Issues with Business-to-consumer E-commerce

Issues with Business-to-consumer E-commerce Introduction: The long-term prosperity of business-to-consumer e-commerce depends upon the existence of consumers confidence and the availability of adequate supporting legal framework with effective means of enforcement. Because of the technological development e-commerce industry is growing with enormous speed. Majority of consumers prefer to buy products online and make electronic transactions with companies situated outside their national boundaries. The expansive use of e-commerce and the existence of complex legal framework necessitate that efforts should be made to introduce new means of enforcing Business to Consumer e-contracts and disputes resolution across state borders. This research work will mainly concentrate upon the existing issues in enforcing business to consumer e-contracts across national borders. These include the issue of jurisdiction, the issue of applicable law and the issue of enforcement. Furthermore it will evaluate thoroughly the need for new means of disputes resolution in cross border B2C e-commerce transactions. It will further assess the potentials of B2C e-commerce disputes resolution through internal complaint handling mechanism and direct contact with business. It will also evaluate the Alternative Dispute Resolution mechanisms, such as facilitative ADR, Advisory ADR, Determinative ADR, Combined ADR etc and will recommend how these forms of disputes resolution can be effectively implemented on national level and to be of binding nature. basic principle such as equality, fair treatment, affordability, Awareness about the ADR principles, accessibility to ADR mechanism, finality and rapidness of ADR process, and objectives of ADR. The research work will further analyse the concept of ADR in legal perspective and will suggest that what efforts should be made on international, regional and national level to promote the use and development of ADR, particularly in disputes arising out of cross-border transactions. It will take into consideration various legislative and other legal instruments i.e. European Union Directive on Electronic Commerce, OECD E-commerce Guidelines, European Commission Recommendations 1998, European Commission Recommendations 2001, International Chamber of Commerce best practices, ADR Guidelines 2003, International Consumer groups and International Businesses groups, and EEJ-NET etc and will suggest if necessary amendments are needed. The research work will also focus on the current obstacles in the expansion of ADR mechanism, such as unawareness of businesses and consumers of ADR process and its benefits, Lack of trained and educated specialist in dispute resolution, cultural and linguistic issues Due to cross-border nature of e-commerce, and jurisdictional and procedural issues resulting from the multi-national nature of e-commerce etc. Moreover this research will propose certain recommendations that how the current obstacles may be removed to paved a way for an effective dispute resolution system, compatible with the need of time, such as making of legislation on international, regional and national level to determine the issue of jurisdiction, applicable law and enforcement of judgement, making efforts by the governments to create awareness and educate people about the effective means of enforcing their rights and resolving disputes, the creation of independent bodies and institutions on international, regional and national level to deal with e-contracts enforcement and disputes resolution, the encouragement of both traditional and modern mechanisms of disputes resolution, the availability of internal complaint handling department in every business etc. Aim and objectives: The main aim of this study is to evaluate the existing issues in cross-border Business-to-Consumers ecommerce transactions. Specifically the research focuses on judicial obstacles, such as the issue of jurisdiction, applicable law, and enforcement. This study further suggests that what could be the best alternatives to address these issues and increase consumers confidence in online shopping. Hypothesis: According to my hypothesis the following are the main issues inherent in resolving business-to-consumers cross-borders ecommerce disputes. Issue of jurisdiction: The first and the most important issue in B2C ecommerce dispute is the issue of Jurisdiction. When a consumer in one country purchase a product online in another country and subsequently a dispute arises between the parties and consumer wants to seek judicial remedy, than in such case a question arises that which court is having territorial jurisdiction to entertain the matter. Applicable law: The matter of applicable law in ecommerce is another considerable issue. It is very difficult to determine that under which legal system or under what law the matter should be dealt with. Issue of enforcement: The issue of enforcement also needs to be addressed. In resolving business-to-consumers ecommerce dispute it is unclear that how and where the judgement may be enforced. Literature review: Literature review literally means a review of whatever has already been written by different scholars about the existing research topic, and than to demonstrate that the existing research is deficient and needs some supplementing. In todays advance technology the use of ecommerce is increasing. â€Å"Between 2004 and 2008, in EU the use of shopping through