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.⁽²⁾ eBay now has local site presence in over twenty-four countries, including China, India and South Korea.⁽³⁾ In October 1999, the company launched its UK based site eBay.co.uk.⁽⁴⁾ If you haven't already seen its ingenious advertising campaign or signed up as one of its 11.6 million UK users⁽⁵⁾, it is only a matter of time until you do. According to a March 2006 YouGov poll, people in the UK regard eBay as one of the most positive brand names on the net.⁽⁶⁾ 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 has grossed over £100 billion since 1995.⁽⁷⁾ 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.⁽⁸⁾

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-to-consumer (C2C) online auction model is particularly problematic, in that, in essence, although eBay can control its own business practices, it 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).⁽⁹⁾ 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. Ordinary users, it might be hypothesised, are more likely to prioritise worries about issues like trust and security over the potential advantages of cheapness, convenience and access to rare items.⁽¹⁰⁾

Yet, eBay continues to be one of the most positive brand names on the net for UK consumers according to calculations by net monitoring company Envisional published in 2007.⁽¹¹⁾ 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.⁽¹²⁾ eBay also continues to maintain its leadership of the online auction market, with 28% growth in profits in 2005⁽¹³⁾, although it admits it is facing strong competition from the likes of Yahoo!, especially in some newer markets such as China.⁽¹⁴⁾ 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 promoted⁽¹⁵⁾ 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 frequency⁽¹⁶⁾, how UK and EU consumers are still often mistrustful of commerce and the online world. The frequently-mooted idea of ADR is that it will help restore that trust, given the prevalence of disputes on business-to-consumer (B2C) and consumer-to consumer (C2C) platforms. When ADR is transplanted to an online environment, it is sometimes termed “online dispute resolution” or ODR; and eBay is probably the best known example of an ODR provider in the world (via its acquired company, Square Trade, discussed extensively below)⁽¹⁷⁾.

 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 certainly many.⁽¹⁸⁾ In pursuit of the Holy Grail of consumer trust, eBay established a relationship with independent online ADR (ODR) provider Square Trade in 1999. Katsch reported that Square Trade handled nearly 200,000 disputes from 2000-2002,⁽¹⁹⁾ the majority of which emanated from eBay disputes.⁽²⁰⁾ Later statistics have not been regularly made externally available by Square Trade, but given the growth in eBay transactions since 2000, one would expect the numbers to be higher. Conley Tyler reported in 2006 that Square Trade in the US had provided mediation services online in more than 1 million commercial disputes between buyers and sellers on eBay: it is unclear if these figures are global or relate only to US eBay users.⁽²¹⁾ She also reported that resolutions were achieved in c 80% of cases.

The University of Edinburgh’s AHRC Centre⁽²²⁾ conducted an online survey assisted by 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 do not? 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?⁽²³⁾

eBay’s ODR Mechanisms Explained

One of the significant advantages that eBay appears to have over competitor auction sites like Yahoo! , QXL and Ubid is the range of ADR and ODR mechanisms which are available online for buyers and sellers.

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.⁽²⁴⁾ 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,⁽²⁵⁾ 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.⁽²⁶⁾ Finally, in extreme cases, eBay will withdraw feedback comments from members who have violated eBay policies such as using offensive, threatening or vulgar language.⁽²⁷⁾

eBay has also instituted 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.⁽²⁸⁾ It is not known whether eBay may be seeking to expand this process to other country sites or other areas in the future.

Problems are known to exist with the validity of feedback – there is a known tendency for both seller and buyer to give positive feedback for fear of retaliation, and feedback may also be “gamed” by, for example, making a very large number of small value sales or purchases so as to build up a highly positive feedback score. Ebay are aware of these issues, and have attempted to meet some of them by making feedback more granular in their so-called “Feedback 2.0” introduced in 2007.⁽²⁹⁾

Square Trade negotiation/mediation

eBay recommends referral to Square Trade for resolving disputes that have not been rectified by other dispute resolution processes. 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.⁽³⁰⁾ 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.⁽³¹⁾ Normally the two services are used consecutively, ie mediation would only be sought after automated negotiation had failed.

