"The system itself is very straightforward and painless to use. ...When you use Fair Reputations, you are demonstrating to both the buyer and the e-commerce platform that you use that you have indeed acted in a fair and constructive way to resolve issues resulting from an online transaction that the buyer deems negative. ...[I]t has not yet been adopted as a standard by eBay or other e-commerce platforms, but because of its balanced and symmetrical process, I don't see any valid reason why the outcomes from these cases wouldn't be considered in reputation calculations when the certificates are submitted to online marketplaces."
(Vangie Beal: New Service Promises to Restore Seller Reputations, Ecommerce Guide Magazine, May 21, 2008)
"This takes away the incentive to bluff and gives an incentive to settle amicably. ...What could be more fair to buyer and to seller? What could be a better move for eBay?... This will scare away cruddy sellers ... and it allows good sellers to stand up against abuses. And it works the same way for buyers... This has the potential to be one of the best things that has happened to eBay in a long long long time. ...And look at the utility here. The process will work for all e-commerce sites. ...Absolutely brilliant."
(EBay discussion forum entitled Fair Outcomes Launches Dispute Resolution Service for eBay Sellers, EBay Discussion Forum, May 14, 2008)
"The system has built-in what eBay's former partner SquareTrade did not: strong incentives for sellers to make fair proposals at the outset of the dispute resolution process, while ridding buyers of any reason for not participating."
(Ina Steiner: Fair Outcomes Launches Dispute Resolution Service for eBay Sellers , Auctionbytes, May 14, 2008)
"The process...provide[s] sellers ample opportunity to protect their reputations by demonstrating their willingness to settle with irate buyers."
(John Timmer: Fair Outcomes: Using Game Theory For Honest Feedback on EBay , Ars Technica, May 13, 2008)
"By offering this kind of dispute resolution, a seller demonstrates a willingness to settle a matter fairly at the outset."
(Fair Outcomes Strives for Fair Ebay Settlements , WebProNews, May 15, 2008)
Learn More About the Fair Reputations System
The Fair Reputations system is a bargaining system that can be used by a party to justify a discount of negative feedback relating to that party's reputation arising out of an online transaction on an e-commerce website. This website provides access to a fully operational, online embodiment of a version of the system that can be used by a party that has been subjected to a claim (or to negative feedback to the effect) that it should make a payment, credit, or refund to a second party in connection with a given transaction. A party that wishes to initiate a use of the system, or to run a free test of the system, can do so by clicking to Issue an Invitation. A party that has received an invitation to use the system following its initiation by another party in a specific case may confidentially learn more about how the system would work in that specific case by clicking to Respond to an Invitation.
For an in-depth analysis, in PDF format, of how and why the Fair Reputations system works, with citations to relevant academic authorities, click here. To review a copy of a press release that was issued by Fair Outcomes, Inc. with regard to the introduction of the Fair Reputations system, click here.
A party that is unhappy with an online transaction is frequently unable to obtain relief from a court, or extract a fair settlement from the other party, because cost and distance make a lawsuit impractical. Allowing such a party to submit negative feedback that affects the "online reputation" of the other party—adversely affecting the other party's ability to do business—facilitates the resolution of disputes because it creates an incentive to settle that would otherwise not exist.
Companies that administer e-commerce sites typically (a) allow such negative feedback to be posted on their sites and/or factored into public "online reputation" rating systems, and (b) will not remove or discount it without the consent of the party that submitted the negative feedback. This, in turn, often facilitates a resolution of the underlying dispute, but at a cost because these sorts of feedback systems can also be misused.
For example, a party may submit negative feedback, or threaten to submit negative feedback, in an effort to extract unwarranted concessions or accommodations from the other side. Administrators of e-commerce sites are understandably reluctant to get involved in examining or passing judgment on the merits in such cases. Thus, a party seeking relief from negative feedback, or from a threat of negative feedback, has historically been left with no option other than to try to bargain with the other side—either directly or through the use of an alternative dispute resolution service—in an effort to persuade the other side to not submit, or to withdraw, the feedback in question. Yet, in many cases, this simply provides the other side with a platform for demanding concessions and outcomes that are self-serving and unfair, delaying and in many cases precluding a fair resolution.
The Fair Reputations system allows a party that has been subjected to negative feedback to the effect that it should make a payment, credit, or refund to another party to demonstrate that it has provided that other party with access to a full and fair resolution of the underlying dispute, justifying a removal or discount of that negative feedback. The party subjected to the negative feedback (the "First Party") unilaterally initiates the use of the system by entering a proposed resolution into the system. The specific terms proposed by the First Party remain confidential and do not become enforceable unless the system determines that those terms are acceptable to the other side (the "Second Party"). The Second Party is then informed of these facts and invited to confidentially enter a proposed resolution into the system. If the Second Party does so and the system determines that the terms proposed by the First Party are equal to or more favorable to the Second Party than the terms proposed by the Second Party, then the First Party's proposed resolution becomes the resolution. If not, then the system gives the Second Party immediate written notice of that fact (without disclosing these communications to the First Party) and invites the Second Party to confidentially propose alternative terms, an invitation that is repeated on each such occasion up to a fixed deadline.
