ONLINE DISPUTE RESOLUTION: THE MISSING BLOCK IN CONSUMER PROTECTION

-Shreyashkar & Shivam Shantanu (NLU NAGPUR)

From exchanging goods in the barter system in the old times to coins, notes, cheques, to
digital transactions and crypto-currencies in the present times, the global market system has
evolved enormously. This transition from a physical marketplace to a digital marketplace can
be attributed to the global internet revolution which started in the 90s era of the twentieth
century. In India, online shopping sites started to take small steps in the early 2000s but it
saw a rise in the latter half of the decade and today it is a big reality. The big reason for a late
bloom of e-commerce was spread of internet accessibility in different parts of the country.
Consumerism has been given various connotations but according to a Cambridge dictionary it
means “protection of consumers against harmful products or business methods.” In India,
Consumer Protection Act of 1986, came as a result from global wave of consumerism. But
when this act came into force at that time e-commerce was not a thing at all. In the present
era, where everyone is shopping at the tap of their fingertips, the consumer disputes arising
out of such transactions posed technical barriers which couldn’t be sorted out with the
previous act in an efficient manner.

To overcome the legal and practical obstacles presented by the previous act, a new Consumer
Protection Act came in force in the year 2019. An express inclusion of online consumer
disputes was made thereunder. There are many provisions in this act which expressly
recognizes e-commerce transactions. A Central Consumer Protection Authority is established
under this Act for better well-being of the general interest of consumers. For the first time an
ADR mechanism is introduced in resolution of consumer disputes. Mediation is adopted as a
mechanism for dispute resolution of consumer disputes under this act. Filing of consumer
dispute complaints has been made easier in the greater good of the consumers’ community by
expanding the jurisdiction of consumer courts.

Online Consumerism as a concept for safeguarding the consumer interest in the current times
is evolving rapidly in some parts of the world such as in the European Union. It has adopted a
model of ODR (Online Dispute Resolution) for resolving all the disputes arising out of
consumer matters. The United Commission on International Trade Law in the year 2016
adopted a non-binding document in the form of Technical Notes on Online Dispute

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Resolution. The European Union adopted this mechanism of consumer dispute resolution in
the year 2013 through a directive on consumer ADR and a regulation on consumer ODR.
The European Union model and the technical notes by UNCITRAL lays down the ground for
an ODR mechanism to be followed by different nations. ODR mechanism has a potential to
be the next big thing in the field of dispute resolution at the world level.

According to a report, India will witness 220 million online shoppers by 2025. It means that
there will be a rise in online consumer disputes also. Although the Consumer Protection Act
of 2019 covers online consumer disputes under its sphere but it needs a big stride to provide
access to speedy and complete justice. Online Dispute Resolution as a channel for resolution
of consumer disputes arising out of online transactions should only be covered in the present
times under the present Act.

ONLINE DISPUTE RESOLUTION: GLOBAL PERSPECTIVE

It is an extended form of ADR mechanism which takes place on a digital platform. Currently
in some parts of the world it has effectively started for resolution of disputes such as in
European Union, US, Hangzhou Internet Court of China and Brazil and the data in Brazil
shows that 2 million cases were resolved there in the course of 5 years. It doesn’t act as a
substitution of existing legal framework or any other dispute resolution mechanism but it
complements the existing system to work efficiently and it is to provide “new and better
ways to resolve the disputes that arise in connection with [network] use.” UNCITRAL
Technical Notes on ODR define it as a mechanism to assist parties to resolve disputes
without any requirement of physical presence of the parties through various alternative
dispute resolution methods and any other type which may be formed. It does not give an
exhaustive list of forms and approaches under ODR method.

A difference which can be drawn between the ADR mechanism and ODR mechanism is that
the former is done through a third party involvement and the latter is done by indulging a
fourth party i.e. ‘technology’. Technology acts as a tool to reach the parties without them
being required to be present physically. It acts as an aid to the third party to resolve the
dispute in hand between different parties.

EUROPEAN UNION & ODR

In the year 1993, a green paper was published titled consumer access to justice. Again in the
years 1996 and 1998, the European Commission pushed for consumer access to justice by out

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of court settlements. After many efforts throughout the years finally the European Union was
convinced to have an ADR and ODR mechanism for the settlement of cross-border consumer
disputes in the year 2011 when a communication titled Single Market Act - twelve levers to
boost growth and strengthen confidence: “working together to create new growth” was made
to the European Parliament, the Council, the Economic and Social Committee and the
Committee of the Regions by the European Commission. Finally in the year 2013, Directive
on consumer ADR and Regulation on consumer ODR was released for setting up of different
entities for resolving the consumer disputes across the European Union.

