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OnLine Dispute Resolution: Implications for the ADR Profession

by Dan DeStephen & John Helie
July 2000

Introduction

On June 6-7, 2000, the Federal Trade Commission and the Department of Commerce sponsored a conference on "Alternative Dispute Resolution for Consumer Transactions in the Borderless Online Marketplace".

The purpose of this conference was to bring relevant stakeholder groups together to discuss the use of online dispute resolution (ODR) addressing a broad class of consumer disputes arising out of the growing online commercial marketplace. Attending the conference were representatives from government, consumer advocacy groups, the European Union, and approximately 15 providers of online conflict resolution services. While the specific focus of the conference was on online business-to-consumer transactions, conference participants also addressed the broader use of online dispute resolution processes to resolve a variety conflicts.

Despite what might seem a daunting journey, the Internet will increase the quality of service provided by the individual practitioner and improve the practice of dispute resolution. Future increases in bandwidth will bring audio and video into the mix, allowing mediators to use the Internet to speak with and see parties in real-time, expanding the potential applications to the field. The innovations reflected in the presentations at the conference provided a preview of the ways the Internet will benefit the field of dispute resolution.

Our ability to control the rate at which the Internet affects our practice is low. Thinking that we can control when and how the Internet will affect our practice is illusionary.

The Internet is not a fad. People will not experiment with the Internet and then return to more traditional forms of doing business or connecting with one another. At the universities, the most adamant chalk-and-talk professors are finding that as their students discover ways to integrate the Internet into their learning, they need to adjust their teaching. Students will carry the Internet into every aspect of their/our lives. In a similar sense, as the users of dispute resolution services integrate the Internet into their work/lives, dispute resolution providers will need to adjust.

There will continue to be a need for traditional forms of dispute resolution. Nothing at the conference foretold of the immediate demise of how dispute resolution is currently practiced. Indeed, the presenters outlined the still formidable obstacles to the expansion of online dispute resolution. Yet even the most traditional face-to-face practitioners will find that the Internet is going to be a growing part of their practice.

What we found surprising was the amount of sudden growth within the field of online dispute resolution. Fifteen ODR businesses submitted comments for the Conference. An additional 5-10 ODR businesses attended. The problem with determining how many ODR businesses are out there depends on the day of the week, how tuned in you are to this aspect of the Web and where in a business you consider the ODR business launched. New businesses are opening regularly; some are relatively robust while others are fledglings. Announcements come from large well-established Face to Face/Brick and Mortar ADR providers and law firms, while others are from small entrepreneurial mediation firms and individuals. Internet business opportunists, knowing little about ADR yet confident that they can learn all they need from a group of advisors, are also entering the field.

Competition/collaboration Balance

Most importantly these entrepreneurs have used sophisticated business plans and extensive market analysis to convince investors that there is a business in resolving disputes. That they choose to focus on the online delivery system is almost incidental to the reality that there is a large business potential in disputes.

The Internet will significantly increase the interaction between the field of dispute resolution and other fields. Our relatively small community of practitioners will begin to "rub elbows" with information technologists, venture capitalists, and ecommerce providers. These groups view dispute resolution from a very different perspective.

At the conference, for example, ecommerce providers described online dispute resolution alternately as part of an organization's customer service strategy, a means to establish consumer trust in ecommerce, and as a product/service they could market. Conversations focused more on "trust-marks" and "branding" than on "evaluative" vs. "transformative" mediation practices.

This is a borderless "service business" opportunity. If you can resolve disputes without needing to travel, you can set up office anywhere. In the Brick and Mortar world you know that if there is stiff competition in a geographical region you should set up shop elsewhere. Most of your work will be generated through traditional local person-to- person networks and competing for that network is tough. We all know the key ADR players in each geographical region; they have a marketing network advantage there.

Resolve disputes without traveling and you have opened your opportunity to the world. Sounds great—resolve disputes throughout the world—but this fundamentally shifts the marketplace and the strategies for succeeding.

