Online dispute resolution: What you need to know before ODR legislation is enforced

From July 9, 2015, EU member states will be asked to implement new legislation that will require their businesses to settle disputes with consumers through a system of online mediation. 

When consumers have problems with a trader regarding a product or service they bought, they can settle the dispute out-of-court through an Alternative Dispute Resolution or Online Dispute Resolution (ADR / ODR) procedure.

The Digital Single Market initiative is designed to strengthen consumer protection by requiring businesses to add links/information on their websites to ODR providers.

Since awareness of ODR as a way of resolving consumer disputes is still fairly limited amongst retailers, here is some background into ODR and its value to ecommerce. 

An introduction

"Technology is not neutral. Each technology has properties that make it easier to do some activities, harder to do others. The easier ones get done, the harder ones - neglected.“

These words from the father of user-centered design Don Norman ring true even in the field of online customer compaints.

At the dawn of ecommerce, there was very little customers could do to provide feedback to the services and products they purchased. In 1990s, digital communication had barely the option of ordering items. The social concept of sharing emotionally-charged information – either positive or negative – was only at its beginnings.

That all changed with the rise of social media. The stiff politeness of early 'nettiquette' was rapidly trampled under a stampede of negative reviews and biased rants of disgruntled customers. This came at very steep cost for businesses. A 2013 study shows that 86% of consumers are influenced by negative online reviews. Taking into account that it takes 12 positive client experiences to make up for one bad one, businesses cannot be thrilled by the prospect of negative reviews.

How many disgruntled consumers are we talking about? Just last year, eBay received about 60 million customer complaints. And how did the biggest online auction site handle this overwhelming number? By taking them into the consideration and actively reacting to them through mechanisms of online dispute resolution.

What is ODR?

Online dispute resolution is technology-assisted way of settling disputes between two parties, involving mainly negotiation, mediation and arbitration. As far as ecommerce transactions are concerned, most of the customer complaints are of low-value, high-volume category – thus ideal for resolution via new technologies.

"While an increase in complaints may sound alarming in reality, in which dispute resolution mechanisms are facing heavy backlogs, the efficiency of ODR mechanisms coupled with the potential of ODR to detect patterns of disputes may actually contribute to a long-term decrease in full-blown conflicts,“ comments Ethan Katsh, the so-called 'father of ODR' in the International Journal of Online Dispute Resolution. "ODR  has better change to identify systemic contributors to conflict – and also show overall solutions that could help reduce conflict. This is what makes ODR more qualified for conflict management than older forms of alternative dispute resolution that only focus on resolving individual claims.“

Let's look at the real-world examples of successful dispute resolution implementations. Since 2012, there has been an emergence of automated and technology-assisted negotiation or mediation approaches, which include problem identification processes (eBay), tools for matching problems and solutions (SquareTrade), structured resolution dialogues for ecommerce issues (Youstice), automated negotiation support systems (SmartSettle) and blind bidding tools (CyberSettle).

So what are the benefits of ODR for resolving customer issues? One of them is the convenience of having a communication channel, dedicated specifically to handling customer issues 24 hours a day, 7 days a week. Another benefit is the fact it helps organisations avoid the lengthy process of waiting for a court decision over simple cases where the shopper and retailer don't agree – not to mention saving on all the costs of court proceedings. Still another benefit would be enhancing customer experience and reputation boost for those e-shops that allow for this type of issue resolution.

As a demonstration of ODR's growing popularity, the European Union has now enshrined it as a part of the Digital Single Market initiative. The directive for etailers operating in European market comes into full effect on July 9, 2015.  

Ecommerce is nothing if not innovative, and all the 2015 online retail trends show huge progress from product-centric business to customer-centric approach. As eBay, the poster child for online dispute resolutions shows, ODR has a long history of development, but now proudly stands as one of the front-runners in putting consumers in the spotlight of retailer’s attention.

Zuzka Jakubkova is communications expert at Youstice.com.