The Regulation provided for a European ODR platform common for all the member states for
the resolution of consumer disputes. Only disputes arising out of online transactions has been
covered under the Regulation on the other hand the Directive includes both online and offline
transactions. All the disputes which arise from the services provided in the Regulation, ODR
system acts as a single point of entry for all the consumers and traders for getting resolution
of their disputes. ADR entities of the member states receive complaints through the platform.
Websites functioning in the European Union shall mention the link of the platform to spread
awareness about the existence of such a mode of dispute resolution. The Regulation doesn’t
oust the jurisdiction of the courts to resolve the disputes acts as a complementary method of
dispute resolution.

A report from European Union shows very interesting result after 2-3 years of functioning of
ODR from 2015. The report shows that “high web-traffic on the ODR platform during the 12
months covered by this report, with some 5 million people visiting the platform in total and
an average of 360,000 unique visitors per month… 2% of cases reached an ADR body after
agreement between the consumer and the trader and 81% of complaints were automatically
closed after the 30-day legal deadline (i.e. deadline for the consumer and trader to agree on
a competent ADR body).” It indicates that although people engaged on the online platform in
the beginning but at the later stage the case remains unresolved. The reason for this can be a
strict implementation authority.

UNCITRAL & ODR

At it’s forty-third session, the United Nations Commission on International Trade Law
recognized the fact that many cross border transactions is going on in the online sphere and
there is a requirement of an Online Dispute Resolution Mechanism. In the year 2016, at its
forty-ninth session, UNCITRAL gave a final shape and adopted the Technical Notes on

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Online Dispute Resolution. These notes are not binding in nature. They are merely
descriptive and guiding in nature which can become a future course of action. Countries can
look up to these notes as they present a model which is created after a lot of deliberations.

The resolution adopted by the UNCITRAL reflects upon the features of the ODR mechanism
such as simplicity, fast methodology, flexibility, feasibility, etc. to resolve cross border
disputes which arising out of low value sales or service contracts done online. These notes
define ODR as a mechanism to “assist the parties in resolving the dispute in a simple, fast,
flexible and secure manner, without the need for physical presence at a meeting or hearing.
ODR encompasses a broad range of approaches and forms (including but not limited to
ombudsmen, complaints boards, negotiation, conciliation, mediation, facilitated settlement,
arbitration and others), and the potential for hybrid processes comprising both online and
offline elements.” Technical notes don’t promote ODR as the best method for the resolution
of disputes and they are intended for cross border disputes arising out from e-transactions
which are of low value sales and service contracts. These notes also lay down certain
principles which are required for functioning of ODR mechanism such as, transparency,
independence, expertise, consent.

The resolution of disputes under these notes is divided into three stages: (i) negotiation (ii)
facilitated settlement (iii) final stage. After notice is submitted by the claimant on the ODR
platform then the ODR administrator shall inform the existence of a claim against him to the
respondent. The first stage which is involved in this process of dispute resolution is a direct
negotiation between the parties with the help of technological means. The first stage can be
skipped by the parties themselves. If the first stage fails and there is no result or the parties
didn’t participate then the parties shall move to the second stage i.e. facilitated settlement.
This stage involves a third party neutral to reach a settlement. It is more of like an online
mediation or conciliation proceedings as they don’t have any power to adjudicate. If the
second stage also results futile then it is on the ODR Administrator to decide how the dispute
needs to be resolved in the third and the final stage. They may use any form of the ADR
techniques to get to a final result. The technical notes prescribe a multi-tier dispute resolution
mechanism in the digital space.

The ODR mechanism as presented in the technical notes is quite different from the offline
method of ADR. It is more of any institutional method of dispute resolution unlike many
ADR techniques which are generally ad-hoc in nature. ODR Administrator plays a very

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important role in this method of dispute resolution as he coordinates and administers all the
dispute resolutions taking place on the ODR platform.

