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

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

by Alan Wiener
Alan Wiener
Part 2
Part 3
End Notes

February 15, 2001





Multilateral Initiatives: OECD, EU-US Summits and G-8

European Union

United States


Australia and New Zealand


International Chamber of Commerce

Business and Industry Advisory Committee to the OECD

and Alliance for Global Business

Global Business Dialogue on Electronic Commerce

Electronic Commerce and Consumer Protection Group

Better Business Bureau and BBBOnline


Federation of European Direct Marketing

Electronic Commerce Promotion Council of Japan


European Consumers' Organisation

Transatlantic Consumer Dialogue

Consumers International


Trustmarks and Seals of Approval


BetterWeb Seal


Federation of European Direct Marketing

Secure Assure

Square Trade


Trusted Shops

WebTrust Seal

Which? Web Trader

Trustmark Standards and Certification

Electronic Commerce Platform Netherlands


European Commission e-Confidence Group


American Arbitration Association

American Bar Association

Coalition of Internet Dispute Resolvers

Society of Professionals in Dispute Resolution

and Association for Conflict Resolution

Center for Public Resources Institute for Dispute Resolution





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 potential customers worldwide. As importantly, businesses and consumers are 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 disclosures, 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 efficacious 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 e-commerce transactions and online dispute resolution should regulated by government or self-regulated by industry.

Two interlaced aspects of online dispute resolution regulations and standards are examined in this paper. The first area involves customer service and dispute resolution provisions contained in (or excluded from) the many sets of guidelines for merchants conducting electronic commerce, which have been evolving for several years. The second area concerns specific guidelines for online dispute resolution providers, which became the subject of considerable attention less than a year ago, and are in seminal stages. While each of these facets raise unique issues, their convergence indicates that persons considering either area should be cognizant of concerns and developments in the other.

This paper is intended as resource for those concerned with the development of guidelines for online dispute resolution, and as a foundation for discussion rather than a position paper. An effort has been made to objectively summarize principal initiatives in the field, in the hope that this will promote constructive dialogue regarding both facets of online dispute resolution guidelines. Although most of the public attention is focused on business-to-consumer e-commerce, the pertinence of online dispute resolution and the online standards dialogue to resolving business-to-business and offline disputes transactions should not be overlooked.

The body of this paper begins with an overview of public and private online dispute resolution initiatives. Government policy statements, forums and other initiatives are then described. Industry policy statements, activities and self-regulatory initiatives are presented next, followed by policy statements and activities of consumer organizations. Third-party "trustmark" programs that accredit online businesses are then described, before the final section discusses initiatives of dispute resolution provider organizations.

To borrow the technical nomenclature, this presentation is Version 1.01. Numerous initiatives are in process and developments are occurring almost daily. Participants and observers of the online dispute resolution initiatives are encouraged to submit any additions, corrections or comments to the author. It is intended that this paper will be periodically republished to report the evolution of the field.


Multilateral and national government organizations have studied the policy and practical aspects of electronic commerce extensively, 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.

Governments have broadly supported the use of alternative dispute resolution, and specifically online dispute resolution, as a primary means of addressing the challenges of business-to-consumer e-commerce. Government policy statements also encourage government, industry and consumer cooperation to develop fair and effective dispute resolution processes. Additionally, industry has been encouraged to pursue self regulatory initiatives such as codes of conduct, trustmarks and reliability programs. Little specific government regulation of e-commerce has yet occurred, however intensive work and some legislation in this area are progressing.

Industry has been quite proactive in its efforts to both minimize 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.

Industry initiatives generally 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 of conduct, consumer groups advocate that these must be backed by effective government regulation.

Consumer organizations also generally support alternative dispute resolution, with the strong caveat that consumers must retain the right to redress in their countries' courts. They have promulgated principles upon which dispute resolution systems should be based, including independence, personnel qualifications and reporting of cases to a publicly accessible clearinghouse. Consumer organizations have also called for national and international standards for business-to-consumer online dispute resolution, third party accreditation and government monitoring of providers.

