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Gawith, Daril --- "Non Litigation-Based Redress for International Consumer Transactions is not Cost Effective - A Case for Reform?" [2006] MqJlBLaw 7; (2006) 3 Macquarie Journal of Business Law 115


Non Litigation-Based Redress for International Consumer Transactions is not Cost Effective – A Case for Reform?

DARIL GAWITH[*]

I Introduction

This article considers whether methods of redress/protection[1] for low value[2] international consumer transactions (ICTs) by means other than through litigation is cost-effective[3] and, as will be seen, finds that such protection methods as they currently exist are generally not cost-effective.

To begin, let us consider why the lack of cost-effectiveness of non litigation-based redress/protection methods for ICTs may be an issue of some importance.

Whatever the reason for the lack of cost-effectiveness of the various redress methods for ICTs, the fact remains that the growth of global e-commerce is being retarded as a result. From the mid 1990s there has been an exponential world-wide growth in the volume of ICTs. According to Australian government data,

on average, approximately one million Australians aged 14 years and over made a purchase online in any given week of 2002-03. This represented an increase of 85 per cent since 2000-01.[4]

This is consistent with international trends. According to OECD data,[5]

e-commerce sales in the USA,[6] as a share of total retail sales, increased to 1.2% in late 2001, being valued in excess of US$10 billion in 2001. It is likely though, that because of general trust concerns on the part of consumers, such growth has in fact been significantly retarded – relative to what it could have been without trust concerns.

According to an OECD survey of online consumers, one of the most significant impediments to engagement in an ICT is consumer concern about the lack of consumer protection, specifically ‘trust concerns/concerned about receiving and returning goods’.[7]

This suggests that a solution to the problem of untrustworthiness (for consumers) would lead to an even greater acceleration of e-commerce sales world-wide, benefiting all involved. What lies at the heart of this trust problem is that consumer redress for disputed/failed ICTs involving uncooperative vendors is not practically possible, generally speaking, due to the fact that the cost of obtaining a remedy will be greater than any amount that could be recovered by any of the current means of redress available. In other words, in considering any of the currently available means of redress for a disputed/failed ICT, it is clear that none of them are ‘cost-effective’, ie, the cost of redress is greater than any positive effect of any available form of redress (especially true, the lower the value of the consumer transaction). This article though, only considers non litigation-based methods of redress for ICTs, therefore it is only the proposition that non litigation-based methods are not cost-effective that this article seeks to establish.

Now, assuming for a moment that the proposition is correct, and that an elimination of impediments in the growth of e-commerce would be desirable, the lack of cost-effectiveness of non litigation-based methods for ICTs would clearly represent a case for reform, especially if litigation itself, as a redress method, was also not cost-effective (which research by the present writer strongly suggests is the case).

The focus of this article, then, is upon the cost-effectiveness of any (current or potential) method of redress, other than litigation, by which a consumer who is an aggrieved party to an ICT could seek a remedy from a foreign merchant for non/wrong-delivery of goods. Such methods include quasi-litigation through some form of ADR, and effective ‘pressure’[8] – applied through an agreement between a merchant and a credit card issuer (on behalf of a consumer), or between a merchant and an industry body to which the merchant is a member, or by any other body – that may so effect a merchant that a remedy is made available by them to the consumer. This article also briefly considers such potential non-litigation-based redress methods as transaction insurance and trust marks. There are 13 protection methods considered in this article, in total.[9] It was considered important that no possible or alleged protection method be excluded from consideration as it would be unreasonable to draw a conclusion that ‘there are no cost-effective protection methods’ if any potential method had been excluded.

The data in this article on such topics as contractual protections[10] (such as may be associated with credit card terms, chargeback,[11] transaction insurance and escrow), technological protections (such trust marks, consumer complaints bulletin boards), ADR and arbitration, consumer education programs, industry codes of conduct, the appointment of foreign lawyers and foreign public consumer protection authorities (for the application of ‘pressure’), and national deregistration of websites was collected from bank-level credit card issuer conditions of use, credit card provider websites, and OECD reports; from insurance companies (by telephone, mail and Internet searches); from academic texts, public sector reports and unpublished conference proceedings; and from a number of Brisbane and Sydney law firms with overseas agencies.

We can now consider explanations of ‘cost’, ‘difficulty of enforcement’ and ‘complexity’, terms which will be used repeatedly in this article, as follows.

The definition of ‘cost’, for the purpose of this article, is an outlay or expenditure, tangible or intangible, incurred or anticipated, in exchange for a desired object or outcome.

The idea of ‘difficulty of enforcement’, for the purpose of this article, is as follows. The beginnings of a definition of ‘difficulty of enforcement’ may be found by first considering the meaning of ‘enforceability’. The word enforceability derives from the word ‘enforce’ which has been defined as ‘to compel observance of or obedience to’[12]

and ‘to compel obedience to a law, regulation, or command’.[13]

The basic common element to these definitions is compulsion. Enforceability is therefore defined by this article to mean the aspect of an ICT protection method such that the remedy offered by the method may be imposed compulsorily upon a party to the ICT (assuming that physical enforcement in the real world is actually possible and not merely hypothetical) either directly through litigation or indirectly through legal or equitable/moral obligation. Alternatively, enforceability may be thought of as having compulsion in varying degrees of strength. Thus ‘difficulty of enforcement’ is a variable depending on the degree of compulsion involved. By way of illustration, ‘consumer education’ as a remedy for solving ICT problems would normally be understood to involve no compulsion and thus having ‘high’ difficulty of enforcement, since the information offered by way of consumer education would normally be unilaterally offered simply as good advice for avoiding such problems in the first place, on a take it or leave it basis. On the other hand, ADR and arbitration would generally be understood as having comparatively less difficulty of enforcement associated with them, at least in some cases. ADR may involve enforceability by way of a process which might result in a binding (and thus enforceable) agreement. Arbitration can be binding where a quasi-judicial judgment may be binding and thus enforceable against the relevant party.[14]

Litigation is highly enforceable (ie, ‘low difficulty of enforcement’) when the party being sued is within the relevant jurisdiction because it involves state-backed enforcement powers, but may be less enforceable when the other party is not within the jurisdiction.

The definition of ‘complexity’, for the purpose of this article, is as follows. ‘Complexity’ has been defined by the Oxford dictionary as being the noun form of the word ‘complex’ meaning ‘consisting of parts, composite; complicated’.[15]

It has also been defined as ‘the quality or state of being complex’.[16]

For present purposes however, the definition of complexity shall mean the opposite of or the lack of ‘simplicity’. Simplicity has been defined as ‘the state of being simple, uncomplicated, or uncompounded’,[17]

where ‘simple’ is defined as ‘free of secondary complications’,[18]

‘lack of complexity, complication, embellishment, or difficulty’[19]

and ‘the property, condition, or quality of being simple or uncombined’.[20]

In this article, simplicity is defined as freedom from complications, that is, a state where there is an absence of confusion or complexity.

ICT protection methods are evaluated in terms of simplicity according to the extent to which those methods are accompanied by complexity, confusion or complications. Thus complexity, confusion or complications may involve a range of factors of various types, such as degree of difficulty in learning, using or applying the remedy, potential waiting time, inconvenience and stress, and include objective and subjective complications. Such factors can overlap with each other, and they can even overlap with the cost and enforceability criteria. Simplicity is thus a catch-all criterion, a clear advantage of which is to allow for a limitation in the total number of criteria being used to evaluate ICT protection methods.

Therefore complexity (lack of simplicity) may be used as a criterion to evaluate ICT protection methods (litigation and non-litigation based) because, firstly, it would be an advantage to a consumer to be able to avoid unnecessary complications as between similar or equal protection methods and, secondly, the criterion is general enough to cover a wide range of factors left over after consideration of cost and enforceability factors in relation to comparable protection methods. On that basis, an ideal protection method might be one which was cheap, enforceable, not too difficult to use, speedy and relatively stress-free.

To conclude this introduction, consider a brief explanation of the assessment methodology used, ie, of the application of the above concepts to the various ICT redress methods examined here.

The three criteria, cost, difficulty of enforcement and complexity, are used to assess the cost-effectiveness of the protection methods considered, such that each method obtains an individual result, under each of those three criteria, of either ‘very low’, ‘low’, ‘acceptable’, ‘high’ or ‘very high’.

Thus, as the result of applying the three evaluation criteria – cost, difficulty of enforcement and complexity – any ICT protection methods examined in this article can then be given an overall cost-effectiveness ‘result’ of either ‘yes’ or ‘no’ – on the basis that any method which has any one or more evaluation criteria that is higher than ‘acceptable’ will receive a ‘no’ for its overall cost-effectiveness result. Thus a method whose cost, difficulty of enforcement and complexity was very low, low or acceptable, by all three criteria, would be cost-effective.

II Description and Assessment of Non-Litigation based Redress Methods

A Credit Card Terms[21]

1 Description

Broadly speaking, a ‘credit card’[22] is a means by which a bank-level card issuer pays a vendor for goods or services on behalf of a card holder (a consumer), and the card holder is able to defer full payment of the resultant principal debt from one month to the next, by payment of a minimum percentage of that debt. Thus a payment could be made to pay part of the debt and an interest charge, and possibly some kind of government duty, in whole or in part.

Credit issued through the use of credit cards is based on four bilateral loan contracts between card issuers (bank-level issuers), card holders/consumers, vendors who are willing to accept particular cards, and the vendor’s financial institution. The four contracts are between consumer and vendor, between issuer and consumer, between issuer and vendor’s financial institution, and between vendor and their financial institution. Vendors provide goods or services to cardholders in accordance with prior agreements between issuers and vendors, whereby issuers agree to reimburse vendors for purchase transactions on behalf of card holders. A reimbursement of a vendor by an issuer thus amounts to a loan by the issuer to the card holder.

A hypothetical example would be where a consumer quotes their personal Mastercard number to a vendor in lieu of payment for goods offered for sale by the vendor. Assuming there are no disputes between the four parties, ‘Mastercard’ will pay the vendor (through the vendor’s financial institution), and the consumer will repay ‘Mastercard’ through a single payment or a series of instalment payments.[23]

Credit card ‘terms’ are the terms of use (sometimes called the ‘the conditions of use’), which a prospective card holder must agree to in order to become a card holder. Thus they are terms contained within the contract between the card holder and the bank-level card issuer. Such terms include the card issuer’s terms regarding transaction-security where the cards are involved in the purchase of goods and services. Therefore, the terms potentially amount to a method of protecting ICTs because they could provide protection for card-holding consumers in the event of non or wrong delivery of goods.