ODR : NEED OF THE HOUR

The Consumer Protection Act of 2019 has provided Indian consumer rights a whole new
direction from the previous act working in the field. Specifically with regards to the aspect of
e-commerce and alternative dispute resolution mechanism, the present act has made a path-
breaking impact. The previous 1986 Act was not in tandem with the present day problems
and situations. It was enacted when there was nothing like e-shopping in India. Amending
that act would’ve also not done a great deal. So it became necessitated to bring a whole new
legislation with regards to the consumers’ rights. The whole consumer dynamics is changing
vigorously so it was required to be done. The legislature has taken care of most of the
situations and problems of the present day and has presented a quite comprehensive act. The
present act has brought a lot of new dimensions to consumer rights. The major highlights of
the current act is introduction of mediation as an alternative method of resolving the disputes,
introduction of the concept of product liability for differentiating the liabilities of product
manufacturer and product seller, establishment of a Central Consumer Protection Authority,
specific recognition to the e-commerce transactions etc.

The missing block which can make the present act fully comprehensive consumer protection
legislation is inclusion of an ODR scheme as a method of dispute resolution. According to a
report India will surpass United States by the year 2034 to become the second largest e-
commerce market in the world. Though the present act has given recognition to the e-
commerce market but a modern world requires a modern solution to its problems. ODR will
provide a simple, secure, feasible and a fast method of dispute resolution. In the present times
where Artificial Intelligence is also taking shape it can be used as a great tool for a smoother
functioning. The recently formed Central Consumer Protection Authority can play a major
role in setting up a ODR platform in India and administering the affairs. An ODR platform
common for all in the country acting as a single point of entry of disputes just like EU will be
effective when combined with the stages of dispute resolutions laid down in the UNCITRAL
Technical Notes.

A POSSIBLE INDIAN MODEL

We don’t have many models in the world to look around to see how the effectively a system
like Online Dispute Resolution is working. There are very few countries which are having

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such a system. Member states of European Union follow the Regulation on consumer ODR,
which we’ve seen above. The others are the US model where few county courts are adopting
this mechanism as the first step, else it is done privately by the e-commerce companies since
2000 itself, in China an Internet Court is set up in the city of Hangzhou for resolution of e-
commerce disputes through ODR mechanism, Brazil also allows companies to directly
resolve their disputes online with the customers. In India also many companies have started
to using ODR mechanism for resolution of disputes so it is a good sign to introduce this
system in a nationwide aspect.

The Indian Model which can be imagined can be made through a culmination of all the above
mentioned models and the model presented by the UNCITRAL. Firstly, the newly
established Central Consumer Protection Authority, shall be made the principal body
managing and running the Online Dispute Resolution system in India acting as an ODR
Administrator as mentioned in the technical notes. It shall be the governing and supervising
body under which the functioning of ODR machinery shall take place. Secondly, an ODR
platform should be created and that shall be the only platform running in the country and no
other private firms should be allowed although they can become a part of this platform where
they can provide their services. It shall be done to bring a level of uniformity in the dispute
resolution system. Thirdly, rules shall be framed for the governance of the dispute resolution
of the process. Again this will bring uniformity to the system as different rules will again act
as a hindrance in enforcement of consumers’ right. Fourthly, all the e-commerce websites
shall be registered on this platform and shall be provided with a certificate. And it should be
made a mandatory requirement for such companies. And following the EU model the
websites should provide a link to the ODR platform increase awareness in the consumer.
Fifthly, the dispute resolution clause in the standard form contracts shall be in accordance
with the guidelines which shall be formed by the Central Consumer Protection Authority.
And violation of this rule shall attract heavy penalty as it will act as a protection of
consumers from unfair terms made by the companies. Sixthly, due to low awareness and low
digital literacy it shall not be made a compulsory first step. Otherwise it will create more
havoc than helping people. Seventhly, the dispute resolution process as provided in the
Technical Notes, should be multi-tiered. Firstly there should be negotiation, then mediation,
and then it will be on the authority to decide whether to send it for arbitration or any other
method.

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Sometimes many person from different places are affected by a single cause of action e.g.
deficiency in services by an airline company. With the present act where a consumer has been
given an option to file a complaint where he resides or where the business takes place of the
service provider, increases multiplicity of complaints against the trader. For this ODR
mechanism will be of great use where all the complaints can be clubbed into a single one
when the relief claimed is common. It will reduce hardship on such a service provider also.