These service businesses will be evaluated on their ease of use, technological innovations, and rates of positive consumer responses. Yes, you will be evaluated: if not the mediator directly, the .com business will have to show results and let the world know that they are the best. Transparency, competency, and neutrality will become market values.

"What ODR.com do you use?"

Wise investors want to know what "unfair advantage" your .com has in the marketplace. They want to know what technology and what business practice patents you hold. What are the barriers to entry? What will keep others from succeeding in your marketplace?

Several of the ecommerce dispute organizations are seeking patents for specific online dispute resolution techniques. It is difficult to patent a piece of technology. There are many ways of building technology tools and interfaces to do a blind bidding negotiation, but if you can patent the business process then you have an asset. What other dispute resolution business practice is patentable? All the ODR.coms are asking that question. "How can we set up a service which is better than anyone else in ways that we can protect?"

In technologist terms, the ADR community has been operating in an "Open Source" development relationship, more like LINUX than Windows. In "Open Source," the basic code of the operating system is shared, along with the innovations. We encourage others to excel and try to give them something that will help them succeed. The sharing of practice that has characterized the current community of dispute resolution is at risk in a highly competitive Internet marketplace. It may be awhile before the ODR community comes together to share innovations.

If innovations in the practice of dispute resolution become trade secrets and patents then the entire field will suffer. There is also the risk of large organizations exercising monopolistic power to threaten other practitioners. The current influx of millions of dollars into ebusinesses and their corresponding rapid expansion into the online conflict resolution market is partially designed to discourage the entry of potential competitors.

There has and will always be an element of competition in the ADR community, but collaboration has been high, and secrecy has been low. ODR will likely shift that balance.

Standards and Qualifications

Borderless transactions will not only impact jurisdictional issues, they will impact standards of practice and qualifications for dispute resolution providers. The European Union, for example, is already looking into establishing a process for certifying online mediators who wish to practice within the European Common Market.

As the use of dispute resolution services expands worldwide and operates across borders, the number of governmental units seeking to regulate the practice will continue to grow.

On the other hand, the International Chamber of Commerce Working Group on ADR in their Global Business Dialogue (GBDe) draft report suggests:

"Refrain from imposing national or regional accreditation criteria or systems for ADR mechanisms, but rather encourage the development of international self-regulatory principles and rules that could be the basis for self-declarations of compliance. Critical reviews by consumer organizations will without any doubt function as an efficient mechanism for the creation of transparency and for assessing the value of the individual mechanisms for consumers."

The ODR.coms will join these groups in discussing the implicit certification processes of online conflict resolution. These businesses will set standards of practice and competency in creating and maintaining the rosters of their practitioners. There is considerable risk that such standards will also become accepted in establishing standards for face-to-face dispute resolution. The cross border nature of the Internet also complicates many of the North American-based controversies we currently are discussing. Placed in an international perspective, what relevance does the current angst over the Uniform Mediation Act or the Unauthorized Practice of Law really have?

The ability of the Internet to expand choice is well established. If clients are not satisfied, the Internet provides an easy means to find an alternative. For those in the ADR "quality assurance" discussion who feel that the market will speak with their feet, it is even more compelling when the market can speak with a click of their mouse.

The Internet will increase awareness of ADR

With the amount of venture capital available to start-up companies, new online entities can become major providers of dispute resolution services in a very short time frame. Business will continue to flow through the normal gatekeepers of ADR services, courts and lawyers, but marketing will be aimed more at business networks and end users.

These ODR.coms will have large marketing budgets and will use all advertising media channels. The press is intrigued. A recent San Francisco Chronicle Technology Section front page article sported a 1 inch "Mediator" Headline with a Sub title: "Net Services referee disputes between online seller, buyers."

National Public Radio has had recent programs on ODR. We have seen more news coverage of ADR in the last six months than we have in six years. Visit any ODR site and you will see a proud list of all the articles they have scored about their services.

