Creating Trust and Satisfaction Online: How Important Is ADR? The UK eBay Experience- Solved

Creating Trust and Satisfaction Online: How Important Is ADR?

Case Study of UK eBay

(7900 Words)

 

Abstract

According to the latest figures from the Interactive Media in Retail Group Index (IMRG), UK online shopping is currently growing 130 times faster than high street sales.Ease of access, greater customer choice and competitive pricing are some of the obvious reasons why the current generation of consumers increasingly logs on to shop. But what

attributes make consumers seek out a particular online retailer? Is it prices pure and simple, brand, privacy and security guarantees, trust marks or seals, or something else entirely? The University of Edinburgh s AHRC Centre conducted an online survey assisted by focus groups and email interviews to gain insight into these questions and in

particular, to explore UK consumer satisfaction with alternative dispute resolution (ADR) on one of the most frequently visited online sites in the UK, eBay.co.uk.

  1. Introduction

In 1995, Pierre Omidyar conceived a vision of a free market where consumers could sell

goods to other consumers without the need for a middleman. The name of this vision

was, of course, eBay. From Omidyar s own first sale of a broken laser pointer for $14 in

1995, eBay has grown to the point where, if eBay’s trading were the total economic

activity of a nation state, it would represent the 59th largest economy in the world, just

behind Kuwait.4 eBay now has local site presence in over twenty-four countries,

including China, India and South Korea.5 In October 1999, the company launched its UK

based site eBay.co.uk.6 If you haven’t already seen its ingenious advertising campaign or

signed up as one of its 11.6 million UK users7, it is only a matter of time until you do.

According to the latest statistics, people in the UK spend more time on eBay than any

other website.8 What is eBay’s lure? Why do millions keep coming back and why are

millions more joining each year? eBay’s popularity is undoubtedly to some extent, merely

part of a general trend towards increased uptake of online shopping, as borne out by the

latest UK consumer figures. The latest statistics show that UK online shopping jumped

20 per cent to £3 billion (GBP) for Christmas 2005 alone.9 In addition, the IMRG Index

states that UK online shopping is worth 6.3 per cent of UK consumer s total spending and

that UK online shopping is currently growing 130 times faster than high street sales.10

But the question remains: why do some online brands attract the public more than others?

What attributes make consumers seek out a particular online retailer? Is it simply low or

cheaper prices, brand, range of goods, privacy and security guarantees, trust marks or

seals, or something else entirely? What puts consumers off shopping online and what can

sites do, if anything, to restore faith in the online model? The eBay consumer-toconsumer

(C2C) online auction model is particularly problematic, in that, in essence,

although eBay can control its own business practicesit may find it rather more difficult

to control those of its sellers and buyers, especially given eBay s clear intention to retain

its neutral intermediary status (see further below).11 The problem is aggravated by the

fact that the typical eBay consumer is now more likely to be an ordinary man or

woman than the techno-sophisticate geek user of the early days, and hence more likely

than eBay to admit to prioritising worries about issues like trust and security over the

potential advantages of cheapness, convenience and access to rare items.12

Yet eBay is the most positive brand name on the net for UK consumers, according to

calculations by net monitoring company Envisional published in 2005. It scored the

highest in terms of how positively it is perceived on the net, compared to McDonald s,

which had the most negative perception online.13 eBay also continues to maintain its

leadership of the online auction market, with 28% growth in profits in 200514, although it

admits it is facing strong competition from the likes of Yahoo!, especially in some newer

markets such as China.15 What can a platform like eBay do to encourage its sellers to

have faith in its buyers (and vice versa), as well as its own platform, and thus to maintain

its business growth?

One answer that has been promoted16 is to provide simple and cheap access to alternative

dispute resolution (ADR) solutions, since consumers are likely to find court-based

remedies inherently undesirable, being slow, expensive, scary and off-puttingly opaque.

Add to this, the fact that online sales are currently typically of low value goods (though

this is changing eBay is now, for example, doing very good business selling used cars)

and that going to court is even less attractive in the transnational and legally emergent

world of online shopping than in the real world , and ADR begins to look like an

attractive carrot to offer to consumers. Statistics continue to record with tiresome

frequency17, how UK and EU consumers are still often mistrustful of commerce and the

online world. The idea of ADR is that it will help restore that trust, given the prevalence

of disputes on C2C platforms. It is hard to find figures on what percent of eBay

transactions do give rise to disputes (one of the aims of this piece of research was to try to

establish this) but anecdotally it seems there are many.18 Looking at fraud related

disputes alone, Which? Computing magazine estimated there were 200 fraudulent

auctions every day on eBay in Britain in 2005.19 In pursuit of the Holy Grail of consumer

trust, eBay established a relationship with independent online ADR (ODR) provider

Square Trade in 1999. The most available statistics show that Square Trade handled

nearly 200,000 disputes from 2000-2002,20 the majority of which emanated from eBay

disputes.21 Later statistics have not been made externally available by Square Trade, but

given the growth in eBay transactions since 2000, one would expect the numbers to be

higher.

