Regulations and Standards for Online Dispute Resolution: A Primer for Policymakers and Stakeholders (Part 1)

by Alan Wiener
Alan Wiener
Part 1
Part 2
End Notes

TRUSTe

User privacy issues were the first subject of Internet trustmarks, and the TRUSTe seal is the Internet's oldest and most widespread attempt to police itself in this regard. TRUSTe launched a privacy seal pilot program in July 1996, and went worldwide in June 1997.(90) In three years, more than 1300 companies displayed the TRUSTe seal, making it the most displayed banner in the country, according to Neilsen NetRatings.(91)

The TRUSTe seal is awarded to web sites that adhere to established privacy principles of disclosure, choice, access and security. Web sites that display the TRUSTe privacy seal agree to comply with ongoing TRUSTe oversight and alternative dispute resolution processes.(92) They promise to provide consumers with simple, effective means to submit their privacy concerns directly to the web site. Users are requested to contact the Code Subscriber directly before filing a report with TRUSTe. If a satisfactory response is not provided, TRUSTE conducts an investigation which may result in revocation of the trustmark, termination from the program or, in extreme cases, referral to an appropriate government agency.(93) TRUSTe has been challenged for not taking action against seal holders. In March 2000 it had reportedly never revoked a seal, despite a number of publicized complaints.(94)

Trusted Shops

Trusted Shops promotes itself as "the first European Seal of Approval for online shops with a money-back guarantee for online shoppers backed by ... one of the leading industrial insurers worldwide."(95) Consumers can register for a free (to the consumer) money-back guarantee from Gerling Insurance Group, insuring against non-delivery, non-refund due to returns and liability due to credit card fraud.(96) If the goods ordered are not received within 30 days, or the merchandise is returned in accordance with the shop's return policies, Gerling will guarantee refund.(97)

Components checked before certification by Trusted Shops are a clear marking and overview of prices, general terms and conditions that are understandable and easy to read, and prompt customer service. Guidelines require that customer inquiries always be answered within a reasonable time, but apparently do not include any dispute resolution provisions.(98) Trusted Shops listed over 110 Certified Shops in 15 business categories in February 2001.(99)

WebTrust Seal

WebTrust is a program of the American Institute of Certified Public Accountants (AICPA) and the Canadian Institute of Chartered Accountants (CICA). Public accounting firms and practitioners who have a WebTrust business license can evaluate and test whether a particular web site meets the WebTrust criteria. The WebTrust Seal of assurance is a symbolic representation of a practitioner's unqualified report.(100)

The WebTrust program generally certifies that the Subscriber discloses and complies with its own policies, rather than that it follows external guidelines. A WebTrust Consumer Protection seal program, signifying that sites have met critical standards for protecting consumer transactions and privacy, is announced as "coming soon."(101) The WebTrust index listed approximately 25 accredited web sites as of February 2001.(102)

WebTrust Version 3.0 (effective March 2001) is modularized, so that a web site can be accredited on one or more of six separate Principles, including Business Practices and Transaction Integrity.(103) This Principle requires (in part) that "[t]he entity discloses its business practices for electronic commerce [and] executes transactions in conformity with such policies ..."(104) To demonstrate conformity, the entity must disclose its customer recourse procedures, which should include both: 1) management's commitment to use a specified third party dispute resolution service if the customer is not satisfied with the entity's proposed resolution; and 2) the procedures for resolving complaints, first with the entity and if necessary with the designated third party.(105) If the recourse mechanism is arbitration, that process must conform to the twelve Principles of Arbitration developed by the National Arbitration Forum.(106)

Which? Web Trader

Which? Web Trader (WWT) is run by Consumers' Association (CA), a charity registered in the United Kingdom with a mission that includes empowering people to make informed consumer decisions.(107) Traders (Subscribers) displaying the WWT logo agree to follow guidelines concerning disclosure of information on their web site, the sale transaction, privacy, security and complaints and dispute handling.(108)

