Dispute Resolution

Should I include an arbitration or mediation clause or similar provision on the site?

As more transactions have been completed entirely online, arbitration and other forms of alternative dispute resolution have also migrated to the online world. An ecommerce business and its customer can use mediation or arbitration remotely, through several kinds of online mediation and arbitration providers, to resolve their disputes.

Some sellers’ terms and conditions specify that a consumer must give up the right to go to court and, instead, resolve disputes with the seller through arbitration. Arbitration proceedings can be speedier than a comparable proceeding in court. They may also be cheaper or, depending on the situation, more expensive. With arbitration, one person (not a judge or jury) decides the case. Appeal of that decision is extremely limited, there is often no record made, and (depending on the agreement) a purchaser may forego the right to bring a class action. Most arbitration clauses specify what organization is to set up the arbitration. Each organization has its own fee schedules and rules. For an example, see the website of the National Arbitration Forum at: www.arb-forum.com.

There is much controversy over the use of “binding mandatory arbitration” clauses in consumer contracts. Many business groups support them. But, many consumer groups oppose them. Some of the consumer groups have establishedto provide information about these kinds of clauses and information to help you find sellers who do not require them.

In a mediation, a neutral third party helps the parties reach a settlement of their dispute. A mediator typically has no power to impose a solution if the parties cannot agree. In that sense, mediation is completely voluntary, and you typically have the freedom to walk away from it without settling the dispute. Some agreements include mediation as a step toward resolution: the parties may be required first to attempt to mediate their dispute and, if unsuccessful, they may then go to court or to an arbitration for a resolution.

Enforceability of arbitration clauses in terms and conditions
In the United States, the Federal Arbitration Act gives arbitration agreements priority in disputes arising out of a contract including such provisions. Similar state laws based on the Uniform Arbitration Act (and recently Revised UAA) also give force to arbitration provisions in consumer as well as business-to-business contracts.

A minority of courts in California have held consumer alternative dispute resolution clauses (including arbitration clauses) unconscionable where the right to class-wide relief is waived. For the small or medium sized e-tailer, however, challenges to the enforceability of arbitration provisions rarely succeed since the FAA and (R)UAA require the courts to defer to arbitrators on most disputes arising out of the associated contract.

Use of third-party providers particular to ecommerce context
Online Dispute Resolution (ODR) providers offer direct negotiation, mediation and arbitration services online to resolve disputes between parties anywhere in the world. A list of ODR providers is maintained by The Center for Information Technology and Dispute Resolution.

For business owners already familiar with their local Better Business Bureau, the BBB offers similar services online through its BBBOnLine Reliability Program.