The University of Edinburgh s AHRC Centre conducted an online survey assisted by

focus groups and email interviews to gain insight into these issues, and in particular, to

explore what part ADR really plays in the high uptake by UK consumers of transactions

on eBay.co.uk. Is ADR what eBay has that other online auction sites and retailers don t?

If not, does it really play a vital part in encouraging C2C and B2C e-commerce, and

should the law play a part in encouraging it?22

  1. eBay s ODR Mechanisms Explained

One of the significant advantages that eBay appears to have over its competitors is the

range of ADR and ODR mechanisms which are available online for buyers and sellers.

2.1 Feedback

Probably the best-known ODR solution is the feedback system. Feedback is eBay s

primary means of establishing a user’s reputation. eBayers are able to rate those who they

buy/sell from by marking each transaction with Positive, Negative or Neutral Feedback.23

Feedback is the only information that other members see about the person they are

transacting with. Consequently, eBayers go to great lengths to keep their feedback rating

at 100% as potential customers use this score as the hallmark in selecting trustworthy

patrons. Originally, eBay refused to allow any method of altering positive or negative

feedback, even where it was the subject of heated dispute,24 except in extreme cases i.e.

threats, etc or if parties had made use of Square Trade. eBay now however provides the

Feedback Dispute Console (FDC) where an aggrieved party can dispute the feedback left.

Under the FDC a buyer/seller can leave a comment explaining the poor feedback they

have received. This comment is shown under the disputed feedback. In addition, eBay

provides a system of mutual feedback withdrawal, which was introduced in 2004. This is

used when both trading partners agree to solve a problem after feedback is left. When

both parties agree to withdraw their comments, the feedback remains but the strikes are

removed from the parties feedback scores.25 Finally, in extreme cases, eBay will

withdraw feedback comments from members who have violated eBay policies such as

using offensive, threatening or vulgar language.26

Recently, eBay has also started a third party process called the Independent Feedback

Review. This system allows members to ask an independent reviewer to evaluate a

feedback comment left for certain types of transaction, namely motor vehicle sales.

However this service is currently only available to those who buy from the US based

eBay.com Motors area. 27 It is not known whether eBay may be seeking to expand this

process to other country sites or other areas in the future.

2.2 Square Trade negotiation/mediation

Another third party dispute service, which eBay recommends for resolving disputes that

have not been rectified by other dispute resolution processes, is Square Trade. Square

Trade, as noted above, is a third party online negotiation/mediation service that

adjudicates disputes. A typical Square Trade case can start two different ways. Firstly,

the filer must chose between using a human mediator or a computer based Direct

Negotiation Tool (DNT). The difference between the two is that it costs a small initial

sum to involve a human Square Trade mediator and nothing to use the DNT to file or

respond to a case.28 It should be noted that if you choose the human mediator service and

the other party fails to respond to the mediator, the party who has brought the case would

have their money refunded.29

2.3 Not received items, not as described items, and items not paid for

Some of the most common disputes on eBay involve buying an item and not receiving it

from the seller; receiving an item that it is not what they had agreed to purchase (e.g. in

poor condition, broken, wrong colour, wrong size); or when a seller is not paid by the

buyer who has won the auction and committed to purchasing the item. As these types of

disputes are so commonplace, eBay has set up an online Safety Centre where aggrieved

buyers and sellers can initiate different ODR processes to rectify their grievances in these

areas.30 Here, three of the processes you can engage in are eBay’s Item Not Received

Process, eBay s Significantly Not as Described Process and eBay s Unpaid Item Process.

A typical Item Not Received or Significantly Not as Described Process can begin from

10 60 days after the date of the transaction. At this time the Buyer will indicate what

type of dispute has occurred. However it should be noted that if the Buyer used PayPal to

purchase the item these processes would not apply, as all complaints must be done

through PayPal s own internal ODR processes.31 If the transaction was not done using

PayPal, then eBay will contact the seller of the item in question via email and inform

them that a dispute process has been initiated against them. The email will provide the

seller with several options depending on the type of dispute that is being initiated. In the

case of the Item Not Received Process, the seller will be given the options to either:

contact the buyer personally and resolve the dispute, state whether they have sent the

item already, state that they have not received or not cleared payment for the item, or

offer a full refund for the unsent item.32 In an Item Significantly Not as Described

dispute, the options for the seller are slightly different. They include: the option to

personally contact the buyer and resolve the problem, dispatch a replacement item or

offer a refund for the item.33 Finally, the buyer can close a dispute in several ways.