WWT complaint handling requirements include acknowledgment of complaints within five working days, advising the consumer how long it will take to resolve the complaint and keeping the consumer advised throughout the process. A Trader that is unable to directly resolve a dispute must tell the consumer that they may go to WWT to have the complaint resolved. WWT will determine whether the Trader handled the complaint properly and will recommend a solution if appropriate. The WWT decision is binding on the Trader, but will not prevent the consumer from going to court. If WWT finds that a Trader has not complied with the Code, it will take enforcement action, potentially including exclusion from the trustmark scheme. WWT will report to TrustUK concerning compliance of its Traders.(109)

Which? WebTrader certification begins with submission of an online application form containing information about the business and its proprietors. The web site is examined to determine if it displays all of the information required by the Code of Practice, and the site's terms and conditions are examined by WWT's legal department to insure compliance. If adjustments are necessary, the applicant is notified and given opportunity to make changes. When the application is accepted, the applicant's logo is displayed on the WWT site, and the WWT logo may be displayed on the Subscriber's site.(110)

Trustmark Standards and Certification

Ironically, the proliferation of e-commerce trustmarks has led to the perceived necessity for guidelines and standards for accrediting these certification mechanisms. The following discussion describes several such initiatives.

Electronic Commerce Platform Netherlands (ECP.NL)

Electronic Commerce Platform Netherlands (ECP.NL) is a national association for electronic commerce, founded in 1998 to stimulate and accelerate the implementation of electronic commerce into the Dutch economy. It's 170 members originated from users and providers of e-commerce, including government, intermediary organizations and universities.(111) ECP.NL studied the potential of self-regulation to address legal issues concerning electronic commerce, in consultation with Dutch stakeholder representatives, and then drew up the Model Code of Conduct for Electronic Commerce.(112)

The ECP.NL Model Code is a generic framework for codes of conduct designed to increase trust in e-commerce, and is intended as a starting point for drafting codes for a range of sectors.(113) It provides general principles that should be addressed, alternative specimen provisions and explanatory notes. The Model Code provides that code adherents (Subscribers) should clearly indicate what facilities are available in the event of disputes, but does not provide guidelines or specimen language concerning dispute resolution procedures.(114) The Model is intended as a dynamic and flexible instrument, to be adjusted in light of experience and international discussions.(115) ECP.NL is also a member of the European Commission e-Confidence Core Group, which is drafting guidelines for the accreditation of e-commerce codes of conduct. (See infra, page 23).

TrustUK

In 1999, the UK Government became concerned that the large number of trustmark schemes being developed worldwide might cause consumer confusion and lead to false assumptions about the value of the particular symbols and the trustworthiness of the merchants displaying them. It therefore asked the Alliance for Electronic Business (AEB) and the Consumers' Association (CA) to jointly develop a self-regulatory scheme to address the needs of online consumers.(116)

TrustUK Ltd. is a non-profit venture endorsed by the UK Government and governed by consumer representatives and industry leaders. It seeks to foster consumer trust and confidence through the accreditation e-commerce Codes of Conduct. Businesses that subscribe to any TrustUK accredited Code may display the TrustUK hallmark on their web site, with or without the accredited intermediate trustmark.(117)

TrustUK has promulgated two sets of core principles that online codes of conduct must minimally satisfy for accreditation. Core Principles for On-line Codes of Practice addresses marketing and transactional issues including advertising, disclosures, contracts, privacy and security. Core Principles for Redress Mechanisms, Monitoring and Enforcement sets forth rather comprehensive dispute resolution provisions that codes of conduct must include for accreditation by TrustUK.

For accreditation, Codes must require that Subscribers have an internal complaint handling system that is fair, effective, confidential, easy to use and speedy, and that meet specified minimum requirements. Subscribers must be required to direct complaints that are not satisfactorily resolved internally to the Code Owner for independent resolution. Code Owners must establish alternative dispute resolution mechanisms that are effective, free or low cost, independent, quick, easy to use, transparent and binding on Subscribers. If the complainant remains dissatisfied after the dispute resolution process on the grounds of procedural impropriety only, the Code Owner must refer the case to TrustUK.(118) Specific requirements for monitoring and enforcing Subscribers compliance are also imposed on Code Owners.

