Alternative Dispute Resolution for Consumer
Transactions in the Borderless Online Marketplace
Comments submitted by
Ministry of International Trade and Industry, Japan
The Ministry of International Trade and Industry, Japan (hereinafter referred to as
MITI) is pleased to submit the following comments in response to the request of Federal
Trade Commission and Department of Commerce, regarding alternative dispute resolution for
consumer transactions in the borderless online marketplace.
MITI is one of the governmental agencies which is responsible for consumer protection
in the Japanese Government. Especially with regard to consumer protection of B2C
electronic commerce, MITI is responsible for implementation of the following measures :
1) Enforcement of Door-to-door Sales and Other Direct Sales Act which
provides regulations on advertising by direct marketers (*) ;
2) Promotion of self-regulatory initiatives by private organizations ;
3) Promotion of and support for online seal program ;
4) Development of related legal / non-legal frameworks, including privacy protection,
electronic signature and authentication, etc.; and
5) Facilitation of discussions among all related stakeholders (consumer, business,
lawyer, NGO / NPO, international organizations, etc.) in order to build consumers'
confidence on B2C electronic commerce.
(*) B2C electronic commerce is regarded as a form of direct marketing under the Act.
- MITI's Observation on Consumers' Confidence over Current Online Marketplace
Although increasing number of population are involved in B2C electronic commerce, both
consumer and business still feel uncomfortableness, or sometimes, concerns over the online
Such uncomfortableness includes :
1) concern over abuse of privacy information ;
2) anxiety about credit card number transmission online ;
3) concern on unidentified "physical existence" of the retailer ;
4) anxiety about risk to be involved in malicious transactions
(get-rich-quick business such as pyramid scheme etc.); and
5) lack in knowledge about how to access dispute resolution/redress.
However, these concerns cannot be wiped out solely with traditional legislative
measures, and various non-legislative measures would be workable, including industry's
self-regulatory initiatives, seal program, and other devices (escrow,
electronic signature and authentication, encryption technology, rating system by consumer,
Competition can be a good source for an online marketers to develop new business
devices and technologies to build further consumers' loyalty on its own business,
therefore, unnecessary and inflexible regulations to harm these attempts shall not be
Rather, like a shopping in the real (offline) marketplace, consumer and
business need to know the ways not to be involved in malicious or
troublesome transactions, and all the stakeholders shall work in a cooperative
manner to realize establishment and penetration of common senses or
community's rules of the online marketplace.
- What are the reasons for industry, consumers and governments to participate (or not
participate ) in developing ADR for the global online marketplace ?
Although MITI has not yet announced its official policy direction regarding ADR in the
online marketplace, as repeatedly discussed by a number of experts, carefully designed ADR
mechanisms has various advantages over traditional litigation process in resolution of
consumer disputes :
1) inexpensive and timely resolution (crucially important for less- experienced
consumers and small / medium enterprises) ;
2) less confrontational resolution(good for business in keeping its reputation) ;
3) non-legal experts involved and non-legal factors taken into account ;
4) privacy protected (resolution process not disclosed) ; and
5) possible for handling cross-border dispute.
Given these advantages, ADR is regarded as a mutually beneficial measure both for
consumers and businesses, and thus, ADR is also considered to be valuable and effective
from government's point of view.
In addition, following aspects are worth mentioned :
1) Regulation on pre-transaction phase can be minimized if effective
ADR mechanism would give sufficient post-transaction dispute resolution and
redress, therefore this feature is appropriate where technological neutrality is crucial ;
2) Accumulated and disclosed experiences of ADR cases are expected to accelerate
spontaneous development of common senses and community's rules in
the online marketplace. This would be working so as to enhance consumer's readiness and
skills in preventing disputes in the pre-transaction phase.
Above-mentioned views clearly depict that ADR mechanism would greatly help to establish
consumers' confidence on B2C electronic commerce.
