An Introduction to Online Dispute Resolution

I.          Introduction

The impact and reach of the Internet in today’s society is self-evident.  Today the internet provides businesses with a speedy and cost effective vehicle to conduct business transactions.  As one could imagine, as Internet usage increases as a vehicle to conduct business so do disputes with regard to the transactions which take place in cyberspace.  But these pure cyberspace disputes are not the only disputes addressed through online dispute resolution (ODR).  Even offline disputes are finding their way to cyberspace for resolution. The purpose of this paper is to explore how ODR assist in resolving the myriad of disputes which arise either online or offline.  Particular attention will be given to the vehicles currently in place online to resolves these disputes, how effective online dispute resolution can be expected to be and what obstacles may impede effective mediation or arbitration when the process is conducted in cyberspace. 

II.         Resolution of Disputes which arise Online

The type and factual scenarios of disputes that can arise online are probably as vast as those that can arise in the tangible world.  With that being said, there are general categories under which each dispute can be slotted.  These are E-Commerce disputes, domain name disputes and intellectual property disputes.

E-Commerce disputes arise when a business transaction between a business and consumer or two businesses takes place online, entirely in cyberspace.  For example, a person with little time decides to purchase a birthday present online and wants to have it delivered to his or her home.  The dispute arises when the person either does not receive the gift, is charged twice by the e-vendor or is shipped the wrong merchandise.  When this happens the consumer is in a quandary as to how to proceed.  If this problem occurs in the tangible world the consumer can just take it back to where he or she purchased the item, or at least speak to a person to get the billing sorted out.  The online purchase on the other hand presents the consumer with no easy solution. 

Domain name disputes present yet another fertile ground for disputes in cyberspace.  A domain name is a personal address used to arrive at a specific destination on the internet.  It is an address, much like the street address of a residence in the tangible world.  The dispute arises when two parties claim ownership of the same domain name.  It is impossible for two entities to share the same address; therefore the issue becomes who should rightfully get to use the address?

Intellectual property disputes arise mainly because of the amount of information available via the Internet.  The most notable example of an intellectual property dispute would be the sharing of copyrighted music via file sharing.  The shear magnitude of the infringement requires an innovative flexible forum to help clarify the issues and possible solutions.  ODR may provide that forum.

Different venues exist online for the resolution of each category of dispute.  For E-Commerce disputes webmediate.com and squaretrade.com are the premier venues.  WebMediate and Squaretrade specialize in matters where a monetary settlement is the goal.  Some scholars believe that since the disputes arise online each party is familiar with the methods of communicating online and that the use of such a service becomes that much more convenient.  Although in theory that might make sense, I am sure that is not always the case.  I can envision the legion of technophobes who rejoice in completing an online transaction in only an hour, when a trip to the store may have taken 15 minutes, only to realize they received the wrong merchandise.  I am not sure the assertion that an online resolution provides those people with a speedy convenient alternative holds up.  I think the presumption in the majority of articles in preparation to write this paper, that everyone who sits down in front of a computer is comfortable is slightly overstated.  With that said, sites like webmediate and squaretrade do provide a forum to resolve disputes arising from e-commerce that are convenient and efficient.  Although each site operates slightly different, the premise is basically the same.  When an issue arises the aggrieved party can utilize either site to initiate the negotiation to resolve the dispute.  Essentially what occurs is the aggrieved party will begin the process by entering a demand to resolve the issue and will await a reply from the other party.  Should the other party wish to take part in the negotiations a counter offer can be made through the site.  After a number of rounds of negotiating a computer program will evaluate the final demand/offer of each participant and if the numbers are within a certain range the computer program will usually split the difference and resolve the matter.  By taking part in the negotiations each party agrees to be bound by the determination.  Squaretrade is slightly different in that direct negotiations between the parties are preliminary to utilization of the round robin bidding process.  Also, through squaretrade the parties have the option to employ the assistance of a live mediator prior to moving on to the computer program solution.

A.                 Specific Examples of Disputes that arise Online

Square Trade and eBay

If you have a computer and an Internet connection (if you are reading this article, it’s a safe bet that you do), you know what eBay is and how to use it.  You may have even bought or sold something on eBay in the past.  For those of you who don’t know what I am talking about, eBay is an online auction site where users place items (from the very inexpensive to the very expensive) up for bid and other users who are interested in purchasing those items bid on them and the highest bidder at the end of the allotted time wins that item.  The buyer and seller then make arrangements for shipping and payment.  Usually the seller will not ship the item until the buyer pays.  It used to take several days (in the olden days) for payment to be received, but relatively recently; automatic transfers via the internet (from sites like PayPal) are common.  Therefore, payment can be made immediately upon the end of the auction and the goods could be shipped the same day.  Once received, the buyer gives the seller positive feedback if the transaction went smoothly and the seller does likewise.  Both sides get what they want – the seller gets rid of unwanted items and the buyer gets the item he was looking for at a good price. 