2 Assessment

In some cases, the inherent risks to the consumer in a transaction involving payment by credit card (through potential non/wrong-delivery of goods, for example) will be insured against by built-in transaction-security insurance provided by the issuer. The future of this scheme as a solution to ICT problems depends however on the specific transaction-security terms offered by issuers[24] in respect of individual transactions. (The content of applicable local law[25] is relevant too, but such law is independent of the topic of credit cards terms being examined here). It is thus necessary to look at the specific terms applicable to each particular transaction in question, something beyond the scope of this article. It is possible however to look at representative terms relating to the four major card types available,[26] and analyse them in terms of their cost, enforceability and simplicity from the perspective of the consumer.[27]

(a) Citibank Visa

Citibank expresses its Visa card transaction-security terms in the following way:

Delivery Guarantee: If you purchase a personal item with your Citibank Credit Card and the item is never delivered, the Citibank Delivery Guarantee means you're covered for up to $10,000, for one transaction per Statement Period.

Purchase Cover: Purchase Cover provides insurance for almost all new personal items bought with your Citibank Credit Card. If any items are lost, stolen or damaged within three months of purchase, we'll arrange for them to be repaired, replaced, rebuilt, or reinstated, free of charge. It doesn't matter where in the world it happened.[28]

In respect of the Delivery Guarantee, the consumer is thus covered only for purchase transactions worth $10,000 or less (in whole, or in part, i.e. the first $10,000 worth of a transaction exceeding $10,000), but will not be covered for any secondary or subsequent non-deliveries within any Statement Period (one calendar month). There would be no coverage, under these terms, for values exceeding $10,000 relating to non-delivery, or for non-delivery of goods of any value if the non-delivery related to a second or subsequent purchase in the same month. This provides a reasonable but limited level of protection, and a consumer relying on these terms is left with limited redress under current law for non-delivery.

In respect of the Purchase Cover, there would be no cover under these terms where goods arrived in a damaged state (a form of wrong delivery) or there is a dispute between the consumer and vendor regarding delivery of the wrong type of goods.

(b) Westpac Mastercard

With respect to the Westpac Mastercard, according to the ‘Safe Shopping Online’ page of Mastercard International’s website:

If you don’t receive the goods ordered, or they are of an unacceptable quality and you have returned the goods, ask the financial institution that issued your card if it will undertake a ‘chargeback’. They may be willing to cancel the transaction and reverse the payment to the business.[29]

Unfortunately the cardholder could not rely on this as it does not come from an actual Mastercard issuer, and amounts to ‘consumer advice’ only. Westpac Banking Corporation's Consumer Credit Cards Conditions of Use limits its relevant transaction-security to the following terms:

‘Unauthorised transaction’ means any transaction made without your knowledge or consent. [Clause 2.0 (x)]

If an unauthorised transaction is an eCommerce Transaction and we are notified that the transaction is unauthorised by the due date shown on your Card Account statement, the Account Holder will not be liable for the amount of the transaction. [Clause 11.2.3]

If you have a problem or complaint, it is your responsibility to notify us of the situation. We will aim to resolve the matter when you first contact us. If we cannot resolve your issue there and then, we will … let you know who is handling your complaint, keep you informed of what is happening, and aim to resolve your complaint within five working days.

If you remain dissatisfied with the outcome … you can refer your complaint to The Australian Banking Industry Ombudsman. [Clause 10.2][30]

These clauses are of no use to a cardholder in the face of non/wrong delivery, as such cases do not involve ‘unauthorised’ use, as defined.

(c) American Express

American Express expresses its transaction-security terms as follows:

Online Fraud Protection Guarantee: Provided you notify us immediately upon discovery of any fraudulent transactions and you have complied with your Card Conditions, you will not be held liable for any unauthorised charges.[31]

The use of the term ‘unauthorised’ (as with Westpac Mastercard) refers to unauthorised usage of the card by a third party (after it has been lost, stolen or ‘borrowed’). Therefore, if a consumer uses their own card (as with Citibank Visa card holders), they will have to pay fully for transactions involving breach of contract by the vendor (such as those involving non/wrong-delivery of goods, which involve a ‘service dispute’ between vendor and consumer only), and thus the transaction-security terms noted are inapplicable to breach of contract cases where an American Express card is used as a means of payment. In other words, where there is no fraud by an unauthorised third party, there is no transaction-security provided by the credit card terms themselves, and a ‘chargeback’ will only be made in certain circumstances, on the decision of American Express:

If a Merchant does not provide you with the goods and services purchased by use of the Credit Card, we may at our discretion credit your Account for the amount charged. If we do so, you appoint us your attorney to pursue any rights you may have against the Merchant, in your name but at our cost.[32]

(d) Diners Club

The relevant Diners Club terms are the Diners Club Electronic Access Conditions of Use, which expresses its transaction-security terms as follows:

We will promptly look into the [disputed] matter and decide what course of action should be followed, if your complaint is not immediately settled to the satisfaction of both of you and us … We will advise you in writing of our procedures for the investigation and resolution of the complaint. [Clause 13(c)]

Where, as a result of our investigation, we discover that the account has been incorrectly credited or debited, we will, where appropriate, promptly adjust the account … [Clause 13(h)][33]

A great advantage to the consumer is that the submission of a complaint to Citibank, Westpac, American Express or Diners Club and the subsequent response by those issuers in relation to the attempted purchase of goods for which there was an unremedied non/wrong delivery, is free of charge. The pursuit of a remedy is conducted entirely at the expense of the issuers.

As regards the enforceability, by the consumer, of the vendor, no direct coercion of the vendor is possible as the result of a relationship between the consumer and any card issuer. As regards the enforceability, by the consumer, of an issuer, the issuers would be contractually bound to provide the limited protections available. If it came down to a dispute between the consumer and any of the issuers, however, the consumer would probably not have a cost-effective remedy through any of the four cards if they had to sue an issuer to enforce the relevant contract due to the typical relative difference between transaction value and litigation cost. In respect of enforceability through Westpac Mastercard and American Express, the consumer is in a worse position than the Citibank Visa card holder. As noted, the clauses under those two cards are of no use to a card holder in the face of non/wrong delivery, as such cases do not involve ‘unauthorised’ use, as defined; and are subject to the discretion of the issuer in the case of American Express and Diners Club.

Finally, the complexity of the protective qualities of the card can be evaluated. As far as this method does provide protection, it is relatively simple to contact an issuer, lodge a complaint, provide further details of the transaction in question and of the nature of the complaint, and expect them to conduct the handling of the matter from then onward. The cards all do well in terms of complexity and cost then but suffer from lack of enforceability – especially in the case of Westpac Mastercard as compared with the Citibank card, as there is nothing worth enforcing. Thus the consumer is left without any real power to obtain a remedy using any card, in the worst case scenario, for a justified complaint.

In respect of card issuers generally, there is anecdotal evidence that they are often quite willing to assist with purchase difficulties associated with the use of credit cards. This article however, is concerned with the relevant black letter terms which card usage is subject to, and with the actual formal redress methods in the event of serious dispute.

3 Conclusion

The OECD says there are four ‘approaches’ to consumer protection for payment cardholders in OECD Member countries, namely legal and regulatory regimes, industry practice, individual issuer initiatives and the recommendations of international organisations.[34]

With respect to the first approach (the only approach with potentially serious enforcement power behind it), the OECD advises that

Not all OECD Member countries have legal or regulatory regimes covering consumer protections for payment cardholders. Further, there are great differences among those that do have these regimes. While many Member countries, for example, have specific provisions with regard to unauthorised charges and processing errors, not as many have specific provisions addressing non-delivery or non-conforming goods and services.[35]

Of those Member countries that do have such provisions, since they are national provisions, they are probably ineffective outside their own national boundaries. Hence ‘there may be more comprehensive protections for domestic transactions than for cross-border transactions. There are questions as to whether the [UK] Consumer Credits Act’s section on liability in cases of breach of contract or misrepresentation applies to overseas transactions’;[36]

and while ‘in the United States cardholders doing business with merchants outside the United States are covered by the same federal legal protections as those afforded them when trading with merchants within the United States’,[37]

the enforcement effectiveness of such purportedly ‘long arm’ statutes are questionable where the only assets of merchants who are outside the US, are outside the US.

An overall result of ‘no’ for cost-effectiveness of the credit card protection method is determined as follows. As cost is not actually a factor at all in the kind of support offered to consumer card holders (ie, card issuers charge nothing for such support), this method achieves a result of ‘very low’ for cost. The result for the credit card method of ICT protection in terms of difficulty of enforcement, as an evaluation criterion, is not high – even using the best case scenario (Citibank). This method does not involve the coercion of the vendor party to the failed/disputed ICT, and it does not involve credit card suppliers providing complete protection for non/wrong delivery of goods. Furthermore, what protection it does offer, generally speaking, is up to the discretion of the card issuer (in the terms noted above) – which the consumer would be unlikely to want to sue upon, on economic grounds. This method, therefore, achieves a result of ‘very high’ for difficulty of enforcement. Finally, as far as the credit card method of ICT protection does provide protection, it is relatively simple (but not without some effort) to contact a card issuer, lodge a complaint, provide further details of the transaction in question and of the nature of the complaint, and expect the card issuer to conduct the handling of the matter from then onward. This method, therefore, achieves a result of ‘low’ for complexity. Protection of ICTs, by credit card terms, for non/wrong delivery of goods, is not cost-effective. Tabulated, the overall result for credit cards is as follows.[38]

Methods
Cost
Difficulty of enforcement
Complexity
Cost-effective?
1 – Credit card terms
Very Low
Very High
Low
No

B Foreign Lawyers

1 Description

Appointment of foreign lawyers (ie, those who reside in the vendor’s country) is considered here as a means by which a consumer might respond to a disputed/failed ICT where such response covers (mostly) all manner of negotiations with the vendor – but extending to litigation in the vendor’s country, should that be required.

In respect of retaining foreign lawyers, a lawyer in one country who wished to acquire the assistance of a lawyer in a foreign country, would probably start by enquiring through their local Law Society (or equivalent) to see if they had the contact details of the equivalent body in the relevant country – who would then be contacted for a recommendation based on various suitability criteria. Alternately, the lawyer could conduct a search for such contact details on the Internet. The first method would probably not even occur to the average consumer and, while the second method would necessarily be technically available to the Internet-using consumer, once again, it would probably not even occur to them to look for such a body. The average consumer is unlikely to know about the existence of various foreign law societies. A third method (perhaps the more likely scenario) would be for the consumer (or their local lawyer) to approach a local law firm with foreign agents or affiliates.

