¿How, exactly, PayPal resolves disputes between ecommerce merchants and their customers? Colin Rule, PayPal‘s Director of Online Dispute Resolution was intervied by Practical eCommerce magazine:

Practical eCommerce (PeC): If an ecommerce customer pays for a legitimate product using PayPal and then decides he doesn’t like it and complains to PayPal, what will PayPal do?

Colin Rule: In cases where the buyer is simply disappointed in the item, we would encourage the buyer to work directly with the seller. PayPal does offer buyer protection, but this protection covers buyers for items that they didn’t receive and for items that are significantly not as described. It does not cover cases where the buyer is merely disappointed with the item or where the item did not meet the buyer’s expectations.

Practical eCommerce (PeC): What are a merchant’s options if a customer asks PayPal to hold payment?

Colin Rule: If a merchant does get a chargeback, a couple pieces of information can be extremely helpful to dispute it. Proof of delivery, such as online tracking offered by both USPS and UPS, can be critical evidence in reversing the chargeback. A copy of the buyer’s signature confirming receipt can also be extremely effective. Finally, if a merchant did refund the buyer at any point in time, proof of the refund (and/or the shipment of a replacement item) is important.

Practical eCommerce (PeC): What other options are available to merchants to address disputes?

Colin Rule: Again, we always encourage buyers and sellers to first try to work through disputes together. To help with that, we’ve launched the dispute resolution center – a step-by-step system designed to facilitate communication between the buyer and the seller in order to get resolution of the issue. Since launching PayPal Dispute Resolution, buyer claims against sellers decreased by 50 percent, and seller losses on PayPal due to chargebacks decreased 20 percent.

If the dialogue with the seller fails to produce a satisfactory result, the buyer can then escalate the dispute into a claim, where our claims specialists gather information from both parties, examine the case and work with both parties to try to fairly and efficiently resolve the claim. In this process, PayPal will ask sellers for documentation that helps us determine that they shipped the item to the buyer and that the item was as described.

Practical eCommerce (PeC): Why should an ecommerce merchant accept payments from PayPal?

Colin Rule: It helps them increase sales and lower costs. PayPal has 141 million accounts worldwide and merchants therefore have access to a large, global base of buyers. At any given time, there is $3 billion stored in PayPal accounts, which turn over every two weeks. Many buyers view the money in their PayPal accounts as discretionary, so they are more willing to spend it, perhaps with an ecommerce merchant.

Source: Quick Query: PayPal’s Director of Online Dispute Resolution

Despite the dot.com bust, the future of Internet commerce (e-commerce) still looks rosy. According to recent studies, it is now projected that by 2005 one billion people will be on the Internet and at least one third will make online purchases. What is even more remarkable is that this huge, $1.6 trillion business will be based essentially on trust, among sellers and buyers who are unlikely to ever see or speak to each other.

Inevitably, some of those e-commerce transactions are bound to turn into disputes. So what happens when a seller in the USA and a buyer in Russia disagree over a sale transaction worth only a few hundred dollars? What recourse do they have, when litigation, Small Claims court and arbitration are obviously not feasible options?

More and more online merchants are realizing that, if trust is indeed such a critical factor in e-commerce, having reliable products, clear return/refund policies and a multi-language web site may not be enough. It is far more effective if worldwide customers are reassured that, if they have a disagreement with the seller, they can get it resolved through an independent, neutral and inexpensive dispute resolution process.

Ebay has already proven how this can be done. With more than four million auctions daily, eBay is the world’s largest online auction. When sellers and buyers throughout the world have a dispute, they are referred to Square Trade, an independent ODR (Online Dispute Resolution) company based in San Francisco. A Square Trade trained mediator assigned to the case then gets in touch with both parties and helps them negotiate a mutually acceptable settlement. The purpose of mediation is not to determine which party is right or wrong, but to help seller and buyer answer one simple question: How can your case be resolved in a way you can both live with?

The entire mediation process takes place by email, and neither the mediator nor the parties need to be online at the same time. Therefore, parties can read and respond to the mediator’s messages whenever they want: after a few minutes, hours or even days.

As a Square Trade mediator, I have mediated over 900 eBay cases, with parties across the USA, Europe, Asia, and transactions worth anywhere between one penny and $35,000. All cases have fundamentally the same features. There are some substantive, tangible issues (like money, products, refunds, etc.); and there are also intangible issues (like the buyer’s need to feel heard and respected), which can often be resolved just with an apology.

Interestingly enough, the settlement rate achieved through online mediation is similar to the settlement rate achieved in face-to-face mediation in Small Claims courts. In other words, it does not really matter whether seller and buyer know each other since they live in the same city, or are total strangers because they live in different countries. What matters most is that both parties feel equally empowered by a neutral process that does not favor one party over the other, and gives them total control on its outcome.

Giuseppe Leone is a Square Trade online mediator and MCP mediator for Hawaii Small Claims courts. mediationplus@yahoo.com

Year 2003

This paper aims to be a basic overview of the issues that Online Arbitration raises when dealing with B2B transactions.

Summary of Questions Submitted for Discussion:

Question 1: What is your opinion on the general approach that the EU institutions should follow on ODR and Online Arbitration of B2B transactions? Should the initia-tives be limited to B2B transactions?

Question 2: Do you think that a directive is the most appropriate regulatory instrument to deal with e-commerce issues? And to deal with ODR methods? Do you think that the European Primary Law provides the EU with a legal basis to adopt a directive on ODR methods?

Question 3. Could or should the principles set out in the two recommendations apply indiscriminately to fields other than consumer protection? Of the principles enshrined in the Recommendations, which in your view could be incorporated in the legislation of Member States?

Question 4: Do you think that the EU should follow the Uncitral Model Laws, or should it leave the regulation of Online Arbitration disputes to national laws?

Question 5: What is your opinion on the controversial issues highlighted in section 7? Are they controversial at all? Is this a fictitious debate? What option would you adopt, if any, to solve the inconsistencies? What other alternatives would you propose?

Question 6: Do you think that this is an appropriate time to pass a directive on ODR methods? Would you be in favour of a directive on ODR methods? What are, in your opinion, the legal bases, if any, for a directive on ODR methods?

Question 7: Do you think that the adoption of European standards for Online Arbitration technologies is necessary? Do you think that the EU has the human and technical resources to dictate European Standards without public discussion? Would it be wise to create an interdisciplinary group capable of negotiating standards with other geo-graphic regions?

Question 8: Should there be a register of ODR providers or any other administrative control that ensures the respect of due process rights? Would the intervention of ad-ministrative entities impair the development of ODR bodies?

Question 9: What is your experience in negotiation and enforcement of private mecha-nisms? Should electronic awards be dealt with in an EU directive?

Question 10: Would you eliminate the formal requirements of deposit and notarisation at all? Would you empower notaries and other public authorities to deposit, authenticate and notify the award to the parties?

In your opinion, what are the inconveniences of harmonising the formal requirements of deposit and notarisation and attributing more essential faculties to public authorities?.

Year 2002