ADR on the Information Highway
In today`s world of e-shopping, e-banking and e-contracting, traditional forums for resolving disputes are ineffective for e-commerce issues because of jurisdictional problems. There are unique problems presented when transacting over the Internet.
Today there is a struggle among lawyers, legislators, policy makers and industry representatives to determine how existing laws can function in cyberspace. An area of concern presented when contracting over the Internet is determining the proper jurisdiction for disputes that may arise when one or all of the parties are located in different cities, states or even countries.
The Internet creates a global marketplace for consumers. On the Internet merchants and consumers do business differently. Everything is virtual; people can do business with each other from points all over the globe without ever contracting face to face. The Internet provides companies the ability to take their local businesses globally almost instantly. As a result many companies are instantly subject to a myriad of state, federal and international laws which may not be enforceable. The use of on-line alternative dispute resolution may provide a solution to this problem. Many companies, governments and policy makers are exploring the use of non-judicial methods of dispute resolution for resolving Internet related disputes.
The World Wide Web is the most well known method of locating and retrieving information on the Internet. The web consists of a vast number of documents stored in different computers all over the world. Some simply are files of information. Others are known as web pages and are more elaborate. Most web pages contain information and allow the viewer of the page to communicate with the owner of the page.
"Electronic commerce" in the last few years has become a highly used term in contemporary language. These two words are used in the business world to describe a broad class of activities which are associated with using the Internet to trade goods and services in an electronic manner. Commerce has always provided opportunities for fraudulent and unfair commercial conduct. E-Commerce is no exception and may allow fraudulent activity to affect a larger population in the global economy.
You can buy almost anything by transacting over the Internet today. This includes groceries, prescriptions, alcohol, apparel as well as big-ticket items like cars and even real estate. The purchases made include private individuals buying from retailers, private individuals buying from other private individuals, private individuals buying through auction sites, and businesses buying from other businesses. Many consumers pay their bills and bank online through a cyber bank. 39 million people in the U.S. shopped on line in 1999 and spent an average of $1,200 per person per year on on-line goods. This figure was up from the 17 million who shopped online in 1998.
One of the major problems regarding e-commerce disputes is determining the proper jurisdiction to hear a claim. There is a struggle over how the existing laws can be effective in disputes involving transactions over the Internet. The use of alternative dispute resolution may be the best solution for this problem. Some economists have predicted that the level of confidence consumers have regarding getting disputes resolved over the net will impact the future of e-commerce. Many promoters of the global economy believe uncertainty over the forum for resolution of disputes concerning e-commerce may inhibit consumers from purchasing products or services over the Internet and prevent companies from conducting their businesses online. Many organizations both domestic and international are taking steps to encourage consumer dispute resolution mechanisms. There is no uniform law that governs Internet transactions.
Alternatives to litigation such as mediation are not new but could become even more popular for resolving disputes occurring with e-commerce issues. The Internet is providing a new forum for ADR. Today with the jurisdictional problems posed by disputes related to selling and buying goods over the Internet, ADR is becoming more popular than ever. Several studies are being undertaken to determine the use of ADR to resolve disputes regarding e-commerce issues. The ABA Task Force on E-Commerce and Alternative Dispute Resolution is exploring issues such as maintaining confidentiality of electronic communications.
Online ADR minimizes problems regarding jurisdiction that occur through e-commerce disputes. Generally claims of a low monetary value on the Internet do not have a forum for resolution. Small-Claims courts are ineffective for these disputes. Consumers who purchase a $50 item in Virginia on the Internet will not be able to go to small claims court in Brooklyn to prosecute problems that occur with the transaction. The number of small claims type cases regarding transactions over the Internet will likely grow. Online ADR provides a solution for accountability of private individuals transacting on web sites which host online auctions such as ebay.
