Past Results and Prospect of
Alternative Dispute
Resolution (ADR) in JapanFor Building a Trustable Internet Consuming Environment

Sep 27, 2006

EC Network, Japan
Yuko TONOMURA

tonomura@ecnetwork.jp

Market Size of E-Commerce inJapan
trillion yen 140
1201008060
40200
Transition of EC rate

BtoB

BtoC

12.9%

1.2%

Survey of the Ministry of Economic, Trade andIndustry in 2005
2Outline
1. Introduction
2. EC Network
3. Results of ECOM/ADR
4. Study cases
5. ODR, Trustmark &Future
prospects

Established on April 13, 2006, Tokyo.
Directors: Toshiko Sawada and Yuri Harada
Non-profit private organization
Mission: Empower small sized EC merchants
Promote “good market practice” =EC Guide→build market confidenceInternational matters

http://www.ecnetwork.jp/index.html

For members

Services by EC Network◆Up-to-date information services
・trouble case study
・related law/regulation
・trouble trend◆Consulting services
provides consultation for individual case
◆ADR services
As 3rd party, provide ADR services

For all◆Advise for consumers◆Consultation for cross border online
shopping trouble◆ATA/GTA collaboration work
◆Advice to local Consumer Centers◆General e-Commerce information

E-Commerce problems with consumers

Members
3 times per year
For 10,000 YenPer year

Register its problem into Member site（24havailable)
Qualified advisers (counselors)

Legal and/or technical point of view by experts

Hard to solve thetrouble by direct
negotiation

membercustomerTroublerrAgnt
meeetesquRe

Complaint from customer toward the member→member has to agree with commencing ADR

ADR service with no charge

Qualified adviser (counselors) facilitate the solution providing objective view

If requested by both party, qualified adviser (counselor) would propose a solution
based on EC guide. EC Network members have to follow this solution in principle.

What is ECOM/ADR Office?
Pilot Project sponsored by METI
(Ministry of Economy, Trade and Industry)z Period：Apr. 2003 ~ Mar. 2006z Target：Disputes arising from consumerrelated EC including C2C transactions andcross-border transactionsz Procedure：Consultation, Mediation,Adjudication (or non-binding arbitration)>all by e-mail8

Achievement of ECOM/ADR Officez Accumulated trouble cases arising from both

B2C and C2C e-commercez Accumulated knowledge and know-how in ecommercez Thought about preventive measures againsttroubles
z Pparticipation of international alliancez Cooperation on 66 cases with BBB Online(North America)
9

Tendency of Troubles Arisingfrom E-Commercez The majority of complaints is “non-delivery of goods or services” including
fraudulent cases.

• As ADR cannot deal with fraudulent cases, itis necessary to cooperate with law
enforcement agencies.
• But ADR can resolve other types of disputes
effectively such as misunderstanding,miscommunication, etc.

10Breakdown by Transaction Type in2005
1,600
1,4001,200

Crossborder

1,000

17.1%

Crossborder
Crossborder

800

9.1%

12.6%

600
400
200
0On-Line
ShoppingInternetAuction

Others

Total

Cross border

240

123

109

472(13%)

Domestic

1,158

853

1,085

3,096

1,398(39%)

976(27%)

1,194(34%)

3,568

Total

Breakdown by Locationof the Business
792005

1971

2004

240%
North America

10%016135

2001Nov.-2002

738112

2003

2420%

30%

40%

50%

60%

70%

South America

EuropeAsia

Oceania

unknown

80%

144

22

5490%

100%

12Complaints in Cross-border
Transactionsz 10〜15% of disputes were cross-bordertransactionsz BBB and ECOM have jointly handled

66
complaints arisen from transactions between
North-America and Japanz Many Japanese do shopping on the NorthAmerican sites

13Complaint Cases Jointly Handled
Between BBB and ECOM (As of Nov. 2006.3)
ECOM → BBB Cases
24Settled

BBB Member

2

Non BBB Member

22
27

Unsettled

BBB Member

3

Non BBB Member

24Total51

BBB →ECOM Cases
Advice/Not Handled

7Settled

2

Unsettled

6Total15

Results of International ADR
Co-operation• Learned foreign business practices
and the ways to handle complaints
over overseas organizations.
• collected frequent information ontroubles• contributed to build consumerconfidence.
15

Settled Case 1z ECOM→BBBz Miscommunication in ordering soap molds• A Japanese consumer ordered soap molds froma U.S. website. Although she specified delivery
by sea mail, the goods were shipped by air,which cost much more.

• The company finally refunded $15, thedifference between air mail and sea mail.

16

Settled Case 2-1
z A Japanese consumer successfully bid fora glove at the US auction site.
z The seller was a sports goods store.
z The consumer received the damaged glove
z The Japanese consumer insisted that theseller should replace the glove.
z However, the seller insisted that theJapanese consumer should send the glove
first, and pay for shipment.
17Settled Case 2-2
z ECOM contacted to the seller.
z The seller did not agree easily.
z The dispute caused by insufficient

communication.
z The Japanese consumer conceded, sent theglove first and paid for shipment.
z The seller issued a refund.

18

Fraudulent Case 1z A consumer living in Bahrain ordered 3

trucks made in Japan and paid $30,000
through a bank transfer. But he neverreceived them and lost contact with theseller.
z Upon ECOM’s investigation, the seller’s
address and telephone number turned
out to be a dummy.
19Fraudulent Case 2z After losing the bid on a US online

auction, a Japanese consumer wasoffered a direct trade from an American
individual who pretended to be a seller.
z The consumer sent a payment by moneyorder.
z But the Japanese consumer neverreceived them and lost contact with him.
20

Online Dispute Resolution
Merits
1. No constraint on time and distance→The greatest merit for cross-border transactions.
2. Both parties can keep calm and be logic.
3. Keep the records

Demerits
1. Less immediacy
2. A little hard to convey a complaint through writing

Trustmark Program in Japanz Started in 2000 by METI’s initiativez Current number of accredited sites: 640
Japan Chamber of Commerce and Industry: 380
Japan Direct Marketing Association : 260• Certification cost is very highz Similar functions• Virtual shopping moll (ex. Rakuten)
22

Conclusionz Combined with Trustmark & effective

ADR(ODR) could be a solution.
z Cooperation with both domestic andinternational law enforcement entities
z Cooperation with international ADR org.
is more effective

Thank you!
Please send any Comments or Questions to
below:

Yuko Tonomura
tonomura@ecnetwork.jp24