THE EVOLUTION OF ANTITRUST ARBITRATION

By Christopher R. Leslie¹

Until the 1920s, arbitration was not generally an option for legal disputes being heard in federal court. But then Congress enacted the Federal Arbitration Act (the FAA) in 1925 to allow inter-merchant disputes to be decided in private arbitration. For the next sixty years, federal courts held that pre-dispute arbitration clauses were unenforceable with regards to federal statutory claims, including antitrust lawsuits. Beginning in the 1980s, however, the Supreme Court imagined a new revisionist history of the FAA as creating an omnibus federal pro-arbitration regime. Federal courts began enforcing arbitration clauses and compelling the arbitration of antitrust claims. In many ways, the expansion of antitrust arbitration has undermined America’s antitrust law regime. This evolution compels courts and Congress to reevaluate aspects of antitrust doctrine that were premised on the non-arbitrability of antitrust claims. This Essay traces the relationship between antitrust law and private arbitration.

I. THE 1920S: THE EARLY DAYS OF PRE-DISPUTE BINDING ARBITRATION

In the early years of the Sherman Act, antitrust claims were not arbitrated because, broadly speaking, almost nothing was arbitrated. Although private arbitration is older than the country,² until the twentieth century arbiters’ decisions were unenforceable without a court order.³ Arbitration decisions and awards were not self-executing, but instead required judicial enforcement, which American judges often resisted because they viewed "irrevocable arbitration agreements as ‘ousting’ the courts of jurisdiction."⁴ And, further, the parties retained the power to revoke their promise to arbitrate,⁵ and either party could "repudiate arbitration agreements at any time before the arbitrator’s award was made."⁶ Some merchants in disputes with other merchants — such as retailers purchasing products or produce from wholesalers or distributors — preferred arbitration over litigation. Arbitrators chosen for their knowledge of the trade at issue were seen as better equipped to interpret contract terms and apply appropriate remedies.⁷ Acceding to the merchants’ requests, some states — most notably New York and New Jersey — enacted laws to enforce predispute arbitration agreements.⁸