Opportunities And Initiatives In Online Dispute Resolution

Republished by permission of Association for Conflict Resolution. Originally published in SPIDR News, Society of Professionals in Dispute Resolution, Summer 2000, Volume 24, No.3.

Introduction

The Internet is an exploding global population and economy where in-person and telephone transactions are replaced by keystrokes and mouse clicks transmitted through wire and now wireless webs. This new electronic community has created dispute resolution needs, opportunities and challenges which ADR providers, merchants, consumers, technologists and regulators are bustling to fulfill. A growing number of ADR providers are developing and using Internet based technologies to facilitate resolution of disputes which arise both online and off.

This article examines the Internet marketplace and current Online Dispute Resolution (“ODR”) initiatives. Demographic and economic considerations which frame online disputes and proposed guidelines for resolving disputes arising from online consumer transactions are first discussed. Current and developing ODR services and technologies and recent movements to promulgate standards of practice for online dispute resolution are then considered.

The Internet And The Online Disputes

Internet Demographics and Economics

An estimated 288 million people were “online” as of March 31, 2000. This population is up from just 50 million in 1996, and is projected to increase to nearly one billion by 2005.www.glreach.com/globstats

Approximately 56% of all United States adults use the Internet. This is a six hundred percent increase since 1995, and makes the Internet the fastest growing technology in the history of the world, surpassing even the computer.

Geographic and political borders are largely irrelevant on the Internet. Some demographers classify population by language, because people who share communication form online communities regardless of where they live. Approximately 51% of the current online population are native English speakers, and the remainder represent 27 other languages. Native English speakers are expected to constitute less than 27% of the Internet population by 2005.

Tremendous growth is predicted in the number of online sellers and buyers. The number of “small” merchants (annual sales from $100,000 to $10 million) on the Internet is projected to increase from 17,500 in 1999 to 2.6 million in 2004. Twenty-nine percent of people who go online are expected to purchase goods or services on the Internet in 2000. Thirty-eight percent are expected to make online purchases by 2003, generating $1.6 trillion in Internet commerce (“e-commerce”) that year.

The median amount of all online transactions is just $300. The median business-to-business (“B2B”) transaction is $800, and more than half are under $1,000. The median business-to-consumer (“B2C”) transaction is $244, and 37% are less than $100. B2B e-commerce is projected to grow from $43 billion in 1998 to $1.3 trillion in 2003, and B2C e-commerce from $7.8 billion to $108 billion during the same period.

The characteristics of the Internet community and of e-commerce transactions increase both the likelihood of online disputes arising and the difficulty of efficiently resolving them. Linguistic and cultural differences and the absence of face-to-face or telephone communication may contribute to misunderstandings and impede their resolution. Geographic distances may create logistical obstacles to completing e-commerce transactions and resolving ensuing problems. Conflicting laws may cause divergent expectations and impede conflict resolution for parties located in different jurisdictions. Conventional dispute resolution and even face-to-face ADR processes are impractical means of resolving the vast majority of e-commerce transactions.

Initiatives for Resolution of Online Consumer Disputes

Government and business organizations have recognized the importance of appropriate dispute resolution processes for online consumer transactions. The Organization for Economic Development and Co-operation (OECD) has recommended that member countries adopt Guidelines for Consumer Protection in the Context of Electronic Commerce. The recommended guidelines state, in part: “Consumers should be provided meaningful access to fair and timely alternative dispute resolution and redress without undue cost or burden.”

President Clinton has directed the Secretary of Commerce to facilitate partnerships between industry and consumer advocates to develop redress mechanisms for online consumers. On June 6 and 7, the Department of Commerce and Federal Trade Commission sponsored a public workshop: Alternative Dispute Resolution For Consumer Transactions in the Borderless Online Marketplace. The purpose of the workshop was “to examine developments, gain further understanding, and identify potential issues associated with the use of alternative dispute resolution for online consumer transactions.”

Leading technology companies, including America Online, AT&T, Dell, IBM, Microsoft, Network Solutions and Time Warner, have formed the “Electronic Commerce and Consumer Protection Group (“E-Commerce Group”) and proposed Guidelines for Merchant-to-Consumer Transactions. The E-Commerce Group’s dispute resolution guideline states, in part: “Merchants should provide Consumers with fair, timely, and affordable means to settle disputes and obtain redress.” The guidelines provide that merchants should establish internal mechanisms to address consumer complaints, and allow merchants to contractually require consumer participation if notice is given at the time of the transaction. Merchants are encouraged to participate in reputable, independent third-party dispute resolution programs, including online dispute resolution processes. The guideline also states “third-party dispute resolution programs should encourage Consumers to seek redress through a Merchant’s internal complaint mechanism prior to being granted access to third-party dispute resolution programs.”