As of January 2001, TrustUK had accredited Codes owned by Which? WebTrader, the Direct Marketing Association and the Association of British Travel Agents. These Code Owners, respectively, had accredited approximately 100, five, and no web sites.(119)

European Commission e-Confidence Group

The European Commission convened the e-Confidence Group of stakeholders

to develop general principles which could be used by accreditation bodies in the EU Member States to endorse codes of conduct and trust mark schemes. The e-Confidence Core Group was established to draft the guidelines, and released first drafts of three sets of accreditation principles for public discussion and comment in November 2000.(120) The Core Group is comprised of representatives from ABN-AMBRO, AmericaOnline, BEUC, ECP.NL, Hewlett Packard, International Chamber of Commerce, Proctor and Gamble, TrustUK, Vivendi and the European Commission.

The Core Group's draft Guiding Principles for Generic Codes of Practice for the Sale of Goods and Services to Consumers on the Internet are general principles, meant to guide accreditation bodies when confronted with issues not covered in other frameworks. The E-Commerce Codes of Conduct - Specific Requirements Additional to Community Law and the General Guiding Principles are designed to provide specific guidance on points not otherwise covered by EU law and are presented as a compilation of the best practice enshrined in codes from around the world. The Guiding Principles for National Accreditation Bodies for E-Commerce Codes of Conduct address the composition of accrediting bodies, granting and withdrawing accreditation, monitoring complaints, enforcement and sanctions.(121) Together, the draft principles establish a three-level dispute resolution scheme for business-to-consumer e-commerce.(122)

The Guiding Principles for Generic Codes provide that Codes should require Subscribers to ensure that their in-house complaint process is transparent, confidential, free to the consumer, easily accessible and responsive. Subscribers should respond to any complaint in a timely, clear and fair way with the aim of satisfying complaints and providing appropriate remedies. Where internal procedures do not resolve a complaint, Codes should require Subscribers to submit the dispute to an alternative dispute resolution scheme (complying with the Commission Recommendation on out-of-court settlement bodies handling consumer disputes) and to accept the outcome.(123)

The Specific Requirements Additional to Community Law and the General Guiding Principles require Codes to require Subscribers to provide information on their complaint handling process, to acknowledge complaints within a reasonable time and to seek to resolve complaints within 30 days of acknowledgment. Subscribers are to provide information on the alternative dispute resolution scheme they adhere to when the consumer remains dissatisfied after internal procedures. Subscribers must also inform Code Owners of complaints not satisfactorily resolved internally, and of the outcome of the alternative dispute resolution process.(124)

The Guiding Principles for National Accreditation Bodies for E-Commerce Codes of Conduct state that accreditation bodies must be able to properly monitor Code Owners, either by requiring that the Owners report on complaints and outcome of disputes submitted to alternative dispute resolution, or through other methods. Accreditation bodies are encouraged to regularly publicize their work and to seek feedback about Codes from consumers and competitors.(125)

In comments to the e-Confidence Group, the Consumers' Association (CA) emphasized the importance of harmonizing standards for e-commerce codes. It believes this can be accomplished either by national approval systems such as TrustUK, or by a single EU wide body. In either case, CA believes consumer awareness of the schemes is crucial to their success.(126)

DISPUTE RESOLUTION PROVIDER INITIATIVES

American Arbitration Association (AAA)

The American Arbitration Association (AAA) announced, in May 2000, that it was developing new standards and training protocols for resolving disputes over the Internet, and would soon begin offering online dispute resolution.(127) At the June FTC/Department of Commerce conference, a representative said the AAA would convene a broad committee of stakeholders to develop due process protocols for the use of Internet-based alternative dispute resolution mechanisms.(128)

The AAA announced, in January 2001, that it had developed the eCommerce Dispute Management Protocol - Principles for Managing Business-to-Business Relationships in collaboration with key industry leaders. Initial signatories include AT&T, BellSouth, DaimlerChrysler, Honeywell, FexEx, Microsoft, PepsiCo and Wells Fargo.(129) The Protocol enunciates five general principles, including that "all businesses are entitled to a fundamentally fair dispute management process...," and that "it is important to isolate disputes and resolve them with minimal disruption to other transactions." It encourages "the use of a variety of cost-effective methods to resolve disputes at the earliest possible stage" and supports "the use of appropriate technology to aid the swift and economical management of disputes." The Protocol does not enunciate any specific standards, guidelines or procedures for online dispute resolution.(130)