If the Second Party's proposal does not produce a settlement then, in addition to giving the Second Party the option to revise its proposal, the system gives the Second Party the option of having an impartial arbitrator review, in confidence, the First Party's proposal and the Second Party's final proposal for the purpose of making a determination as to which party's proposal was fairer given the underlying circumstances (as discussed in Section V below) and announcing that determination to the parties. If the E-Commerce site where the transaction took place does not offer such arbitration services to its customers, then the arbitration will be performed by attorneys with experience in commercial law, with funding provided by the fees paid in cases which do not proceed to arbitration (i.e., the vast majority of cases).
If the Second Party elects to proceed with arbitration, the Second Party may also elect at that time to have the arbitration be non-binding unless the arbitrator rules in favor of the Second Party. In contrast, the First Party agrees in advance to abide by any resolution arrived at through the use of the system (either prior to the deadline or via binding arbitration if the Second Party elects that process), under penalty of being barred from any future use of the Fair Reputations system, and further agrees that such a failure may be made public by the administrator of the involved e-commerce site and result in the full restoration of any negative feedback that had been previously removed or discounted.
If the Second Party elects to proceed to arbitration, that fact will be disclosed to the First Party. If the Second Party elects to have the arbitration be non-binding unless the arbitrator rules in favor of the Second Party, that election not to be bound will not be disclosed to the First Party or to the arbitrator unless the arbitrator rules in favor of the First Party.
The arbitrator will not disclose the offer made by a party unless the arbitrator rules in favor of that party and, if the arbitrator rules in favor of the First Party, the arbitrator will not disclose the amount of that offer to the Second Party unless the Second Party had elected to be bound at the time that the Second Party opted for arbitration. This allows each party to propose a fair offer without having to be concerned that its proposal will become a starting point for further demands if the matter is not fully resolved through the use of the system.
The arbitrator's determination with respect to which of the two offers is fairer will, in the absence of special circumstances, be made within ten (10) calendar days of the initiation of the arbitration process and will be based solely upon a review of any relevant written material submitted by the parties within seven (7) calendar days of the commencement of that process, such as communications between the parties (including representations that were made by either party to the other via the e-commerce website and e-mail exchanges relating to that transaction and to the parties' positions with respect to same), as well as photographs, receipts, appraisal reports, etc.
If the arbitrator concludes that the Second Party has submitted relevant material that the First Party lacked knowledge of at the time that the First Party initiated the use of the system, then the arbitrator may require, as a condition for taking that material into account, that the First Party be allowed to initiate a second use of the system. If the arbitrator concludes that the First Party has submitted relevant material that the Second Party lacked knowledge of at the time that the Second Party made its final proposal, then the arbitrator will not take that material into account. Prudent First Parties will accordingly wish to disclose whatever material they have, and whatever positions they wish to take, to the Second Party, and will want to invite the Second Party to do the same, in e-mail or other exchanges taking place prior to the initiation of the system.
Although the intent of the arbitration process it to give the parties "due process," the process that is "due" is necessarily limited by factors such as the amount in controversy, which constricts the amount of time and resources that the parties and the arbitrator can justifiably be expected to devote to the arbitration process. The arbitrator's role is, on one level, akin to that of a judge in a "small claims" court: to determine what facts are, and are not in dispute, to determine whether or not a party had met a burden of proof that might properly be assigned to that party with respect to a given disputed fact, to assign weight to the evidence submitted by the parties by reference to, but without any strict application of, traditional rules of evidence, and to apply basic principles of commercial law. However, on another level, the arbitrator's role is akin to that of a small claims court judge who, after considering the positions advanced by each party, was asked by the parties to identify what would constitute a fair and reasonable settlement range: the party whose offer is closest to the midpoint of that range will be deemed to have submitted the "fairer" offer and will win the arbitration.
Second Parties are not charged any fees in connection with their use of the Fair Reputations system, regardless of whether or not the matter proceeds through arbitration via the system. First Parties who initiate a use of the Fair Reputations system are currently being charged a ten-dollar ($10) fee at the time that they initiate that use and are not being charged any further fees, regardless of whether or not the matter proceeds through arbitration via the system. This fee structure applies to all uses of the system initiated while this fee structure is in place (i.e., to all uses of the system initiated prior to an amendment of this paragraph, as it appears publicly on this page of our website).
Unlike mediation and traditional sealed-bid arrangements, the structure of the Fair Reputations system gives the initiating party a strong incentive to make a fair and reasonable proposal at the outset of the process, and it deprives the other party of any incentive or excuse for failing to do the same prior to the deadline. The initiation of the system by a party that was subjected to negative feedback allows that party to demonstrate that it has provided the party that submitted the negative feedback with an opportunity to seek and obtain a fair and binding resolution in a highly efficient and fair manner. Thus, the initiation of the system serves to justify a removal, nullification, or discount of the negative feedback, regardless of whether or not the party that submitted that negative feedback elects to take advantage of the opportunity to seek and obtain a fair outcome.
For an in-depth analysis, in PDF format, of how and why the Fair Reputations system works, click here.