Dispute Resolution On The Internet

ODR Processes and Technologies

An increasing number of organizations are providing mediation, arbitration, and less traditional dispute resolution services over the Internet. These providers use a growing array of technologies to resolve disputes which arise online and offline. Nineteen ODR providers, their Internet addresses, and the type of services offered when this article was written are identified in the sidebar.

“Blind bidding” or “blind negotiation” is one of the most prevalent dispute resolution services currently available online. The common characteristic of these processes is the parties’ submission of monetary offers and demands which are not disclosed to their negotiating counterpart, but are compared by computer in “rounds.” (SettleSmart appears unique in allowing either party to include non-monetary settlement terms, such as confidentiality or indemnity, by submitting them via fax or e-mail before making their offer or demand.) If the offer and demand match, fall within a defined range or overlap, the case is settled for the average of the offer and demand, the matching amount, or the demand in the event of an overlap. If the claim is settled, the participants are immediately notified while online or by e-mail.

SquareTrade offers an online forum which allows buyers and sellers to collaboratively resolve issues involving online transactions. Claimants initiate a case by completing an online form stating what happened and what they want the other party to do. SquareTrade notifies the other party by e-mail, so they can respond. The complaint and response are posted on a secure page, where the parties can exchange information as long as they need to. If this does not resolve case, SquareTrade may assign a mediator at the request of the party who initiated the complaint.

iLeveL members can submit complaints against vendors and their desired solutions online. This information is forwarded to the vendor by iLeveL, and held confidential until the parties have had an opportunity to reconcile. Failing a reconciliation, and with the member’s authorization, all information gathered is posted online. The online public can then review the dispute and express their views and comments in favor of the member or vendor.

iCourthouse offers online “Peer Jury” and “Panel Jury” processes to assist in the evaluation and resolution of disputes. In Peer Jury cases, volunteer iCourthouse jurors select the cases they would like to decide, review the parties’ Trial Books, may post questions to the litigants, and ultimately render their verdicts. The parties receive a summary including the number of votes cast, the median award and a compilation of juror comments. (The parties decide whether the verdicts will be binding or advisory.) In Panel Jury Cases, the parties choose specific jurors based upon their responses to voir dire questionnaires and can monitor deliberations real-time. In addition to their verdicts, jurors answer questionnaires from the parties about the effectiveness of the evidence and arguments presented.

An increasing number of ODR providers are mediating disputes over the Internet. Typically, one participant initiates online mediation by completing a confidential form on the provider’s Internet site which identifies the parties, the nature of the disagreement and the desired outcome. An ODR coordinator or mediator then contacts the other parties, informs them of the submission and invites their participation. If accepted, an agreement setting forth the online mediation groundrules or procedures is often executed. The mediator then communicates with the parties, sometimes jointly and sometimes individually, and attempts to facilitate an agreement using many face-to-face mediation techniques. If an agreement is reached, it is commonly commemorated in writing.

One Accord offers support for simple and complex negotiations on the Internet through a patented neutral site. The system is promoted as integrating interest-based negotiation principles with technology designed to optimize settlements. A facilitator helps parties jointly model their negotiation problem and then assists each party individually input their confidential preferences from their private computer terminal. The system “elicits complex preferences by allowing parties to associate confidence in relative importance of issues and package ratings” and “accurately models negotiation cases and party satisfaction functions allowing parties to experiment with ‘what if’ scenarios.” Finally, the system “generates fair compromises, equivalents and optimal solutions apportioning benefits according to an equity reference established by negotiating parties.”

WEBdispute.com currently offers Document/E-Mail Arbitration for disputes resulting from e-commerce transactions. Participants complete and submit an Agreement to Arbitrate (or Demand for Arbitration) and Oath of Participation. WEBdispute.com issues a schedule for submitting and answering disputed issues (including statements of the case, documents and affidavits) and sets a five-day E-mail Hearing. When the hearing is opened, each party presents their case and opposition to the opponent’s arguments by e-mail. The arbitrator may pose questions to both sides and, on the last day of hearing, the parties may submit final arguments by e-mail. The arbitrator then closes the hearing, considers all evidence, and renders a decision by US Mail within twenty days.

