{"id":1908,"date":"2017-04-23T01:48:08","date_gmt":"2017-04-23T05:48:08","guid":{"rendered":"http:\/\/www.businessconflictmanagement.com\/blog\/?p=1908"},"modified":"2017-04-24T21:49:32","modified_gmt":"2017-04-25T01:49:32","slug":"consumer-redress-and-the-new-handshake","status":"publish","type":"post","link":"http:\/\/www.businessconflictmanagement.com\/blog\/2017\/04\/consumer-redress-and-the-new-handshake\/","title":{"rendered":"Consumer Redress and “The New Handshake”"},"content":{"rendered":"

For many years, a tempest has surrounded public policy approaches to consumer protection, largely implicating three utterly inapt legal constructs:\u00a0 FRCP 23<\/a>, the Federal Arbitration Act<\/a>, and traditional principles of contract formation.\u00a0 Accustomed to managing customer complaints but unwilling to expose themselves to the coercion of class actions, companies have sought to require consumers to waive rights to collective remedies.\u00a0 Courts have recognized the validity of contracts containing such waivers if they are embedded in agreements to arbitrate.\u00a0 And consumer agreements to arbitrate have been enforced despite widespread acknowledgement that consumers have no idea that they are agreeing to anything, what they are agreeing to, or what rights they are waiving.<\/p>\n

So intractable has been the legal discourse that Congress, through Dodd-Frank, created an agency to promulgate rules protecting consumers<\/a> of financial products from \u201cforced arbitration and class action waivers.\u201d\u00a0 And so vulnerable is our regulatory environment that once Congressional power shifted that promulgating agency (the Consumer Financial Protection Bureau) and its proposed rules are presumed to be dead before ever having come to life.<\/p>\n

The whole thing has been a testament to the futility of the law to address a felt need in a way that conforms to our legitimate expectations.<\/p>\n

Comes now Prof. Amy J. Schmitz<\/a> of the University of Missouri and Colin Rule<\/a> of Modria with an extra-legal, market-driven, empirically-based approach whose values reflect old-time America and yet whose execution relies upon cutting-edge technology.<\/p>\n

Prof. Schmitz remembers when she would buy ears of corn from a local farm stand, hand the farmer a buck, and shake his hand.\u00a0 The dollar signified the market value of the corn.\u00a0 The handshake signified the farmer\u2019s willingness, in the event that an ear was wormy, to replace it with a good one.<\/p>\n

Harry Truman expressed his frustration with economic advisors who equivocated \u201cOn the one hand\u2026 but on the other hand\u2026\u201d by declaring that what this country needs is a one-armed economist.\u00a0 Schmitz and Rule suggest that what this country needs is a New Handshake<\/a>.\u00a0 Their book of that name makes a compelling argument.<\/p>\n

In a calm and informed voice, the authors explain the legitimate expectations of online retailers and their online customers.\u00a0 Both seek, and almost always realize, accuracy, satisfaction, efficiency and responsiveness.\u00a0 Retailers devise easy methods of product identification, ordering, payment and order fulfillment.\u00a0 Moreover, they compete with others in the marketplace to provide those experiences better than their customers\u2019 alternative suppliers.\u00a0 Consumers want ease of use, quick delivery, conforming goods, and both privacy and safety with respect to the details of their financial transactions.<\/p>\n

The question is, if 98-99% of those transactions go as contemplated, what do consumers expect with respect to the 1-2% that do not?\u00a0 And what are the market justifications for retailers\u2019 trying to meet those customer expectations?<\/p>\n

Rule and Schmltz argue that the online nature of the transaction presents the opportunity for an online resolution of the disputes arising from this economy, and that management of disputes through the internet, arising from internet-based consumer transactions, presents opportunities for both customer satisfaction and enhanced business.\u00a0 Setting aside the concerns of third party advocates, regulators and lawyers, the authors propose that what customers really want is a dispute process that is as easy to access as the sale was; is online, like the sale was; is fair, quick, private, confidential, effective and direct.\u00a0 They do not want coupons, negotiations, arguments, excuses, or offers of discounts for future purchases, and they certainly do not want to have to pick up a telephone and have a recording tell them how important their call is.<\/p>\n

Here comes the most compelling part of the study: based on a study of the buying behavior of millions of consumers on the retail site eBay, the authors conclude that consumers who are offered, and who initiate, online dispute processes concerning their purchases actually engage in more purchases \u2013 irrespective of the outcome of the dispute process they initiated.\u00a0 That is to say, the mere availability of a direct, simple online access to remedy boost customer loyalty with respect to that online merchant.\u00a0 The authors even call this phenomenon \u201cReturn on Resolution,\u201d or RoR.<\/p>\n

This can backfire if done badly, of course.\u00a0 If the online consumer redress protocol is perceived as unfair, or complaints get lost, or other adverse experiences lead customers to feel hoodwinked, things will change rapidly for the worse.\u00a0 But the empirically-based proposition is that the presence on a retail website of an online consumer dispute mechanism results in enhanced customer loyalty. It acts like a farmer\u2019s handshake.<\/p>\n

If you accept the validity of this behavior \u2013 and we\u2019re talking about consumer behavior, not self-described consumer \u201csatisfaction\u201d \u2013 then a whole new world of online dispute resolution (ODR) presents itself, driven and enforced by the market rather than by legal theories or regulatory initiatives.\u00a0 The authors envision a global, uniform, multi-lingual, cross-cultural system of online consumer redress that possesses certain design criteria:<\/p>\n