Effective Redress for E-Commerce: A Case of eBay

As the Internet becomes part of our daily lives, electronic commerce (e-commerce) has been developed into one of major ordinary transaction methods.  However, despite of its rapid growth and wide popularity, e-commerce is still risky in nature, due to its anonymity, accessibility, diversity, and popularity. [1]  E-commerce is a double-edged sword: its features may benefit the online transaction environment or, conversely, harm the sound online transaction environment.  Its advantages, such as convenience and anonymity, are frequently abused and may cause online fraud, damaging e-commerce.  The seventh annual fraud survey reported online fraud would harm e-commerce by causing a loss of $2.8 billion out of e-commerce profits in 2005. [2]  In order to promote the constant growth of e-commerce, one must look to practical solutions.  One of the recommended solutions for e-commerce is effective redress. [3]

II. Redress offered by eBay

Redress is usually referred as “both reactive and proactive methods (e.g., alternative dispute resolution (ADR) and transaction insurance…).”[4] Following to this definition, eBay, one of leading online companies in the world, provides mainly two forms of redress in addition to eBay protection policy: (a) PayPal’s Buyer Protection through secured online payment [5] and (b) SquareTrade’s Online Mediation in the case of disputes. [6]

As a secure payment provider, PayPal sends the money to recipients by the payment option chosen by senders and will cover up to $2,000 for eligible transactions, if they were paid through PayPal on eBay. [7] Another major redress is the Impartial Mediation Service provided by SquareTrade. [8] Consumers can file a case by clicking the “file a case” icon and the complainant will be notified automatically via email. [9] Parties are encouraged to have a direct negotiation at first, but they may have Mediation Service through the SquareTrade webpage. [10]

III. Survey Results from eBay users

Is redress effective to consumers?  The effectiveness of redress for consumers can be measured with cost-efficiency, enforceability, and simplicity. [11] However, a 2005 study conducted in the U.K. should be considered at first before beginning to analyze the effectiveness.  The study presented that only 8% of sellers and 3% of buyers answered that they had ever used SquareTrade’s online negotiation or mediation service among 400 U.K. eBay users. [12] In addition, only 4% of the pool answered that “they regarded eBay as ‘as safe a place to shop as the high street,’ while 93% of them ‘were very of fairly satisfied with the majority of their eBay transactions’ and 96% of them were satisfied with online transaction generally.” [13]  Further information on the study includes the following:

“Of the One-third of users with problems who chose not to use any ADR mechanisms, nearly 52% resolved their disputes by contracting the other party directly, without the help of eBay.  Around 20% thought that it was worth more than the value of the item in question to enter a dispute, and a similar percentage said they either couldn’t be bothered to use ADR, or did not know such process existed.  Only a very few chose to turn to legal advice, or to bodies outside eBay such as the police, trading standards, credit card companies, or the courts.  Even though many may have used PayPal to pay for transactions rather than credit cards or other means such as cheques or money order, it seems to show a lack of awareness among consumers of their rights…” [14]

IV. Strategies for the Effective Redress

The result may suggest that we can not even examine the effectiveness of the redress because too few people try to access the provided services: the existing redresses do not reach to consumers.  It could be because consumers already know that the redress is not effective or they do not know that redress exists or what their rights are.  Either way, solving this problem requires some marketing “strategies”. [15] Firstly, more convenient, enforceable, and simple redress methods should be developed under a uniform policy. [16]  Secondly, consumer should be educated on the possible redress and their rights by governments, consumer groups, or businesses in casual languages. [17]  Thirdly, trust should be built in the redress for its fairness, neutrality, transparency, enforceability and confidentiality. [18]

There are several sub issues within the strategies, and the strategies require the cooperation of governments and industries. [19]  Governments or public sectors have motives: public policy requires consumer protection and e-commerce promotion.  Industries or businesses have also incentives: they should attract consumers in the market. It is not easy, though not impossible, to align the goals of these two groups.

