The Case for Online Dispute Resolution

Whenever you have buyers and sellers, you will inevitably have disputes, and the online world is no different. What the online world lacks but needs is an inexpensive, quick, efficient and impartial method of dispute resolution. What we have now is a patchwork system for dealing with these issues and I'm not optimistic that major improvements are coming anytime soon.

Today, when you make a purchase online and then have a dispute with your seller, there is no quick and easy answer to resolving the problem. This isn't necessarily a uniquely online problem either. For example, just the fact that most consumer purchases are for relatively small amounts creates a problem. You can't exactly hire a team of lawyers, bring in three arbitrators and serve subpoenas because your Beanie Baby arrived without its birth certificate.

While my Beanie Baby example might be a bit flip, it does help make the point that even small arguments need a method of dispute resolution that's perceived as fair to all concerned. Moreover, the online world is different from going to your local store for a multitude of reasons. We must come up with better ways to deal with disputes that arise online or face the consequences of consumer fear of online buying because of concerns about things like bad service, broken promises and fraud.

The starting point of why online is different is distance. There was a time that the best check on 'reasonable behavior' by both buyers and sellers was geography. If you lived in a small town where everybody knew everybody, the desire to maintain one's reputation helped insure that buyers and sellers were fair with one other.

One interesting attempt to take the 'reputation' check on behavior from the offline to the online world is what a Website like eBay does. There, you can see how other buyers have rated your potential seller. The idea is that lots of negative comments will cause people to shy away. The flip side is that the fear of negative comments will cause sellers to act responsibly.

Still, the Internet and e-commerce do throw away geography. With e-commerce, it's almost (the 'almost' is mostly about shipping issues) as easy to buy from China as your city's Chinatown. Often, a buyer doesn't even know where their seller is. Most people don't know where even a famous online seller like Amazon.com is located.

Then, consider the language issues created by the Net and the reduced relevance of distance and geography. Sure, the court systems in large metropolises like Miami, New York and Los Angeles have their share of language issues, but that's nothing compared to the language issues if the world is the marketplace.

Often things develop almost by accident and today's best online dispute resolution process from a consumer's perspective is an accident brought to you by your credit card company. I call it 'an accident' because nobody really wanted to make Master Card and Visa the world's judge and jury, but in the realm of small purchases, they often fill that role.

It's a role they evolved into taking because of their practical need to resolve disputes between buyers and sellers when the buyer refuses to pay because of a dispute with a seller. I always tell people to use their credit card, and not a check, when buying online because their best remedy in case of a problem is to complain to the credit card company. In many ways, it is a good remedy for consumers because the credit card companies tend to give the benefit of any doubt to consumers.

Still, it's not quite a system and it doesn't help where a credit card wasn't the payment method. What we need is some sort of universal arbitration system, similar to the credit card dispute resolution system.

For such a system to work, it will need to be perceived by all as independent and impartial. Systems set up by industry trade groups and other apparently biased organizations just won't pass the consumer's smell test.

It's also important that disputes be decided consistently according to a clear body of law. One system that fails this test is the arbitration system in place for domain name disputes. While they do publish the decisions of these arbitrators, and that could theoretically be useful for researching precedent relevant to your case, publication isn't useful because the decisions are inconsistent and unpredictable.

In many ways, a good system comes down to a right to be heard, a right to respond, a fair hearing and a decision based on clear legal principles. It sounds easy until you consider that e-commerce is international by nature. Trying to create an international and enforceable system of dispute resolution isn't going to be easy.

I go back to my starting point: I'm not optimistic that it will happen anytime soon. Until it does, a consumer's best protection online remains buying with a credit card.

Mark Grossman is a member of this publication's editorial board and a shareholder and chairperson of the Technology Law Group of Becker & Poliakoff, P.A. His Website is www.EComputerLaw.com. Online research provided by LexisNexis.

Whenever you have buyers and sellers, you will inevitably have disputes, and the online world is no different. What the online world lacks but needs is an inexpensive, quick, efficient and impartial method of dispute resolution. What we have now is a patchwork system for dealing with these issues and I'm not optimistic that major improvements are coming anytime soon.

Today, when you make a purchase online and then have a dispute with your seller, there is no quick and easy answer to resolving the problem. This isn't necessarily a uniquely online problem either. For example, just the fact that most consumer purchases are for relatively small amounts creates a problem. You can't exactly hire a team of lawyers, bring in three arbitrators and serve subpoenas because your Beanie Baby arrived without its birth certificate.

While my Beanie Baby example might be a bit flip, it does help make the point that even small arguments need a method of dispute resolution that's perceived as fair to all concerned. Moreover, the online world is different from going to your local store for a multitude of reasons. We must come up with better ways to deal with disputes that arise online or face the consequences of consumer fear of online buying because of concerns about things like bad service, broken promises and fraud.

The starting point of why online is different is distance. There was a time that the best check on 'reasonable behavior' by both buyers and sellers was geography. If you lived in a small town where everybody knew everybody, the desire to maintain one's reputation helped insure that buyers and sellers were fair with one other.

One interesting attempt to take the 'reputation' check on behavior from the offline to the online world is what a Website like eBay does. There, you can see how other buyers have rated your potential seller. The idea is that lots of negative comments will cause people to shy away. The flip side is that the fear of negative comments will cause sellers to act responsibly.

Still, the Internet and e-commerce do throw away geography. With e-commerce, it's almost (the 'almost' is mostly about shipping issues) as easy to buy from China as your city's Chinatown. Often, a buyer doesn't even know where their seller is. Most people don't know where even a famous online seller like Amazon.com is located.

Then, consider the language issues created by the Net and the reduced relevance of distance and geography. Sure, the court systems in large metropolises like Miami, New York and Los Angeles have their share of language issues, but that's nothing compared to the language issues if the world is the marketplace.

Often things develop almost by accident and today's best online dispute resolution process from a consumer's perspective is an accident brought to you by your credit card company. I call it 'an accident' because nobody really wanted to make Master Card and Visa the world's judge and jury, but in the realm of small purchases, they often fill that role.

It's a role they evolved into taking because of their practical need to resolve disputes between buyers and sellers when the buyer refuses to pay because of a dispute with a seller. I always tell people to use their credit card, and not a check, when buying online because their best remedy in case of a problem is to complain to the credit card company. In many ways, it is a good remedy for consumers because the credit card companies tend to give the benefit of any doubt to consumers.

Still, it's not quite a system and it doesn't help where a credit card wasn't the payment method. What we need is some sort of universal arbitration system, similar to the credit card dispute resolution system.

For such a system to work, it will need to be perceived by all as independent and impartial. Systems set up by industry trade groups and other apparently biased organizations just won't pass the consumer's smell test.

It's also important that disputes be decided consistently according to a clear body of law. One system that fails this test is the arbitration system in place for domain name disputes. While they do publish the decisions of these arbitrators, and that could theoretically be useful for researching precedent relevant to your case, publication isn't useful because the decisions are inconsistent and unpredictable.

In many ways, a good system comes down to a right to be heard, a right to respond, a fair hearing and a decision based on clear legal principles. It sounds easy until you consider that e-commerce is international by nature. Trying to create an international and enforceable system of dispute resolution isn't going to be easy.

I go back to my starting point: I'm not optimistic that it will happen anytime soon. Until it does, a consumer's best protection online remains buying with a credit card.

Mark Grossman is a member of this publication's editorial board and a shareholder and chairperson of the Technology Law Group of Becker & Poliakoff, P.A. His Website is www.EComputerLaw.com. Online research provided by LexisNexis.