The availability of online arbitration is increasing. e-Resolution currently offers online arbitration of Internet domain name disputes, and indicates on its web site that it will begin business-to-business and business-to-consumer arbitrations online in 2000. The American Arbitration Association announced in May that it will soon offer online arbitration. Ultimately, in this scenario, a conflict and supporting documents will be submitted to the AAA and an arbitrator selected electronically, video-conferences will replace face-to-face meetings, awards will be delivered electronically, and fees and settlement funds will be transferred via a secure server.

E-mail is the most common technology currently used for online dispute resolution. Some providers supplement e-mail with other communication tools including electronic conferencing, online chat, video-conferencing, facsimile and telephone. Some ODR providers will arrange face-to-face meetings with the participants if necessary and practical, however there is a discernable preference among many for electronic communication.

The CAN-WIN^TM
Internet conferencing system allows registered participants to log into an electronic conference room from anywhere in the world using standard browser software. A list identifying all parties present appears on each participant’s screen, and clicking on a participant’s name opens a window to compose e-mail to that individual. There is also an area on each participant’s screen to type messages to all participants. When sent, these messages immediately appear on the screen of all parties, identified with the sender’s name and time. Participants on one side of a dispute who are in different locations may also caucus privately with each other and/or with the mediator during an online session. Two electronic conference rooms allow break-out sessions, during which the neutral may communicate with both rooms but parties in one room may not communicate with parties in the other.

ODR Standards Initiatives

The burgeoning field of online dispute resolution has created a new set of ethical and standard of practice issues. All such questions which have been debated in the face-to-face dispute resolution context also pertain online, including neutral qualification, certification, impartiality and rendering of professional advice, party self-determination, confidentiality, quality of the process, advertising and fees. Some of these issues, such as confidentiality and inter-jurisdictional regulation, are further complicated by the nature of the online environment.

The need for online dispute resolution standards is being recognized by a growing number of individuals and organizations. Online Mediators has published Draft Protocols for Online Mediation, which overlay the ABA/SPIDR/AAA Model Standards of Practice. The Technology Section of the ABA Section of Dispute Resolution has formed an Online Standards Subcommittee. AAA President and CEO Slate told ADRWorld that the development of protocols for online dispute resolution is essential to the success and acceptance of online ADR.

ODR pioneers John Helie, Jim Melamed and Colin Rule organized a June 5 meeting of leaders in the face-to-face and online dispute resolution communities, to stimulate informal discussion regarding standards and best practices for online dispute resolution. Approximately 35 participants attended, including representatives of SPIDR, the ABA Dispute Resolution Section, JAMS, mediate.com and approximately a dozen ODR providers. There was general consensus that there should be both capable minimum standards for ODR providers and room for innovation. There was also general consensus that online mediation should begin with adoption of the SPIDR/AAA/ABA mediation standards.

A number of participants at the June 7 Commerce/FTC workshop advocated for a private sector effort to create minimum standards for online dispute resolution. Many said the code should be developed through a collaborative process involving all interested parties. European Union and Japanese officials indicated their governments would support collaborative standards, and a U.S. official suggested that government would not write regulations if businesses design and implement their own code of conduct. The AAA and the ABA Section on Dispute Resolution have both recently announced the formation of groups to develop ODR standards.

Conclusion

A provocative forecast of the interface between technology and dispute resolution is presented in Mediation in the Year 2051. This article envisions the debut of Artificial Intuition Corporation’s new product, AICompanion2050 (“AICom”), one day after closure of the last civil court. AICom is the creation of a diverse and esteemed group of business people, software architects, lawyers, medical and other professionals, ethologists, philosophers and “common sense consultants of all ages, genders and ethnicities.” The system achieves almost complete intuitive communication with disputing parties, interpreting their thoughts and emotions without the human prejudices and personal preferences of judges and mediators. In beta testing, the developers found that disputants followed the solutions suggested by the software in 97% to 99.99% of cases. Considering some of the current technology and initiatives in online dispute resolution, AICom may be neither as fanciful as it initially sounds, nor fifty years from release!

Online dispute resolution will undoubtedly proliferate as the Internet continues its phenomenal growth. The demographics and economics of the Internet community create an enormous need for appropriate dispute resolution processes, which this technologically oriented population will certainly seek to satisfy online. Benefits of existing and emerging ODR tools and processes will also cause many parties to seek resolution of offline disputes on the Internet.

Great challenges, as well as opportunities, face the dispute resolution profession as it goes online to fulfill these needs. As technology and alternative dispute resolution merge, it is imperative that the values and standards of ADR serve as the guide posts for technology, rather than the reverse. The recent collaborative initiatives by dispute resolution professionals to assure the availability and quality of online dispute resolution are encouraging first steps in this direction.

Table of Providers and Process Options

                       

Alan Wiener

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… MORE >