Firstly, if the seller fails to respond to eBay s emails within 10 days the dispute is

automatically closed and the buyer is given the option to escalate the claim. Escalating

the claim could be taking the other party to Square Trade, contacting the police, Office of

Fair Trading, or Citizen s Advice Bureau. Another way to end the dispute is when the

buyer indicates to eBay that the parties involved have resolved the dispute.

The other commonly used ODR mechanism on eBay is the Unpaid Item Process. The

Seller can initiate this process up to 45 days from the transaction date, but they must

normally wait 7 days to allow for the payment of the item. After this time the seller can

begin the ODR procedure with eBay. eBay begins by contacting the buyer of the item

and gently reminding them of their obligation to pay for the item they have bid on. The

buyer is then asked to communicate with the seller by giving a response to the reminder.

The buyer may indicate: that they want to make an immediate payment, that they have

already paid for the item or that they would prefer to contact the seller directly.34 The

seller can end the dispute in a few different ways. Firstly, the dispute may conclude after

the seller communicates with the buyer and states that both parties have reached a

settlement.35 The dispute is also ended if the buyer does not respond within seven days.36

In addition, the process can be closed by the seller stating that the parties have agreed not

to complete the transaction37, or that the seller no longer wants to communicate with the

buyer.38 It should be noted that unpaid item strikes could be appealed through another

eBay has also initiated consumer protection schemes such as eBay’s Standard Purchase

Protection Programme Process. Under the Standard Purchase Protection Programme,

most items bought on eBay are covered for up to £120.00 (minus £15.00 to cover

processing costs) and at no extra expense to the claimant.40

We have seen that eBay provide an imaginative range of ODR mechanisms at little or no

cost to consumers. Yet, we have yet to see whether or not these mechanisms do in fact

yield a higher degree of satisfaction or trust in eBayers. We will now describe the results

and methodology of the AHRC Centre online survey investigation into the level of UK

consumer satisfaction with eBay, and the effect of eBay ODR mechanisms on its

customers.

  1. Methodology

In undertaking our research we first conducted background research into online

consumerism, online auctions, ODR/ADR and the eBay model. From this preliminary

research we set out distinct objectives to determine the level of UK/Irish consumer

satisfaction with the eBay model and in particular the ADR mechanisms that eBay

provide as a factor in consumer satisfaction. It was noted in our initial research that there

was what appeared to be a large uptake for eBay s dispute resolution methods. Taking

this into account we sought to find if there was any correlation between satisfaction with

ODR/ADR methods and satisfaction with the eBay service in general. We also looked at

the correlation between ODR/ADR mechanisms and trust in purchasing/selling on eBay

in particular, as opposed to online in general.

Next we authored a twenty-seven question online survey in order to gain substantial

evidence into our theories. The survey used both qualitative and quantitative questions to

measure consumer experiences. The survey methodology was edited by Dr Lesley

McAra, an expert in criminological and socio-legal empirical research. We chose the

online survey approach, as it was the most cost effective and direct means of contacting a

large number of people across the UK and Ireland. In addition, we recognised that our

theoretical population far outnumbered our accessible population and that we needed to

use simple methods for soliciting survey uptake.

Before we implemented our full survey, we conducted a sample survey. Our sampling

frame was composed of University of Edinburgh faculty and students and our sample was

composed of 25 University of Edinburgh students and staff who had used or browsed

eBay at least once in their lifetime. Following their feedback and questions, we amended

our survey to better suit future participants and clear out areas of potential ambiguity.

Our main uptake for soliciting survey participants was done through eBay chat rooms and

regional eBay user groups. As an incentive for partaking, we entered participants email

addresses into a £50 random drawing prize. We also collected email addresses of

especially interesting survey participants for future focus groups and e-interviews. At all

times, we upheld the privacy rights of all survey participants. Participants were given the

option to disclose or withhold their email address. We employed the social research

techniques of cluster/area sampling, snowball sampling and convenience sampling.

Cluster/Area sampling is widely used when research subjects cover a large geographical

area and when resources are limited as to gaining access to survey participants.41

Snowball sampling is when you ask your participants to pass along the survey to other

similarly interested parties.42 Finally, convenience sampling is a random sampling of

participants who have been grabbed from a particular area, such as a chat room.43 As

stated previously, we did not have the resources to undertake proper random sampling

techniques; we acknowledge that our sample may for this reason be biased.

Over a four-month period from October 2005 to January 2006, we compiled over 400

responses using the convenience, snowballing and cluster sampling methods. Our data

was then imputed into the Statistical Package for the Social Sciences (SPSS) Version 13

software. SPSS is a software system commonly used by professionals and academics for

data management and analysis.44 Within SPSS we were able to make cross tabulation

and frequency tables and charts of our accumulated data. Analysis of our amassed data

will be seen later in this paper.