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.⁽³²⁾ 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.⁽³³⁾ 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.⁽³⁴⁾ 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.⁽³⁵⁾ 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.⁽³⁶⁾ 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.⁽³⁷⁾ The dispute is also ended if the buyer does not respond within seven days.⁽³⁸⁾ In addition, the process can be closed by the seller stating that the parties have agreed not to complete the transaction⁽³⁹⁾, or that the seller no longer wants to communicate with the buyer.⁽⁴⁰⁾ It should be noted that unpaid item strikes could be appealed through another process.⁽⁴¹⁾

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, although there are a number of significant exceptions.⁽⁴²⁾

We have seen that eBay provide a varied range of ODR mechanisms, generally at little or no cost to consumers. The purpose of our study was to see if we could find a connection between the provision of ADR and the level of consumer trust in using the site. Did these mechanisms in fact yield a higher degree of satisfaction or trust in eBayers? Our survey was limited by its simple “tick the box” format (and by the patience of those questioned) in how much it could qualitatively ask of respondents, and on the whole we sought to measure quantitative uptake of ADR mechanisms, rather than less quantifiable notions such as how far users were aware of their multiplicity of options, and what the pros and cons of each ADR solution might be for their particular dispute. We did however devote some questions to specifically asking about satisfaction and impacts on trust and confidence, with interesting results. 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.

Methodology

In undertaking our research we first conducted a literature review into online consumerism, online auctions, ODR/ADR and the eBay model. Theunissen engaged with the active “repeat user” eBay community in user groups and eBay fora, and gained useful knowledge as to the background culture and “norms” of eBay disputes and dispute settlement. From this preliminary research we set out distinct objectives: to determine the level of UK/Irish consumer satisfaction with the eBay model; to look at uptake of eBay’s ADR mechanisms by sellers and buyers; and in particular to try to determine if the ADR mechanisms that eBay provided were, in fact, a determining factor in creating consumer trust and satisfaction, as the global ADR literature often claims. We also looked, using the same survey sample, at trust and satisfaction in purchasing/selling online in general, as opposed to just on eBay, so that comparisons could be drawn which took into account the “special added value” of eBay as an online shopping and selling site where ADR was available.

EBay was an obvious site to study as the literature indicated it had probably the richest sample of disputed cases going to ADR in the online consumer world. We decided to survey only a UK/Irish sample for a number of reasons. First, we were UK researchers in e-commerce law, and there was no literature we could find which described empirically the behaviour of UK eBay users in a legal context. This seemed to us to be a major gap in the literature. In the US, by contrast, foundational empirical work had already been carried out by Ethan Katsh. Second, it was more than obvious that there are significant differences between both the legal and online environment, and the behaviour of, UK and US consumer. The UK has historically lagged behind the US in uptake of e-commerce, both on the selling and buying ends, though the gap has closed in recent years. UK consumers have historically come to the Internet later, and retained timidity about online purchasing longer. Although most of the UK now has access to high speed broadband, for a number of years, consumer uptake of the Internet was inhibited in the UK by the fact that when accessing the Internet via dial up modems, local phone calls were not free of charge as they are in the US. The UK is also a different legal culture from the US, having far more emphasis on protection of consumers and regulation of the marketplace than the US has in general. The UK forms part also of the EU harmonised regime of consumer protection law, which includes distance selling, unfair terms and consumer credit regulation. UK buyers have arguably greater expectations of protection in the marketplace than US buyers. For all these reasons, we felt a UK-only survey was not only possible but necessary. Finally, our contacts were with the UK eBay community. Getting consumers to participate in our online survey within a reasonable time frame required considerable networking resources, and achieving this on an international scale would not at this stage have been plausible.