2 Assessment

Such appointments, apart from cost, language and private international law issues is potentially an excellent solution to problems associated with ICTs. Furthermore, such appointments won’t alter the fact that the ICT itself has transborder-related difficulties, but it may make the subsequent handling of the matter easier through use of the lawyer’s local knowledge and skill (e.g. it may be more effective for a lawyer in the vendor’s country to negotiate with the vendor than for the consumer’s local lawyer to attempt the same). The possibility of appointing lawyers in the country of the offending supplier might potentially reduce the complexity of such situations down to the level found in the situation facing a consumer involved in a dispute with their local supplier pursuing the usual methods of redress. Unfortunately, however, cost, language[39] and private international law issues are potentially inherent in situations involving foreign lawyers, and such issues may create serious difficulties for the average consumer. Furthermore, the mere act of finding appropriate foreign legal counsel is another potential difficulty for the average consumer in its own right, as is the issue of not just finding a lawyer in a foreign country but finding the ‘right’ lawyer. The associated problems don’t necessarily stop there. According to Black

Consider the obstacles faced by a consumer contemplating litigation in a distant forum. That prospect entails considerable expenses for travel (both for the consumer litigator and for witnesses) and communication, expenses that are unlikely to be recouped in any award of costs. The already formidable step of retaining a lawyer is doubly daunting where the lawyer resides in a distant jurisdiction. Foreign counsel will not infrequently be retained on the consumer’s behalf by the local lawyer whom the consumer has first contacted, which means that the consumer is faced with bills from two lawyers, one of whom is an unknown quantity. And since the lawyers may have different incentives when it comes to the question of whether to settle or sue, a proceeding may be dragged out in an inefficient fashion. In addition, there will be emotional hurdles. A consumer who must litigate in a faraway forum will feel psychologically vulnerable and exposed, while the stay-at-home (corporate) party will feel correspondingly grounded and assured.[40]

Furthermore, it is through the process of attempting to retain foreign lawyers that costs could begin to accumulate.

In any event, there does remain the potential problem of cost, language and private international law issues. In the best case (but unlikely) scenario, the cost problems would be no worse than those in connection with the appointment of lawyers in the consumer’s own country of residence in a straightforward consumer protection action against a local supplier (probably expensive enough as it is). The more likely scenario is that because costs would probably be increased by distance and language issues (and possibly also by private international law issues[41]), costs are likely to be more expensive for the plaintiff consumer as compared with costs generated in a purely domestic action.

Apart from such difficulties, there may also be problems inherent within a foreign jurisdiction anyway because of local cultural peculiarities. A survey was conducted by this candidate in April 2003 of nine law firms in Brisbane and Sydney that have branch offices or affiliates outside Australia. According to one firm:

[Firm name] operates 10 Asian offices … apart from the common law jurisdictions in Singapore, Malaysia and Hong Kong, it is difficult to operate in the civil courts in other South-East Asia countries. This is caused by inadequacies of the court structure and concern about corruption so far as judicial officers are concerned …

In a country like Indonesia, it would be very unusual for an individual consumer to even contemplate an action in the courts, due to the expense and uncertainty of the process and a perceived bias in favour of Government or large corporations.

Our firm certainly has the capacity in each jurisdiction to engage in litigation but it is generally not recommended to clients because of the uncertainty of being able to provide a favourable outcome.[42]

In any event, even with no problems with foreign lawyers, such foreign lawyers guarantee nothing (with or without litigation). That is, the least that retention of foreign lawyers will mean, generally speaking, is expense, without any assurance of desirable results.

Assessed in terms of cost, the ‘foreign lawyers’ protection method may be no better than litigation, and possibly even marginally worse. In other words, if the use of this method is taken to include litigation costs, the cost of this method would clearly be comparable with the cost of litigation. Furthermore, if litigation involved any extra costs for foreign lawyers, this method could be worse than straightforward litigation. If the foreign lawyer method is used without resort to actual litigation, the relative cost would be better than the cost of litigation, being exclusive of the costs of litigation.

Assessed in terms of enforceability, and continuing to assume that the foreign lawyer method is being used without resort to actual litigation, the method is not especially effective as it is basically concerned with negotiation (and the threat of litigation) and, as such, has very little actual coercive force, while retaining, arguably, a degree of psychological coercive power through the involvement of court officers.

Assessed in terms of complexity, and continuing to assume that the foreign lawyer method is being used without resort to actual litigation, the method is simple compared with actual litigation. It would be fairly straightforward, once the initial step of retaining the foreign lawyer was achieved and assuming potential language difficulties can be avoided, for the consumer to supply the foreign lawyers with whatever statement and evidence was required.

3 Conclusion

An overall result of ‘no’ for the foreign lawyers protection method is calculated as follows. This method achieves a result of ‘acceptable’ for cost; being cheaper than the cost of litigation but still expensive. This method (without litigation) does not involve actual coercive power but may have some persuasive power; its result for difficulty of enforcement is therefore ‘high’. Finally, the foreign lawyers method of protection for complexity results in ‘acceptable’. It is likely then that appointment of foreign lawyers would not be cost-effective as a means of solving problems with low-value ICTs. Tabulated, the overall result for foreign lawyers is as follows.

Methods
Cost
Difficulty of enforcement
Complexity
Cost-effective?
2 – Foreign lawyers
Acceptable
High
Acceptable
No

C Foreign Public Consumer Protection Authorities

1 Description

Obtaining help from ‘foreign public consumer protection authorities’ refers to a scenario where the consumer approaches the consumer protection authorities in the country of the foreign vendor (if any) either directly or through a local consumer protection authority, hoping that their local authority has a co-operation agreement with an equivalent institution in the vendor’s country. While this is a promising development,

Enforcement agencies do not typically co-operate in support of consumers bringing actions for civil remedies … [and] … domestic law may pose barriers to enforcement agencies entering into co-operation agreements. For instance, the wording of domestic laws may explicitly link enforcement powers to a specific law. Depending on how narrowly these powers are drawn, this may preclude enforcement agencies from providing assistance in respect of matters which do not come within their jurisdiction.[43]

In 2002, APEC (Asia-Pacific Economic Cooperation) countries with co-operation agreements were Australia, China, Japan, Korea, Mexico, New Zealand, Russia and the United States of America.[44]

The possibility is that regardless of how proceedings were initiated the authority in the vendor’s country may act to seek redress from the vendor on behalf of the consumer.

2 Assessment

Depending on the exact nature of the powers held by such bodies, they are likely to be in no better position than the consumer’s local authority to resolve the problem. The Australian authority for example – the Australian Competition and Consumer Commission (ACCC) – may act against a local offender at the request of a foreign consumer in relation to serious offences (not low-value ICTs), usually referring problems with ICTs to ‘econsumer.gov’.

The econsumer.gov website (launched in April 2001) collects into a single place a collection of information resources. A consumer facing a stubborn vendor in a foreign jurisdiction however, would be hard-pressed to find anything in there which would lead to a cost-effective enforceable remedy. The ‘remedy’ options there are not practically helpful. For example, the site allows consumers to ‘report your complaint’ but advises that ‘you should not necessarily expect any country to pursue your complaint on your behalf’[45] and suggests ‘ways to resolve your complaint’, but these are limited to ‘links [that] may offer a quick and inexpensive way for you to resolve your complaint without having to initiate a formal legal action’. An example of this is a link to information about Alternative/Online Dispute Resolution (ADR/ODR), an ultimately unenforceable option in the vast majority of cases, and depending for success on the benevolence (or otherwise) of the vendor. The website, while better than nothing, amounts to little more than an exercise in consumer education, plus a complaints registry which guarantees nothing at all (although, as indicated by Michael Donohue, OECD's Consumer Policy Analyst then responsible for the OECD Guidelines, in a personal interview in June 2003, it may be too early to criticise such efforts, as no trend data is available yet). As of late 2005 such trend data is still unavailable although it is being collected.

The ACCC is also a member of the International Consumer Protection and Enforcement Protection Network (ICPEN), which is

a membership organisation consisting of the trade practices law enforcement authorities from more than two dozen countries. The mandate of the Network is to share information about cross-border commercial activities that may affect consumer interests, and to encourage international cooperation among law enforcement agencies.[46]

Bodies like the ACCC and its equivalents in other countries, ‘econsumer.gov’ and ‘ICPEN’ appear to have a long way to go to provide dependable and cost-effective remedies for low-value ICTs.

Assessed by the cost criterion, the ‘foreign public consumer protection authorities’ protection method is excellent as it is normally completely free of charge, all costs of pursuing a remedy being borne by the public authority. This, however, is a generalisation, a full survey of public consumer protection authorities around the world being beyond the scope of this article. Typically however, such public authorities provide complaint handling and investigation without charge to members of the public. The only cost involved for the consumer would be the incidental costs (if any) of submitting complaints with copies or originals of relevant evidence.

Assessed in terms of enforceability, the method is not especially effective. As noted above, the ACCC, for example, may act against a local offender at the request of a foreign consumer in relation to offences other than low-value ICTs, usually referring problems with ICTs to ‘econsumer.gov’ which, itself, is likely to refer such matters onwards to ODR providers. In the best case scenario, however, where the public authority decided, for example, to take on an offender in order to set an example, it could conceivably litigate. In that case, costs would be low (being borne by the authority), and the enforceability would be as high as the foreign enforcement powers would allow – and as effective as they could be, given the amount of assets of the vendor remaining in the jurisdiction. ‘Taking on an offender in order to set an example’ would, however, occur only in exceptional circumstances and would not be available to consumers as of right.

Assessed in terms of complexity, the method would be comparatively simple. It would be fairly straightforward, once the initial step of locating the foreign authority was achieved (assuming language issues, if present, were not insurmountable) for the consumer to supply that authority with whatever statement and evidence was required.

3 Conclusion

An overall result of ‘no’ for the ‘foreign public consumer protection authorities’ protection method is calculated as follows. This method achieves a result of ‘low’ for cost: quite cheap but still not without some expense. This method does not normally involve actual coercive power but may have a little persuasive power; its result for difficulty of enforcement is therefore ‘very high’. Finally, the method, for complexity, results in an ‘acceptable’. It is likely then that the ‘foreign public consumer protection authorities’ protection method would not be cost-effective as a means of solving problems with low-value ICTs. Tabulated, the overall result for foreign lawyers is as follows.

