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Electronic commerce is a principal catalyst of the 21st Century global economy. Virtually every large corporation and a great many small and medium sized enterprises currently transact business over the Internet. Entrepreneurs without resources to open even a small physical location can also now reach customers worldwide. As importantly, businesses and consumers are now empowered to shop globally for nearly any product or service with the click of a mouse. The phenomenal growth rate of this new marketplace will continue well into the new decade.
The characteristics of the Internet economy present substantial challenges, as well as opportunities. Swindlers, purveyors of substandard products or services and honest traders unable to perform their agreements can access the global market as easily as legitimate and capable businesses. The impersonal nature of e-commerce makes it more difficult for traders to discern a merchant or transaction that will not satisfy their expectations. Geographic, linguistic and cultural barriers increase the likelihood of misunderstandings and make them more difficult to resolve. The electronic medium raises new issues concerning the disclosure, privacy, security, contract formation and enforceability. Cross-border transactions are additionally complicated by questions of what law governs and where an enforcement action may be brought. The relatively modest value (under $500) of the median e-commerce transaction presents added challenges to efficient and economical dispute resolution.
Government, industry, consumer and dispute resolution organizations have been actively attempting to promote the opportunities and address the challenges of e-commerce. Predictably, each of these stakeholder groups seek solutions that favorably address their interests and concerns. Nevertheless, a broad and fundamental area of agreement has been the potential of alternative dispute resolution, including online dispute resolution processes, to address business-to-consumer disputes. A principal area of disagreement is whether, and if so the extent to which, e-commerce and online dispute resolution should regulated by government.(1)
Multilateral and national government organizations have intensively studied the policy and practical aspects of electronic commerce, and continue to do so. Policies officially enunciated by the OECD, the European Union (EU), G-8 and the EU-US Summit emphasize the importance of protecting consumer interests while promoting an environment in which e-commerce can flourish. National initiatives by bodies responsible for consumer protection have been undertaken in the United States, Canada, the United Kingdom, Australia and New Zealand.
The use of alternative dispute resolution, and more recently and specifically online dispute resolution, has been broadly advanced by government as a primary means of addressing the challenges of business-to-consumer e-commerce. Government, industry and consumer cooperation to develop fair and effective dispute resolution processes has been encouraged. Industry has also been encouraged to pursue self regulatory initiatives such as codes of conduct, trustmarks and reliability programs. Very little specific government regulation of e-commerce has yet occurred, however intensive work and some legislation in this area are progressing.
Industry has been proactive in its efforts to both minimizing government regulation of e-commerce and promote consumer confidence through self-regulation. Several new organizations have been comprised of the world's foremost technology and information companies and other commercial stakeholders in the electronic marketplace. These hi-tech consortia and more traditional trade associations have been developing and promoting e-commerce policies, voluntary guidelines and codes of conduct, independently and in collaboration government, academia and consumer organizations.
In general, industry initiatives support the use of alternative dispute resolution for online business-to-consumer disputes. Major industry policy statements advocate that government should encourage the use of industry-led alternative dispute resolution systems. One industry paper urges government to refrain from imposing accreditation standards or criteria for ADR providers, and makes specific recommendations to providers concerning their services.
International associations of consumer organizations have also formed and mobilized to advocate their constituents' interests in e-commerce policy making. These stakeholders' fundamental premise is that consumers should have at least the same level of protection online as off. While supporting voluntary codes, consumer groups advocate that these must be backed by effective government regulation.
Consumer organizations generally support alternative dispute resolution, with the caveat that consumers must retain the right to redress in their countries' courts. They have promulgated principles upon which ADR systems should be based, which include independence, personnel qualifications and reporting of cases to a publicly accessible clearinghouse. An international survey to determine the extent to which online dispute resolution services adequately address consumers' concerns resulted in consumer recommendations to ADR providers. Consumer organizations have also called for national and international standards for business-to-consumer online dispute resolution, third party accreditation, government monitoring and making dispute resolution results public.
Seals of approval or "trustmarks" are currently a chief mechanisms of promoting self-regulation and consumer confidence in electronic commerce. An increasing number of private organizations (Code Owners) are promulgating e-commerce standards and Codes of Conduct and then certifying that online businesses (Code Subscribers) have qualified and/or agreed to abide by the Code. Accredited Subscribers are licensed to display the trustmark on their web site, which is expected to improve consumer confidence.
Trustmark schemes vary considerably in their terms and operation. Some certify only particular aspects of online business, such as privacy, while others certify a full range of issues including advertising, disclosures, contract terms and performance, security, dispute resolution and protection of children. Some programs certify only that the Subscribers have accurately disclosed their own policies, while others certify that Subscribers have met the Code Owner's standards and agreed to abide by its Code of Conduct. There is also considerable variation in the certification, monitoring and enforcement procedures and the fees charged to the Subscribers. To protect against misplaced confidence in trustmarks displayed on web sites, several government and private initiatives establish standards for accrediting trustmark schemes.
The dispute resolution provisions of both trustmark schemes and industry's self-regulatory initiatives also vary considerably. Some only vaguely address internal dispute resolution (customer service), while others include detailed requirements and specifications for third-party alternative dispute resolution. Where external dispute resolution is specified, there are significant differences in the type of process (i.e. arbitration or mediation), whether the consumer is required to first utilize the internal process, selection and impartiality of the third-party, whether the merchant is required to accept a third-party determination and whether consumers must retain recourse to the courts. Differences also exist in whether the alternative dispute resolution provider is permitted or required to report or publicize results of the process.