We authored a twenty-seven question online survey. The survey used both qualitative and quantitative questions to measure consumer experiences. Without the resources for a statistically significant number of face to face interviews, we wanted nonetheless to gain some insight into the motivations of our sample population as well as quantitative responses on what they did, or said they did. The survey questionnaire was edited by Dr Lesley McAra, an expert in criminological and socio-legal empirical research. We chose to use an online survey tool, Survey Monkey, as the most cost effective means of contacting a large number of people across the UK and Ireland. In addition, we felt, given limited resources, that we needed to acquire a relatively simple set of survey responses for subsequent analysis to be practical. The survey was thus designed with relatively limited expectations: to determine what uptake of ADR on eBay was in our sample population, to determine satisfaction with both transacting and dispute settlement on eBay, and to see if a correlation could then be found between availability of ASDR and consumer trust, as the literature suggests.

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. 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.⁽⁴³⁾ Snowball sampling is when you ask your participants to pass along the survey to other similarly interested parties.⁽⁴⁴⁾ Finally, convenience sampling is a random sampling of participants who have been grabbed from a particular area, such as a chat room.⁽⁴⁵⁾

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. Because of drawing on eBay chatrooms and discussion groups as “seed” groups for finding survey participants, we are likely to have accessed a disproportionate number of experienced, “many time” eBay users rather than “one off” users. As discussed below, our survey certainly disclosed a bias towards being a survey of fairly to very experienced Internet users; very few in our sample presented themselves as Internet novices or virgins. As might have been expected given this bent towards experienced users, our survey sample also displayed a bias towards confidence with the Internet as users. Furthermore our sample (as also discussed below) also had a bias towards youthfulness, which may also have substantially affected their feelings of trust and confidence (or absence thereof) in both eBay and the online environment in general. Finally, some survey respondents may have gravitated towards eBay fora because they had a particular propensity towards generating or encountering disputed transactions on eBay, ie were particularly “dispute prone”. These limitations must be taken into account in interpreting the results below.

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.⁽⁴⁶⁾ 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. We had hoped to carry out a second phase of research which would have involved around 20 e-interviews and two focus group meetings drawn from the participants in the survey; however for a number of operational reasons this was not possible. Around five documented individual post-survey on-line interviews with participants were however carried out, and along with those carried out at the preliminary research stage, provided some useful though non-statistically significant insights into the minds of eBay users.

Analysis

Basic eBay Survey Demographics

Of the 400 who replied to the survey, 57% were female and 43% were male. A Nielsen/Net Ratings survey showed divergent information stating that eBay’s audience was slightly more male.⁽⁴⁷⁾ 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.⁽⁴⁸⁾

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.⁽⁴⁹⁾ Also at the top of the list were Cambridge and Reading.⁽⁵⁰⁾

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.

Figure 1: eBay Survey Age Demographic 1

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.⁽⁵¹⁾

Use of 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.

Satisfaction with eBay and online shopping

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.

Figure 2: How satisfied are you with the majority of your eBay purchases?

Figure 3: How satisfied are you with the majority of ALL your online transactions?

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 self-selection, 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 (see note above). 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 seems a remarkable finding. As noted previously, eBay is one of the few online shopping sites to provide a range of methods of dispute resolution. We therefore 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.

Figure 4: How satisfied are you, in general, with the handling of disputes in eBay 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. Colin Rule⁽⁵²⁾, now Director of On-Line Resolution at eBay, has long 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. Other writers in this area such as Ethan Katsh also continue to claim that “ODR can resolve problems after they occur but the presence and promise of ODR on a website can , by itself, also build trust and reduce a potential buyer’s level of risk. By assuring potential users that a forum exists for resolving problems, users are encouraged to engage in some activity at that Web site⁽⁵³⁾”.

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, 32.5% (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 out-performs 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, a better interface, critical network mass, or other factors.