Following statistical analysis of our population data we have initiated our focus group

and e-interview stage of research. We hope to interview at least 20 survey participants

using e-interview and interactive chat forums in the next 2 months. As of March 2006,

we have interviewed five participants. We also expect to organise two in-person groups

before May 2006. As an incentive for participating we are offering £10 for each einterview

and interactive chat and travel expenses for focus group participants. Our full

report of research, statistical analysis and focus and e-interview analysis is expected in

June 2006.

  1. Analysis

4.1 Basic eBay Survey Demographics

Of the 400 who replied to the survey, 57% were female and 43% were male. A recent

Nielsen/Net Ratings survey showed divergent information stating that eBay s audience

was slightly more male.45 However, we have found strong evidence from both our

demographic and literature reviews that women are increasingly making up a greater

portion of eBay users.46

Geographic origins of respondents were: 63.4% from England, 26.1% from Scotland,

4.7% from Wales, 4.2% from the Republic of Ireland and 1.5% from Northern Ireland.

Our large English contingent fits the eBay demographic for the UK as substantiated in

multiple sources including the BBC, who named Norwich the UK eBay capital in

February 2005.47 Also at the top of the list were Cambridge and Reading.48

The age demographic of our survey is slightly divergent from what we would have

expected given comparative surveys by net monitoring companies. We realise our survey

probably has a youth bias as our sample was partially obtained via youth orientated media

such as chat rooms and user group forums.

In terms of professions, not surprisingly given our youth bias we had a spike on

students at 30% of respondents. However apart from this, we had a very even

distribution of professions across the standard survey categories

4.2 Use of, and Satisfaction with, eBay and online shopping

Of those surveyed 49.5% stated that they were solely buyers on eBay, 31.6% were buyers

and sellers equally and 8.2% were solely sellers. Only 6% of the sample bought or sold

on eBay as part of a commercial business. In terms of frequency of online shopping in

general, 9.4% of those surveyed said they bought items online more than 10 times a

month, 11.9% bought 6 10 items a month, and 40% bought items 2 5 times a month.

About a quarter of the sample characterised themselves as infrequent or occasional online

shoppers. We also sought to measure confidence in Internet use, as well as frequency,

and found, not surprisingly, a rough correlation in our sample. 78.9% were confident

Internet users and 19.2% were fairly confident Internet users. In terms of longevity,

almost the entire sample had been on the Internet for two years or longer. It is clear

therefore that, given our self-selecting sample, the survey can only provide a guide to the

views and attitudes of fairly confident and experienced Internet users and shoppers, and

not the population as a whole. When we turned to eBay use specifically, over half the

sample 55% browsed the eBay site more than 10 times a month.

A staggering 93% of respondents said they were very or fairly satisfied with the majority

of their eBay transactions. A remarkable 98% plus of those we surveyed also said they

were very or fairly satisfied with the majority of all their online transactions, not just

those on eBay. We will come back to these surprising figures.

4.3 eBay Problems and Dispute Resolution

We found that around two thirds 66% of those who either purchased or sold on eBay

had problems with their transactions. This was backed up by another question, which

asked those who said they had problems, how many problematic transactions the

respondent had experienced on eBay. The median response to this question was 2 4,

given by 53% of the sample. A smaller group of 10% of respondents had 5 10 problems,

and a still smaller group 6% had 10 or more problems. Less than a third of the sample

had only one problematic transaction. Given the high uptake of our survey by confident

and experienced users, this seems a high number of problems, and also seems to point to

the problems arising from the eBay site itself, or from deliberate fraud or misuse by

second parties, not incompetence by users. Again, one suspects a certain amount of selfselection,

in that those who had an axe to grind about unresolved disputes would be most

likely to answer an online survey on this issue, especially given some degree of

recruitment on eBay user groups and forums. Yet despite this likely self-selection by the

disgruntled, as noted above, 93% of our respondents still stated that they were very or

fairly satisfied with the majority of their eBay transactions. This seemed to present a

paradox. As noted previously, eBay is one of the few online shopping sites to provide a

range of methods of dispute resolution. We sought to find out if our participants high

percentage of problems yet high satisfaction with eBay could be explained by satisfaction

with eBay s alternative dispute resolution mechanisms.

Our participants experienced a range of problems both buying and selling on eBay. 27%

had problems with purchasing an item and not receiving it; 21%, with receiving a

purchased item that was significantly not as described at the time of sale; 26%, with

selling an item and not getting paid for it; 16.6% disputed feedback given to buyers or

sellers; 14% had disputes involving payment via PayPal; and only 5% stated that they

were a victim of fraud or account tampering. But how many of those who encountered

problems used ADR mechanisms? The answer was two thirds (160 out of 235 buyers and

sellers who reported problems): 67%, of those who had had problems online in our

survey, had engaged in one or more of eBay s more formal dispute resolution

mechanisms namely, eBay’s Standard Purchase Protection Programme Process (14.4% of

sample total with problems), eBay’s Item Not Received or Significantly Not as Described

Process (53.8%), and eBay s Unpaid Item Process (66.2%). Around 40% of buyers, and

60% of sellers who had problems, also reported giving negative feedback in the case of

disputed transactions.