Methods
Cost
Difficulty of enforcement
Complexity
Cost-effective?
3 – Foreign public consumer protection authorities
Low
Very High
Acceptable
No

D ADR/ODR, Arbitration, IBCDRSs

This section is an assessment of the cost-effectiveness of the following ICT protection methods: ADR/ODR, arbitration and industry-based consumer dispute resolution schemes (IBCDRSs).

1 ADR/ODR

(a) Description

ADR (alternative dispute resolution)[47] is a broad term for a range of methods by which dispute resolution is attempted without resort to litigation and thus without direct appeal to judicial enforcement powers.

As a preliminary point it should be noted here that ODR (online dispute resolution, or online ADR) is not substantially different to ADR; it is merely a technological means of facilitating ADR by allowing some/all efforts by parties to ADR to be made online instead of face-to-face. Also, ICTs, being international in nature, will necessarily require the ODR variant of ADR rather than traditional ADR: rational disputants to low value ICTs, being in separate countries, will not normally physically travel across international boundaries to attempt to settle.

ADR may or may not entail the involvement of a neutral third party, but usually will do so. ADR has also been defined as

The decision making process by which matters are resolved outside the usual court-based litigation model. The aim of ADR is to encourage parties in conflict to arrive at compromise solutions with the assistance of a neutral person. ADR includes processes such as assisted negotiation, expert appraisal, mediation, conciliation, evaluation, and arbitration.[48]

When a third party is involved in ADR, they can bring varying degrees of expertise to the process, they can have varying degrees of involvement in the process, and their final opinion may be more or less ‘binding’[49] on the parties, depending on the rules and standards applicable in each case. Other terms, such as ‘mediation’, ‘conciliation’, ‘negotiation’, etc, are understood here as forms of ADR, although it can be noted that the spectrum of third-party involvement, from lesser to greater, arguably runs: negotiation, mediation, conciliation, arbitration.

The OECD’s paper on ADR commences with a useful summary of the topic, starting with ways of avoiding the need to resort to ADR in the first place: complain to the vendor, get your credit card issuer to help, contact your local consumer protection agency.[50]

Specifically, the paper says that ‘usually, the best first step is to contact the business directly. Businesses often have excellent complaint handling systems that will help solve your problem quickly and efficiently’.[51]

This is reasonable advice but it will not help the consumer if the consumer wishes or needs to pursue a matter with an uncooperative foreign vendor. The paper then suggests that ‘if you paid for goods or services using a credit or debit card … read your payment card statements for information on contesting charges’ (see section above, on Credit Card Terms, as regards the effectiveness of this), and further recommends that the consumer could ‘check with your local consumer protection agency to see whether any special protections apply in your country’.[52]

Local consumer protection agencies however, will almost certainly have very limited leverage against foreign vendors.

The paper then states ‘online ADR involves a process through which you can contact an ADR provider,[53]

file your complaint online, have the other party respond online, and resolve the entire dispute from the comfort of your own home with no need to travel at minimal cost’, but urges consumers to ‘check with your local consumer protection agency to see if ‘mandatory’ or ‘binding’ ADR clauses are legal in your country’.[54]

In other words, if a consumer has agreed to a clause in the relevant contract that he/she cannot go to court either without having gone through ADR first, or at all, or the ‘rulings’ which may result from ADR are ‘final’, and the consumer’s local law either allows that, or prohibits it, the consumer should be aware of that – it could make an important difference. For example, the vendor may be trying to mislead the consumer into believing the consumer is bound by a certain provision, where that may not be the case because of local law.

As regards the methods of ADR providers and the effectiveness of such methods, consider the well-known example of ‘SquareTrade’.

SquareTrade's methodology is simple. Any buyer or seller with a complaint contacts SquareTrade and files a complaint. They are asked certain questions about the nature of their dispute, and common solutions to frequent dispute types are presented to the complainant along with an inquiry into whether the complainant would be amenable to any of the suggested resolutions. Then the other party to the dispute is contacted and provided with some information about the nature of the SquareTrade process. They, too, are presented with some common resolutions and asked if they would be amenable to any of the resolutions. If each side selects the same suggested resolution, the SquareTrade system recommends that the parties resolve the dispute in that manner.
If an agreed-upon resolution is not forthcoming, the two parties are put into a negotiation environment where they can discuss their problem without the assistance of a mediator. This environment is made available to the parties at no cost. If the parties cannot reach agreement on their own in the negotiation environment, they can request the assistance of a mediator for a nominal fee. If a mediator is brought in, the mediator then works with the parties to resolve the issue at hand. If they are unable to resolve the dispute, then the mediator can make a suggestion to the parties as to how they think the dispute should be resolved, in sort of an expert evaluation role. However, the suggestion is not binding.[55]

The absence of compulsion/enforceability in every stage of this process is self-evident.

(b) Assessment

There are some potential advantages and disadvantages of ADR. ADR can offer cost advantages: it is currently expensive to litigate internationally, especially since there are no guaranteed outcomes, and a means of achieving the same result at relatively low cost could be extremely beneficial. A potential problem with ADR, however, is that there can be irremediable ‘service’ (vendor unresponsiveness to calls to attend ADR) and ‘enforcement’ problems. While this criticism can also be true of international litigation, enforcement is potentially a far more serious problem with ADR as it all depends upon the cooperation of the parties involved, even where ‘binding’ ADR clauses are present in an ICT. If a potential ‘defendant’ in a transnational ADR matter simply chooses to ignore the ADR equivalent of ‘service of process’ or ‘judgment’, there is little the ADR provider could do about it, even if mandatory or binding ADR clauses are legal in the country of whichever party has the decision against them, apart from recommending litigation to the ‘plaintiff’ (should they succeed).

In respect of judgement, the OECD paper states that where mediation is used ‘it's up to you and the other party to reach an agreement’.[56]

This advice will be of little help to a consumer with a legitimate grievance in the face of an unrepentant vendor beyond the reach of a body with real enforcement power.

The OECD concludes that ‘if you have tried ADR unsuccessfully … your last resort may be legal action’.[57] Thus the OECD recommends that the consumer avoids ADR if they can,[58] but if the consumer must resort to ADR that ADR does not guarantee a remedy and aggrieved consumers may still have to resort to litigation eventually to pursue their claims.[59]

This raises the following argument: if a consumer believes there is any chance at all of wasting their energy, time and money by fruitlessly pursuing their claim through ADR (either because no satisfactory decision will be reached, or because a good decision can be reached but the merchant won’t comply with it, thereby requiring litigation anyway to obtain enforcement), then omitting ADR and going straight to court must be better. This requires a consideration of two further issues. Firstly, when is there a chance of a consumer wasting their energy, time and money by fruitlessly pursuing their claim through ADR? Secondly, are there any further advantages to ADR (other than the cost advantage already noted above) which will more-strongly justifying a consumer taking a chance and risking it?

Regarding the first question, there could be many indications that the character of the foreign online merchant is such that ADR could be risked. The merchant could in fact have a good consumer relations reputation. The merchant could have a convincing consumer disputes policy that suggests they wish to maintain a good public reputation and therefore they will take ADR seriously in a manner sympathetic to the reasonable claims of consumers. They could be a well-known brand-name and wish to avoid adverse publicity even if it costs them something to buy ‘good PR’. The amount at issue could be trivial or non-trivial and ADR is therefore simply worthwhile (depending on the subjective perceptions of the consumer). Therefore, the consumer may decide that they would be wasting their time on ADR if any or all of these factors are either objectively absent, or absent because the consumer may feel the merchant either just won’t come to ADR,[60]

won’t take it seriously or won’t abide by the decisions made there. This imputes non-rational motives to consumers, but consumers (humans) are motivated in such ways.

The second question was whether there any further advantages to ADR (other than potential cost advantages) which will more-strongly justify a consumer taking a chance and attempting ADR before resorting to international litigation. Twelve potential extra (but overlapping) advantages of the ODR variant of ADR for consumers (over international litigation) noted by Rule[61]

may be summarised as follows:

1 Speed: Scheduling meetings and planning for travel and finding space are not necessary to convening and beginning an online process. A virtual meeting room can be opened instantaneously and a neutral can be engaged from anywhere around the world.

2 Asynchronous interaction: Online participants have the possibility of asynchronous (non-simultaneous) interaction where their response is not expected immediately. Disputants can defer their response until after they've had time to consult or just contemplate the situation.

3 Power differentials: People in relationships based on past/present power differentials (e.g. expert trader and consumer) can communicate on a more-level playing field when online communication options are engaged.

4 Research: In an ODR process it’s a simple matter for participants to conduct research in the middle of the process.

5 Cooling distance: As compared to face-to-face communications, ODR is less likely to escalate to accusations, name calling and violence.

6 More-reflective communication: In written communications people have a tendency to explain why they are saying what they’re saying, whereas in face-to-face communications people often just state their position and cross their arms, refusing to elaborate further.

7 Self-disclosure – Race, Sex, and Age: Different people are biased by different things. Some people are biased by race, others by age or gender, etc., but on the Internet no-one knows who you are.

8 Anonymous communication: Applicable to ICTs if the consumer has not already disclosed their identity in the contractual formation stage.

9 Convenience: In face-to-face communications there is usually a ‘convening penalty’ consisting of the time, money and energy required to merely get the parties to sit down at the table. With ODR, this is almost eliminated.

10 Access to better neutrals with more subject-area expertise: An advantage of ODR is that geography, schedule, and expertise are no longer major concerns. The parties can choose any neutral they like to help them resolve their dispute, regardless of where that neutral is in the world, their time zone, or even their other commitments.

11 Text-based communication: Text-based communication has the advantage that people are forced to translate their preferences into text from the beginning of the process. When the time comes to draft an agreement, the mediator can lift actual language from past postings to ensure that the parties will approve of the phrasing.

12 Efficient automated negotiation processes: When online, an automated tool such as blind-bidding software[62]

can be used, when the parties reach that particular stage, in order to more efficiently find the amount in question, without the time-consuming back and forth negotiation that characterizes most procedures where one side and then the other make monetary bids in an attempt to agree on an acceptable number.

To that list one further potential advantage could be added:

13 No actual law need be involved: In ODR the legal location of the dispute doesn't matter because the resolution is crafted based on either the preferences of the parties [eg, an industry code of conduct] or some other standard administered by an arbitrator. It's not necessary to get legal counsel in the other country, because the decision isn't going to be based on the law.[63]

The question arises now as to whether any of these ‘extra advantages’ guarantee (or at least more-strongly justify) an acceptable outcome for an average consumer involved with an ICT, such that ODR should be used instead of international litigation and, making the cost of ODR worthwhile.

