51 Pages Posted: 16 Dec 2005
This article analyzes procedural due process concerns as an element of arbitration in online dispute resolution (ODR) in business-to-consumer (B2C) e-commerce. One factor hindering its growth is the lack of effective dispute resolution. Courts may not be a feasible forum, thus leaving private mechanisms, such as ODR, as the primary source of dispute resolution. Existing incentives may provide for a level playing field for online arbitration in disputes between merchants; however, these incentives may be nonexistent or inadequate with regard to disputes between consumers and merchants.
Affirmative positive government regulations to regulate ODR may not keep pace with changes in e-commerce technology and business models.
Top-down regulation suffers from governmental inefficiency; it is costly and time-consuming. In the fast moving technical world of the Internet, an enactment may not be promulgated in time to match technology in use. Statutory prohibitions may fail because they consistently emerge only after the harm has been done... Top-down regulation also prevents persons from individually choosing to allow a harm that, in their personal opinion, is harmless.
Further, in order to be effective in a global e-market place, positive government regulation would require trans-border coordination between governments. There are no existing transnational or bilateral institutions to coordinate this form of government regulation. Nor are there any significant efforts to create such institutions. Lacking coordinating institutions and the political will to support them, the top-down approach to regulating ODR is doomed to failure.
Alternatively, a laissez-faire market solution focusing solely on consumer action is even less likely to succeed, because the process is not transparent. Consumers do not have the time or the incentive to investigate ODR options until the post-contract dispute arises. Further, under the repeat player paradigm that would dominate B2C ODR, the relevant consumers from the perspective of the ODR providers would be the merchant and not the consumer. Accordingly, existing direct market-incentives motivate the ODR provider to cooperate with the merchant rather than a consumer. Regulatory models that provide voluntary safe harbor provisions, coupled with explicit incentives to encourage due process and fair play to ameliorate the repeat-player influence, may be the superior regulatory models because these models are flexible and are more likely to keep pace with the evolution of e-commerce.
This article concludes that a hybrid approach to government incentives that encourage the development of consumer institutions to counter the market advantages enjoyed by repeat players (such as merchants) and to change the judicial standard of review for a consumer arbitration award may result in a more level playing field for the consumer. For example, one recommendation is that in the consumer context courts should not automatically grant the arbitral award a deferential standard of review.
Rather, courts should examine the processes and procedures that produced the arbitration award. As the processes and procedures used by the arbitrator move along the continuum from arbitrary to due process and fair play, the court will give correspondingly greater deference to the arbitral award. Since awards that fall within these safe harbor provisions will be less expensive to reduce to a court judgment, the arbitrator and the parties have a graduated incentive to assure a more level playing field.
Keywords: ODR,ADR, online dispute resolution, due process, ecommerce, economic market for justice, repeat-player, reputational sanctions, computer mediated communications, CMC
Suggested Citation: Suggested Citation
Gibbons, Llewellyn Joseph, Creating a Market for Justice; a Market Incentive Solution to Regulating the Playing Field: Judicial Deference, Judicial Review, Due Process, and Fair Play in Online Consumer Arbitration. Northwestern Journal of International Law & Business, Vol. 23, 2002. Available at SSRN: https://ssrn.com/abstract=483922
By Ronald Brand
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