This is the outcome of majority of the auctions on eBay; however, to be an informed eBay user, you have to know what options are available to you if the transaction does not go as planned.  Many problems can be avoided if you take some precautions.  First, if you are a bidder, you should examine the item description very carefully and make sure you know exactly what you are bidding on.  Also, you should research the seller very carefully.  The most important aspect of the seller is to examine the feedback rating.  This rating is the user’s history of how his past transactions completed.  If a transaction completes with no problems, then the user may get positive feedback.  If there were some minor problems, then the user may get a negative feedback.  If things completely fell apart, then the user may receive a negative feedback rating.  You should be cautious before you completely discount a seller with one or two negative ratings.  These ratings are used by future users to determine if they want to do business with that person.  For many transactions that go bad, this is the usual outcome of the transaction – each user gives the other negative feedback.  But what happens when simply giving the other user negative feedback is not sufficient?  EBay has a forum for the user to use in an effort to solve these disputes.

            First, the user can reply to the feedback that was given to him.  This way, he can explain his side of the dispute to users who investigate him.  Next, the user can follow-up on the feedback that you have given to the other party.  This will add more information to the earlier comment or clarify the transaction if new information has come to light in the meantime.  Next, each party can mutually withdraw the feedback if they resolved their dispute.  If none of these options satisfy each party, then eBay offers a dispute resolution service through SquareTrade. 

            SquareTrade is a service that offers to mediate disputes between users. 

There are basically four steps to the process:

Step 1: File a Case.  One of the users files a case with the site and enters information about the dispute and some possible resolutions.

Step 2: SquareTrade notifies the other party.  SquareTrade contacts the other party via an automatically generated email and provides instruction on responding to the case. The case and all related responses appear on a password-protected Case Page on the SquareTrade website.

STEP 3: The parties discuss their issues directly in Direct Negotiation.
Once each party is aware of the issues, they first try to reach an agreement using SquareTrade's Direct Negotiation tool.  In this phase, each party communicates directly with each other through an automated process.  If they reach an agreement, then there is no charge for the service.  If they still have a dispute, then the next step is to have a SquareTrade Mediator guide the process. The mediator's role is to facilitate positive, solution-oriented discussion between the parties. He or she does NOT act as a judge or arbitrator. The mediator will only recommend a resolution if the parties request it.

STEP 4: The case is resolved.
The parties may either reach a Settlement Agreement independently during Direct Negotiation, or with the assistance of a SquareTrade Mediator.

Throughout the ODR process, SquareTrade gives buyers and sellers an innovative way to establish confidence and trust in one another. By building our services around these ideals, SquareTrade brings buyers and sellers the confidence they need to do business freely online.

Amazon.com and Dispute Resolution

Amazon is unique in how they handle disputes between online users.  They guarantee that if a buyer does not receive the item that he bought from another user (not directly from Amazon) or if it is materially different than the description, the user can receive a full refund.  They call this the A-to-Z Guarantee.

There are three requirements before the user can receive a refund.  First, the user must wait 30 days before submitting a claim so shipment delays can be worked out if the item was never received.  If the item was received but the buyer is still unsatisfied, the item must be materially different than the description.  Finally, each user is only allowed to use the service three times in the lifetime. 

This type of service is unusual in that Amazon.com is not involved in the dispute but takes this position in order to make its users satisfied with the hope of getting return business from this user.

III         Resolution of Disputes that arise Offline

The disputes, which fall under this heading, are those that would typically find their way to mediation or arbitration in the tangible world.  It should be noted that when parties decide to attempt to mediate a dispute typically both parties will agree on a third party neutral to conduct the session.  Today many of these mediators use the Internet to assist them in promoting and conducting their business.  The questions which arises are, how much should a mediator use the internet to conduct the mediation, at what point does the dehumanization of the process adversely affect the process, what benefits are derived from online mediation for each party and is pure online mediation of disputes becoming more plausible with advancing technology.  Each of these questions will be addressed.

A.        Degree of Use

Each mediator has their own style and technique.  Therefore, the degree to which a mediator employs use of the internet will depend on the preference of the mediator, who in turn might be influenced by the parties and issues involved. James Melamed believes that the asynchronous nature of online mediation is beneficial to the process because it allows for a gap between communications.  He reasons that because of the asynchrony the parties have more time to evaluate their responses to the opposition’s demands or offers.  Unlike face to face mediation, where posturing plays a big role, the ability to consider and produce a reasoned response is conducive to the goal of mediation.  Still, Melamed concedes that strategic use of face-to-face sessions may play a big role in finalizing an agreement or getting over rough spots during the negotiation.  Melamed suggests that a mediator can use the Internet to send everyday communications to the parties, post forms, handouts and exhibits electronically to avoid the cost of paper reproduction, use e-mail for caucus discussions at the party’s convenience and send draft agreements electronically.  It seems sensible that if the mediator can reduce cost to the parties through the use of the internet, while being true to the process, he should do so.  One should remember that most parties choose mediation as a way to save money.

