One of the most important applications of any dispute resolution is commerce. Consequently, e-commerce is an important field for ADR in Cyberspace.
At the same time, e-commerce is one of the toughest fields for any dispute resolution, since it involves small one-time transactions by customers. Cost efficiency and simplicity are therefore key in this environment. There are a number of specialized providers in this field: E-Bay, PayPal, Juripax and the Credit Card chargeback mechanism.
E-Bay has a long history of employing alternative dispute resolution for disputes arising out of the platform. Disputes were first handled by the Online Ombuds Office and later by Squaretrade (For more information, see here). Nowadays, E-Bay handles disputes itself. The details of the procedure are set out in E-Bay's Buyer Protection.
In short, E-Bays system is a strongly simplified arbitration procedure, with E-Bay serving as the Arbitrator.
If a buyer cannot resolve a dispute with the buyer directly, he/she can file a case under the buyer protection procedure. E-Bay only covers items that were paid in one lumpsum, and either by credit card or one of E-Bay partners (PayPal, Moneybookers etc.) The procedure can only be initiated if the buyer has not initiated any other dispute settlement procedure, like a credit card chargeback or a PayPal procedure
E-Bay excludes some problematic items from the resolution, most importantly digital content and real estate (for more, see here). Most transactions on E-Bay, for which the main venues of payment are credit card and PayPal should be covered.
E-Bay offers resolution for "good faith disputes". Such a dispute is given if:
Ebay states that it does not cover "buyers remorse" but states that buyers may open a case and receive a refund if the seller agrees.
The form of settlement is defined by the site on which the buyer made his purchase (e.g. E-bay USA), and the Seller is bound to those terms.
The E-Bay dispute resolution team accesses the facts by using the tools available of E-Bay, reviewing the messages send and the transaction history. If E-Bay discovers that the item may e.g. still in transit, it will not proceed with the resolution. If the resolution is proceeded, E-Bay gives the seller a chance to adress the dispute, akin to a hearing.
When a Buyer initiated the procedure with E-Bay, the burden of proof is shifted to the seller. The seller must either prove that the item was send and received correctly, or work on a settlement with the buyer himself (more information about the possibilities can be found here. The seller has 7 day (10 for international transactions) to do so.
If the seller does not resolve the dispute, E-Bay will refund the Buyer. The Buyer then has to send back any items received according to the sellers return policy.
E-Bay will refund the buyer from it's own funds and the recover the funds from the seller. For both processes, it uses PayPals services.
The buyer will be able to claim it's refund via PayPal, using either an existing account or creating a new one.
The Seller is required to have at least one refund method on file that E-Bay can use to draw money from. By selling on E-Bay, sellers are bound to comply with these terms. If the seller has a PayPal account, E-Bay will draw from that and might even freeze the account. If the seller has no PayPal account, E-Bay will use other collection methods.
For Business to Business Disputes, E-Bay does not use the Buyer protection policy. Those disputes are handled by an (unnamed) external agency.
PayPal operates a dispute resolution system very similar to that of E-Bay. PayPal's Purchase Protection allows the puchaser of an item to file a claim if the item was not recieved or significantly differs from the description.
The eligibility and procedure almost mirror those of E-Bay's system. Unlike E-Bay, PayPal puts a greater thumb on negotiation, as it first requires the buyer and the seller to negotiate. Only if that fails, the "dispute" can be "escalated to a claim" within 20 days of opening the dispute.
PayPal also seems less consumer protective, as it requires information from both sides and does not completely shift the burden on the seller. Once all information is collected, PayPal will make a final decision either to refund the buyer and require him to send back all items received, or to close the dispute.
As to enforcement, PayPal uses the funds available on the respective PayPal accounts.
Interestingly, PayPal offer to reimburse the buyer if he could have received a higher amount by filing a credit card chargeback but did not because the PayPal procedure was not yet completed.
Juripax is a relatively new provider in the field of ADR in Cyperspace. Juripax is aimed at businesses that wish to enhance their complaint handling mechanisms and offers a modern web-based mediation interface.
Juripax offers to be negotiation and mediation platform. The aim is to allow a business to invite compainant onto the electronic platform to exchange informations and conduct discussions (the procedure is described here.
The idea is that relevant information is exchanged prior to a dispute to prevent misunderstandings and thereby lead to a faster and cheaper resolution. If the process fails, juripax does not only offer mediation services, but also provides the parties with information as to which court to take the dispute to.
Juripax states that all information is treated strictly confidential and employs encryption technologies to keep information secure.
Perhaps the most common dispute resolution method used in Cyberspace is a credit card chargeback. A credit chargeback is a very basic form of dispute resolution and that may be the reason why it is so efficient. While this method of resolution is confined to e-commerce cases, it is perhaps the most accesible and most buyer-friendly method of resolving a dispute.
The legal underpinnings of a credit card chargeback are supplied by the Fair Credit Billing Act. In short, the Act allows a customer to challenge any transaction on his credit card. Sine the vast majority of e-commerce is conducted with credit cards, credit card chargeback are frequently used and give the customer a very potent tool to resolve disputes.
a customer usually has nothing but the money invested in the transaction at stake. By getting that money charged back to him, the dispute is effectively resolved. It can be argued that the system is one-sided, giving the customer significant leverage over the seller, but that leverage may balance the inherent difference in bargaining power between the two.
As stated, the Fair Credit Billing Act of 1994, 15 U.S.C. §§ 1666 et seq., requires credit card companies to provide for a chargeback mechanism. This mechanism allows cardholders to challenge any "Billing Errors"
Under the Fair Credit Billing Act, the following count as billing errors:
The Procedure is set forth as follows:
The fact that the credit card company must provide evidence of the goods rightly send leads to the fact that the company must act as a dispute resolution agency. It must determine whether the goods were actually send and make a judgement.
In most cases, the credit card company will conduct the chargeback and the merchant will subsequently substantiate the charge. After a negotiation directly between the cardholder and the merchant, the charge can then be reinstated.
How a chargeback works in practice is described for example by the google checkout merchant help. The Tips on increasing your chances to win chargebacks, also offered by google, provide additional insight into how the credit card companies handle chargebacks. The video below is google's overview over the process.
As stated by the Fair Credit Billing Act, the chargeback procedure may take no more than 90 days. Longer periods are possible if the merchant against whom the chargeback was granted substantiates the charge afterwards, but the issue will generally be resolved in a few months, often much faster.
For the buyer, there are no costs other than supplying a letter. If the chargeback is granted, the merchant has to pay a chargeback fee that varies between credit card companies.
Credit card chargebacks are regarded by many scholars as the most important vessel of dispute resolution for consumer disputes. Almost no cases are reported where a consumer was not satisfied by the chargeback procedure.
At first glance, this is surprising, because chargebacks are a very incomplete and one-sided dispute resolution model. Banks can grant chargebacks without complete investigation, and the burden is completely shifted to the seller. However, there are several reasons why the system is nevertheless effective:
Event though merchants seem disadvantages by the system, it turns out that most like it. If the buyer stops payment of for example a check, the seller has no attractive remedy, especially if it was a small one-time transaction. A chargeback at least allows the seller to try and substantiate his claim without having to refer to traditional dispute resolution.
Like E-Bay's and PayPal's system, a chargeback uses and intermediary that has relations to both parties to solve the dispute. That concept is cost effective and has proved highly workable.