ISSUE OF ARBITRABILITY
Introduction of an ADR mechanism in the form of Mediation for resolution of consumer
disputes is a big welcome step. But the Indian courts have always shown apprehension in
promoting ADR mechanism such as Arbitration in resolving consumer disputes because of
unfair terms provided in the standard form contracts. These unfair terms jeopardize the
consumers’ interest at a great extent. But the present act specifically deals with unfair terms
provided in the contract between a trader and consumer which prejudicially affects
consumer’s rights. But still the issue of non-arbitrability haunts the consumer disputes. In the
case of Fair Air Engineers Pvt. Ltd. and Anr. v. N.K. Modi, the Supreme Court of India for
the first time gave precedence to the Consumer Protection Act of 1986 over the Arbitration
Act of 1940, despite the presence of a valid arbitration agreement between the parties.
Regarding the consumer legislation as a lex specialis (special law) and the arbitration act as a
lex generalis (general law) the court should give precedence to a welfare legislation. In the
case of Thirumugugan Cooperative Agricultural Credit Society v. M. Lalitha, the remained
firm with previous stand by giving the reason that if arbitration will be allowed in the
consumer disputes then the Consumer Protection Act of 1986 will become redundant. Again
in the case of A. Ayyasamy v. A. Paramasivam and Ors., the court took the stand by providing
the reason that the parties cannot opt out of the exclusive jurisdiction of the consumer forum.
But in many cases it has been held that it is at the option of the consumer to decide whether to
arbitrate or not and remedy provided under the Consumer Protection Act is an additional
remedy and is not in derogation to other remedies. So the biggest problem which can arise by
making consumer disputes arbitrable will be that traders will take undue advantage of
consumers by forming unfair terms of contract. They can make terms like the seat of
arbitration will be at a foreign place and many such other terms which can prejudice the
consumers’ interest.

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The issue of arbitrability can be settled after inclusion of the ODR mechanism in the
consumer dispute resolution scenario. As we have seen in the above discussed probable
Indian model, the Central Consumer Protection Authority’s role becomes pivotal in balancing
both the consumers’ interest and access to justice through ADR/ODR mechanism. After the
setting up of the Central Authority in regards to consumer protection, it can lay down a
specific dispute resolution clause and through incorporation method it should be adopted in
all e-commerce and standard form contracts for the protection of consumers’ interest.

THE COVID TIMES

Instances of hoarding of necessary items witnessed a steep rise in the early phase of
coronavirus pandemic. The consumers were in middle of a life threatening pandemic and
non-sympathetic greedy traders. Online shopping rose up as the most viable and efficient
option in the hands of consumers. The whole country went through months of lockdown and
is still opening up in phased manner. During such hard times e-commerce proved to be a
boon for the society. Just imagine being under lockdown in the year 1920, the conditions
would’ve been worse.

Though e-commerce acted as succour in such gloomy times but the consumers went through
many hardships dealing online. Consumers faced regular e-commerce challenges like frauds,
bad quality, etc. but now they were completely handicapped in legal sense. People could not
file their complaint and remained vulnerable to such challenges. The lockdown phase in India
became witness to an unprecedented surge in e-commerce market. But it also reflected the
need of establishing an Online Dispute Resolution mechanism for the purpose of enforcement
of consumers’ rights. Had there been any such mechanism in place, the consumers could’ve
easily placed their problems in front of the appropriate authorities.

CONCLUDING REMARKS
New problems require new solutions. ODR is that new thing which is going to bring further
changes in dynamics of consumer protection. A consumer will be able to file a complaint
without being required to go to a physical court. He can file all the pleadings and evidences
through the online platform. It is on the consumer to get a help of a lawyer or not. Though the
same was in the case of forums and commissions where they can represent themselves by
their own. But the fear of a common man to go into the court stopped them from representing
themselves. The world is witnessing the new age consumers who prefer to stay at home and

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do all the shopping and book services ranging from getting a massage at home to shopping
gym equipment. Everything is getting done on a finger tap on the screen.

Though ODR is in a nascent stage right now but will certainly be the dispute resolution
mechanism in future. Adopting it early when there will be less traffic, the lacunas will be
done away with in a more swiftly manner rather than when adopting it will be the urgent
demand of the time. The meteoric rise of internet penetration India is witnessing in the
current times shows how things are going to be changed and a robust system shall be in place
to handle the problems arising out of it. With great internet penetration the e-commerce
sector is also witnessing a sharp rise. In India currently few ODR firms are working and some
e-commerce and banking sites are also using it.

Starting with consumer disputes is a first step in the direction of getting internet courts in
India. Consumer disputes being not of much legal nature involving any question of law shall
act as a testing object for achieving a complete ODR mechanism for resolving other kinds of
dispute also. It will certainly help in clearing the backlogs of the cases in the Indian courts.
India requires such a system as soon as possible because the numbers of cases pending to the
numbers of judges is really worrying state of affairs.