The counter view to the benefits of asynchrony is that the lack of face-to-face interplay places each party at a disadvantage.  The inability to observe the other party, hear the tone of their comments or inflection in their voice may inhibit the process.  Jeffrey Scott Wolfe points out that because emotion plays a big role in and is usually a central theme in most disputes the removal of the human factor inhibits the process and may not bode well for the future of ODR.  Mr. Wolfe concludes that the use and success of ODR may not depend on the advances in technology, but rather the attitudes of society toward such a medium of resolving disputes. 

Although both views make valid points with regard to the pros and cons of ODR, I believe the success or failure boils down to the parties involved and whether or not they feel comfortable with the process.  Therefore, it becomes the duty of the mediator to determine when and how much of the negotiation will be conducted via the Internet.  Clearly, use of the Internet should be discussed with the parties prior to beginning of the process.  The answer to the first question posed above would seem to be – it depends.  But it is clear that the option should be given to the parties prior to the beginning of negotiations.

B.        The Effect of Dehumanization

The majority of articles reviewed in preparing to write this paper listed the impersonal nature of ODR as the number one draw back.  Joel Eisen posits that ODR imposes an electronic distance on the parties, while recognizing that mediation was designed as an informal face to face discussion between the parties with the use of a third party neutral in an attempt to get the parties talking about the real issues.  Mr. Eisen continues on to indicate that the lack of personal involvement might not create the trust in the mediator that is needed to successfully resolve the issue.  The problems, which arise when using e-mail as a substitute for face-to-face discussions, are apparent.  When reading an e-mail it is like the party is in a vacuum.  There is no emotion or inflection that comes along with the e-mail.  Just words on a screen or piece of paper.  How then are parties expected to place the proper weight to any given communication?  This is a difficult question to answer.  Some scholars have indicated that the use of bold, italic, or different fonts could make up for this lack of non-verbal communication.  I find it hard to believe that anyone typing in all caps will have the same effect as a person sitting across a table from me communicating in a raised voice to make their point.  I believe that for the medium to be successful all the parties involved must admit the shortcomings of the process in advance and agree to communicate frankly, thusly dealing with the shortcomings of e-mail communication.  On the benefit side, the fact that the majority of communications will be written may force parties to hone their thoughts before putting them on paper, that in turn might lead to more succinct communications and quicker resolutions.

The ODR process and its impersonal nature has its greatest detrimental effect on the Mediator.  Clearly, the inability to observe the parties, cajole the parties in caucus or use charisma to move parties inhibits the Mediator.  Certainly the majority of Mediators who are successful have developed a reputation of being fair.  A lot of what goes into developing that reputation comes from the interactions attorney’s and people have had with the Mediator.  With ODR much of that interaction is lost.  The question then becomes, what fills the gap and what can be used to separate skilled from unskilled Mediators?  I think the answer here is easy.  A person who has the ability to help people resolve disputes usually has some inherent quality that helps them rise above personalities of the parties and see the issues for what they are.  ODR may assist the Mediator in that it removes personalities from the mix altogether, thereby leaving the issues as stated by the parties.  I agree that the loss of personal interaction could hurt the process somewhat, but I believe that skilled mediators would be able to adapt to the system to make it work for them. 

C.        Benefits of ODR

The limited cost of ODR is the most cited reason for its attractiveness to potential litigants.  The cost of traditional mediation as opposed to that of litigation was the primary driving force for choosing mediation as an alternative to litigation.  ODR provides even greater cost saving features when compared to traditional mediation.

The ability for participants to conduct mediation sessions online at their own pace removes the need to meet at a central location.  This is significant for parties who are separated by great distances.  The need to choose a neutral location, or travel to and from the adversary’s location is nullified.   As everyone knows time is almost as valuable as money.  Some would say time is money.  ODR removes, to some extent, the time pressures imposed on parties.  When working through an ODR the parties do not lose valuable down time traveling, rescheduling meetings and waiting while the mediator caucuses with the opposing party.  Similarly, the mediation does not have to be squeezed into one place and time with the added pressure of knowing if the issue is not resolved there may never be another chance to reach an agreement.  Through ODR parties may be more methodical and deliberate in approaching the issues.  Without the pressure of “do or die” parties may be able to work through the issues more thoroughly ending with a better result for everyone.  In the aggregate the time spent by each side might well be less than if they participated in a traditional mediation.  ODR provides cost savings for disputes that arise online as well.  It has been suggested that cyber mediation may be the only method feasible for the traditional e-commerce claim involving a low dollar amount.  It is suggested that hiring an attorney for the purposes of settling an online dispute is unwarranted.  As an aspiring attorney I do not know if that is sound advice.  First, the commentator assumes that the aggrieved party is aware of his or her rights with regard to the dispute in question.  And second, it is assumed that the party in the wrong is dealing fairly in the process.  As cynical as it might sound one has to remember that typically the violating party is a business created to produce a profit.  And one should remember that e-business is no different.  Profit is the motivation, not a fair outcome for the consumer.

