Consumer Alternative Dispute Resolution (ADR) Law

Consumer Alternative Dispute Resolution (ADR) Law

At Last -  A Business Regulation That Will Deliver Increased Sales!

Let me let you into a secret. There is a new law in place that most retailers are failing to properly implement. They see it as an unnecessary regulation. The reality, in fact, is that it is a huge aid to sales growth to those wiser retailers who fully utilise. Don’t miss out! Here’s a quick heads up:-

What is the purpose of the new law

To encourage and facilitate the resolution of disputes without the necessity for court action and to, thereby, give more confidence especially to people buying online.

What is it called?

The Alternative Dispute Resolution in Consumer Disputes (Competent Authorities and Information) Regulations 2015 and the linked EU Regulation on ODR which both came into effect last year.

To what types of sales does it apply?

It applies to sales, online or offline, to customers who buy other than for the purpose of a business, e.g. not buying to resell, or to use in the manufacture of some other item or to use to enable the buyer to offer a service to others etc. These are termed ‘consumer sales’. It is important to understand that such does not limit to low to modest value transactions. There is no price limit. The law applies equally to the sale of a £20 Airfix model yacht kit or the sale of a £30m McMullen and Wing ocean going yacht. The law applies equally to the sale of a £50 rail ticket to Birmingham on Virgin Trains or a £20,000 space flight on Virgin Galactic. The law also applies to the sale of services such as the extension to a house or the installation of a swimming pool. Importantly for web businesses, it applies to those who are not themselves retailers but provide an online marketplace on which others sell their own items or services.

What is the effect of this law?

The combined effect of these two pieces of legislation is to create for the first time a statutory duty on anyone covered by this law to refer those customers who are dissatisfied and with whom they cannot reach agreement to the web address of an approved provider of Alternative Dispute Resolution (ADR), a term applied to any method  of resolving disputes ,who, as they must be able to operate the ADR service online in order to gain approval, effectively must be an ODR (Online Dispute Resolution) service. Further, if they sell online they also have a duty to carry a hyperlink to a European Union run website that will itself refer dissatisfied customers to one such approved ADR service. I will explain in this article why I believe this gives a new and significant opportunity to retailers to market themselves to the public in a way that will give the public more confidence in buying from them than from those who do not take this action.  When selling online, the more confidence a customer has in your company, the more they will buy from you. However, what must be borne in mind, and what creates the sales opportunity for you,  is that the EU withdrew from making actual participation in online dispute resolution by the trader mandatory , not even in the very service to whom the trader refers the unhappy customer .

OK, so here’s the proof:

Firstly, imagine yourself as a prospective buyer. Imagine if the retailer’s website stated clearly that, in the event of your dissatisfaction with the product, the company will participate in a speedy and very low cost dispute resolution service that is conducted online by an independent body approved by the Chartered Institute for Trading Standards. Imagine that there was another website offering the same product at the same price/delivery. Imagine that this other website complied with the minimum requirements of this new law and displayed a hyperlink to the EU’s online dispute resolution website but buried deep within its Terms and Conditions but did not state that it will participate in an online resolution service. If price and delivery were more or less the same from which website will you buy? You don’t need to tell me. The answer is obvious.

But more than that, I can offer some actual statistics. The benefits to traders who participate in ODR of increased customer revisits and sales has in fact now been clearly established in a study. See “Quantifying the Economic Benefits of Effective Redress: Large E-Commerce Data Sets and the Cost-Benefit Case for Investing in Dispute Resolution – Colin Rule – University of Arkansas Law Review Law Review, v. 34, p. 767 -777, 2012. 

The study analysed the activity on eBay of hundreds of thousands of consumers who had raised a dispute. Their activity on the site was tracked both in the 3 months prior to the dispute , the period during the dispute and the three month period subsequent to the dispute. It compared those disputes in which the retailer participated in ODR and those who did not. The result was that participation in ODR by the retailer led to increased customer loyalty to the eBay site, i.e. buying more, even from those customers whose claim was not upheld in the ODR process. It seems that simply knowing there was a fast process to resolve disputes gave buyers confidence to buy.

So far I have talked about increasing sales but another reason to participate is to avoid losing sales. If you do not offer to resolve through ODR, you risk customers causing damage to your company’s brand by sharing the dissatisfaction with your product or service through social media or posting adverse reviews, whether on the marketplace platform through which you sell or on consumer review websites. It’s not just about losing sales to those who read adverse comment but to those who are deterred by lowered ratings such as on Google star ratings as a result of adverse comment taken into account for rating assessment. Think also of Amazon’s own use of the acronym ODR, Order Defect Rate, and how those penalties can directly damage your business. You may also be penalized by credit card chargeback rules. You may feel that the occasional adverse comment is not damaging given that it represents such a very small proportion of overall sales. However you will never know how many people have been deterred from buying from you through adverse comment.  Their adverse comment will be seen not just by their followers but by those who search against the name of the trader. Building and protecting your brand is vital to business success.

So what to do?

Research the various ADR providers currently approved under the law, finding out how they operate and  their terms of business. Select one whose terms are acceptable and whose process appears most appropriate for your business. Such has been the slow uptake so far that you may be able to negotiate a special deal with some providers just keen to begin casework. Apart for the fees, a service that offers online mediation is always preferrable to one just offering a form of ombudsman style arbitration. The reason is that mediation always results in an outcome with which both you and your customer find satisfactory whereas under arbitration/adjudication, in which a third party declares a decision which is binding on yourself but, subject to the terms, not necessarily binding on the consumer, at least one of you, and often both, are usually unhappy with the outcome. Mediation is also more likely to result in the customer remaining loyal  to your company leading to future purchases.

I can advise and guide you on steps to take . Contact me at [email protected]

Graham Ross © 2017