Empowering Consumers Through Global Redress Systems

Consumers continually make small-dollar purchases through business-to-consumer (‘B2C’) Internet contracts, often across borders and usually without incident. Occasionally, however, the goods and services that consumers purchase do not arrive or fulfill their expectations. When this happens, consumers often lack information about their rights and do not know where to turn for assistance regarding their purchase problems. Furthermore, even when consumers understand their rights, they may lack the resources or confidence to pursue processes for obtaining assistance. This is especially true for consumers in the United States (‘US’) due to costly and impractical judicial options for recourse.  Additionally, these consumers often face strict enforcement of pre-dispute arbitration clauses under the Federal Arbitration Act and accompanying US Supreme Court jurisprudence. 

Indeed, businesses have cut back customer service, and have cut off consumer access to judicial relief through one-sided form contracts with arbitration clauses that preclude class relief of any kind. This often leaves consumers with no practical process for obtaining remedies with respect to small-dollar claims. For example, a consumer generally will not pursue a claim regarding a $700 USD cell phone if that means she must pay the nonrefundable $200 filing fee required to initiate arbitration. That is especially true when one considers the consumer’s time, travel, and attorney costs.

At the same time, borders are losing meaning in B2C contracts as ecommerce connects buyers and sellers from all over the world and eliminates the need for face-to-face (‘F2F’) negotiations. However, borders matter when disputes develop due to jurisdictional difference in laws and procedures for obtaining remedies. It is therefore critical to consider legal redress mechanisms on a global scale. Businesses and policymakers must address differences in consumer redress systems, and collaborate to create mechanisms that operate efficiently and fairly for consumers regardless of residence.

This is possible using the Internet for development of Online Dispute Resolution (‘ODR’) mechanisms.  The European Union (‘EU’) has already taken a lead.  The EU has promulgated the ADR Directive and ODR Regulation, which work in tandem to require Member States to implement ODR systems for consumer claims. Furthermore, the United Nations Commission on International Trade Law (‘UNCITRAL’) worked for many years in advancing guidelines on ODR for cross-border ecommerce through its Working Group III on Online Dispute Resolution.  Although the Working Group never reached a consensus for such guidelines, it ended in 2016 with a strong recommendation for continuing development of ODR as imperative for efficient redress in cross-border claims.

In a recent chapter, Consumer Redress in the United States, published in The New Regulatory Framework For Consumer Dispute Resolution (OUP 2016), I provide a snapshot of consumer redress processes in the US and suggest policy reforms building on EU advances in B2C ODR. A pre-publication draft of the chapter is available here. As the chapter explains, the US traditionally has been distinct in its allowance for class relief and other judicial action as the primary means for consumers to pursue remedies in B2C transactions. However, these traditional American remedies processes have diminished due to the strict enforcement of pre-dispute arbitration clauses and other restrictions on class actions in the US. Furthermore, US small claims court and credit card chargeback procedures are limited and outdated, while emerging online complaint and dispute resolution processes remain largely unregulated. This leaves many consumers without meaningful access to remedies when they experience purchase problems. The chapter therefore invites discussion and creativity aimed to enhance consumers’ access to remedies in the US and abroad.  Ideally, global ODR efforts will prevail for the good of businesses and consumers worldwide.

Amy J. Schmitz is the Elwood L. Thomas Missouri Endowed Professor of Law, University of Missouri School of Law.