Volume 43, Issue 2 (Spring 2025)
By Meirav Furth-Matzkin*
Recent evidence reveals a critical but often overlooked form of discrimination within consumer markets: “discrimination in contractual performance.” This phenomenon occurs when sellers use discretionary authority in ways that disproportionately disadvantage certain consumers, including those belonging to racial or ethnic minorities or lower socioeconomic classes. Presumably, sellers intend to standardize transactions and limit discretionary decisions by using form contracts.
But empirical evidence reveals that sellers’ representatives frequently adjust terms to benefit some customers (e.g., white, more affluent consumers) over others (e.g., those belonging to minority groups and lower-income consumers). For instance, Black consumers encounter greater difficulties in returning items without receipts or obtaining homeowners’ insurance claims compared to white consumers, and lower-income homeowners face more challenges in avoiding foreclosure compared to their more affluent counterparts. This disparity, fueled by implicit biases, constitutes a hidden form of price discrimination by which minority consumers receive inferior services at the same cost. Yet, despite the social harms that this practice generates, it has so far received very limited scholarly or regulatory attention.
Building on the accumulating evidence suggesting that sellers routinely engage in discriminatory contract performance, this Article proposes that sellers be banned from discriminating against minority consumers in contractual performance. More specifically, it suggests using existing anti-discrimination laws to address this form of marketplace discrimination, particularly the Civil Rights Act of 1866, codified at 42 U.S.C. § 1981, which prohibits racial discrimination in the “making and enforcing” of contracts. While courts have predominantly restricted this statute’s application to the initial stages of contract formation, this Article advocates for a broader interpretation of Section 1981 to encompass discriminatory practices in the performance of form contracts. While doing so, this Article confronts the legal and practical challenges of stringent causation standards in discrimination lawsuits, recommending a shift from intent-based inquiries to a “disparate treatment” analysis and streamlining evidence collection through disclosure mandates. By addressing these challenges, the Article aims to promote more equitable contractual performance for all consumers.