3. Currently Available ADR in the Online Marketplace of Japan
Japan Direct Marketing Association (JADMA) and Japan Chamber of Commerce and Industry
(JCCI) are conducting Online Shopping Trustmark regime in order to provide
information about reliable online marketers, and this regime also provides complaint
MITI is financially supporting this Trustmark regime and expects that this
regime will help building consumers' confidence on B2C electronic commerce.
Under this program, online marketer which is accredited to use the
Trustmark shall make every efforts to resolve disputes in good faith, if a
consumer would raise questions or claims (by using both online and offline
Although dispute resolution mechanism to provide the third party's mediation and
arbitration is not provided, the accreditation organizations expect that almost all of the
disputes will be resolved in a satisfactory way by the currently available measures, which
are internal claim handling process and third party's consultation /
If a consumer's claim would not be treated appropriately, the online marketer would run
a risk to lose the Trustmark based on its contract with the accreditation
JADMA just began discussions with its overseas counterparts with a view to constructing
dispute resolution mechanism to cope with cross-border transaction.
4. What issues need to be addressed in developing / conducting ADR in the online
As were discussed by a number of experts, following conditions should be met to develop
ADR mechanism which is workable for consumer transaction disputes :
(1) easy-to-access by consumer ;
(2) inexpensive and timely resolution ;
(3) independence of ADR body and impartiality (neutrality) (**);
(4) fair and professionally skilled conciliator / mediator / arbitrator ;
(5) disclosure of ADR principle and procedure to assure predictability ;
(6) enforceability (especially crucial for cross-border disputes) ;
(7) sufficient consideration to language / cultural difference ;
(8) appropriate mixture of online / offline procedure ; and
(9) appropriate linkage to litigation process without harming flexibility of ADR process.
(**) This point needs further discussion :
- If a specific model of ADR is designed which is aimed to be inexpensive for consumers,
such ADR mechanism would be inevitably financed by marketers.
- However, this situation would raise a question whether business- financed ADR mechanism
is "impartial" or not.
Whether these conditions are met or not shall be clearly notified to consumers and
businesses prior to their transaction. In order to realize such disclosure, all the
stakeholders (consumer, business, government, etc.) need to discuss about establishing
guidelines or self-regulatory codes in pursuit of appropriate ADR practices.
Among above-mentioned conditions, especially, careful definitions of
fairness and impartiality are critical in order to realize
clear and understandable disclosure in view of consumer protection.
Further, it should be noted that a up-to-date legal framework is indispensable
(sometimes in a form of deregulation) for realizing various alternatives of ADR to be
widely tested by consumers and businesses.
From this point of view, a number of stakeholders point out that Japanese legislation
does not give a sufficient legal framework to ADR business conducting mediation and
One of MITI's informal working group composed of business person, legal experts and
other stakeholders announced its report on ADR. The conclusion (both B2C and B2B covered)
of the report includes :
1) importance of international harmonization of legislation related to arbitration ;
2) importance of development of domestic legislation with regard to arbitration (***);
3) needs for consideration about guidelines on selection of mediator / arbitrator and
possible mandatory clause for privacy protection, etc. ; and
4) needs for deregulation of Lawyer's Law to realize non-lawyer's involvement
into arbitration agent business.
(***) Variety of experts should be admitted to be incorporated in order not for harming
voluntariness and flexibility of its procedures.
Along with exploring suitable business models by private sector, an
appropriate legal framework needs to be developed based on the society's needs.
Carefully designed ADR mechanism is expected to work to enhance consumers' confidence
on B2C electronic commerce if it is conducted appropriately. Such ADR is beneficial both
for consumer and business.
Considering its value and usefulness, all the stakeholder in the online marketplace
including consumer, business and government, should work together to realize ADR
mechanisms which meet various conditions itemized in the Section 4 of this document.
International cooperation is indispensable for realizing appropriate ADR mechanisms to
cope with cross-border disputes and MITI would like to make substantive contribution to
Submitted June 29, 2000
Deputy director, Commerce Policy Division,
Commerce and Distribution Policy Group,
Ministry of International Trade and Industry