Many consumer contracts — builder-buyer agreements, service agreements, insurance policies and online terms — contain arbitration clauses. Businesses sometimes assume these clauses prevent consumers from going to consumer commissions. In general, they do not.
The Supreme Court has held that the remedies under consumer protection legislation are in addition to other remedies, and that an arbitration clause in a consumer contract does not bar a consumer from approaching a consumer commission. The consumer can choose that forum despite the clause.
The reasoning is that consumer protection law creates special rights and forums for consumers, recognising the imbalance between individual consumers and businesses drafting standard-form contracts.
This does not mean arbitration clauses in consumer contracts are useless. If the consumer chooses to invoke arbitration, or if both parties agree after a dispute arises, the dispute can be arbitrated. And for business-to-business disputes, arbitration clauses apply in the ordinary way.
For businesses dealing with consumers, the practical lesson is to design complaint handling and settlement processes that resolve issues quickly, rather than relying on an arbitration clause to keep disputes out of consumer forums.