‘Asynchronous interaction’, ‘research’ and ‘more-reflective communication’ are arguably a single advantage type being so related. That is, it is asynchronous interaction which makes research and more-reflective communication possible. Of the ‘twelve’ (apart from ‘anonymous communication’ which may be inapplicable to ICTs, and where ‘access to better neutrals’ may be improbable due to the implication that ‘any neutral they like’ will always be willing and available), they are probably all highly attractive to a consumer, in theory, especially where the alternative is international litigation. The final advantage noted by Rule (‘no actual law need be involved’), would appear quite attractive because it means the problems with national legal systems could just be ignored. Reconsider the nature of those problems:

The law surrounding these transboundary transactions is complex. Just figuring out which law applies to a transaction can cost a lot of money. Getting legal representation or even just advice from another country can be frustrating and expensive. Legal systems don’t really know how to handle disputes that straddle borders very well. Paying lawyers to put the time into figuring it all out really doesn’t make that much sense, especially if the transaction is less than a couple of thousand dollars.[64]

At this point, ODR sounds like an appealing alternative means of redress for consumers involved with ICTs. This would be even more true if the cost of ODR were cheap relative to any particular amount in dispute. Rule says that

Online dispute resolution is still a very new phenomenon, so there is a lot of confusion about how ODR services should be priced …

While pricing models vary between ODR providers, there are some common trends. In auction or e-commerce disputes there is usually a one-time filing fee paid by the initiator of the case. This filing fee is usually between $15 and $25, depending on which site the case came from and the value of the dispute. This filing fee is often not enough to even pay the mediator for the services rendered.

If the rates are too high for these low-end services then the parties will never elect to use them. B2C e-commerce disputes are frequently worth less than $500, and many of them are between $50 and $75 …

It might make more sense in the long run to require the [vendor] website to pay up front for dispute resolution services …

… the confusion over how best to price ODR services will likely continue for some time.[65]

If this view is accepted, cost is not necessarily an automatic disincentive to ODR for ICTs. If the amount in dispute is low enough, then an inability to find ODR at a cheap enough price will not be a major problem as the highest loss in the event of no resolution is not all that high to begin with. Likewise, as the amount in dispute climbs, the chance of finding cheap enough ODR climbs also. As regards ‘requiring’ websites to pay for ODR services up front – presumably this could result from law requiring this as an express obligation of merchants who are parties to ICTs (and this could provide a desirable overall stimulus to international B2C e-commerce, of benefit to all) – the question arises as to which current law or law-maker could be capable of requiring this in respect of ICTs. In any event, this is not a major problem for consumers at present. Therefore, cost is not currently an automatic disincentive to ODR for ICTs.

There is a question about the success rates of ODR-type schemes, that is, about whether they suggest cost-effectiveness as compared to international litigation for ICTs. Unsurprisingly, there appears to be no data on the success-rates of international litigation for low value ICTs (no doubt because of the inherent difficulties), but there is some data suggestive of how successful ODR-type schemes for low value ICTs might be:

For 1989/1990, the Queensland Consumer Affairs Bureau reported results [for ADR] as follows: 38.1 per cent full redress; 15.4 per cent partial redress and 22.3 per cent incapable of resolution. For 1990/1991, the same bureau reported that less than 17 per cent of complaints were not satisfactorily resolved, and a further proportion of those achieved satisfactory results in Small Claims Tribunal hearings. Other States report similar high success rates.[66]

It is up to the consumer however, as to whether such data shows ODR-type schemes for ICTs would be worth the risk in terms of time, effort and monetary cost. Likewise with the following data:

The United States Postal Service, which has one of the most sophisticated and widely used employment ADR programs in the federal government, found that 81 percent of mediated cases are eventually closed without a formal complaint being filed. Satisfaction was also extremely high, with exit surveys completed anonymously by 26,000 participants indicating that 88 percent of employees are highly satisfied or satisfied with the amount of control, respect, and fairness in the ADR process …

The Air Force also found ADR very effective in the government contracts area, where it used ADR in more than 100 cases, of which more than 93 percent have settled.[67]

Such results are encouraging but a fundamental problem remains. Effective protection for low value ICTs is not available from ADR/ODR. ODR is conducted without the possibility of appeal to judicial enforcement powers: stubborn merchants can simply ignore ‘binding’ decisions of ODR-provider. Harris says of ‘private mediation services’ that ‘in relation to consumer disputes, the service is of limited value as it is dependent upon the amenability of the respondent to the process’;[68] in respect of ‘community justice centres’ she says that ‘one weakness of this service as an effective dispute mechanism is its inability to ensure compliance, because any agreement reached in mediation is not enforceable in any court’;[69] and in respect of ‘consumer affairs bureaux’ she says that ‘the agencies do not have power to enforce an agreement reached through intervention’.[70]

At best then, ADR/ODR can be seen as a valuable contribution to the range of options available to consumers, with merely some probability of providing a successful outcome for them in the event of a favourable decision, remembering that consumers seek more than just a decision, however favourable.

It is said that there can be ADR/ODR with ‘binding’ decisions. Without judicial enforcement powers (powers of compulsion using the enforcement apparatus of the state), the best that an ODR-provider can do for a consumer is to provide a favourable decision which would result in an actual valid binding enforceable contract between the consumer and the merchant[71] (or, perhaps place some sort of cyberspace authority, such as ICANN,[72] in a position where the merchant could be disciplined or punished somehow). So the question arises as to whether a favourable ODR decision, which results in an enforceable contract, would amount to a real victory for the consumer. Put this way, the answer should be obvious: absolutely not. Courts around the world hear hundreds of contract disputes daily. The mere existence of a valid binding contract (resulting from ODR) is the best the consumer may have,[73] there being no guarantee at all that parties to such contracts will comply with them. Therefore, there will always be recalcitrant online merchants who simply will not comply with the ‘binding’ decisions of ODR-providers. In fact the mere presence of a merchant in a situation which could warrant the use of ADR/ODR, could mean that the merchant will not honour the decision of the ODR-provider anyway. Having gone through the difficulties of ODR, the consumer would then have to start again – but this time through the international litigation route.

There is also an issue about ‘cyberspace authorities’ like ICANN.

One of the biggest challenges of ODR is its enforceability. Sometimes enforceability in ODR is readily achievable. ICANN is an excellent example of this. When a panellist in a UDRP process transfers a domain name, ICANN can easily enforce that decision because they have absolute control over the database that assigns domain names to their owners. In B2C e-commerce disputes, this type of absolute enforceability is not possible. If [for example] a product is shipped to a purchaser and the wrong amount of money is charged, the shipper [or the ODR-provider] cannot compel the purchaser to return the item or to pay more money.[74]

This is an example of the self-regulatory regime of so-called ‘code’ (software controls) as the libertarian regulator of cyberspace proposed by Lessig. Unlike realspace where the state tries to convince citizens to adopt norms of behaviour (obey the law), in cyberspace because of the unavoidability of ‘code’, the state doesn’t need to ‘convince’ anyone of anything: it’s either obey or stay out; there simply won’t be any opportunity to do otherwise.[75]

Such code may seem to regulate Internet presence (existence and activity within cyberspace), but simply will not regulate subsequent offline contractual performance of Internet retailers in realspace. Furthermore, stand-alone retail websites cannot be regulated by network ‘code’ in the same way that ISPs (Internet service providers) can regulate their ‘chat room’ subscribers, for example.

Thus it would appear that none of those ‘extra advantages’ of ADR would guarantee an acceptable outcome for an average consumer involved with an ICT, such that ODR should be used instead of international litigation. At this point then, the two alternatives are the problems of decisions made through ODR potentially being truly enforceable only through subsequent litigation, or the problems of international litigation as they currently stand.

Assessed in terms of cost, the ADR/ODR protection method would be better than litigation: cheaper but still not without cost as ODR is run by private for-profit organisations. Assessed in terms of enforceability, the method is not especially effective as it is basically concerned with mediation and the potential threat of litigation and, as such, has no actual coercive force. Assessed in terms of complexity, the method is more simple than litigation. It would be relatively straightforward, in many cases, for the consumer to supply the ODR service provider with whatever statements and evidence was required but to properly prepare for ODR (as indicated by Rule) could involve almost as much time and effort as preparation for litigation.

(c) Conclusion

The question arises now as to whether cost-effective protection for low value ICTs is available from ADR/ODR. ADR/ODR can be a valuable contribution to the range of options available to international consumers, but with only some probability of providing a successful outcome for them in the event of a favourable decision concerning a disputed ICT. That would not be good enough. That is, for an average consumer who had paid for goods from a foreign source that were delivered but were not what was actually ordered, who had evidence to prove their case and whose only option was ODR, ODR would not be good enough.

The effectiveness of ADR/ODR in the future depends, to some extent, on increased cost advantages but, primarily, upon an improvement in enforcement powers. The prospects for this, however, seem unlikely.

An overall result for the ADR/ODR protection method is determined as follows. This method achieves a result of ‘acceptable’ for cost: cheaper than litigation but still not cheap. This method does not involve actual coercive power but has some persuasive power; its result for difficulty of enforcement is therefore ‘high’. Finally, the result for complexity is ‘high’: to properly prepare for ODR (as indicated by Rule) could involve almost as much time and effort as preparation for litigation. ADR/ODR is not cost-effective as a means of solving problems with low-value ICTs. Tabulated, the overall result for the ADR/ODR protection method is as follows.

Methods
Cost
Difficulty of enforcement
Complexity
Cost-effective?
4 – ADR/ODR
Acceptable
High
High
No

2 Arbitration

(a) Description

The term ‘arbitration’ can possess at least two distinct meanings: ‘the system of determining disputes by a private tribunal constituted for that purpose by the agreement of the disputants’[76]

with non-binding decisions because tribunals do not exercise judicial power; or ‘the system of permanent public arbitral tribunals constituted not by the choice of the parties but by public authority’,[77]

not empowered to make binding decisions and not bound to administer the rules of evidence strictly. It is the first meaning which is of interest here as the public variety is inapplicable to ICTs.

Noting that the dictionary definition of ‘arbitration’ alludes to the idea of a difference between public and private tribunals, ‘tribunal’ has been defined as:

A person or body of persons, other than a court … who is required by law to act in a judicial manner to the extent of observing one or more of the rules of procedural fairness in arriving at decisions: for example, Administrative Law Act (1978) s 2 (State of Victoria, Australia) … an [Executive/quasi-Judicial] body which usually reviews ‘administrative’ action … a tribunal may not exercise the judicial power of the Commonwealth (that is, make enforceable determinations of legal rights and obligations) due to the doctrine of separation of powers.[78]

That is taken here to be a definition of public tribunals. Having a definition of public tribunals assists with distinguishing between public and private tribunals.