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 wrong– our sample of consumers do not appear to have been so aware .(

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 process⁽⁵⁴⁾ (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 Trade⁽⁵⁵⁾ 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.⁽⁵⁶⁾ These small numbers can of course be interpreted two ways. First, buyers may have found satisfaction with the earlier stages of ADR and not felt the need to move on to “full” negotiation or mediation. On the other hand it might be seen as showing either a lack of knowledge on the part of buyers that these options were available, or worse still, an acknowledgement by them that they were not likely to get them the outcome they wanted. The fact that a fairly high percentage of buyers reported “no satisfactory outcome” would seem however to point tentatively towards the first interpretation.

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 service⁽⁵⁷⁾ (18%) and 8% went all the way to Square Trade for negotiation or mediation. These percentages must be regarded as indicative only given the small size of the sample. 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%).⁽⁵⁸⁾ 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).

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; “cyber-safety” 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).

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 4.

Figure 6: On a scale of 1-5, do you think eBay is as safe a place to shop as the High Street? (1 Definitely Not As Safe and 5 Completely As Safe)

Figure 7: Does the fact that eBay gives you access to dispute resolution processes make you feel safer about buying or selling on eBay?

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.

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 intermediary, and has resisted efforts by commerce and consumers to prejudice this status.⁽⁵⁹⁾

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.⁽⁶⁰⁾ 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 connected⁽⁶¹⁾, 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.⁽⁶²⁾

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 excluded⁽⁶³⁾ 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).

The issue of whether eBay should or should not be held liable in law for losses arising from (say) fraudulent or negligent transactions on its site is clearly a wider topic than the scope of this article allows, but it would seem partial not to mention the users’ feelings about this as an important, if adjunct, finding to the main thrust of the survey. eBay can be seen as but one of a wave of what are sometimes termed “Web 2.0” companies whose business model is to make profits out of user generated content. In the case of sites like MySpace and YouTube, the content is user profiles, user-created music or videos; on eBay it is items users want to buy or sell. In all three cases the important point is that the web 2.0 companies are currently in the position of “being able to have their cake and eat it”; they gain financially from the activity of their users (whether by adverts, merchandising, subscription or listing fees) without being legally obliged (other than by their own contractual undertakings) to fulfil any duties of care towards their users. Instead, by presenting themselves as mere intermediaries or platforms, the law grants them immunities from risk which are wider than those granted to comparable off line industries. Given the relative novelty of the online market, and in particular the C2C market, it is possible that this protective attitude towards Internet platforms is still as justifiable now as it was when adopted in 2000. However it is also possible that this status quo will be re examined when the Electronic Commerce Directive comes up for re-examination as is expected in 2007-8.

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.⁽⁶⁴⁾”

When the survey achieved our target of 400 respondents, we were left with many interesting hypotheses to explain our survey results but as yet insufficient empirical evidence to fully substantiate these theories. 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 unrepresentatively at ease online, and so our findings cannot be deemed typical 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 from email communications during the recruitment process 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.⁽⁶⁵⁾

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 qualitative 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 was little or no spontaneous mention of ADR as one of the reasons people shopped on eBay or something that made them feel happier or safer. 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 those answering the question agreed that the access eBay gave to ADR mechanisms made them feel “safer buying or selling on eBay” – but more simply skipped the question than answered it - and in fact we are talking here about 144 people saying “yes, I felt safer”, ie only about a third of the total sample.).

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. Our tentative hypothesis was that advantages of range, cheapness, and ease of access on eBay and online in general, simply seem to outweigh the risks. Further work will be necessary however to test this empirically.

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 strangers⁽⁶⁶⁾. 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 more “advanced” 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."⁽⁶⁷⁾

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 sample 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 and is unlikely to be implemented, 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, it may 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 suggested⁽⁶⁸⁾.

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 anonymous 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." Madness.”

In conclusion then, our survey reveals that much more work needs to be done on the relationship between ADR and on-line consumer trust. On line auction sites are an exciting example of the peer to peer or consumer to consumer model. It is vital that research into what makes these kinds of interactions work is carried out so it if both consumers and commerce are to reap the full rewards of the on-line marketplace