International Association of
Professional Negotiators March 17, 2000 Honorable Robert Pitofsky Dear Chairman Pitofsky: The Board of Directors for the International Association of Professional Negotiators is pleased to have the opportunity to participate in the dialogue on Alternative Dispute Resolution for Consumer Transactions in the Borderless Online Marketplace. As an organization that is committed to promoting appropriate Alternative Dispute Resolution methodologies instead of litigation, we applaud the efforts of the FTC. We request the opportunity to actively participate in the upcoming discussion panels and hope that you will extend that invitation. Since the request for information was done in question form, we will supply our answers to the specific questions asked. 1. What types of ADR are there? Are certain types better suited for online transactions There are several different types of ADR. They include Arbitration, Mediation, Negotiation, Fact-Finding, Summary Jury Trails, Partnering Agreements and Early Neutral Intervention. The types of ADR that are more suited for online transactions are mediation and negotiation. These processes are less formal and allow the parties more control over the settlement outcome. These processes can also be carried out without having a face to face meeting. Improving technologies have made online mediation a viable option for disputing parties. 2. Under What circumstances is ADR used to resolve disputes about consumer transactions today? How does ADR work in such cases? How are decisionmakers or mediators selected under an ADR program? What lessons can be taken from such a mechanism? ADR is utilized to resolve disputes arising from transactional dissatisfaction, lost or broken goods, shipping overcharges, distribution and delivery problems, and billing disputes. These disputes are resolved through the ADR methodology that is included in the terms of use on the website, which is usually arbitration. They are also resolved when the consumer enlists the services of an ADR professional who will recommend the appropriate ADR methodology that should be utilized. The utilization of ADR methodology allows the disputing parties to attempt to resolve their problems in an out of court arena. At the present time mediators and decisionmakers are usually taken from a list of professionals that are supplied by member driven professional associations such as the International Association of Professional Negotiators, American Arbitration Association, American Bar Association or the Society of Professionals in Dispute Resolution. Under this process businesses and consumers are at the mercy of the vendor and professional associations due to the fact that they are unaware of smaller ADR firms that are available. The American Arbitration Association is frequently designated by vendors as the independent authority. This creates a virtual monopoly for this organization and possibly restricts consumers' rights to a truly impartial decision. 3.What ADR programs currently exist for online consumer transactions? Do these programs address cross-border transactions? Please describe these programs and how they work. In describing the programs, please address issues such as fairness, effectiveness, affordability, accessibility, and due process concerns. Mediation and arbitration are the predominant ADR strategies that are utilized in resolving consumer online transactions. There is no one specified program. There are several businesses, organizations and academic institutions that offer their services. Some of these are "Online Mediators", "Online Ombudsman", "Web Dispute Resolutions" and "Square Deal". E-commerce is international. However, it is subject to existing frameworks on applicable law and jurisdiction. Electronic commerce poses challenges to the framework for some of the following reasons:
Existing ADR programs provide access to fair and timely resolution for an educated consumer. However, accessibility remains an issue due to a lack of public awareness of the availability of ADR professionals and the process involved. The issue of affordability varies among the programs, yet they are far less than the cost of litigation. 4. Does this ADR program provide information to a consumer before he or she is asked to agree to submit disputes to the program? At what point and how is this information provided? Exisitng ADR programs offered by e-commerce businesses are not transparent to the average consumer. ADR clauses are often buried within the lengthy terms and conditions. The recourse for dispute resolution is often located near the end of a very long document that the average consumer probably doesn't even read. There are often rigid participatory requirements for the consumer. Information is provided under the users/consumers terms and conditions on the website. The information is frequently written in complicated legal terms and usually near the end of the agreement. This brings to our attention the question of whether or not the average consumer takes the time to read the full document, and does the consumer understand his/her rights as set forth in the document. If the consumer does not read the document or understand the terms and conditions, it has a negative impact on his/her due process rights. In other words, does the average consumer know how and where to obtain advice and assistance in soliciting an ADR advocate/strategist? 5. What are the procedural effects of this program, for example, to what extent are decisions binding? To what extent are they appealable for a decision? Is participation in the program a prerequisite to filing a lawsuit? There is no set process for resolving business to consumer disputes. Therefore, it follows that procedures vary from program to program and country to country since cross-border transactions are subject to national framework and applicable laws and jurisdictions. Many firms doing business on the Internet state in their terms and conditions that the dispute resolution process for the consumer is binding arbitration. Decisions from a binding arbitration may be appealed to legal authority, but in many cases only in the jurisdiction in which the business entity is incorporated or resides. 6. How are decisions enforced under this ADR program? The disputing parties agree to enter into an appropriate ADR process. If the attempt to reach a settlement is successful, the parties will acknowledge that they have reached a settlement by signing an agreement. The settlement agreement details the procedure to be followed in achieving the resolution. The whole process requires mutual respect from the parties. Failure to comply with a mutually agreed upon settlement can be brought to legal authority for further action. 