Policy Levers Tailoring Patent Law to Biotechnology: Comparing European and US Approaches
Authors: Lemley Mark 
Published: July 2018

In a string of recent opinions, the Supreme Court has made it harder forconsumers to avoid arbitration clauses, even when businesses strategicallyinsert provisions in them that effectively prevent consumers from beingable to bring any claim in any forum. In American Express Co. v. ItalianColors Restaurant, an antitrust case, the Court held that class-actionwaivers embedded in mandatory arbitration clauses were enforceable evenwhen they had the effect of making it economically irrational for thevictims of antitrust violations to pursue their claims.Courts have long considered antitrust claims to be too complex and tooimportant to trust to private arbitrators. By the 1980s, the Supreme Courtpermitted federal statutory rights, including antitrust claims, to bearbitrated so long as the plaintiffs could effectively vindicate theirrights in the alternative forum. In 2013, the Supreme Court in ItalianColors fundamentally weakened the Effective Vindication Doctrine when itheld that arbitration clauses that precluded class actions and classwidearbitration were enforceable even when they effectively prohibited allindividual plaintiffs from bringing a case.Arbitration differs from litigation in ways that harm the interests ofconsumer antitrust plaintiffs. For example, arbitration limits discoveryand has no meaningful appeals process. Furthermore, defendants use theterms in arbitration clauses to prevent class actions and to undercut thepro-plaintiff features of antitrust law, including mandatory trebledamages, meaningful injunctive relief, recovery of attorneys’ fees, and alengthy statute of limitations. With the Court’s undermining of theEffective Vindication Doctrine in Italian Colors, defendants’ efforts todismantle these pro-plaintiff components of antitrust law may prove moresuccessful in the future.The problems associated with antitrust arbitration are magnified inconcentrated markets. Supporters of enforcing arbitration clauses assumethat they these contractual provisions are the result of an informed,voluntary bargain. But when a market is dominated by a single supplier or asmall group of firms, consumers often find it impossible to purchase anecessary product while retaining the right to sue, especially sincearbitration clauses are generally embedded in contracts of adhesion. Thismeans that in the markets most likely to be affected by antitrustviolations, consumers are least likely to be able to avoid mandatoryarbitration clauses. Furthermore, when mergers result in concentratedmarkets, they can increase the problems explored in Part Two.Antitrust authorities can address the problem of proliferating arbitrationclauses. When evaluating mergers, officials at the Federal Trade Commissionand the Antitrust Division of the Department of Justice can threaten tochallenge the merger unless the merging parties agree to specifiedconditions, such as the divestiture of certain assets. Because thosemergers that pose the greatest risk of anticompetitive effects also magnifythe problems associated with mandatory arbitration clauses, antitrustofficials would be wise to condition merger approval on the mergingparties’ agreement to not require arbitration of antitrust claims.