Disputes are the essential element of a successful resolution business, online or off. Educating the market place is even more important than developing sophisticated technology. We will see mediation, arbitration and all forms of ADR services being marketed vigorously. Buses will travel our streets touting the superior dispute resolution processes of this or that ODR.com. Someday a blimp will float overhead with some "ODR.com" flashing in neon.

ADR services will need to be clearly explained in a compelling way. As ecommerce businesses incorporate dispute resolution options into their customer service strategies, the world's population will become more aware of how such processes can benefit. The Web's capacity to disseminate information about ADR throughout the world is one of its greatest assets. Even if the business plans are wrong, ADR services will significantly gain from the research, marketing, exposure and creative energy flowing into the field.

Opportunities for the Practice of Dispute Resolution

The Internet provides considerable opportunities for private practitioners who want to move some of their practice online and wish to enhance their face-to-face practice through integrating elements of the Internet into their work.

The Internet provides a vibrant marketplace for both individuals and organizations to market themselves in very cost-effective ways. There is already a significant expansion in the use of the Internet to market face-to-face dispute resolution. Less certain is how the Internet will affect the provision of face-to-face dispute resolution services.

A second area of business growth is in providing face-to-face providers with internet-based tools to enhance their practice. One firm, for example, will allow for online "jury" evaluations of lawsuits to provide parties with a quick neutral evaluation of their cases.

Blind bidding sites allow parties to secretly submit settlement offers. If the two offers are within a set range of agreement (e.g., within 5% of each other or within $30,000 of each other), the web site splits the difference and returns a "settlement" amount.

On an upnote, mediation and voluntary settlement will likely increase in use over the more ajudicatory processes that rely on some level of jurisdictional issues. Cross boundary and geographical differences are best dealt with if the parties agree to the resolution.

The Internet will significantly expand the number and type of entities/people engaging in the practice of ADR. While opportunities for solo-practitioners will continue to grow, new configurations of service providers will enter the field of dispute resolution. These new practitioners and new organizations will be seeking opportunities for continuing education, networking, and affiliations. Membership organizations that can provide high quality services to these new entrants will experience considerable growth in membership.

Challenges for the Practice of Dispute Resolution

The Internet will also create significant challenges for those who currently practice within the field. Relative obscurity has provided a measure of protection to our values and beliefs about the practice of dispute resolution. These core values and beliefs will be challenged as the Internet becomes more and more a part of our practice.

First, the Internet threatens the meaning we hold for many of the practices within ADR. As the market value of conflict resolution services increase so will the temptation to label a broader range of activities as being "conflict resolution." If bad practice becomes associated with the terms used to describe our field, then potential consumers will evidence increasing resistance to utilizing any form of dispute resolution. The Internet will seriously challenge any one group's ability to control the meaning of the terms that are at the core of the group's identity.

Strategies for the Practice of Dispute Resolution

Unlike the adage of "Everything comes to those who wait," the online world rewards innovation and risk and punishes those who adopt a wait-and-see attitude. In the online world, "It is better to be a year too early than six weeks too late."

Educate yourself

The technology of dispute resolution will impact all of our practices. Understand how the Internet can be integrated into your practice; explore the emerging opportunities of online conflict resolution, and how internet-based tools can be used effectively in your place-based practice.

Speculating on the direction of technology, especially as it relates to the Internet, is a risky business. Innovation, when mixed with lots of money, can produce instability. What is safe to predict is that the Internet will change the ways in which providers interact with their clients. We need to be prepared to take advantage of the opportunities the Internet offers.

Biography



Dan DeStephen

As one of the founding directors of the Mediation Information and Resource Center, John Helie continues his commitment to dispute resolution and the Internet. John founded ConflictNet in 1989, as a communication, forum and information sharing network for the Conflict Resolution Practitioners community. A trained mediator and facilitator, John has pioneered work being done with online conflict and communication. His interest in conflict resolution and the Internet led to his involvement with RuleNet, an Internet/Web based Regulatory Negotiation Process sponsored by the Nuclear Regulatory Commission. He designed software tools for building and evaluating consensus within the RuleNet project and was the first facilitator to use this technology.

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