Tesla urged by seven senators to end forced arbitration for car owners

In a letter sent on Monday, a group of senators urged Tesla CEO Elon Musk to stop using mandatory arbitration clauses in the company's contracts with car purchasers.

These compulsory arbitration clauses, typically electronically signed when purchasing a new Tesla vehicle, can obscure or hide important details about Tesla’s vehicle safety and business practices from the public, the senators say in their letter.

“The public deserves the full record of safety complaints about Tesla vehicles,” they said, adding that while clauses in customer contracts can theoretically let customers opt out of forced arbitration, they rarely do so, making the difference basically moot.

Of particular concern to the senators were consumer complaints of phantom braking that occurred in Tesla vehicles.

“Beyond flawed design choices, Tesla’s vehicles appear to be plagued by myriad hardware and software issues: steering wheels in two Tesla vehicles fell off during operation because of a missing retaining bolt, which NHTSA recently opened an investigation into, while another vehicle appeared to spontaneously combust,” they wrote. “But because Tesla drivers, as a practical reality, are subject to confidential arbitration agreements, we and the public – including would-be buyers – have no visibility into what complaints may have already been made and what other potential safety issues with Tesla vehicles may exist.”

Forced arbitration clauses are a common practice among car dealerships, says Paul Bland, executive director at Public Justice, a consumer advocacy group. However, Tesla makes and sells its cars direct to consumers so its forced arbitration clauses cover more than the norm where auto sales are concerned.

Bland said, “It makes a lot of sense to me that senators would focus on this. Tesla uses arbitration clauses as a tactic to shunt people into a forum that’s pretty rigged for the corporation.”

Bland also characterizes forced arbitration as a secretive system that makes it harder for consumers to find out what happened to previous cases. Without court filings that would outline what exactly occurred, whether the vehicle was repurchased, what the safety defect was and if anyone was hurt. Bland also said arbitration makes it harder for consumers to form class action lawsuits, or even to make informed choices about where they want to take their business.

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