But did this high uptake of eBay s ADR mechanisms indeed correlate to, and perhaps

explain, high satisfaction with transacting on eBay? It seems not. Academics such as

Colin Rule50 have claimed that the existence of ADR mechanisms inspires trust and

confidence in consumers online, and eBay have surely bought into this model with the

investment and publicity they have put into developing ADR mechanisms. Yet we found

that of those who had experienced problems on eBay, only 15.8% were very satisfied

with the handling of their disputes on eBay, 325 (the majority response) were fairly

satisfied , while another quarter were neutral as to satisfaction. Even if these two

categories are added together we come up with a 72% satisfaction or neutral rate which

does not correlate to the 96% in Figure 2 above, who were very, fairly or neutrally

satisfied with their transactions on eBay. If we add in our previous finding that 98% of

survey respondents were very or fairly satisfied with all of their online transactions, it

begins to look as if the ADR mechanisms specific to eBay add little to the reasons why

users engage with eBay and that would lead one to presume that perhaps the appeal of

eBay lies instead in the conventional attractions of all online shopping sites such as

brand, range of goods, ease of access and low prices. When considering why eBay outperforms

other C2C online auctions sites, it is possible that the answer lies in its market

advantage, combined perhaps with associated plusses like word of mouth, familiarity, and

critical network mass, or (other) factors not explored in this survey at all, such as site

usability or international sourcing of hard-to-find goods.

Why did some of those who had problems, choose not to participate in any of the dispute

resolution processes? This might shed some light on why ADR alone does not seem to

generate high levels of user satisfaction. Of our remaining one third of users with

problems who chose not to use any ADR mechanisms, over half (51.9%) resolved their

disputes by contacting the other party directly, without the help of eBay. Around 20%

thought that it was worth more than the value of the item in question to enter a dispute,

and a similar amount said they either couldn t be bothered to use ADR, or did not know

such processes existed. Only a very few chose to turn to legal advice, or to bodies

outside eBay such as the police, trading standards, credit card companies, or the courts.

Even given that a certain amount of our sample clearly used PayPal to pay for

transactions rather than credit cards or other means such as cheques or money order (see

below), this is a surprising finding. Lawyers know the Consumer Credit Act (CCA)

forces credit card issuers to act as effective guarantors in the event of transactions where

payment was made using credit cards going wrong51 our sample of consumers do not

appear to have been so aware (and this ties in with preliminary email interview work,

which seems to shows both a lack of knowledge of the existence of consumer legal rights,

and that they apply online).

4.4 Outcomes of ADR, and satisfaction?

Another reason why high uptake of ADR might not create high satisfaction with eBay

problem handling would be if the outcomes of the ADR process were unsatisfactory for

one or more of the parties. Investigating outcomes within the context of a simple online

survey was difficult, given the diversity of ADR mechanisms that eBay offers to buyers

and sellers. Yet, very roughly, we found that the most likely outcome for both sellers and

buyers involved in disputes and ADR, was the leaving of negative feedback. Buyers and

sellers who had been in disputes were asked separately to report back on what their

outcomes from ADR had been. As noted above, around 40% of buyers, and 60% of

sellers who had problems, reported giving negative feedback. But apart from this, there

was no clear pattern at all of a majority of disputants getting what they wanted out of

ADR in any other form.

For buyers almost 40% reported getting money back as a result of ADR. But almost as

many 35.7% reported getting no satisfactory outcome. Much smaller numbers

reported achieving resolution via PayPal s complaints process52 (15%) or finally

receiving their goods in a form, which matched description (10%). Vanishingly few of

our sample 4 people in all took their problem all the way to eBay s preferred ODR

provider , Square Trade53 for assisted negotiation or mediation, despite the fact that a

case can be filed there for free, remains free throughout negotiation, and even if

mediation is commenced it costs only 30 USD or less.54 For advocates of the promise of

ADR in online marketplaces, this is a disappointing discovery.

For sellers, there were even fewer signs of success resulting from ADR. About a third,

32.8%, reported there was no successful outcome for them, similar to the figure for

buyers. Again, fairly small numbers achieved resolution via PayPal s complaint service55

(18%) and 8% went all the way to Square Trade for negotiation or mediation. Other

outcomes included having themselves or the other party banned from eBay (8%), getting

goods back (5.7%), negotiating a compromise price (3%) and asking eBay s own Trust

and Safety team to mediate (13%).56 Given these figures, it is apparent that sellers seem

to depend heavily on negative feedback as their main comeback against non-compliant

buyers (80% of sellers reported leaving negative feedback).

