Settling E-commerce Disputes

Despite the dot.com bust, the future of Internet commerce (e-commerce) still looks rosy. According to recent studies, it is now projected that by 2005 one billion people will be on the Internet and at least one third will make online purchases. What is even more remarkable is that this huge, $1.6 trillion business will be based essentially on trust, among sellers and buyers who are unlikely to ever see or speak to each other.

Inevitably, some of those e-commerce transactions are bound to turn into disputes. So what happens when a seller in the USA and a buyer in Russia disagree over a sale transaction worth only a few hundred dollars? What recourse do they have, when litigation, Small Claims court and arbitration are obviously not feasible options?

More and more online merchants are realizing that, if trust is indeed such a critical factor in e-commerce, having reliable products, clear return/refund policies and a multi-language web site may not be enough. It is far more effective if worldwide customers are reassured that, if they have a disagreement with the seller, they can get it resolved through an independent, neutral and inexpensive dispute resolution process.

Ebay has already proven how this can be done. With more than four million auctions daily, eBay is the world’s largest online auction. When sellers and buyers throughout the world have a dispute, they are referred to Square Trade, an independent ODR (Online Dispute Resolution) company based in San Francisco. A Square Trade trained mediator assigned to the case then gets in touch with both parties and helps them negotiate a mutually acceptable settlement. The purpose of mediation is not to determine which party is right or wrong, but to help seller and buyer answer one simple question: How can your case be resolved in a way you can both live with?

The entire mediation process takes place by email, and neither the mediator nor the parties need to be online at the same time. Therefore, parties can read and respond to the mediator’s messages whenever they want: after a few minutes, hours or even days.

As a Square Trade mediator, I have mediated over 600 eBay cases, with parties across the USA, Europe, Asia, and transactions worth anywhere between one penny and $35,000. All cases have fundamentally the same features. There are some substantive, tangible issues (like money, products, refunds, etc.); and there are also intangible issues (like the buyer’s need to feel heard and respected), which can often be resolved just with an apology.

Interestingly enough, the settlement rate achieved through online mediation is similar to the settlement rate achieved in face-to-face mediation in Small Claims courts. In other words, it does not really matter whether seller and buyer know each other since they live in the same city, or are total strangers because they live in different countries. What matters most is that both parties feel equally empowered by a neutral process that does not favor one party over the other, and gives them total control on its outcome.