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Abstract

Following the birth of the Federal Arbitration Act–which made arbitration agreements valid, enforceable, and irrevocable in courts of law–mandatory arbitration clause use in commercial, consumer, and employment contracts exploded. These types of clauses require parties to submit all disputes arising out of or related to a contract to an impartial third party. This third party, known as the arbitrator, reviews the facts, listens to the parties’ arguments, and makes a final, binding decision resolving the dispute. Corporations have long relied on mandatory arbitration clauses to resolve disputes privately and confidentially, often hoping to avoid the public scrutiny and accountability associated with litigation. Many scholars have focused on how mandatory arbitration clauses undermine principles of fairness and force individuals into one-sided arbitration procedures, but far fewer have evaluated how these clauses interact with privacy law frameworks. This article explores that interaction, arguing that mandatory arbitration clauses frustrate privacy law frameworks like the California Privacy Rights Act (CPRA) and the General Data Protection Regulation (GDPR). When mandatory arbitration clauses force consumers to resolve disputes outside of the courtroom, their privacy rights erode. With respect to the CPRA, mandatory arbitration clauses preclude California consumers from exercising their narrow statutorily granted private right of action, which undermines the ability for California consumers to hold businesses accountable. With respect to the GDPR, mandatory arbitration clauses inhibit data subjects’ access to effective judicial remedies and can interfere with the GDPR’s international data transfer requirements. To remedy these issues, this article advances the following solutions: (i) offering consumers meaningful opt-out provisions; (ii) imploring consumers to arbitrate; (iii) requiring EU courts to review final arbitration awards; and (iv) enacting a comprehensive U.S. federal privacy law.

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