Introduction and summary

The European Commission recently published a Report on the effectiveness of the EU framework for online dispute resolution (ODR) and alternative dispute resolution (ADR) for consumers. The report demonstrates that whilst the use of ODR and ADR has increased, consumer awareness remains insufficient. The Commission is looking to improve the use of ADR platforms and part of this will no doubt include enforcement of the rules at Member State level.

Background

The ADR Directive (Directive 2013/11/EU) and ODR Regulation (Regulation 524/2013) aim to make it easier and cheaper for consumers to enforce their consumer rights in contractual disputes with traders, rather than having to go to court to get redress for low-value claims. The legislative framework gives consumers access to ADR, including via a multilingual web-based platform. Ultimately, the rules are there to strengthen consumer trust, particularly in an online environment since lack of trust hampers trade and thus economic growth.

Consumer rights within the EU single market include the right to return products bought online within 14 days or to have products repaired or replaced within a guarantee period. The ADR Directive and ODR Regulation are key tools in helping consumer enforce such rights to deliver the full potential of borderless trade across the EU’s 28 (and soon to be 27?) Member States.

How effective has ADR and ODR been?

The Report assess the impact of the ADR Directive and ODR Regulation.

• ADR. Whilst the Directive makes ADR measures mandatory, it does not prescribe a specific model (e.g. for the ADR entity’s corporate identity or territorial and sectoral coverage). There is therefore variation in how each Member State has approached ADR, including relating to whether participation in the procedure is voluntary or mandatory, or whether the ADR procedure’s outcome is binding.

• ODR. The Regulation has direct effect (meaning that, unlike a Directive, Member States do not need to specifically implement its provisions). The Regulation builds on the infrastructure of the ADR Directive, but it applies specifically to consumer disputes regarding online purchases.

The Regulation establishes the ODR platform: a centralised, multilingual, interactive website that allows consumers to submit online their consumer-to-business disputes (domestic or cross-border). The platform allows the parties to agree on an ADR entity to resolve a dispute. All online traders (such as Amazon or high street retailers with a digital offering) are required to publicise the ODR platform in their T&Cs.

In the UK, whilst levels of compliance with this requirement are relatively high, consumer awareness of the right to ask for ODR is very low in comparison.

Impact and uptake in Member States

The Report found that the impact of the Directive includes that ADR now exists in Member States where previously there was none. The EU considers ADR a useful tool in the consumer dispute resolution landscape providing traders with an incentive to respecting consumer rights. However, whilst awareness has increased among both consumers and retailers the ADR framework is still underused.

Specific barriers include that consumers confuse ADR with a trader’s customer care service. Also, both traders and consumers perceive the ADR process as being biased in favour of the other. The confusion is compounded by the fact that there are many ADR models, names and procedures without a consistent approach even within a single Member State. This makes ADR difficult for consumers and traders to navigate.

Since the launch of the ODR platform in 2016, it has attracted more than 8.5 million visitors and 120,000 consumer-to-business disputes (around 56% domestic and 44% cross-border). Interestingly, most disputes were about airlines (13.2%), despite the fact that specific legislation giving consumers a right to compensation in the case of delays applies. Hardly any traders used the ODR platform to resolve disputes they had with a consumer (0.1% of cases).

However, the Report also found that only one in three retailers is willing to use ADR, which the EU considers insufficient. A key cause being that participation in ADR is not mandatory. Worse still is the fact that in only 2% of cases referred to ADR did the parties agree on an entity to handle the dispute. That said, in almost half of all disputes submitted, the parties were able to settle their dispute between themselves. It would seem that the platform has the ability to facilitate communication.

Next Steps

The Report concludes that the ADR/ODR framework is currently underused and yet to reach its full potential. The Commission aims to improve awareness of and engagement on the ODR platform by making the platform more responsive to user’s needs. Such measures include providing more targeted information on consumer rights and direction on the ADR tools available.

The Commission intends to compare the various ADR models to identify and share best practice. National enforcers of the legislation will also begin to take a more pro-active approach to non-compliance and may also launch national campaigns to raise awareness amongst traders and consumers on the availability and benefits of ADR. However, a perceived lack of transparency and bias will likely remain significant barriers to using ADR, particular in jurisdictions like the UK, which already have well-established and effective courts to handle low value disputes e.g. ‘small claims court’.

Nonetheless it is imperative that retailers get up to speed with the requirements of the ADR framework. Brexit is not likely to impact on the ADR requirements at least in the short term, because it would appear that the government is committed to carrying through all such consumer protection aspects of EU law at least for the transition period. That said, with a General Election looming in the UK, it may well have a different government in the New Year.