Among US states, there are no uniform guidelines for handling consumer complaints regarding e-commerce. The Attorney General's office of Virginia has provided statistics regarding online consumer complaints. The Virginia Attorney General's office received 213 Internet-related complaints in 1997, 64 in 1998, 87 in 1999, 45 as of May 23, 2000. Virginia's Office of Consumer affairs reported various complaints from the same time period; 16 consumer complaints in 1997, 53 in 1998, 115 in 1999, and 59 in 2000.
In 1999, the need for online ADR was expressed by officials of the Department of Commerce, the European Union, the Federal Trade Commission, and the Hague Conference on Private International Law. Today there are several ADR service providers worldwide who offer online ADR services for disputes that occur over the Internet.
ClickNSettle.com is a service that allows parties to register and provide information regarding their status in the case and give a brief description of the dispute. The initiating party is required to give contact information regarding the opposing party and an initial monetary demand. The opposing party then responds with a counter offer or demand. Both parties are allowed to submit new demands and offers within 60 days. All of these offers are blind so neither party knows what the other is bidding but when the demand is within 30% of the offer, the case settles for the midpoint of the offer or demand. The negotiations begin when the other party is contacted.
ClickNsettle offers a fully interactive web site to settle disputes. All demands and offers are communicated through electronic mail. Offers and demands are required to follow rigid guidelines where each new offer must increase by a minimum of 5% and each new demand must decrease by a minimum of 5%. Either party may terminate the case at any time. Once a settlement is reached, all parties are bound by the settlement. The claimant agrees to release the defendant as long as the settlement amount is paid. Sixty days is the time limit so any cases that have not settled by that time are terminated. The costs associated with ClickNSettle are relatively low. The submitting party must pay a $15.00 fee before an initial offer or demand can be made. There is a 10.00 charge for each offer or demand made during the first twenty days. This fee increases to 20.00 for the last twenty days. If the case settles for less than $10,000 each party pays a $100 settlement fee. This fee is $200 if the settlement is over $20,000.
BBB Online is the Better Business Bureau's online program launched to address consumer disputes on the net. The Better Business Bureau has been dealing with consumer disputes for 86 years. The BBB Online offers an online dispute resolution process which begins with a consumer contacting the Dispute Resolution Intake Center. The consumer must demonstrate that they have made a good faith effort to settle the complaint. To meet this prerequisite, a description of the complaint and correspondence to the merchant must be forwarded to the BBB. The merchant is contacted and asked to respond in 15 days. If a response is received, it is forwarded to the consumer and the consumer is given 10 days to respond. Once a response is filed or the ten-day time limit is up, a decision is made.
WEBdispute.com offers arbitration services online. The company's stated mission is to provide a fast, affordable and convenient on-line forum for resolving commercial disputes. The document E-mail hearing requires parties to submit documents such as written statements, notarized witness affidavits, contracts, photographs and correspondence to the arbitrator and the opposing party. The arbitrator gives the parties one week to make comments on the other party's position by E-mail and then renders a decision on the merits of the case.
Square Trade is an online dispute resolution service that uses direct negotiation through mediation or arbitration to resolve consumers' disputes. The services are web-based and capable of handling disputes between parties based in different countries. Initially, Square Trade?s online ADR service was available only to ebay.com customers but today it is available for other online transactions.
The Internet has changed our economy and way of doing business in ways we could have never predicted. The growth of the global economy will continue. As this growth continues we must find new methods to address the problems associated with this global economy. On-line ADR will provide a solution to some of the problems presented when parties located in different jurisdictions transact over the Internet.
Joni Davis Goodman is a certified mediator in Virginia and Florida. She received her Bachelors and masters degrees from Virginia Commonwealth University and her law degree from Barry University with a concentration in international law courses at Stetson College of Law. Currently, she is a law clerk in the Chief Staff Attorney's office of the Virginia Supreme Court. If you would like to receive a copy of this article with footnotes and references, please contact the Department of Dispute Resolution Services.
This page last modified: October 29, 2001