Seals of approval or "trustmarks" are currently a chief mechanism of both promoting self-regulation and consumer confidence in electronic commerce. Under these arrangements, private organizations promulgate qualifications and e-commerce codes of conduct, which often include dispute resolution provisions. Online businesses that meet the qualifications and/or subscribe to the code are licensed to display the trustmark on their web site. Considerable variation in trustmark schemes has resulted in initiatives to accredit the trustmarks, to help assure that reliance upon them is not misplaced.

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, the dispute resolution profession has apparently not been very active in developing these guidelines.

Dispute resolution professionals and other entrepreneurs have responded to the call for online dispute resolution services. These providers are using a growing array of techniques and technologies to resolve online and offline disputes over the Internet. 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 agreements by the parties without a human intermediary. Some of these 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.(1)

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 disagreed on whether and how government should be involved in ensuring that online dispute resolution programs for consumer e-commerce 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.

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 were announced in September 2000. The 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 these organizations has yet promulgated standards for online dispute resolution, however this work is progressing on several fronts.


Multilateral Initiatives: OECD, EU-US Summits and G-8

The Organisation for Economic Co-operation and Development (OECD) has been an early and consistent catalyst in the development of standards for electronic commerce.

In April 1997, this policy forum of 29 member countries announced the urgent necessity for an internationally coordinated approach to issues arising from commercial transactions on the Internet. The report also noted the importance of identifying those issues which should be dealt with by industries, by industry self-regulation and by government regulations.(2)

The Joint E.U. - U.S. Statement on Electronic Commerce of December 1997 recognized that global electronic commerce would be an important engine for growth in the world economy in the 21st Century. The statement encouraged an open and world-wide dialogue between governments and the private sector to construct a predictable legal and commercial environment for the conduct of business on the Internet. The US and the EU agreed to work together within multilateral institutions and other fora to reach coherent and effective solutions, preferably at a global level. Guiding principles that were enunciated included government's roles of promoting an environment in which electronic commerce can flourish and ensuring the protection of consumer and other public interests. The Statement recognized that industry self-regulation is important and that public interest objectives can be served by codes of conduct, model contracts and guidelines agreed upon between industry and other private sector bodies.(3)

The OECD Committee on Consumer Policy began to develop e-commerce consumer protection guidelines, in cooperation with businesses and consumer representatives, in April 1998. The OECD Council officially promulgated and recommended that its member countries implement Guidelines for Consumer Protection in the Context of Electronic Commerce (OECD Guidelines) in December 1999. The Guidelines are a set of principles to help governments, businesses, consumer groups and self-regulatory bodies formulate and implement appropriate consumer policies and initiatives for electronic commerce.(4) They seek to assure that consumers are no less protected when shopping online than they are when shopping from their local store or a catalogue.(5)

The OECD Guidelines encourage fair and efficient alternative dispute resolution, in addition to addressing transactional concerns including fair business practices, disclosure, payment and privacy. The Guidelines state:

"Consumers should be provided meaningful access to fair and timely alternative dispute resolution and redress without undue cost or burden."

The Guidelines encourage businesses, consumer representatives and governments to cooperatively develop fair, effective and transparent policies and procedures, including self-regulatory programs and internal dispute resolution mechanisms (which consumers should be encouraged to use), as well as the option of effective alternative dispute resolution.(6)

Leaders of the G-8 nations endorsed the OECD Guidelines, and specifically alternative dispute resolution, in the Okinawa Charter on Global Information Society, dated July 22, 2000. The leaders agreed upon key principles and approaches to maximize social and economic benefits of the Information Society, including:

"Promote consumer trust in the electronic marketplace consistent with OECD guidelines and provide equivalent consumer protection in the online world as in the offline world, including through effective self-regulatory initiatives such as online codes of conduct, trustmarks and other reliability programs, and explore options to alleviate the difficulties faced by consumers in cross-border disputes, including use of alternative dispute resolution mechanisms"(7)

The Charter also states that, although the private sector plays a leading role in the development of information and communications networks, it is up to governments to create a predictable, transparent and nondiscriminatory policy and regulatory environment.

