2024, AAA registered 92 mass arbitrations involving over 280,000 individual cases. The gaming and entertainment industry accounted for more than 100,000 of these cases.
According to the AAA, less than 9% of these cases reached the merits stage, and under 1% resulted in an actual award for consumers. The median value of awards was around $7,500 per consumer. This figure is minimal compared to the millions in arbitration fees that companies must pay to handle such claims.
Companies are faced with a dilemma: either pay high arbitration fees or settle claims at amounts disproportionate to their merit. Despite its growing use, many businesses remain unfamiliar with mass arbitration strategies and lack preparedness to manage associated risks.
The AAA’s infographic emphasizes the importance of updating online terms of use as a preventive measure against mass arbitration. A well-drafted arbitration clause is crucial for protection. Cooley LLP advises businesses to consider several strategies: exploring alternative arbitration providers, implementing pre-dispute resolution steps with mandatory individualized conferences, and using batch or bellwether arbitration provisions.
For further guidance on minimizing exposure to mass arbitration, Teresa Michaud or Marc Suskin can be contacted.
The information provided by Cooley LLP is intended for general informational purposes only and does not establish an attorney-client relationship. It should not be considered legal advice and may change without notice. Cooley warns against sending confidential information as they do not guarantee confidentiality.
