RegTech Intelligence

Online dispute resolution is here

Online Dispute Resolution, ODR

The European Commission is in the final stages of launching its online dispute resolution (ODR) platform to the public.  This has been an extended process which involved the publication of a designated regulation on online dispute resolution for consumer disputes back in 2013.  As of 7 January 2016, the launch of the platform was heralded by the European Commission and the site is due to go live for consumers and traders alike on 15 February.  Tipped by the FCA as a ‘hot topic’ in the January edition of their Regulation Round-up, this new ODR mechanism provides an online facility for the resolution of disputes which arise when EU consumers, who have bought goods or services online from a trader based elsewhere in the EU, subsequently have a problem with that online purchase.  The premise is that ODR will benefit both the consumer and businesses by increasing confidence in the online sales process and it sets out to be an “independent, impartial, transparent, effective, fast and fair out-of-court resolution” service.

Where did it come from?

Regulatory methods have been in place for a number of years and advocate for alternative dispute resolution (ADR) mechanisms.  While measures, such as small claims courts and ombudsman services, have offered consumers access to redress for some time, this new online platform offers a means for settling disputes across the boundaries of all 28 Member States and specifically deals in online sales.

How will it work?

The consumer must begin by filling in an online complaint form on the ODR website.  This will be a multilingual service and it will be free of charge.  Once the complaint has been registered, the form will be sent to the relevant trader who will propose an alternative dispute resolution service.  This could be mediation, conciliation, arbitration, ombudsman or complaints board.  From here, the trader and consumer will agree on the preferred resolution mechanism to handle the dispute and the ODR platform will transfer the case which must then be resolved within 90 days.  The entire process will be carried out online.

The terms of the regulation also create additional obligations for traders established within the Union and that engage in online sales or service contracts in terms of promulgating information about the ODR platform.  Traders that qualify must provide an electronic link to the platform on their websites and, where a trader executes sales via email, they must provide such a link in that email.  Terms and conditions of sales and service contracts must also be altered to included information about the ODR service.  This means that businesses need to ensure that they are ready to update their sales processes once the website goes live on 15 February.

What will it do for consumers and businesses?

Online dispute resolution will offer consumers and traders alike an opportunity to deal with complaints in a quick, easy and inexpensive way.

The benefits for business are increased confidence in trading online and across borders, as well as the idea of fostering a new culture of out-of-court, conciliatory dispute resolution between consumers and traders across borders within the EU.  According to a Commission report, 60% of EU traders currently do not sell online to other countries due to perceived difficulties of solving a problem arising from such sales.  Therefore, the ODR platform will give businesses a chance to grow and expand upon their current distribution channels without fearing expensive, cross-border legal battles.  Ultimately, from a trader’s perspective, the idea is to maintain business reputation and good consumer relations, while fostering and promoting growth and expansion across the European single market.

However, while businesses will benefit from a resolution system that does not necessitate court action, the simplicity of this new service may result in a floodgates effect with customers utilising the platform to raise any issues they may have. Traders should be advised to familiarise themselves with the new requirements and get to grips with this new service once it is officially launched.  It may create new obligations but it does also offer new opportunities.

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