Another benefit is the ease of communication and access to parties.  E-mail provides each party with a virtually free method of communication, to be used at the time it is convenient for each party.  One concern is that removing the time pressure for resolution, i.e. “do or die”, might cause the parties to move at a slower pace.  That is when the mediator needs to take charge and keep the parties on track and focused on the common purpose.  It is important that the mediator and the parties attempt to keep e-mail communication centered on one topic.  Failure to do so may confuse parties.  Short precise messages are preferred over long drawn out discussions with no central focus.  It also allows the mediator to address issues in a logical manner.

D.        The Future

As noted above most of the concerns with pure ODR revolve around the inability for the parties and the mediator to meet face to face, and thereby observe each other and develop the interpersonal relationship, which many commentators believe is central to a successful mediation.  One proposed solution is to incorporate a level or degree of face-to-face meetings to begin the process and to resolve more difficult issues.  This approach may be a valid solution, but it may negate any cost benefits associated with pure ODR.  Technologically the answer might be Internet video conferencing.  This process would allow the parties and mediator to observe one another during discussions, and would certainly make ODR more personal.  But it does not come without its drawbacks.  Video conferencing would still require the parties to schedule the conference and participate at that time.  Additionally, the equipment required may be cost prohibitive if the amount in dispute does not warrant such an expense.  Also, the possibility of a technological breakdown is always a present.  With all that said, the option might be enough to sustain pure ODR until technology advances to a point where the video phone with three-way calling is common place.  That may not be to far off.  The end result of video conferencing would be an increase in interpersonal communication, but also a rise in cost.  Certainly those involved in attempting to resolve disputes will determine whether it is a viable option and reasonable tradeoff.

IV.       Conclusion

As a practical matter I do not know how good ODR is for my future profession, particularly if people become comfortable with resolving their own disputes.  Do I really want the general public to become comfortable with settling disputes on their own?  More importantly, is it in their best interest?  Certainly one could foresee the possible problems and potential for increased litigation if the process is conducted without attorney participation.  With regard to pure online disputes the process may allow for unfair bargaining and tip the scales in favor of e-business.  For example, a company involved may have staff counsel to over see the negotiation process.  The expertise brought to the table by the business may overpower the novice negotiator and allow for a resolution one sided in character.  I would suggest to any client that review by an attorney of any negotiated settlement is paramount, if only to secure a fair result.  The cost of securing a fair result may mean paying an attorney for a one-time consultation, but it surely outweighs the result of an unfair settlement.

As for ODR of offline disputes it is certainly possible, but loss of interpersonal communication concerns me.  I do believe that two parties, if given enough time, could resolve a pending dispute if each were willing to submit to the process with the understanding that each was expected to work together.  My main concern is the effect ODR has on the function of the Mediator.  The role of the mediator is certainly diminished in pure ODR.  It seems that the skills and abilities necessary to become a Mediator become irrelevant.  The Mediator essentially becomes a task master, required only to keep the parties active and talking until a resolution is reached. 

I would venture to guess that in the future Mediation will slowly move toward more ODR involvement.  One reason ODR will not dominate the scene over night is because most attorney’s are adverse to change.  They like pushing paper and getting into issues face to face.  This is not a bad thing, because it allows technology to take hold at a pace everyone is comfortable with, not merely because the technology is there to make it possible.  Another reason ODR will take a while to gain acceptance is because most attorneys like to stick with what they know.  Unless they have a favorable experience with ODR, they will probably not entertain getting involved with the process until they hear several testimonials from colleagues they trust.  Lastly, is the learning curve.  From a personal perspective I know that had I not been in school for the last three years and working in front of a computer on a daily basis I would not be as technologically savvy as I am today.  But for all those attorney’s out there without a technological background, or desire to understand technology the area of ODR may not be as appealing as it is to more recent graduates and those familiar with the technology involved. 

In summary, I believe that technology provides a fertile ground to explore new ways to resolve disputes online.  Although I do not believe ODR will ever provide the exclusive venue for dispute resolution I do believe that its acceptance will grow in the coming years, particularly in pure online disputes, where the parties have never had any interpersonal communication.  As for ODR’s future with respect to offline dispute resolution it will depend on technological advancements and whether the parties cost concerns override the need for interpersonal communication to reach a resolution.