Dispute Resolution in the Sharing Economy
Ethan Katsh and Orna Rabinovich-Einy
This essay first appeared in the Internet Monitor project’s second annual report, Internet Monitor 2014: Reflections on the Digital World. The report, published by the Berkman Center for Internet & Society, is a collection of roughly three dozen short contributions that highlight and discuss some of the most compelling events and trends in the digitally networked environment over the past year.
The Sharing Economy is often described in highly positive terms, referring to such values as sharing, collaboration, responsibility, trust, cooperation, and accountability. In the aftermath of the economic downturn, such values were embraced and celebrated. New technologies, mainly the spread of social media and increased availability of smart phones, have fed into these developments and reinforced them. Law is often viewed as an intruder to this newly emerging paradise of sorts.
Sharing-based endeavors, however, are no paradise. In almost any environment in which human beings interact and exchange goods and services, some misunderstandings, grievances, and conflicts occur. While the Sharing Economy has received much attention, there has been limited thought devoted to the different types of conflict that arise in this environment and the ways in which they could be dealt with through emerging online dispute resolution (“ODR”) tools and systems.
Web 2.0 companies such as eBay created new marketplaces of goods that enabled anyone to sell anything to anyone else. Sharing Economy companies, such as Airbnb, Uber, TaskRabbit, RelayRides, and others, are largely selling services, thus allowing anyone to sell any service to anyone else. In so doing, the Sharing Economy is creating and encouraging participation in many marketplaces, generating more varied and complex disputes among users, and requiring a rethinking of regulatory approaches in different industries.
When online auction sites were first established, they needed to persuade regulators that they were actually not in the auction business. This sleight of hand was largely successful, and online “auction” sites could proceed without being subject to the regulations that applied to offline auctions. Sharing economy companies, by selling almost any kind of service, are in competition with a much broader range of businesses and have already been targeted by regulators in ways that eBay never experienced. It is not yet clear what the end result of this will be, and the experience of the earlier online goods marketplace does not seem to provide clear lessons. We are still in the early stage of the development of the Sharing Economy, with many ventures and experiments but little indication which will survive and thrive. Regardless of how the regulatory issues are resolved, however, systems will need to be put in place to handle disputes between those offering and those receiving services.
Ebay was in business for four years before it recognized that it needed to provide an accessible online dispute resolution service. While it previously had a feedback system in place that undoubtedly prevented conflict and influenced the willingness of buyers to participate in the marketplace, eBay eventually decided that an online dispute resolution process was also necessary. Currently, this system handles over 60 million disputes a year, essentially making it the largest small claims court in the world.
Disputes are a topic that most start-ups would prefer to ignore. Any new company’s primary goal is to scale revenue, and dispute resolution is often viewed as a distraction or an investment of funds that are needed elsewhere. Advertising the existence of a dispute resolution process also acknowledges that disputes occur, something, we have often been told, entrepreneurs think can be hidden or at least not advertised. Lastly, these companies, borrowing from earlier models, often assume that reputation and feedback systems are sufficient to deter bad actors.
Over time, eBay and others learned something that Sharing Economy companies will also need to understand. This is that disputes can actually be beneficial to a company. There are several reasons for this. The most obvious one is that dispute resolution represents a promise to users and potential users that if something goes wrong, it will be fixed. It helps build trust and reduces risk, thus influencing a user’s willingness to try the system. In addition, and perhaps more importantly from the company’s point of view, dispute resolution is important in identifying bad experiences. Ebay’s former director of online dispute resolution has explained the value of responding to bad experiences as follows:
As an example, imagine you were buying gifts for your family and friends over several weeks leading up to the holiday season… imagine that one of the items arrives and there is a problem. Maybe it was damaged in shipping, or maybe the wrong item was delivered. When that happens, you as the purchaser must pay individual attention to that particular transaction. You go back to your e-mail, search for the item receipt, and determine which marketplace the item was purchased from. Then you go to the website of the marketplace and try to determine what you need to do to get the problem resolved. That is the moment at which the buyer experiences an in-depth and unexpected interaction with an e-commerce market-place. That is the moment where loyalty is imprinted. If the marketplace provides an easy to find process for resolving the problem, a strong impression is made in the mind of the buyer. If the marketplace does not provide any easy to discover process for resolving the problem, the buyer’s experience instead is one of frustration, which creates a strong impression in the other direction.
Given the speed of communication online, bad experiences not only need to be addressed but addressed quickly. In an age of fast communication, social media, and online reputation sites, disputes cannot be hidden and, as a former customer service manager at TaskRabbit recently told us, “dispute resolution is the one thing that you can’t get wrong.” Getting dispute resolution “right” in the sharing economy requires developing dispute resolution and prevention systems that fit the nature of the online environment. While the literature on dispute systems design recognizes the need to tailor dispute systems to the nature of disputes, parties and the setting in which they arise, they have often overlooked the role of technology in such systems. The sharing economy thus provides a fascinating case study for examining the characteristics of disputes in the internet age, the limitations of traditional avenues, and the potential of ODR mechanisms for addressing such disputes. It also provides an insightful arena for studying the evolution of new systems for addressing disputes in the digital age and the barriers that stand in the way of such development.
