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
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.
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