4.5 eBay, ADR and safety?

Satisfaction with the outcome of disputes is not necessarily the same as feeling safe when

using an online platform or marketplace. Disputes in the C2C environment are between a

first and second party; cybersafety can be seen as a more generic concept which takes

into account factors like encountering unwelcome content (e.g. pornography, racist

material), having your account hacked or your ID stolen by an unknown third party, or

not trusting the platform provider to provide a reliable service (e.g., not misuse or sell on

your personal data, providing back up where a second party proves unreliable). Yet it

seems axiomatically likely that metrics of satisfaction with dispute resolution on eBay,

and metrics of how safe consumers feel would be related. When we asked our sample

(Figure 6 below) to rate how safe they felt shopping on eBay compared to shopping on

the high street , where 1 was Definitely Not As Safe and 5 was As Safe As The High

Street , the most popular response (from about 40% of the sample) was

But when we asked (in Figure 7 above) if having access to ADR mechanisms on eBay

made consumers feel safer about buying or selling on eBay, results were mixed. On the

face of it a high percent 58.8% said yes, it did. But it is noticeable in the return for

this question that a far higher number skipped the question than did Figure 7 (386

answered Figure 6 compared to 245 answering Figure 7). It seems likely that many of

those who did not report using ADR about 248 out of our 400 respondents did not

answer this question, as not relevant to their experience. If that were true, the actual

figure for those who did not think ADR made them feel safer, or did not know what they

thought, would probably be a much higher total. Of course we cannot know which result

is right but it seems we do not have any clear evidence that ADR mechanisms

correlate to a feeling of consumer safety, any more than we have clear evidence it

contributes to satisfaction in dispute resolution.

4.6 Holding eBay Liable?

Finally, perhaps the most legally controversial question we asked in our research was

whether eBay should legally be required to compensate users who lose when something

goes wrong with a transaction. Over half of those who responded 53.4% agreed that

eBay should be legally required to compensate a purchaser or seller in such

circumstances. 29% said they should not be held liable and 17.5% did not know. Yet,

eBay holds itself out firmly on its site, and in its advertising, as a neutral third party

Creating Trust and Satisfaction Online Page 19 of 25

intermediary, and has resisted efforts by commerce and consumers to prejudice this

status.57

The desire of respondents to hold eBay legally liable runs counter not only to eBay s own

legal conception of itself but, also, probably, to the law, and the policy behind it. In EU

and UK law, eBay appear to be entitled to claim the benefit of the exemptions from

liability for information society service provided (ISSPs) under Arts 12 15 of the

Electronic Commerce Directive 2000.58 Art 14 of the Directive provides that a provider

of an information society service is not liable for content they host which is provided by a

third party, unless it was provided under their authority or control , or they had actual or

constructive notice of the existence of illegality and did not take expedient steps to

remove or block access to such content. While liability for third party transactions is not

quite the same as liability for third party content, the two are closely connected59, and the

policy behind the Directive is to protect exactly such online trader platforms as eBay

from the risk of being held liable on potentially millions of transactions.60

It also seems to show that a high percentage of consumers do not pay much attention to

the ADR protection eBay already voluntarily provides. As noted above, under eBay s

Standard Purchase Protection Programme, for most purchases or sales over £15 in value,

eBay refunds up to £105 (£120 minus £15 handling costs) if the transaction goes wrong.

Although some eBay transactions will be worth more than this, and some will be

excluded61 by the complicated eligibility rules, many will still fit within this guarantee.

Interestingly, when we asked about take-up of ADR mechanisms, this protection had the

lowest take-up of any ADR mechanism we listed only 14.4% of the sample of

respondents with problems had used it (compared to the 40%-80% that used negative

feedback). In recent months, eBay has undertaken an enormous campaign to educate its

buyers and sellers as to the types of dispute mechanisms available to its users but

apparently they have failed to popularise this remedy.