The OECD, the Hague Conference on Private International Law and the International Chamber of Commerce jointly sponsored the conference Building Trust in the Online Environment: Business to Consumer Dispute Resolution December 11-12, 2000. Topics included the identity and roles of stakeholders and the need to find common ground among them on essential elements of any fair and effective online ADR for business to consumer disputes. Specific elements considered included transparency, accessibility, cost to consumers, quick decisions, independence, neutrality, impartiality and qualifications of ADR providers, voluntariness, representation and adversarialism.(8)

The United States and European Union reaffirmed their commitment to support the development of self-regulatory codes of conduct, technologies to promote consumer confidence and the OECD Guidelines at their biannual summit in December 2000. Their joint statement specifically recognizes the benefits of fair and effective ADR, especially if provided online, and the importance of promoting its development and implementation. Participation of all interested stakeholders, including governments, consumer groups, industry and academics, is again endorsed. Impartiality, accessibility, low or no cost to consumer, transparency and timeliness of redress are identified as principles necessary to achieve fair and effective ADR.(9)

European Union (EU)

The European Union (EU) has the mission of organizing relations between its 15 Member States and their peoples in a coherent manner and on the basis of solidarity. The European Commission (EC) is the policy origination body for the EU, and has been pro-active in the development of standards to prevent and resolve online and offline consumer disputes.

The EC promulgated Recommendation on the Principles Applicable to the Bodies Responsible for Out-of-court Settlement of Consumer Disputes in March 1998. Seven principles that should be respected by all bodies responsible for out-of-court settlement of consumer disputes are enunciated, including independence, transparency, procedural efficacy, legality of decision, liberty and representation. The Recommendation is not specifically directed to e-commerce transactions, and expressly excludes procedures that only attempt to facilitate a solution by common consent.(10) The Recommendation is pertinent to online arbitration and EC staff are considering the need for mediation and conciliation to be addressed.(11)

The EC proposed a European Parliament and Council Directive concerning certain legal aspects of electronic commerce in November 1998, which is currently in advanced stages of enactment. Article 17(1) requires Member States to ensure that their legislation allows the effective use of out-of-court schemes, including appropriate electronic means, for the settlement of disputes arising from e-commerce. Member States will also be required to ensure that bodies responsible for out-of-court dispute settlement of consumer disputes apply the seven principles previously mentioned. The proposed Directive also encourages out-of-court settlement bodies to inform the Commission of the decisions they make.(12)

The EC convened the e-Confidence Group of Stakeholders to develop general principles that could be used by accreditation bodies in the EU Member States to approve codes of conduct and trust mark schemes covering online shopping.(13) The e-Confidence Core Group, including representatives from AmericaOnline, BEUC, ECP.NL, Hewlett Packard, International Chamber of Commerce, Proctor and Gamble, TrustUK and Vivendi, released first drafts of three sets of principles for public discussion and comment in November 2000.(14) The European Union is also supporting several pilot programs to evaluate the effectiveness of online dispute resolution.

United States (US)

President Clinton directed the Secretary of Commerce, in consultation with the Federal Trade Commission (FTC) and other relevant agencies, to facilitate partnerships between industry and consumer advocates to develop redress mechanisms for online consumers in November 1998.(15) The FTC convened a public workshop in June 1999, to facilitate a dialogue on how governments, industry and consumers could work together to encourage the development of a global marketplace that offered safety, transparency and legal certainty for consumers. Participants agreed that one of the most effective ways to ensure meaningful consumer redress is through innovative forms of alternative dispute resolution, such as online dispute resolution.(16)