There has been significant collaboration within and among the government, industry and consumer stakeholder groups concerning the development of e-commerce guidelines. Consonant with the borderless marketplace, many have been global or regional in scope. Although many of these initiatives include dispute resolution provisions, there has been little apparent participation by the dispute resolution profession in developing these guidelines.
Dispute resolution professionals and other entrepreneurs are responding eagerly to the opportunity and demand for online dispute resolution. These providers are using a growing array of techniques and technologies to resolve disputes over the Internet that have arisen both online and off. Traditional mediation and arbitration are being adapted to the online environment using e-mail, online chat, electronic forums and other emerging technologies exclusively or in conjunction with face-to-face sessions or teleconferencing. Online forums are also being developed and utilized to promote dispute resolution by the parties without a human intermediary. Some structure direct written communication between the parties to enhance their understanding and development of possible solutions. Others permit only their submission of "blind" monetary offers and demands, which are compared by computer and only disclosed to the other party if within a specified range.(2)
The promulgation of standards and/or regulations for online dispute resolution providers became a "hot topic" in June 2000, and has received increasing attention since then. Participants at a US Federal Trade Commission and Department of Commerce workshop broadly supported development of ADR programs to resolve online consumer disputes, but disagreed on whether and how government should be involved in ensuring that such programs are fair and effective. A Commerce Department representative indicated the federal government would leave it to the private sector and stakeholders to draft and implement any code of conduct and would only regulate if necessary. At a follow-up public roundtable on February 6, 2001, both business and consumer advocates reportedly told the FTC there must be government oversight of alternative dispute resolution programs for consumer e-commerce claims.
The American Arbitration Association announced, at the June 2000 FTC workshop, that it would convene a broad stakeholder group to develop due process protocols. One week later, the American Bar Association Section of Dispute Resolution announced that it was convening a broad based working group and an advisory committee to draft standards for online dispute resolution. The formation of a new trade association, Coalition of Internet Dispute Resolvers (CIDR) and its intent to draft standards was announced in September 2000. That same month, the Society of Professionals in Dispute Resolution (SPIDR) formed an Online Sector, also with plans to study online dispute resolution standards.
None of the dispute resolution organizations mentioned has yet promulgated standards for online dispute resolution, however this work is progressing on several fronts. CIDR proponent and the SPIDR Online Sector member Nora Femenia has drafted Proposed Guidelines for Online Dispute Resolution which have not yet been discussed in depth by either organization. The American Arbitration Association has promulgated five general principles for managing business-to-business e-commerce relationships, developed in collaboration with industry leaders, which do not enunciate standards for online dispute resolution. The ABA parent organization has convened a Task Force on E-Commerce and Dispute Resolution, comprised of representatives of the Section of Dispute Resolution and three other ABA Sections, which is about to conduct a second Public Meeting (February 17, in San Diego) and has not yet proposed any standards.
The dispute resolution profession has dual roles with respect to the development of standards and guidelines for resolving e-commerce disputes. In one capacity, it comprises "traders" aspiring to promote and furnish their services in the electronic marketplace. In the other, it represents the impartial professionals that would help resolve conflicts among other marketplace participants. This dual role necessitates particular awareness and discretion as the profession engages in the discussion of standards both for e-commerce in general and for online dispute resolution providers.
I encourage the dispute resolution profession to play a greater role than it has so far in the development of general e-commerce guidelines, and in two capacities. First, the profession has the facilitative skills to assist government, industry and consumer organizations reach agreements concerning regulations or standards that fairly and optimally balance their interests. Additionally, the profession has considerable expertise concerning the design of effective dispute resolution systems. Unless the profession assists in developing dispute resolution guidelines for e-commerce, it will soon be practicing within frameworks designed instead by partisan stakeholders in the processes it is facilitating.
I also urge that the profession model best practices for collaborative decision making in the dialogue concerning standards and regulations for online dispute resolution providers. The profession's multiple online standards initiatives should be integrated to optimize the results and avoid a confusing and conflicting morass of self-regulation. Any standards or regulations promulgated should be developed in fora that include appropriate representatives of all stakeholder groups. The process design should promote full exploration of stakeholder interests and potential solutions by which they might be reconciled, and decisions should be based upon consensus principles. By "walking it's talk" in this manner, the dispute resolution profession will optimize any standards or regulations that may emerge and publicly demonstrate the benefits of collaborative decision-making.
1. This article is an abridged version of a considerably more detailed and heavily referenced paper that reviews public and private online dispute resolution initiatives as a foundation for public policy discussions of the subject. Readers with a deeper interest are encouraged to view the full paper soon available at mediate.com.
2. The description of the online dispute resolution processes is beyond the scope of this
article, and has been addressed by the author elsewhere. See Alan Wiener, Opportunities
and Initiatives in Online Dispute Resolution, in Society of Professionals in Dispute
Resolution, SPIDR News, Volume 24, No. 3, Summer 2000.
Alan has particular interest in online dispute resolution and the development of ethical standards for mediators. He is a member of the SPIDR's Online Sector and the ABA Section of Dispute Resolution Technology Committee, for which he chairs the Online Standards subcommittee. He is also assisting a working group of the California Judicial Council develop ethical standards for mediators in court-annexed mediation programs.
Questions, comments, additions and corrections concerning this article or its subject matter are heartily encouraged. Alan Wiener can be contacted by e-mail or by telephone at 858.538.3300 or visit his website.
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