Consumer Redress: A Changing Tide?

The various challenges in trying to provide effective redress to consumers have created momentum behind an effort to change the way we think about consumer protection. The old zero-sum debate between consumer advocates (presumed to be in collaboration with the class action bar) and the big legal defence firms (presumed to be doing the bidding of big corporations) has achieved little in terms of progress over the past few decades.

Each side has continued to point fingers, with businesses supposedly abusing customers and class action attorneys supposedly filing frivolous cases to force settlement. The debate over pre-dispute binding arbitration clauses is only the latest phase in this ongoing back and forth.

But the internet has continued to change the game even while the zero-sum debate was playing out in the courts and legislatures. In fact, while few were paying attention, some of the promising dynamics that had been identified by the internet futurists like Doc Searls in the 1990s have begun to pan out. Consumers are getting more skilled at using the internet to organise, and the wide spectrum of choice is moving towards more trustworthy merchants and marketplaces. While the regulators and lawyers were debating minimum standards and binding arbitration clauses, leading e-commerce businesses were going far beyond legal requirements for consumer protection.

Forward-thinking merchants are creating the next generation systems that could handle consumer problems. Entirely new types of companies, sometimes called ‘sharing economy’ or ‘collaborative’ companies, were being started by consumers for others consumers. They were bringing a wholly new attitude to consumer protection.

Large internet intermediaries, like online marketplaces (eBay), large merchants (Amazon) and payment processors (Paypal), realised very early on that the consumer trust problem was creating friction on the internet and that solving it could provide a valuable market advantage. These companies weren’t willing to wait for regulators to figure out how to provide consumer protection on the internet, so they moved to build their own solutions to address the problem. For these large internet companies, trust in transactions proved to be a powerful competitive differentiator, one with a demonstrably positive impact on the bottom line.

The next generation

Many forward-thinking consumer protection organisations began to recognise this trend as well. They saw that these new internet platforms were creating next-generation redress systems that were delivering fast and fair resolutions to consumers, all within the private sector. Instead of falling back into the old finger pointing between business and consumer advocates, there emerged a new zone of cooperation that offered some reason for optimism. The 2003 agreement between Consumers International and the Global Business Dialogue on e-commerce (GBDe) was an important step in this direction. Suddenly two groups that had long been tugging on either end of the rope and getting nowhere were finding ways they could now both pull on the same side, working together in common purpose.

Regulators as well had come to the conclusion that court-based approaches to consumer protection were destined to fail in an internet-powered economy. Long-standing efforts to resolve jurisdictional questions around consumer disputes, like the Hague Conference on Private International Law, were not getting any closer to agreement despite decades of negotiation. A proposition to legally locate all consumer disputes i