1894 Doing International Business Online for the Small and Medium Enterprise The Second Law of the Playground: The Trusted Third Party If children cannot or will not engage in a simul- taneous exchange they will often enlist the aid of a trusted third party. A parent or elder sibling will be called upon to hold both prized toys and deliver the items to each party. The third party is responsible for making sure each party gets the bargained for item. In legal terms this is an escrow 7 contract. Use of an es- crow protects both parties since the escrow agent only releases the items upon proper receipt from both parties. Farago v. Burke (1933) (The court UXOHGWKDWWKHHVFURZDJHQWKDVD¿GXFLDU\GXW\ to both the buyer and seller to release funds only upon performance of agreed upon obligations). Moreover, the agent must release the items once in proper receipt from both parties. Moore v. Trott (1909) (The court ruled that once the agreed upon conditions are met, the escrow agent must deliver the items held in trust). Failure to release the items subjects the escrow agent to liability. Bruckman v. Parliament Escrow (1987) (The court ruled that the escrow agent liable for intentional or negligent failure to perform duty to buyer or seller). Not surprisingly, this arrangement is available for online transactions. Typically transactions with online escrow companies follow this basic pattern: 1. Buyer and seller conclude their agreement 2. Buyer sends payment to escrow company (VFURZFRPSDQ\QRWL¿HVVHOOHURIUHFHLSW of funds 4. Seller ships goods 5. Buyer receives and accepts or rejects goods (limited time for inspection) 6. Upon acceptance of goods (automatic at end of inspection period), the escrow company pays the buyer. 8 Use of an escrow agent offers protections to both the buyer and the seller. For the buyer, any risk of not receiving the item or receiving the wrong item is eliminated. The escrow agent cannot re- lease the funds until the buyer has had a chance to inspect the goods. The seller is also protected by this arrangement. First, the escrow agent is responsible for making sure that the funds really exist before notifying the seller to ship. This eliminates the possibil- ity of things such as a check being returned for LQVXI¿FLHQWIXQGV Use of an escrow company is not free of charge. For example, escrow.com charges a minimum of $25 for any transaction and uses a sliding scale that ranges from 3.25% to 0.89% of the total transaction value. 9 For small transactions, the $25 fee is enough to render the service too expensive. However, for larger transactions, the fee is modest compared to the potential risk. For example, the escrow fee for the sale of a $7,500 item is $169, 2.25% of the sale price. 'HVSLWH WKHVH EHQH¿WV IHZ DXFWLRQ EDVHG trades have made use of an escrow agent (Sor- kin, 2001). Sorkin suggests that escrow use is not more widespread because of the cost and the fact that users tend to ignore the risk involved in transactions. Unfortunately, use of an escrow company is not without its own risk. First, the company must be a trusted third party. A common scam involving escrow agents is where the escrow company is in reality a front for the scam artist, often the same person as the seller (Barrett, 2004). -XVW ¿QGLQJ D SURSHU HVFURZ FRPSDQ\ LV D challenge. For example, Sorkin (2001) suggested, ³WKHUHDUHVHYHUDORQOLQHHVFURZVHUYLFHVWKH best known of which is Tradenable (formerly i- Escrow).” Despite being the best known online escrow service during Sorkin’s research in 2001, Tradenable closed its doors in December of the same year (Rao, 2001). As with any online trans- action, updated research is critical for a prudent businessperson. 1895 Doing International Business Online for the Small and Medium Enterprise Multiple Exchanges Another way to limit risk is to spread it out over multiple orders. Rather than taking all the risk in a single order, splitting it into smaller orders will help to spread the risk out. For example, if our buyer wanted to get 12 wooden statues from the Kenyan crafter, the parties could agree on three separate shipments of four statues. While this will increase the cost of shipping and insur- ance slightly, it helps protect both parties from a complete loss on the entire order. This relatively simple method is attractive because it helps both the buyer and seller mitigate their risk without substantial cost. Risks in Misunderstanding the Deal Regardless of the form of the transaction, the parties should be sure to clearly communicate the deal. One of the problems with remote negotia- tions is that the parties may interpret terms and S UR PL V HV G LI IH U HQ WO\ ' RH V³J HQ X LQ HH E RQ\ ´ PH D Q the same thing to the Kenyan seller and foreign buyer? If shipping costs are not mentioned who pays? Who bears the risk if the item gets lost or damaged in the post? Par ties to onli ne transactions should take care to clearly and carefully describe the terms of the deal. Many international commercial transactions rely on special terms, called Incoterms, established by the International Chamber of Commerce that FOHDUO\GH¿QHWKHULJKWVDQGGXWLHVRISDUWLHVWR a transaction. 