  1. Conclusions

Online auction sites like eBay will always be places where a disproportionately high

number of disputes will be expected to arise, and where shopping has relatively high

risks. Ethan Katsh, the pioneer of research into online ADR, and the person who set up

eBay s first ADR mediation pilot in 1999, explains why:

EBay law, like much of law, begins with a concern for public safety. Safety in the

eBay context means not physical safety but safety from a series of harms or losses

that one might encounter there. EBay, like other online marketplaces, needs to be

perceived as a place where risk of loss is low and trust in the process working as

advertised is high. EBay needs to address public safety concerns because a

marketplace in which offers to sell are made by persons with uncertain identities and

no reputations is likely to be a high risk and low trust environment in the extreme. If

one could not predict that auctions and transactions would occur according to

expectations, the marketplace would not thrive.62

As the first phase of our research came to a close, we were left with many interesting

hypotheses to explain our survey results but as yet insufficient empirical evidence to fully

substantiate these theories. This will need to wait for phase 2, email interviews and focus

groups, to be concluded. We were also fully aware that due to the (financially inevitable)

use of an online survey and voluntary participation, at least at this early pilot stage, we

had amassed a self selecting sample which was at ease online, and so our findings cannot

be deemed representative of the whole population of eBay users in the UK by any means

(although we have tried to establish above, we think, that our survey can be regarded as

representative of confident and experienced Internet users). However, with these major

caveats, several interesting points can be highlighted.

First, as demonstrated above, perhaps our most surprising finding was that we found such

very high degrees of satisfaction from the vast majority of our sample, both as to online

shopping in general, and transactions on eBay in particular. Indeed the figures for both

very satisfied and fairly satisfied were almost identical for eBay and the Internet in

general (see Figures 2 and 3, supra.) Given that our anecdotal impression of our sample

was that many had joined the survey expressly so they could complain about particular

transactions that had gone wrong, or what they saw as defects in the eBay environment,

this was all the more remarkable. The high degree of satisfaction could of course be

explained as a self fulfilling prophecy, given that most of our sample were people who

had chosen to come back to online shopping and eBay again and again, and who had

designated themselves as confident users. Yet our sample also reported a very high

incidence of problems in their transactions, around two-thirds reporting they had

problems on eBay. This matches Katsh s perception seven years ago of eBay as a highly

troubled environment , and seems to indicate that our sample were not simply pleased

with the Internet and eBay because they had never run into bad experiences.

One of our main aims of the project was to find out if the provision of ADR mechanisms

on eBay was truly one of the secrets of its success or, to look at it another way, was it

cost effective and worthwhile in creating trust and confidence among its consumer base.

In 2006, Katsh is still pronouncing the conventional wisdom:

What has come to be understood online, perhaps more than it is offline, is that

dispute resolution processes have a dual role, that of settling disputes and also of

building trust. Those interested in attracting users to some online activity, whether

for commerce or some other purpose, have understood that users must be

provided with some measure of trust and safety in addition to convenience and

cost benefits. Users, in other words, need not only to be able to do something

online but to be willing to do it online. Creative use of technology allows us to

participate in many novel activities online but participation will not occur if there

is some risk associated with participating. One method of reducing perceived risk

is to let potential users to know that if problems arise, there are mechanisms in

place for obtaining redress. 63

As described above, we found no convincing evidence of this. If consumers are as

satisfied with general transactions online, as with transactions on eBay then ADR does

not appear to be a silver bullet . Instead, consumers seem to be keen on the experience

of shopping online, and on online auction sites over high street shopping. This was

backed up by our early email interviews, which indicated that respondents were eager

about the ease and use of the eBay format; the variety and amount of items, which they

could sell and which could be sold on the site, and the simplicity of shopping in the

comfort of your own home at all hours of the day. But there has so far been little or no

spontaneous mention of ADR as one of the reasons people shopped on eBay or

something that made them feel happy. When specifically asked, as noted in Figure 4

above, if respondents were happy with eBay s handling of disputes, the response was

much less positive, with only 15.8% very satisfied and as many (16.7%) fairly

dissatisfied . ADR was a partial answer to this lack of satisfaction with dispute handling ;

as we noted above in Figure 7, about 60% of respondents agreed that the access eBay

gave to ADR mechanisms made them feel safer buying or selling on eBay but more

than this number simply skipped the question, as well as the 40% who said No or Don t

know (and an earlier question disclosed that 248 of our total sample of 400 – 62% – had

never used any eBay ADR mechanism at all, other than, possibly, negative feedback.).

The simplest hypothesis that seems to emerge is that both prevalence of disputes, and

dispute handling, are not that important in relation to general levels of satisfaction with

online and C2C site shopping. It also seems to indicate that our sample were more robust

about dealing with the tribulations of the online environment and, in particular, the C2C

environment, than general surveys about consumer trust (or more relevantly, consumer

fear) might have lead us to believe. 96% of our sample did not think eBay was as safe as

the high street (Figure 6) but it does not seem to have put them off shopping there. The

advantages of range, cheapness, and ease of access on eBay and online in general, simply

seem to outweigh the risks.