internet increased from 22% to 34%. In the UK in 2008, 57% consumers did online shopping, in Germany, Denmark and Netherlands the figure remained above 50%. In Estonia, Cyprus, Greece, Italy and Portugal the figure was respectively 10%, while in Romania and Bulgaria it was about 4%†. Although e-commerce is increasing at national level, it is still comparatively unusual for consumers to participate in cross-borders transactions. Consequently the gape between interstate and cross-border e-commerce is expanding. From 2006 to 2008, in EU the figure of online consumers increased from 27% to 33% while cross-border e-commerce remained still at 6% to 7%. On national level â€Å"laws that apply to traditional or off line commerce apply equally in an electronic environment. For instance laws governing business incorporation, registration, taxation, consumer protection, deceptive advertising, product safety and standards, criminal code, inter-provincial trade treaties, intellectual property and liability apply on the internet†. But when the matter goes beyond the territorial boundaries and involves another state than the situation changes completely and gives rise to uncertainty and ambiguity. In an ordinary civil matter the territorial jurisdiction of civil court may be determined on three factors i.e. where the parties reside, where the cause of action arises or where the property is situated. But when any dispute arises out of any electronic transaction that takes place across national borders, the first question arises that which court is having jurisdiction to entertain the matter. So it is very difficult to decide the jurisdiction and competency of the court. For instance, it is if an issue arises out of cross-border e-commerce transaction and the consumer wants to seek judicial remedy than in that case whether the court of consumers country will entertain the matter or it will come under the territorial jurisdiction of the court where the business is situated. According to Scott Cooper, â€Å"in resolving cross-border complaints it is very difficult to determine the matter of jurisdiction. Consumers are confident to resort to the courts of the countries where the businesses are based and in return the businesses will not be keen regarding trans-border transactions that could subject them to the reach of every country where there online customers resides†. Scott Cooper further states that â€Å"different levels have been established by different governments to protect and enforce consumer rights, but there are no international documents or agreements to determine the fact that which country is having jurisdiction to deal with cross-border B2C dispute†. Furthermore it is also very difficult to determine that under which legal system or under what law the matter should be resolved. There is no apparent legislation to conclude that whether the law of consumers state will apply or the matter should be governed by the law of the state where the business is based or it should be dealt with by an international legal system on uniform basis irrespective of geographic location. Similarly it is also unclear that how and where the judgement regarding the subject matter may be enforced. According to Chin Eang Ong â€Å"in a traditional marketplace, consumers knows means of enforcing their rights, but in electronic marketplace in an online transaction, delegating liability and providing access for redress might be a problem for consumers. A transaction is curable when it takes place within a single jurisdiction i.e. access to local court, but e-commerce is borderless and recourse to courts in any cross-border electronic transaction is complicated by difficulty jurisdiction over such dispute and the applicable law†. According to Mohamed S. Wahab because of technological advancement transactions are taking place in an online environment across national borders, where disputes are inevitable. Some of these disputes are unique to the e-commerce environment. Therefore it needs an effective mechanism of dispute resolution. Keeping in view the existing obstacles in resolving business-to-consumer cross-border e-commerce disputes resolution it is inevitable to consider substitute means to protect the rights of the parties and encourage them to participate in cross-border e-commerce. Some international and regional organizations have proposed that cross-border e-commerce disputes should be resolved through internal complaint system. For instance â€Å"the OECD ecommerce guidelines†, â€Å"the UN guidelines†, and â€Å"the Asia Pacific Economic Co-operation Voluntary Online Consumer Protection guidelines† recommend the establishment of fair, effective and transparent internal mechanisms for businesses and consumers representatives in order to address consumer complaints and resolve their queries in fair and timely manner without imposing undue burden or cost upon consumers. When dispute between the parties can not be resolved through internal complaint handling mechanism than the parties should be given access to Alternative Dispute Resolution, as it can offer timely, efficient and cost-effective instrument to resolve cross-border disputes. Alternative Disputes Resolution is a mechanism other than judicial determination, whereby disputes are resolved through the medium of impartial third party by adopting different ways and means. When ADR takes place through internet than it is called Online Disputes Resolution. There is an extensive choice of ADR