The FTC and the US Department of Commerce co-sponsored another public workshop: Alternative Dispute Resolution For Consumer Transactions in the Borderless Online Marketplace in June 2000. Over 120 representatives of academia, consumer groups, industry, ADR providers and government examined existing and developing ADR programs for resolving online disputes. Participants broadly supported the development of ADR programs to resolve online consumer transactions, and recommended continued cooperation among stakeholders in creating a range of ADR programs suitable for different types of disputes, ensuring that ADR programs are fair and efficient, and combating fraudulent and deceptive ADR practices.(17)

Participants at the June 2000 FTC/Commerce workshop were not of one mind concerning the appropriate roles of governments and other stakeholders in ensuring the fairness and effectiveness of ADR programs."(18) Some believed government should take the lead in developing a baseline set of principles to ensure that all ADR mechanisms have certain basic qualities in common. Others cautioned that government involvement in establishing ADR guidelines and government-set guidelines could inhibit development of innovative programs, and supported private-sector development of codes of conduct. Yet others suggested government certification of ADR programs that meet government-set standards, and the use of a seal or trustmark to identify accredited sites.(19)

The FTC hosted another roundtable on alternative dispute resolution and e-commerce on February 6, 2001. The morning discussion focused on recommendations concerning ADR for online consumer transactions proposed by the TransAtlantic Consumer Dialogue (see infra, page 14) and Global Business Dialogue on Electronic Commerce (see infra, page 10).(20) Issues on the agenda included minimum legal standards for ADR, whether ADR mechanisms should be binding on consumers, confidentiality of ADR processes and potential rules for ADR Processes.(21)

At the February 2001 roundtable, both business and consumer advocates reportedly told the FTC there must be government oversight of alternative dispute resolution programs for consumer e-commerce claims to assure that the systems are fair and effective. Consumer representatives stressed that in addition to promulgating guidelines and codes of conduct, government oversight is necessary to ensure ADR providers' compliance with them. Suggested oversight methods included the FTC suing providers that don't comply and a disclosure system involving regular provider reports concerning the nature and outcome of the disputes they handled, with annual independent audits.(22)

No specific guidelines for either business-to-consumer e-commerce in general or online dispute resolution have yet been proposed or promulgated by the FTC or Department of Commerce.


The Office of Consumer Affairs of Industry Canada convened and coordinated the Working Group on Electronic Commerce and Consumers, consisting of business, consumer and government representatives, in August 1999. The working group drafted and approved principles intended to guide businesses, consumers and governments within Canada.(23) Consumer Protection for Electronic Commerce, A Canadian Framework enunciates eight principles addressing disclosure, contract formation, privacy, security, redress, liability, unsolicited e-mail and consumer awareness.

The Canadian "Redress" principle states: "Consumers should have access to fair, timely, effective and affordable means for resolving problems with any transaction." It further provides that when internal mechanisms fail to resolve a dispute, vendors should use accessible, available, affordable and impartial third-party processes for resolving disputes with consumers. Government, businesses and consumer groups are encouraged to work together to develop appropriate standards for dispute resolution mechanisms.(24)

Australia and New Zealand

The Commonwealth of Australia encourages self-regulation by businesses engaged in electronic commerce with consumers. In May 2000, the Consumer Affairs Division of the Department of the Treasury published a "best practice model" that businesses and industry associations are encouraged to adopt. The model addresses a breadth of transactional issues including fair business practices, advertising and marketing, information, conclusion of the contract, privacy and payment.

The Australian model also includes Internal Complaint Handling and External Dispute Resolution guidelines. The later state that businesses should provide consumers with clear and easily accessible information on any independent customer dispute resolution mechanisms to which the business subscribes, and that such methods should be accessible, independent, fair, accountable, efficient, effective and without prejudice to judicial redress.(25)

The New Zealand Ministry of Consumer Affairs published the New Zealand Model Code for Consumer Protection in Electronic Commerce in October 2000.(26) The New Zealand model code is an adaptation of the Australian Best Practice Model, and is substantively equivalent with respect to dispute resolution guidelines.(27)


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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