Disputes between consumers and businesses that are arbitrated are resolved by an independent neutral arbitrator rather than in court. Although parties can agree to arbitrate a particular dispute after it arises or may agree that the award is non-binding, most consumer arbitrations occur pursuant to a pre-dispute arbitration clause
where the arbitrator's award is binding.
In the United States, there is an ongoing debate over the use of arbitration clauses in consumer contracts. Differences between arbitration and litigation include the costs of resolving a case, the speed of resolution, and the procedure of resolving a case, including how and where the arbitration is conducted and the availability of discovery. Critics of consumer arbitration
say that arbitrators and arbitration administrators can be biased (in part due to the repeat-player effect), arbitration clauses are not conspicuous, and for many classes of consumer goods
and services, nearly all providers require arbitration. Proponents of consumer arbitration cite "consumer-friendly" terms that lower the dispute resolution costs of consumers and provide incentives for consumers to bring claims in arbitration. Most arbitration clauses require parties to waive their right to proceed on a class action
basis in either court or arbitration, and, in the United States, the debate over consumer arbitration has also featured discussion of the merits of class actions.
In 2011, the Supreme Court of the United States
ruled in AT&T Mobility v. Concepcion
that state laws that in effect
require the availability of class actions to resolve consumer disputes are preempted by the Federal Arbitration Act. The ruling resulted in the adoption of new arbitration clauses or changes to existing ones in consumer contracts, as well as renewed efforts to persuade the federal government to regulate or ban the usage of consumer arbitration clauses.
The support given to consumer arbitration under United States law (particularly the Federal Arbitration Act) has been compared to other countries, whose laws restrict or ban consumer arbitration.