American Bar Association (ABA)

The Section of Dispute Resolution of the American Bar Association (ABA) announced, in June 2000, that it was launching an effort to develop standards for Internet-base alternative dispute resolution systems. The announcement said the Section would convene a broad based working group to develop the standards, and an advisory group comprised of industry representatives, academics and other entities interested in using the Internet to resolve disputes. The working group would address a range of issues related to online ADR, including scope, confidentiality, enforceability, due process protections, qualifications of neutrals, impartiality, representation, cost and the potential for non-attorney neutrals to engage in the unauthorized practice of law.(131)

The parent ABA organization (rather than the Dispute Resolution Section) ultimately convened the Task Force on E-Commerce and ADR. The Task Force was comprised entirely of representatives from the ABA Dispute Resolution, Litigation, Business Law and International Law & Practice Sections, and is to gather information and draft proposed protocols, guidelines and standards. An Advisory Group is to include ADR providers, Internet providers, consumer representatives, government entities and other organizations with an interest in e-commerce. Advisory Group members (not yet announced) and others are being invited to provide information and comments to the Task Force.(132)

The ABA Task Force convened it's first public meeting on January 27, 2001, at Fordham Law School in New York City. At the meeting, participants reportedly noted that a number of similar processes are being conducted by private organizations, business consortiums and government entities, but said an ABA effort could be more beneficial because of the association's neutrality and profile. The Task Force was encouraged to structure the dialogue so that corporations and the public are able to "clearly understand and discuss" the many issues that must be addressed.(133) Presentations made by representatives of the CPR Institute for Dispute Resolution, the Federal Trade Commission and Online Resolution can be viewed at the Task Force web site.(134)

Participants in the January 2000 public meeting reportedly appeared in agreement on the need for ethical guidelines for neutrals that practice online dispute resolution. Online Resolution president Colin Rule said the Task Force should strive to provide clear guidance and standards of practice without stifling innovation in online ADR mechanisms. Others reportedly commented that the guidelines should be drafted in a way to protect the parties in an online dispute resolution process without stifling competition among ADR providers and neutrals.(135)

A second public meeting of the ABA Task Force will be held on February 17, 2001 in San Diego.(136)

Coalition of Internet Dispute Resolvers (CIDR)

Representatives of SPIDR, the ABA Section of Dispute Resolution, Judicial Arbitration & Mediation Services (JAMS), mediate.com and approximately a dozen online dispute resolution providers met the day before the June 2000 FTC/Commerce Department workshop. The group's principal concern was responding to the U.S. government's interest in supporting online dispute resolution and in establishing standards for online dispute resolution processes. The possibility of an online dispute resolution association or a section of SPIDR developing minimum and best practice standards was suggested.(137)

A planned trade association of online dispute resolution providers called the Coalition of Internet Dispute Resolvers (CIDR) was announced in September 2000. The organization was to encourage the federal government and businesses to increase the use of online ADR for e-commerce disputes. Additional plans included drafting a set of baseline standards for online dispute resolution. The association sought to receive comments on draft standards and to collaborate with industry leaders to establish guidelines that would protect consumers but allow innovations in the design of online dispute resolution systems. The trade association concept received support from online ADR providers, however group organizers subsequently decided to act through the SPIDR Online Sector, at least temporarily.(138)

Society of Professionals in Dispute Resolution (SPIDR)

and Association for Conflict Resolution (ACR)

The Society of Professionals in Dispute Resolution (SPIDR) formed an Online Sector in September 2000. The Sector includes members (among them this author) interested in the issues concerning the development of online dispute resolution standards, and has established a forum concerning this subject.(139) As a result of the recent merger of SPIDR, the Academy of Family Mediators, and the Conflict Resolution Education Network into the

Association for Conflict Resolution (ACR), the Online Sector of the new organization may represent the interests of more than 8,000 dispute resolution professionals.