What does all this have to say to those promoting the development of more or less formal

methods of dispute resolution online? The EU in the E-Commerce Directive 2002, Art

17, encourages states not to hamper the development of ADR mechanisms, including

those by electronic means , in relation to information society services. But the results of

our survey do not give the impression that ADR at least of the online mediation or

negotiation type is what online consumers actually want. There was very low uptake in

our UK sample of the most formal methods of ADR offered, i.e., going to Square Trade

for assisted negotiation/mediation. Only 8% of sellers and 3% of buyers in our sample

had gone as far as Square Trade. By contrast, the far most popular method of ADR was

the least “legal”, and the most indigenous to eBay, namely the giving of negative

feedback. Why was this? Was it simply that negative feedback is the path of least

resistance, the easiest way to fight back in a dispute without going to too much bother, or

is something more going on? Katsh argued seven years ago that the eBay disputants he

mediated were most concerned about their reputation feedback because they bargained

in the shadow of eBay law , i.e., their desire to remain part of the eBay community made

them worry about the effect bad feedback would have on their future chances of trading

with strangers64. Our work so far does not wholly back up this thesis; of our sample of

buyers and sellers who reported having problems, inter alia almost half (presumably

buyers) claimed to have had problems with non-delivery of an item, and almost as many

(presumably sellers) complained of non-payment; while less than a fifth had problems

with disputed feedback. It will be interesting in our future work however to try to find out

how if buyers and sellers were also worried in these common types of disputed cases

about associated problems of bad feedback.

If uptake of eBay s own ADR solutions was disappointing in our survey, uptake of other

forms of quasi-legal consumer assistance was even lower. The question where we asked

respondents if they had ever turned to outside bodies for help, such as the police, Citizens

Advice Bureaux or Trading Standards bodies, was answered affirmatively by only 25 of

our sample of 400. Of these, the significant responses were that 11 persons had contacted

the police and 10, their credit card companies. The major third party eBayers do seem to

turn to (which was investigated in another question in our survey) is PayPal, whose

Protection Plan had been invoked by 22 sellers and 22 buyers. All this seems tentatively

to bear out both Katsh s supposition, that eBayers are more concerned with eBay law

itself rather than the real world law of whatever jurisdiction they lived in, and our own

common-sense supposition, that consumers rarely think of, or wish to, engage with the

formal legal process. This assumption that eBay is separate from the legal apparatus of

the real world has also come out also in the early stages of our email interviews, most

vividly in the quote below: I never thought I could use laws on the Internet. I wish the

Government would tell people. We knew eBay had ways to help us but we did not know

the police or other groups could.”65

This leads us to our second major question. EU governments have taken it upon

themselves since the mid 1990s to try to promote consumer legal rights online, and to

educate consumers about these rights, mainly in the hope (again) of promoting trust and

confidence online, and hence increasing uptake of B2C and C2C e-commerce. But is the

goal of consumer education being achieved? Our eBay consumers conspicuously failed

on the whole, when they ran into difficulties, to approach their credit card companies, the

police, trading standards or, even as a last resort, an actual lawyer. They did not even

seem to take full advantage of some of the remedies eBay themselves offered, like the

Standard Purchase Protection Programme Process (although it is impossible to know how

many of our samples were barred from using this Policy because they paid using PayPal.)

This raises the question of just what kinds of legal rights would be useful to, and accessed

by, consumers. In our research, we found that the blue skies idea of eBay being legally

required to guarantee transactions that went wrong was popular. Although, as discussed

above, this currently runs contrary to actual law, it is still an appealing sentiment for

eBayers. If we are serious about C2C platforms as the future of e-commerce, and about

inspiring trust and confidence, we may need to review the current laws which allow eBay

to claim almost total intermediary neutrality (subject to notice and take down). Making

eBay liable for every transaction on its site where there is fraud or incompetence would

no doubt inspire the usual cries of unlimited risk and immediate bankruptcy. But it may

be that there is room for imposition of some kind of limited duty of care on eBay, e.g.,

where obvious fraudsters are operating, or where counterfeit goods are being sold, as

parties like the Consumer Association magazine Computing Which? have suggested66.

Another issue is whether the government should, as well as publicising statutory

consumer legal rights, start to put resources behind publicising the extra rights sites like

eBay are offering to engender trust in the novel online environment money-back

guarantees, free ADR, extended cooling off periods, buyer protection up to £120, etc.

These contractual rights may be becoming as important to the online consumer as the

statutory rights of the Unfair Terms Directive and the like they could even be called

para-legal rights . Yet alternatively, this could be seen as the government wrongfully

giving its backing to individual commercial competitors. As one respondent put it:

It would be (IMO) farcical for the Secretary of State for Trade and Industry to go

about saying, “Ooh, did you know, eBay have nifty buyer protection thing online,

and you can take anything back to M&S even if you simply don’t like it, and John

Lewis are Never Knowingly Undersold, and Amazon have a special offer this week

on DVDs, and the Co-Op on the corner has bought in a security guard to stop

shoppers feeling intimidated by the teenage kids hanging around in the doorway.”