A private tribunal might thus be defined as a person or body of persons, usually with a commercial interest, empowered by agreement between private disputants to act on an ad hoc basis for the purpose of dispute resolution, and which is required to act in a judicial manner to the extent of observing one or more rules of procedural fairness in arriving at decisions, but without judicial power to make enforceable determinations of legal rights and obligations.

The major distinction then between the two types of tribunal is that in the former (public) case the body is permanently established by a government mostly to review the decisions of the Executive branch of that government, while the latter is either established by request of the parties to a private contractual dispute, or is resorted to by them, to resolve a private contractual dispute. Thus there are some fundamental similarities (aims, methods and absence of enforcement powers) and some fundamental differences (motivation, identity of the clients and permanency) between public and private tribunals. Further, the activities of the former are governed by Administrative Law, while the latter may be governed by the rules of procedural fairness and the Law of Contract.

In considering the relationship between ‘ADR’ and ‘private tribunals,’ a private tribunal could correspond to a process by which ADR could be achieved (eg, ‘unenforceable dispute resolution involving a neutral third party, observing rules of procedural fairness …’); a private tribunal could correspond to a type of ADR (eg, mediation, conciliation); and both ‘ADR’ and ‘private tribunals’ can exist for the same purpose (dispute resolution). ‘Private tribunal’ may also be understood as a name for one type of commercial ADR-provider. Consequently there is much overlap between the two terms (and thus between the terms ‘ADR’ and ‘arbitration’ as used here), but they are not interchangeable terms and therefore each must be used deliberately and precisely.

(b) Assessment

Assessed in terms of cost, the arbitration protection method is better than litigation but still not without monetary cost. It would, generally speaking in relation to matters like low value ICTs, be conducted by commercial dispute resolution providers[79]

and thus would involve no court costs and fewer (legal or other advisory) fees as compared with litigation. Assessed in terms of enforceability, the method is not especially effective as it is basically concerned with negotiation (and, in some cases, the threat of litigation through binding outcomes) and, as such, has very little actual coercive force, while retaining, arguably, a degree of psychological coercive power through the involvement of potentially binding court-like procedures.

Assessed in terms of complexity, the method is comparatively simple as compared with litigation. It would be relatively straightforward, in many cases, for the consumer to supply the arbitration service provider with whatever statements and evidence was required, but to properly prepare for arbitration could involve almost as much time and effort as preparation for litigation.

(c) Conclusion

The arbitration protection method may now be given an overall result. For cost, the method achieves a result of ‘acceptable’; cheaper than litigation but still not cheap.[80]

As this method does not involve judicial power but would have some persuasive power; its result for difficulty of enforcement is therefore an ‘acceptable’. Finally, the method’s result for complexity is ‘high’; arbitration would not be as simple as, for example, the credit card protection method. Arbitration is therefore not cost-effective as a means of solving problems with low-value ICTs. Tabulated, the overall result for arbitration is as follows.

Methods
Cost
Difficulty of enforcement
Complexity
Cost-effective?
5 – Arbitration
Acceptable
Acceptable
High
No

3 Industry-based Consumer Dispute Resolution Schemes

(a) Description

An ‘industry-based consumer dispute resolution scheme’ is understood here to mean a form of tribunal in the sense that it has been established as a tribunal in relation to any particular industry sector (eg, telecommunications, banking, finance, insurance, timeshare holiday ownership, etc), primarily with respect to the hearing of complaints against such bodies by private consumers. Such schemes seem to be positioned roughly mid-way along a continuum between public and private tribunals because they can exhibit some of the properties of both, but are probably positioned closer to the private end of that continuum because of the involvement with private consumers. An industry-based consumer dispute resolution scheme could therefore simply qualify as a variety of ADR scheme, or they could perhaps be understood as a ‘dedicated’ ADR scheme.

(b) Assessment

In any event, whether ‘ADR’ or ‘tribunal’, from the perspective of ICTs, an industry-based consumer dispute resolution scheme suffers the same major weakness of both: lack of enforceability.

Assessed by the cost criterion, the industry-based consumer dispute resolution scheme protection method is far better than litigation and better even than the arbitration method as the ‘tribunals’ involved are already established and are likely to be not-for-profit organisations. It would, generally speaking, involve no court costs and fewer (legal or other advisory) fees as compared with litigation. Assessed by the enforceability criterion, the method is not especially effective as it is basically concerned with negotiation (and, in some cases, the threat of litigation through binding outcomes) and, as such, has very little actual coercive force, while retaining, a degree of psychological coercive power through the involvement of court-like procedures. It may however, have less psychological coercive power than arbitration as, being industry based, it may be seen by the ‘losing’ vendor as being more-protective of itself as an industry member (positive bias). Alternately, an industry-based consumer dispute resolution scheme may have more psychological coercive power over a losing vendor as the industry-based consumer dispute resolution scheme may wish to preserve the public image of its industry and treat its own industry members quite strictly (negative bias).

Assessed by the simplicity criterion, the method is comparatively simple. Supplying an industry-based consumer dispute resolution scheme with information would be simple, although it could involve almost as much time and effort as preparation for litigation.

(c) Conclusion

An overall result for this protection method is as follows. This method achieves a result of ‘low’ for cost; cheaper than litigation and possibly cheaper than arbitration also. This method does not involve actual coercive power but probably has some persuasive power; its result for degree of enforcement is therefore ‘high’. Finally, the complexity result for this method is ‘high’. Therefore industry-based consumer dispute resolution schemes are not cost-effective as a means of solving problems with low-value ICTs. Tabulated, the overall result for industry-based consumer dispute resolution schemes is as follows.

Methods
Cost
Difficulty of enforcement
Complexity
Cost-effective?
6 – Industry-based consumer dispute resolution schemes
Low
High
High
No

E Industry Codes of Conduct[81]

1 Description

As already noted, industry codes of conduct – also known as ‘voluntary codes of practice’ – are bodies of rules which purport to regulate industries from within[82] in the sense that an industry establishes its own rules, rather than having them imposed from outside by a government.

The codes are the basis of industry self-regulation and, while they do come in a ‘statutory’ variety, the non-statutory variety is the norm. An example of the former, in Australia, is the Franchising Code of Conduct, found in the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Commonwealth). Statutory codes, however, are by far the exception to the general rule – that codes of conduct are non-governmental in origin – and, in any event, they still form part of national law, normally having no applicability to ICTs except in the unlikely event that a relevant code – if one could be found – was agreed upon through a contractual choice of law clause.

2 Assessment

Non-statutory codes of practice are voluntary codes enforced by trade associations and the like. Whilst these codes are to be commended and encouraged, they only apply (so far) to country of location and not to cross-border transactions, and they set up industry and suppliers as judges in their own cause (they are also unsupported by state-backed sanctions). One can more-readily imagine, for example, bias or undue sympathy to industry members being a problem in the event of complaint by consumers, in respect of non-statutory codes being applied.

The Internet-using business community has a clear incentive to help establish an environment which gives consumers the confidence to consume, and vendors who voluntarily complied with a code of conduct could encourage such confidence by displaying a kind of trust mark (defined below) – to indicate the availability of such features as mediation of minor disputes, the provision of various kinds of consumer information (such as the identity and location of vendors, refund policy, relevant law, delivery costs and times, and information about the relevant goods and services) – but, as with the trust marks issues examined later, the mere possession of a trust mark does not solve the potential problem that a supplier may operate as a judge in their own cause. There is no state-backed adjudication and enforcement mechanism in relation to industry codes generally and the consumer is still ultimately at the mercy of the vendor in the event of dispute or, at best, the best efforts of a sympathetic industry association.

There has been a recent attempt to improve this situation, but it serves only to reinforce the criticism. In mid-2003, the Australian Competition and Consumer Commission (ACCC) introduced a system of endorsement for ‘high quality’ industry codes of conduct, which would be hard to obtain, easy to lose, and provide the consumer ‘with some reassurance that the business they are dealing with operates in a fair, ethical and lawful manner’.[83]

This measure was described by the ACCC’s chairman as ‘co-regulation’ – being a mid-point between self-regulation and heavy handed regulation by government – which contains an implied admission that self-regulation is less than completely effective. It also raises, perhaps, the more fundamental issues as to how effective such endorsement would be for foreign online consumers who know nothing of such national bodies, and of what help dis-endorsement would be after a failed ICT.

Furthermore, it will be the code of conduct – of either statutory or non-statutory variety – of the vendor’s country that may apply, which means the consumer would still be reliant on accessing a foreign quasi-judicial system, thus raising the problems noted in the section on foreign public consumer protection authorities, above. Industry self-regulation through codes of practice therefore appears to be only a minor means of consumer protection for failed ICTs.

Assessed by the cost criterion, a great advantage of the (non-statutory) industry codes of conduct protection method (as with some other methods), is that the potential protection is provided to the consumer completely free of charge. Assessed by the enforceability criterion however, the method is completely ineffective in respect of post-transaction problems with ICTs: the method has no coercive force at all and a minimum of persuasive force. Assessed by the complexity criterion, the method is comparatively uncomplicated (as compared with litigation). It would be relatively straightforward, in most cases, for the consumer to supply the body administering the code with whatever was required, but to properly prepare for could involve almost as much time and effort as preparation for litigation.

3 Conclusion

The overall result for the industry codes of conduct protection method is as follows. This method achieves a result of ‘very low’ for cost. It does not involve actual coercive power but may have some persuasive power, its result for difficulty of enforcement is therefore ‘very high’. Finally, for complexity, the method is ‘acceptable’. Industry codes of conduct would not be cost-effective as a means of solving problems with low-value ICTs. Tabulated, the overall result is as follows.

Methods
Cost
Difficulty of enforcement
Complexity
Cost-effective?
7 – Industry codes of conduct
Very Low
Very High
Acceptable
No

F Escrow Services

1 Description

Escrow services refer to circumstances where, for a fee, a consumer’s payment to a vendor is withheld by a neutral third party until goods are delivered to the consumer’s approval. A typical escrow service, Escrow.com, describes the system as follows:

Escrow.com reduces the potential risk of fraud by acting as a trusted third party that collects, holds and disburses funds according to Buyer and Seller instructions. Escrow services are provided by a licensed and regulated escrow agent.
Escrow is well-suited for items purchased on auction sites, automobiles, motorcycles, domain names, jewellery, specialized computer equipment, and other high-ticket items.

Buyers receive and inspect the merchandise before the Seller is paid.