mechanisms. The most commonly used mechanisms are â€Å"arbitration†, â€Å"mediation† and â€Å"negotiation†. National Alternative Dispute Resolution Advisory Council (NADRAC) uses the term ADR in a broader sense. According to NADRAC submission â€Å"ADR mechanisms is consist of facilitative ADR, advisory ADR, determinative ADR, and some time the combination of these mechanisms†. According to UN report, the main challenge in e-commerce industry is how to resolve cross-border e-commerce disputes. Traditional methods of resolving disputes may not provide an efficient and effective remedy; therefore there is a need for considering alternative means that would provide speedy and cost efficient redress to the parties. Dr. Moira Patterson has adopted the same view. She states that there are two issues involved in e-commerce i.e. which law should govern cross-border transaction and that such transactions should either be subjected to national laws or should be dealt with by international instruments. In such circumstances Alternative Disputes Resolution offers a cost-effective and speedy solution through the medium of third party. According to Lilian Edwards and Caroline Wilson, â€Å"Online Dispute resolution introduces very powerful and efficient tools for dispute resolution and increases access to redress mechanisms. ODR is an efficient, fast, and cheap way of dispute resolution, Court costs are beyond the means of most consumers and takes twenty to thirty months, while ODR process may take few hours or days†. To look at the concept of Alternative Disputes Resolution in legal perspective, efforts have been made on international, regional and national level to encourage the use and development of Alternative Dispute Resolution, particularly in disputes arising out of cross-border transactions. But they do not have any binding effects. It is a discretionary option for the states to apply and adopt them in their national laws. For instance, Art 17 of the EU Directive on Electronic Commerce deals with out-of-court dispute settlement. â€Å"The Article imposes responsibility upon member states to support those bodies that are responsible for out-of-court disputes settlement of consumer to operate in a way which provides sufficient practical guarantees for the concerned parties. And that the member states shall ensure that their legislation does not obstruct the use of out-of-court methods, accessible under the state law, for dispute settlement†. According to OECD E-commerce Guidelines, â€Å"consumers should be given access to fair and timely ADR and remedy without undue cost or burden. And that Businesses, consumer representatives and governments should work jointly to continue to use and develop just, efficient, and transparent self-regulatory and other strategies and measures, including ADR mechanisms, to address consumer complaints and resolve their disputes arising out of Business-to-consumer electronic commerce in cross-border transactions†. Similarly the European Commission issued recommendations in 1998 which prescribes principles of independence, transparency, adversarial proceedings, effectiveness, legality, liberty, and representation for out-of-court consumers disputes settlement. Furthermore â€Å"Recommendations issued by European Commission in 2001 governs out-of-court procedures which lead to a settlement between the parties by common consent. It prescribes four principles i.e. impartiality, transparency, effectiveness, and fairness of procedure in-order to encourage consumers confidence in e-commerce and to ensure easy access to practical, effective, and inexpensive means of redress†. Moreover the International Chamber of Commerce has issued best practices for ODR. It provides guidance for online businesses and for ODR providers. It encourages businesses to resolve consumer disputes through the medium of Online Disputes Resolution mechanism when the matter can not be resolved internally. ADR Guidelines 2003 agreed between Consumers International and the Global Business Dialogue on Electronic Commerce. â€Å"These guidelines prescribe recommendations for ADR providers on impartiality and qualification of personnel, accessibility and convenience, speed, cost, transparency, representation, applicable rules and consumer awareness. It also recommends to governments to address international rules on jurisdiction and applicable law and to adopt different measures to promote increased use and development of ADR†. Methodology: In research methodology I will pursue triangulation method by adopting both quantitative (questionnaires) and qualitative (interviews) research methodologies. The main reason behind using various methods of research is that â€Å"it facilitates the validation of data through cross verification from more than two sources. In particular it refers to the application and combination of several research methodologies in the study of the same phenomenon†. Sampling: In selecting my respondents I will use both probability sampling method and non-probability sampling method. In probability sampling method I will choose my respondents from a list of potential people that I will use for primary data collection. Such list will be obtained from an existing database of a research organization such as IPSOS MORI. In non-probability sampling method I will question or interview any one who is available. This method is very quick and cost efficient. Method of data collection: For collecting primary data I will use two methods, which