7. What are the costs to the parties engaging in ADR? Who funds these costs? Is this program cost-effective? Is it suitable for small- dollar transactions? Does this program handle a large volume of disputes? Is it capable of doing so? In the ADR process costs are mutually assessed. ADR tends to be cost-effective when compared to the combined costs of litigation. The ADR process tends to result in faster resolution since costs are directly borne by both parties. ADR is not necessarily attached to a dollar amount. It is focused on resolving the dispute, which is not always about dollars and cents. The dispute may involve quality or quantity of goods or the nature of the services provided. An appropriately structured program can resolve large numbers of disputes. To do so, the program may require the use of more than one ADR program provider. 8. Is ADR for online consumer transactions better suited to certain situations than others, for example, cross-border disputes or cases limited to a certain monetary amount? Are there any other factors relevant to determining whether ADR is suited to particular online consumer transactions? ADR is well suited for resolving online consumer transaction disputes. Traditional methods of ADR may prove to be too cumbersome in a logistical sense. Online ADR may be better suited for cross-border transactions since it does not require parties to travel or meet face to face. However, online mediation in cross-border transactions needs to address specific issues such as post-resolution jurisdiction, international trade requirements and other existing framework issues. In implementing ADR for cross-border transactions, business, consumer representatives and governments should employ information technologies and use them to enhance consumer awareness and freedom of choice. Governments need to ensure that an international framework is established to protect consumers at the same level as in other forms of commerce. Consumer transactions that were deemed to have involved illegalities would not be good candidates for ADR. 9. Describe alternative dispute resolution programs for online consumer transactions that are being developed by businesses, consumer representatives or other groups. There are several programs presently available. Most of these use either mediation or arbitration as the methodology. These programs generally follow ADR rules and procedures set forth by the American Arbitration Association and/or the American Bar Association. Frequently, e-commerce firms will specify the organization providing the ADR, i.e. the International Association of Professional Negotiators or the American Arbitration Association. There are several firms that are utilizing online mediations. As technology advances our capabilities, so too will the accessibility and availability of ADR advance. 10. What are the obstacles, if any, to the implementation of alternative dispute resolution programs for online consumer transactions? What are the incentives and disincentives for business and consumers to use such programs? There are several obstacles to the implementation of alternative dispute resolution programs for online consumer transactions.
The incentives to utilize ADR programs are:
Some disincentives to an ADR program are:
11. A variety of arrangements have been developed through international organizations and private sector bodies to facilitate ADR, particularly in a commercial global context. What lessons have been learned from these experiences that might contribute to better understanding of this area in the context of consumer online transactions? Reserved 12. To what extent are mechanisms that have been designed to prevent disputes from arising in online consumer transactions, such as escrow accounts, being used in the online world? Are there legal or other obstacles to the development of these types of mechanisms? To our knowledge there is very little use of escrow accounts to prevent disputes arising from online consumer transactions. Some of the obstacles that exist are:
13. The OECD "Guidelines on Consumer Protection in the Context of Electronic Commerce" encourage businesses, consumer representatives and governments to "work together to continue to provide consumers with the option of alternative dispute resolution mechanisms that provide effective resolution of the dispute in a fair and timely manner and without undue cost of burden to the consumer." What are some steps that could be taken to implement this principle? How can issues such as those raised in questions 4 through 7 (above) be considered in this context?
The option of ADR must be transparent to the average consumer. The language must be simplified. The procedural cost must factor in the logistical burden and expenses for both parties to the action. To implement this principle an ADR proceeding should innovatively employ information technologies. Businesses should be encouraged to partner with established ADR providers as part of their internal mechanisms to resolve online consumer transaction complaints and disputes. Consumer representatives should also be encouraged to partner with established ADR providers. We would recommend that the utilization of ADR mechanisms be mandated and progressive ADR techniques should be exhausted prior to litigation. 14. What issues are raised or created for ADR, if any, by online consumer transactions that do not exist in the traditional, offline environment?
15. What should be the role of governments, if any, in connection with the use and/or development of alternative dispute resolution programs for online consumer transactions? Governments should work with businesses and consumer representatives to promote transparent policies and procedures, particularly in cross-border transactions. Governments should collaborate with consumer representatives and businesses to review consumer protection laws in order to make them applicable to e-commerce. All parties should work to develop and promote innovative uses of technology. All governments should work together to promote cross-border consumer protection programs. They should facilitate on a national and international basis consumers ability to access consumer education and information on how to file complaints related to e-commerce. Governments should work cooperatively on international issues in combating cross-border fraudulent commercial conduct. There should be a cooperative effort in developing agreements for recognizing and enforcing ADR judgments resulting from business to consumer complaints and disputes. 16. What, if any, U.S. Laws or international treaties to which the United States is a member, would have to be examined as potential barriers to implement effective alternative dispute resolution programs for online consumer Transactions? Reserved 17. What should be the primary focus and scope of the public workshop on alternative dispute resolution for online consumer transactions? The public workshop should address the issues of:
18. Are there any other interests not previously described in this notice that should be represented at the workshop? We believe that all parties that would have an interest in this workshop were included in the invitation to participate. James R. Foskett |