Sellers receive their money if the Buyer accepts the merchandise.[84]

Put as simply as that, escrow services appear to represent a simple and complete solution to problems associated with ICTs. A consumer can simply avoid them altogether by using a trusted third party to hold off delivery of payment to the vendor until the consumer is happy.

2 Assessment

Unfortunately, however, there are potential problems (both objective and subjective), including the following:

1 Basic cost: Escrow.com charges a minimum of US$25, a relatively high price to pay in the context of many low value ICTs.[85]

2 Complexity in the form of negotiations between vendor and consumer as to who will pay what costs, which will simply be unacceptable for many consumers engaging in low value ICTs who still desire to purchase internationally.[86] There is also potentially much complexity in the form of multiple party dispute resolution.

3 Inapplicability: some escrow services may not cover international sales/purchases.

4 Unavailability: there may not be enough suitable escrow service providers available globally (and vendors/consumers may prefer such providers to operate in specific countries).

5 Consumer resistance: consumers may resist handing over money to unknown third parties because of trust or reputation issues.

6 Consumer naivety: consumers may simply forget to use an escrow service and be left with the need for a remedy which is then unavailable (too late).[87]

7 Vendor resistance to consumer payment being held by foreign escrow service provider (due to anticipated transborder problems in the event of litigation).

8 Fraud: there is a considerable risk of fraud from the many fake escrow sites on the Internet.[88]

9 Instability: escrow service providers are private organisations and may come in and out of existence at any time. Thus such a service could go into liquidation while holding a consumer’s payment before delivery of the goods.

Escrow systems, especially if they remain unregulated, do little to significantly improve the cost-effectiveness from a consumer’s perspective of low value ICTs.

Assessed by the cost criterion, the escrow protection method is not nearly as expensive as litigation but still involves monetary cost, unlike some other methods, especially so relative to lower value ICTs. Assessed by the enforceability criterion, the method is relatively effective as it will generally be a case of payment not being handed over without a satisfactory inspection by the consumer, beforehand. Due to all the negative factors listed above (except basic cost) however, this method does not achieve a perfect result for difficulty of enforcement. Assessed by the complexity criterion, the escrow method has some problems in relation to the complexity, inapplicability, unavailability and instability factors mentioned above, which can all serve to complicate use of this method for a consumer.

3 Conclusion

The overall result for the escrow protection method then, is as follows. This method achieves an ‘acceptable’ for cost; cheaper than litigation but still not cheap. This method does not normally need the involvement of coercive power (unless coercion of the escrow service itself is required); its result for difficulty of enforcement is therefore ‘low’. Finally, the method achieves a ‘high’ for complexity. It is likely then escrow services would not be cost-effective as a means of solving problems with low-value ICTs. Tabulated, the overall result for escrow services is as follows.

Methods
Cost
Difficulty of enforcement
Complexity
Cost-effective?
8 – Escrow services
Acceptable
Low
High
No

G Other Potential Methods?

The following extra methods of redress are briefly considered here: transaction insurance, trust marks, consumer education, consumer complaints bulletin boards and national deregistration.

Transaction insurance would, in theory, involve a type of traditional insurance coverage for protection against risks associated with ICTs. Such coverage could be for individual transactions or it could cover any number of transactions over a given time period for a single policyholder. The coverage would be analogous to the ‘Purchase Cover Insurance’ provided by the Visa credit card (underwritten in Australia by Zurich Australian Insurance Limited), but would be sold directly to consumers as an insurance industry product and not as a credit card industry product. In fact this solution could also be (but at present is not) provided by being sold as an extended feature of credit card products.

Of the following insurers approached by this writer in 2005 in regard to this question through telephone conversations with manager or assistant-manager level officers – Allianz, AAMI, Australian Better Business Insurers, Zurich, QBE Mercantile Mutual, ING, East West Insurance Brokers, AXA and Aradlay – not a single insurer provided coverage for ICTs or knew of anyone who did. Zurich, was aware of their connection with Visa, but advised that it did not provide such coverage direct to consumers.

There may be a niche in the insurance market waiting to be filled but, as yet, there is no solution here for consumers. In any event, if there is an ICT insurance provider in the market place, the degree of difficulty in finding them is surely a problem for consumers in itself, and so far transaction insurance is no solution at all.

This method deserves some final observations. When it is considered how easily credit-card transaction-security terms could be extended, to better cover non/wrong delivery problems with ICTs, but have not been so extended, the prospects for insurance becoming available for ICTs seem remote. In any event, even if transaction insurance became available, it would not necessarily be seen as a complete or permanent or fully satisfactory solution. Paying on an insurance claim will remain discretionary, and private insurance providers can come and go.

To conclude this section, it is sufficient to note that trust marks (merchant credibility endorsements displayable on vendor websites), consumer education, consumer complaints bulletin boards and national deregistration (‘dis-accreditation’ of websites following unresolved disputes) are neither remedies nor are capable of becoming remedies, in the sense of remedying disputed/failed ICTs, as they are not capable of assisting with post-transaction realspace non/wrong-delivery problems with ICTs.

III Conclusion

This article commenced by noting a concern with analysis of practical issues and alternative scenarios associated with ICTs. It further noted the concern with scenarios which result specifically in non/wrong-delivery of goods in the context of existing non litigation-based protection mechanisms.

Results were assigned to the eight feasible non litigation-based forms of protection for ICTs considered in this article, as follows.

Criteria for evaluation of ICT protection methods

Methods
Cost
Difficulty of enforcement
Complexity
Cost-effective?

Current non litigation-based protection

1 – Credit card terms
Very Low
Very High
Low
No
2 – Foreign lawyers
Acceptable
High
Acceptable
No
3 – Foreign public consumer protection authorities
Low
Very High
Acceptable
No
4 – ADR/ODR
Acceptable
High
High
No
5 – Arbitration
Acceptable
Acceptable
High
No
6 – IBCDRSs
Low
High
High
No
7 – Industry codes of conduct
Very Low
Very High
Acceptable
No
8 – Escrow services
Acceptable
Low
High
No

So, all these (and other) methods were considered and, in every case, they were found to be ineffective as a remedy for failed/disputed low-value ICTs.

At this point then, we can safely answer ‘yes’ to the reform question posed by the title of this article (and the retardation of growth in e-commerce sales will continue, possibly even worsen) – depending perhaps on whether litigation-based methods of redress for disputed/failed low-value ICTs are also not cost-effective and, as indicated, research by the present writer strongly suggests that that is the case also.[89] It is possible then, that reform will need to come in the form of intervention at an inter-governmental level (perhaps in the form of some sort of convention along the lines of the Vienna Sales Convention) as market forces and the private sector show no sign of providing a solution.


[*] B.App. Sc.(EDP), Grad Dip Ed, LLB. PhD candidate.. Lecturer, Solicitor, T C Beirne School

of Law, University of Queensland.

[1] ‘Redress/protection’ here includes both reactive and proactive methods (eg, alternative dispute resolution (ADR) and transaction insurance, respectively).

[2] ‘Low value’ is a term, in this context, which is best not defined exactly. It should be noted though, that in Australia, under Trade Practices Act s 4B a consumer transaction can exceed $40,000 in value.

[3] The definition of ‘cost-effective’, for the purpose of this article, is where, in the pursuit of a remedy for a failed or disputed ICT, cost, difficulty of enforcement and complexity, are not high. These terms are considered below.

[4] Australian Government Treasury, The Internet and B2C E-Commerce (2005) <http://www. ecommerce.treasury.gov.au/bpmreview/content/discussionpaper/03_chapter2.asp> 21 October 2005.

[5] OECD, Update of Official Statistics on Internet Consumer Transactions (2002) <http://www.oecd.org/EN/home/0,,EN-home-29-nodirectorate-no-no-no-29,00.htm> 28 May 2002.

[6] There is no national perspective in this article. Data on the growth of e-commerce in the US is used simply because it is available, from a reliable source. All data in this paragraph is seen as indicative of international trends within an international phenomenon (international consumerism), as indicated by circumstances in the US and elsewhere.

[7] OECD, above n 2.

[8] That is, persuasion, perhaps with some threat of litigation.

[9] The 13 are as follows: Credit card terms, foreign lawyers, foreign public consumer protection authorities, ADR/ODR, arbitration, industry-based consumer dispute resolution schemes, industry codes of conduct, escrow services, transaction insurance, trust marks, consumer education, consumer complaints bulletin boards and national deregistration. This list is not intended to be ‘complete’ or ‘definitive’ or to represent a commonly-accepted classification of all non litigation-based redress methods. It is merely one possible list, based on this writer’s observation. Alternative classifications are entirely possible.

[10] The focus on contractual protections in this article is a reference to contracts with third parties, to protect or guarantee an ICT, to some extent or other.

[11] Chargeback is treated in this article as a topic subsumed within the broader topic of protection by credit card terms.

[12] Dictionary.com, Enforceability (2005) <http://dictionary.reference.com/search?q=enforceability> 19 September 2005.

[13] Encarta Online Dictionary, Enforce (2005) <http://encarta.msn.com/encnet/features/dictionary/ DictionaryResults.aspx?refid=1861608465> 19 September 2005.

[14] Butterworths, Business and Law Dictionary (2nd ed, 2002)

under entry on ‘Arbitration’.

[15] Oxford University, Concise Oxford Dictionary English of Current English (1980).

[16] Merriam-Webster Online Dictionary, Complexity (2005) <http://www.m-w.com/dictionary/ complexity> 23 September 2005.

[17] Merriam-Webster Online Dictionary, Simplicity (2005) <http://www.m-w.com/cgi-bin/ dictionary?book=Dictionary & va=simplicity & x=15 & y=17> 23 September 2005.

[18] Merriam-Webster Online Dictionary, Simple (2005) <http://www.m-w.com/dictionary/simple> 23 September 2005.

[19] Encarta World English Dictionary, Simplicity (2005) <http://encarta.msn.com/encnet/features/ dictionary/DictionaryResults.aspx?refid=1861732764> 4th October 2005.

[20] Dictionary.com, Simplicity (2005) <http://dictionary.reference.com/search?q=simplicity> 23 September 2005.

[21] Note that the various references to ‘fraud’ in this section are included to demonstrate that the various credit card terms are limited to covering little more than fraud and thus the terms do little to address non/wrong-delivery of goods in the absence of fraud. Also, note that the currency of the effect of all credit card terms considered here was confirmed as of January 2006.

[22] ‘Charge cards’ are slightly different to credit cards (generally, charge cards must be paid off in full within one month) but the difference is unimportant here because differing credit extension terms are not relevant to the post-transaction performance issues of non/wrong delivery of goods. For the purpose of this article then, charge cards are the same as credit cards.