V. Conclusion

The positive future of effective redress is not clear, though it is needed to construct a sound e-commerce environment.  However, there is a promise.  Effective redress benefit e-businesses as well as consumers, as demonstrated by the fact that eBay’s earnings were increased up to 50% due to the growth of PayPal, despite of the slowdown in its main industry, the listing of auction. [20] Also, Amazon.com, another leading online transaction company, is considering the adoption of the secured online payment system such as PayPal “to reduce bad debt expenses.” [21]  This implies there are big economic incentives for e-businesses to invest on developing effective redress.  Considering both the government’s interests on consumer protection policy and e-businesses’ interests on economic incentive, effective redress would not be a mere dream. 

Sources

[1]  Mahamed Wahab, Globalization and ODR: Dynamics of Change in E-Commerce Dispute Settlement, 12 Int’l J. L. & Info. Tech. 123, 128 (2004).

[2]  Susan Kuchinskas, Fraud Chewing E-Commerce Profits, eCommerce, Nov. 11, 2005, http://www.ecommerce-guide.com/solutions/secure_pay/article.php/3563526.

[3]  American Bar Association, Addressing Disputes in Electronic Commerce: Final Recommendations and Report, 58 Bus. Law. 415, 420 (2002).

[4]  Daril Gawith, Non Litigation-Based Redress for International Consumer Transactions Is Not Cost Effective – A Case for Reform, 3 MACQUARIE J. BUS. L. 115, 115, footnote 1 (2006).

[5]  eBay PayPal Buyer Protection, http://pages.ebay.com/help/tp/paypal-protection.html (last visited, Sep. 7, 2007).

[6]  eBay Resolving Disputes, http://pages.ebay.com/help/tp/problems-dispute-resolution.html (last visited, Sep. 7, 2007).

[7]  eBay PayPal Buyer Protection, supra note 5.

[8]  eBay Resolving Disputes, supra note 6.

[9]  SquareTrade, A Simple, 4 Step Process to Resolve eBay Disputes, http://www.squaretrade.com/cnt/jsp/odr/learn_odr.jsp;jsessionid=aynxjgmzh1?vhostid=bliss&stmp=ebay&cntid=aynxjgmzh1 (last visited, Sep. 7, 2007).

[10]  Id.

[11]  Gawith, supra note 4, at 115; American Bar Association, supra note 3.

[12]  Lilian Edwards & Caroline Wilson, Redress & Alternative Dispute Resolution in Cross-Border E-Commerce Transactions, European Parliament 16 (2007), available at http://www.europarl.europa.eu/comparl/imco/studies/0701_crossborder_ecom_en.pdf.

[13]  Id.

[14]  Id. at 21

[15]  Wahab, supra note 1, at 131.

[16]  See Gawith, supra note 4, at 150.

[17]  Statement of Principles of the National Consumer Dispute Advisory Committee, CONSUMER DUE PROCESS PROTOCOL 10 (1998), citing Lucille M. Ponte, Boosting Consumer Confidence in E-Business: Recommendations for Establishing Fair and Effective Dispute Resolution Programs For B2C Online Transactions, 12 ALB. L. J. SCI. & TECH. 441, 454 (2002); Wahab, supra note 1, at 141.

[18]  See Wahab, supra note 1, at 147-148.

[19]  See Ponte, supra note 17, at 480; Wahab, supra note 1, at 142.

[20]  Dan Gallagher, EBay Earings Jumpt 50% on PayPal Growth, MARKETWATCH, Jul. 18, 2007, available at http://www.marketwatch.com/news/story/ebay-earnings-jump-despite-slowdown/story.aspx?guid=%7B50FC4DC3-99C0-4C39-ACB4-88B7101CE0E4%7D.

[21]  Peter Kang, PayPal’s Growing Pains, FORBES, Apr. 14, 2005, http://www.forbes.com/2005/04/14/cx_pk_0414paypal.html.

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