are questionnaire and interviews. I will also consult a research organization such as IPSOS MORI, for collecting data for my research work. Questionnaire: For collecting data through questionnaires first of all I will select my target group to be examined through questionnaire. For this purpose I will adopt probability and non-probability sampling methods as mentioned above in sampling section. For questionnaire distribution I will use three methods i.e. sending emails, using postal services and onsite distribution by going to particular places i.e. supermarkets, travel centres to distribute the questions among randomly selected individuals. I will also get in touch with various businesses that are involved in cross borders E-commerce and will analyse their procedure for resolving B2C E-commerce disputes through the medium of questionnaire and conducting interviews. In current research work I have conducted a pilot research to make sure that the questions that will be asked in my actual dissertation are answerable and that the methods that will be used are workable in practical sense. I have distributed 50 questionnaires among the students in Bradford College. The response of the participants was very high and positive. The questions used in questionnaires were quite simple, which I will improve further by making amendments and improvements in my dissertation stage. A sample of questionnaire is attached at the end of this research proposal in appendix 1. Interviews: Interview is the most popular technique of qualitative research. It is very useful because of its flexibility, both in terms of content and time and can be tailored to suit the research questions, respondents, and the researchers own life style much more effectively. The use of interview can help the researcher to gather valid and reliable data that are relevant to the research question and objectives. For collecting data I will use face-to-face interviews, as it is a useful method of data collection and is used by most of the researchers because body language and emotions of the participant can also be studied which is a fundamental factor for a qualitative researcher. I will also use phone interviews and e-mail interviews. Interview will be semi structured and unstructured, and the questions may either be already prepared on a peace of paper or they may be generated during the interview process. There will be in-depth interviews with the participants in order to collect as much information as possible regarding the research topic. If the participants are having any difficulty in understanding the questions I will clarify and explain the question. I can also use opinion poll method to find out public opinion, by making a random selection from the general public. In my current research proposal I have interviewed 15 people in order to check the response and effectiveness of conducting interviews. The response I got from the participants was high but the result obtained from interviews was different from questionnaire although the interview questions were almost similar to the questionnaires. In order to get similar results I will make changes in interview questions to improve the quality and response rate and to make it more attractive for the respondents. A summary of interviews is attached at the end of this proposal in appendix 2. Secondary Data: I will also use secondary data in my research work. In order to conduct my research work effectively I will use different library services to access books, scholarly articles, journals and magazines relating to the research topic. For collecting relevant data I will use internet to access online libraries, electronic books and other online materials. I will also make efforts to study case law in the field of E-commerce to find out that how the courts deal with the matters and to look at the courts procedure about resolving e-commerce disputes and will compare them with out of court settlement methods. Data analysis: Data analysis is a continuous procedure during the whole research. The analysis starts from the point where the researcher and the participants are in close relation for the first time during a research process. For data analysis previous knowledge and experience of the researcher is of vital importance in order to get effective results. Data analysis is an important part of the research, where the researcher prepares the data for analysis. Once a data is analysed it is interpreted and than converted into a final report. The traditional methods of data analysis are now replaced by computer software available in the market. As I have selected questionnaire and interview as my primary data collection process, therefore the questionnaire and interview questions will be prepared in such manners that the acquired result obtained from them is valid and reliable, so that the same results can be gained when the research is repeated subsequently. Triangulation method is used in this research methodology because the data collected can be compared from different angles to get the accurate results for the research. Conclusion: After a detailed study of e-commerce and the existence of certain problems i.e. problem of jurisdiction, applicable law and enforcement of judgement, it is therefore apparent and inevitable for building up consumers confidence and e-commerce development that new means of enforcing B2C e-contracts should be adopted. As obvious from the literature review there are no uniform