CIDR proponent and SPIDR/ACR Online Sector member Nora Femenia has drafted Proposed Guidelines for Online Dispute Resolution. These draft Guidelines address topics including advertising, fees, transparency and reporting, impartiality, confidentiality/privacy, record-keeping, accessibility, mediator qualifications, enforcement and compliance. Under the Proposed Guidelines, full disclosure of all fees and costs to each party would be required, unless one party will bear all of the cost or all except a predetermined portion. Dispute resolvers would be required to furnish statistics including at least the number of disputes handled, the percentage resulting in agreement, the typical and maximum time to reach agreement and the minimum and typical fees for each party. Dispute Resolvers would be permitted to publicize participants' compliance with agreements and to report non-compliance to an agency or authority if this is stated in advance.(140) Dr. Femenia's Proposed Guidelines have not yet been formally considered or endorsed by SPIDR/ACR or its Online Sector.

Center for Public Resources Institute for Dispute Resolution (CPR)

The CPR Institute for Dispute Resolution announced four tools (forms) to assist participants in the business-to-business e-commerce market in September 2000. The CPR Global E-Commerce Commitment sets forth contract formation principles and a voluntary, non-binding dispute resolution method to which companies may agree. The CPR B2B E-Commerce ADR Commitment is identical, except that it addresses only dispute resolution and not contract formation.(141)

The CPR model agreements recognize that businesses attempting to contract electronically confront inconsistent laws of contract formation and enforcement. They provide that in the event of a dispute arising out of the e-contract, executives of the parties having authority to resolve the matter will negotiate. If the dispute is not resolved by negotiation within 14 days, the parties will engage in mediation. If mediation fails to resolve the dispute within 60 days, any party may unilaterally terminate that procedure and pursue other remedies. The CPR E-Commerce Initiative does not enunciate any specific standards, guidelines or procedures for online dispute resolution.

A CPR advisory committee thoroughly explored the use of ADR in business-to-business e-commerce disputes. It apparently found corporations unwilling sign a blanket commitment to use ADR, such as the CPR Corporate Policy Statement on Alternatives to Litigation.(142)

CONCLUSION

Government, industry, consumer and dispute resolution organizations worldwide are energetically attempting to secure the benefits and address the challenges of the global electronic marketplace. One such focus has been on consumer protection, for obvious public policy reasons and also to promote the confidence regarded as necessary to achieve the full economic potential of the Internet. The availability of fair and effective procedures for resolving e-commerce disputes has, in turn, been identified as a fundamental principle of consumer protection. Government, industry, consumers and the dispute resolution profession have all recognized that online dispute resolution offers potential to promote consumer protection. It has also been recognized, however, that online dispute resolution presents challenges which need to be addressed.

Numerous initiatives are currently underway to address challenges of the Internet marketplace by establishing general guidelines for conducting electronic commerce and specific guidelines for conducting online dispute resolution. These activities are being sponsored by a multitude of government, industry, consumer and dispute resolution organizations around the world. The participants are studying, developing and implementing countless policy statements, regulations and self-regulatory guidelines. They act independently at some times and collaborate in different fora and combinations at others. Their guidelines are directed toward and impact interlacing national, regional, geographic, and market sectors. For these initiatives to produce compatible (if not optimum) results, it is important that participants in the various processes be cognizant of each others' thoughts and activities.

This paper has sought to describe the principle online dispute resolution initiatives known to the author. Due to the breadth and pace of activity in this field, it is presumed to be incomplete, and certainly will be very soon. It is also possible that mistakes have been made in interpreting or describing initiatives and events, for which apologies are extended. The submission of additions, corrections and comments to the author for incorporation into future versions of this paper will be appreciated.

ABOUT THE AUTHOR

Alan Wiener received his Juris Doctorate cum laude from the University of San Diego School of Law in 1979, and a Masters of Dispute Resolution from Pepperdine University School of Law in 2000. He conducted a general civil litigation and transaction practice in San Diego for approximately twenty years, and now works exclusively as a mediator and a dispute resolution consultant to government, organizations and individuals. 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 California Judicial Council working group 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 at AlanWiener@mediate.com, by telephone at 858.538.3300, or visited on the web at www.AlanWiener.mediate.com.

Biography


Alan Wiener received his Juris Doctorate cum laude from the University of San Diego School of Law in 1979, and a Masters of Dispute Resolution from Pepperdine University School of Law in 2000. He conducted a general civil litigation and transaction practice in San Diego for approximately twenty years, and now works exclusively as a mediator and a dispute resolution consultant to government, organizations and individuals.

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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