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House bill considers ban on dealer-mandated arbitration

November 16, 2010

Auto dealers celebrated a lobbying victory in 2002 when they got Congress and President Bush to ban mandatory binding arbitration of disputes arising from their franchise agreements with automakers. Now comes the hangover.


Spurred by consumer groups, lawmakers have introduced a bill that would prohibit dealers from requiring customers to accept binding arbitration to settle disagreements over sales or lease deals.


The bill, H.R. 5312, is named the Automobile Arbitration Fairness Act of 2008. A similar bill is expected to be introduced in the Senate by Sen. Russ Feingold (D-Wis.).


"This legislation would connect the chain from manufacturers to dealers and from dealers to consumers," Rep. Linda Sanchez (D-Calif.) said when she introduced the House bill last month.


Sanchez heads the House Judiciary Committee’s subcommittee on commercial and administrative law. The subcommittee held a hearing on the bill March 6, but no other action is scheduled.


The National Automobile Dealers Association is neutral on the Sanchez bill, said David Hyatt, the association’s chief public affairs officer.


The NADA considered passage of the ban on automaker-mandated arbitration "critical" to the well-being of the franchise system, he said. To oppose the latest bill would be "inconsistent," said Hyatt.