legal principles and legislation on international, regional and national level regulating disputes arising out of e-commerce transaction that takes place across state-borders. There are no binding principles to compel the parties to perform their part of obligation. Similarly literature review further indicates that efforts have been made by different governments and organizations to escalate the problem of enforcing B2C e-contracts and to resolve disputes that arising out of cross-border transaction, but they are only guidelines and voluntary principles of non-binding nature. Although new means of enforcing B2C e-contracts and disputes resolution across state borders are in practice i.e. ADR/ODR, but there are a number of obstacles in developing these mechanisms, such as non-awareness of consumers about ADR, non-availability of independent ADR practitioners, linguistic and cultural differences, distance between the parties. All these barriers need proper and positive response from governments, different organizations and private sector. New ways and means need to be introduce in order to increase consumers confidence in cross-border e-commerce because traditional means of dispute resolution such as court proceedings and other administrative actions are very expensive and time consuming, particularly in small value claims. Therefore it can be concluded that to resolve cross-borders e-commerce disputes it is inevitable to adopt, strengthen and support new means of disputes resolution on international, regional and national level to provide an effective, timely and cost-effective system to build up consumers confidence and develop e-commerce. References Lee, N., Lings, I. (2008) Doing Business Research, A Guide to Theory and Practice. SAGE Publications, 2008, p80 Commission Of The European Communities, Report on cross-border e-commerce in the EU, Commission Staff Working Document, Brussels, 5.3.2009, SEC(2009) 283 final, p5 Commission Of The European Communities, Report on cross-border e-commerce in the EU, Commission Staff Working Document, Brussels, 5.3.2009, SEC(2009) 283 final, p6 Key e-commerce Regulatory Issues, An EBC Guide to Taxation, Security and Privacy, E-export and Legal Issues Commission Of The European Communities, Report on cross-border e-commerce in the EU, Commission Staff Working Document, Brussels, 5.3.2009, SEC(2009) 283 final, p5 Commission Of The European Communities, Report on cross-border e-commerce in the EU, Commission Staff Working Document, Brussels, 5.3.2009, SEC(2009) 283 final, p5 Ong, C.E. (2003) B2C E-commerce Trust in Redress Mechanism (Cross Border Issue) Monash University, Bandar Sunway, Petaling Jaya, Malaysia A new Dawn for dispute resolution, the Global Information Society and online dispute resolution, 9/21/2006, Muhammad S. Wahab OECD Guidelines for Consumer Protection in the Context of Electronic Commerce (1999) United Nations Guidelines for Consumer Protection, United Nations New York, 2003 Asian-pacific, Advancing Free Trade for Asia-pacific Prosperity, Economic Cooperation, Electronic Commerce Steering Group The term Arbitration refers to a process or a legal technique whereby a dispute is resolved outside the court through the medium of arbitrators. This mechanism is very useful in resolving disputes arising out of international commercial transaction. Mediation is a process whereby an impartial third party facilitates communication between consumer and business. Mediator tries to enable the parties to reach a settlement. Negotiation is an interaction of influences. It includes the process of resolving disputes, agreeing upon courses of action, bargaining for collective or individual advantage, or crafting outcomes to satisfy various interests. Submission on ADR in e-commerce, by National Alternative Disputes Resolution Advisory Council, p2 E-commerce and Development Report, 2003, United Nations Conference on Trade and Development, Internet edition prepared by the UNCTAD secretariat, United Nations, New York and Geneva, 2003, UNCTAD/SIDTE/ECB/2003/1 Dr. Patterson, M. (2001) An Australian Free Trade Agreement- Opportunities Challenges, Hyatt Hotel, Canberra, Session 4b, Infoeconomy issue, E-commerce Law, Law School Monash University Edward, L., Wilson, C. (2006) Redress Alternative Dispute Resolution in Cross-Border E-commerce Transactions, Briefing Note, IP/A/IMCO/IC/2006-206, p3 Directive 2000/31/EC of the European Parliament and the Council of June 2000, on certain legal aspects of information society services, in particular electronic commerce, in the internal market (Directive on electronic commerce), Article 17 OECD Guidelines for consumer protection in the context of electronic commerce, p 18 98/257/EC: Commission Recommendation of 30 March 1998 on the principles applicable to the bodies responsible for out-of-court settlement of consumer disputes, official journal of European Communities Commission Recommendations of 4 April 2001 on the principles for out-of-court bodies involving in the consensual resolution of consumer disputes, Official Journal of European Communities ICC best practices for Online Disputes Resolution for B2C and C2C transactions, Department of policy and business practices, commission on e-Business, IT and Telecom Alternative Dispute Resolution Guidelines, May, 2003, Agreement reached between Consumers International and the Global Business Dialogue on Electronic Commerce Bogdan, R.C. 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