[23] Note that ‘Mastercard’ here means a card from a bank-level institution which issues a Mastercard – such as a Barclays Mastercard or a Westpac Mastercard. The term ‘Mastercard’ is thus used here as a consumer would use it.

[24] It is important to note here that such terms are not directly offered by the card companies (Mastercard, etc.) themselves, in the sense that the transaction-security terms offered by Mastercard, for example, are not actually offered by Mastercard as such, but by the card-issuing financial institution (e.g. Westpac Bank) or their agents – whose terms may differ from those offered by another Mastercard-issuing institution (due to varying marketing policies and market forces). Thus there are Westpac Mastercards and National Bank Mastercards, and many others, each with their own, potentially different, transaction-security terms (if any). The references to ‘issuers’ above then are references to bank-level institutions.

[25] Such as legislative consumer protection schemes (the Trade Practices Act and the Sale of Goods Act in Australia, for example), and the common law of contract or tort, where applicable.

[26] Only Visa, Mastercard, American Express and Diners Club are examined here (the ‘big four’). Less well-known card names are often just forms of one card or other of the big four (eg, ‘Eurocard’ is a form of Mastercard), or aren't generally available (eg, Eurocard, Discover and JCB – Japanese Credit Bureau – cards), or are held by only a tiny percentage of the global card-holding community.

[27] Note that despite the difference between the terms of the four issuers, due to the general similarity of conclusions in respect of those terms, as will be seen, only a general assessment of the terms shall be given.

[28] Citibank, ‘Citibank's Full Security Guarantee.’

[29] Not a card issuer.

[30] Westpac, ‘Consumer Credit Cards Conditions of Use’ (2003).

[31] American Express, Online Fraud Guarantee (2003) <http://www10.americanexpress.com/ sif/cda/page/0,1641,7021,00.asp#more_info> 13 March 2003.

[32] American Express, ‘American Express Credit Card Conditions’ (2002)

– emphasis added.

[33] Diners Club, Diners Club Electronic Access Conditions of Use (2003) <http://www. dinersclub. com.au/s02_personal/default.asp?whichfile=p26_terms_and_conditions.asp> 7 February 2003.

[34] OECD, Report on Consumer Protections for Payment Cardholders (2002) <http://www.olis.oecd.org/olis/2001doc.nsf/linkto/dsti-cp(2001)3-final> .

[35] Ibid.

[36] Ibid.

[37] Ibid.

[38] For any particular protection method to be considered cost-effective, an overall result where the result for all three criteria would be ‘very low’, ‘low’ or ‘acceptable’ would be required. In other words, a result for any protection method resulting in a ‘high’ or a ‘very high’ under any one or more of the three evaluation criteria could not, by any reasonable standard, be considered to be cost-effective as defined.

[39] Foreign lawyers, being ‘foreign’, will not always speak the language most commonly spoken in the consumer’s country. There may therefore, at the very least, be communication problems as between the foreign lawyer and the consumer. Such problems may involve misunderstandings, delays, and increased expenses as both the direct and indirect result of the language barrier.

[40] V Black, ‘Consumer Protection in the Conflict of Laws: Canada, the United States and Europe’ in Iain Ramsay (ed), Consumer Law in the Global Economy – National and International Dimensions (1997) 207-208.

[41] Should it come to litigation, the preliminary process of adjudicating choice of court and choice of law issues can add a whole extra set of expensive problems that must be dealt with before the substantive issues of the original dispute are reached, especially if the private international law issues are themselves disputed.

[42] G Vickery, Letter, 4 April 2003.

[43] APEC, Approaches to Consumer Protection within the APEC Region – Report of the Electronic Commerce Steering Group, October 2002 (2002) <http://elib.fda.moph.go.th/kmfda/KmDoc/ ApproachesToConsumerProtection.pdf> 5 July 2005,

7-8.

[44] Ibid.

7, footnote 13.

[45] The relevant text, in full, says: Government agencies may use this information [the consumer's complaint report] to investigate suspect companies and individuals, uncover new scams, and spot trends in fraud. However, you should not necessarily expect any country to pursue your complaint on your behalf. Although your complaint may be accessible to government agencies, it may or may not be accessed by them. Many government agencies bring law enforcement actions to protect the public-at-large, but do not intervene on behalf of individual consumers. Other agencies have an obligation to investigate each complaint.

[46] ACCC, What Does Econsumer.Gov Do? (2005) <http://www.accc.gov.au/content/index.phtml/ itemId/255387/fromItemId/8135> 5th July 2005.

[47] ‘ADR’, for these purposes, will be taken to incorporate the term ‘ODR’ (online dispute resolution, or online ADR) except where ODR is treated separately.

[48] Butterworths, Business and Law Dictionary (2nd ed, 2002).

[49] The term ‘binding’ (in respect of ADR decisions) is understood here as follows: The consumer contract contains a provision that says that in the event of dispute concerning the contract, the parties agree that any subsequent decision resulting from ADR, would be contractually binding on the parties. The problem however, is that to enforce that could involve resort to litigation, which could have been used in the first place.

[50] OECD, Resolving E-Commerce Disputes Online: Asking the Right Questions About ADR (2002) <http://www.olis.oecd.org/olis/2002doc.nsf/43bb6130e5e86e5fc12569fa005d004c/7f89b52192b7f8d5c1256bce00389cc6/$FILE/JT00127493.PDF> .

[51] Ibid.

[52] Ibid.

[53] See for example www.settleonline.com

, www.onlineresolution.com

, www.theclaimroom.com

.

[54] OECD, above n 50.

[55] C Rule, Online Dispute Resolution for Business – B2B, E-Commerce, Consumer, Employment, Insurance, and Other Commercial Conflicts (2002) 103-104.

[56] OECD, above n 50.

[57] OECD, above n 50.

[58] OECD, above n 50.

[59] OECD, above n 50.

[60] ‘In Australia to date there are no reported cases where a court has enforced a pre-existing agreement to mediate’ P Mead, ‘ADR Agreements: Good Faith and Enforceability’ (1999) Australian Dispute Resolution Journal 40-52, 49

– and thus the courts won’t help anyway.

[61] C Rule, Online Dispute Resolution for Business – B2B, E-Commerce, Consumer, Employment, Insurance, and Other Commercial Conflicts (2002) 62-70.

[62] Such software ‘evaluates bids from each party and if the two bids are within a prescribed range (for example, 30 percent) then the case settles for the median. If the cases are not within the prescribed amount, then the bids are destroyed and neither side knows what the other proposed. Both parties are fully informed as to the way the process works before it begins, and they agree to abide by the outcome if one is reached.’ Ibid 57.

[63] Ibid 95.

Three further advantages of ADR/ODR, noted by Smith, are ‘range of remedies’, ‘confidentiality’ and ‘flexibility [of procedure] and informality’ J Smith, ‘Can the Advantages of ADR Procedures Be Transposed to a Judicial Forum?’ (1993) Australian Dispute Resolution Journal 299-306, 300-301.

[64] Rule, above n 61, 94.

[65] Rule, above n 61, 294-296.

[66] W Harris, ‘Consumer Disputes and Alternative Dispute Resolution’ (1993) Australian Dispute Resolution Journal 239-252, 243.

[67] Rule, above n 61, 18-19.

[68] Harris, above n 66, 243.

[69] Harris, above n 66, 243.

[70] Harris, above n 66, 243.

[71] That is, the best that an ODR-provider can do, even in the event that such an agreement may ‘be given effect to’ by the courts (see later discussion). And in any event, to what extent would such agreements be enforceable across international borders?

[72] Internet Corporation for Assigned Names and Numbers – the international body in charge of domain names – and the regulator of disputes over domain names, through its Uniform Dispute Resolution Policy (UDRP).

[73] At worst, they may be far less than that: ADR clauses in contracts have been held to be unenforceable ‘either on the basis that they were in reality agreements to negotiate or agreements to agree, were too vague or uncertain to be given effect to, or were an attempt to oust the jurisdiction of the courts’: Mead, above n 60, 40.

[74] Rule, above n 61, 292 – emphasis added. Furthermore, ODR is ‘not compatible with disputes in which one side is not participating in a good-faith effort to reach a resolution. This includes all fraud and criminal cases.’ Rule, above n 61, 284. Actually this would be true even without fraudulent intent: ODR may not help even where a merchant disputes a consumer’s complaint concerning mere non/wrong delivery of goods.

[75] Thus ‘law as code is a start to the perfect technology of justice’. L Lessig, ‘The Zones of Cyberspace’ (1996) Stanford Law Review 1403-1412, 1408.

[76] Butterworths, Business and Law Dictionary (2nd ed, 2002)

– emphasis added.

[77] Ibid

– emphasis added.

[78] Ibid.

[79] An example of a commercial dispute resolution provider is Positive Solutions, (2005) <http://www.positivesolutions.com.au/> at 7 November 2005.

[80] Ibid.

[81] The topic of industry-based consumer dispute resolution schemes, examined above, is concerned with infrastructure (tribunals), whereas this section is concerned with quasi-legislation/legislation. The two topics are related however.

[82] Which may also be used as the content of the ‘law’ which an ADR-provider etc. may refer to in its deliberations.

[83] Findlaw, New System of Endorsement for Industry Codes of Conduct (2004) <http:// www.findlaw.com.au/news/default.asp?task=read & id=16079> 4th March 2004.

[84] Escrow.com, Why Use Escrow? (2005) <https://www.escrow.com/index.asp> 17 June 2005.

[85] ‘EBay recommends purchases over $500 use an escrow’ CarBuyingTips.com, CarBuyingTips.com Consumer Guide to Avoiding Ebay Fraud, Escrow Internet Fraud, Check Fraud, Auto Fraud, and Nigerian Scams (2005) <www.carbuyingtips.com/fraud.htm> 21 June 2005

– which, if true (and there appears to be no reason to doubt this), means that escrow may be an expensive solution for many low value ICTs.

[86] Standard form escrow contracts for ICTs is no solution either.

[87] CNN.com, Three Jailed in Global Ebay Scam (2005) <http://edition.cnn.com/2005/WORLD/ europe/10/28/ebay.scam.ap/index.html> 29 October 2005.

[88] CarBuyingTips.com, CarBuyingTips.com Consumer Guide to Avoiding Ebay Fraud, Escrow Internet Fraud, Check Fraud, Auto Fraud, and Nigerian Scams (2005) <www.carbuyingtips.com/fraud.htm> 21 June 2005.

[89] A forthcoming article by this author aims to demonstrate this.


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