10 In business to consumer transac- tions a consumer is not likely to understand terms VXFKDV³&,)´$EHWWHUSUDFWLFHLVWRFOHDUO\VWDWH the allocation of risks in the contract. )RU H[DPSOH³7KLV SULFH LQFOXGHV VWDQGDUG shipping by air and insurance from us to your address. The customer is responsible for any custom duties or other costs.” Being clear at this stage can prevent misunderstandings and will help avoid disputes. Beware of the Payment Risks In the event that the parties choose not to use an escrow agent, there is a risk that the payment will not reach the seller. The level and nature of the risk varies with the payment method. Sorkin (2001) divides payment methods into traditional and online systems. In 2001, according WR6RUNLQ³>S@HUVRQDOFKHFNVDQGPRQH\RUGHUV are the most commonly used payment mechanisms for online auction transactions.” 11 However, the current trend has seen that increasingly, credit cards have become the main means of payment. Moreover, personal checks are less likely to be used in international transactions given the dif- ¿FXOW\DQGFRVWZLWKFDVKLQJWKHP7KLVVHFWLRQ will examine the risks and advantages of each of the main payment systems. Personal Checks Personal checks present a variety of risks for both parties. For the seller, personal checks, in DGGLWLRQWREHLQJFRVWO\DQGGLI¿FXOWWRGHSRVLW FDQEHVXEMHFWWRUHMHFWLRQIRULQVXI¿FLHQWIXQGV if the account does not have funds to cover the payment when cashed. )X U W KH U WK HU H LV D VL J QL ¿ FD QW GH OD\ EH W ZH H QW KH time that the check arrives with the seller and the point when the seller actually receives the funds. This delay increases the risks. Another problem ZLWKWKHGHOD\LQYROYHVÀXFWXDWLRQVLQH[FKDQJH rates. The longer the time between the sale and WKH¿QDOGHSRVLWRIWKHIXQGVWKHJUHDWHUWKHULVN of the exchange rate changing. A personal check also presents risks to the buyer. With a check, the buyer has little recourse should something be wrong with the item ordered. Once a check has been deposited there is virtu- ally nothing the buyer can do to stop payment. For these reasons, personal checks are not an attractive method of payment. 1896 Doing International Business Online for the Small and Medium Enterprise Money Orders For the seller, money orders offer a bit more protec- WLRQVLQFHWKH\DUHLVVXHGE\¿QDQFLDOLQVWLWXWLRQV and not normally at risk for return due to insuf- ¿FLHQWIXQGV0RQH\RUGHUVGRKRZHYHULQFUHDVH costs since the issuing institution will levy a fee. The seller is also likely to be charged a separate fee to deposit the funds into her account. In addition, the money order physically has to travel from the issuing institution to the seller. This delay results in similar exchange rate risks associated with the personal check discussed. The buyer is similarly at risk when using money orders. Should something be wrong with the order there is virtually nothing the buyer can do to withhold payment on a money order. For these reasons, money orders are not very attrac- tive. Cash It almost goes without saying that cash is a highly risky form of payment. However, despite the obvi- R XV U LV N V 6R UN L Q RE VH U YH G ³ >V@ X U SU L VL QJ O\ cash is another popular payment mechanism for online auction transactions.” The risks with cash are numerous. First, cur- UHQF\LVIUHTXHQWO\³ORVW´LQPDLOLQJ(YHQLILWLV not lost there is no way to track that it was actually received by the seller. Second, counterfeit cur- rency is a risk to the seller. Third, depending on the denomination and currency, the seller might KDYHGLI¿FXOW\H[FKDQJLQJLW)RUH[DPSOHROGHU bills are often not accepted. Credit Cards Credit cards are increasingly becoming the pay- m e n t m e a n s o f c h oi c e fo r m a n y o n l i n e c o n s u m e r s . From the buyer’s perspective, a credit card allows for the funds to be more quickly deposited reducing risks of changes in exchange rates. Moreover, with a credit card payment there is no risk of return IRULQVXI¿FLHQW IXQGV 3D\PHQW YLD FUHGLWFDUG DOVR UHPRYHV GLI¿FXOW\ ZLWK IRUHLJQ H[FKDQJH since the merchant can charge the customer in one currency and receive payment in another. Finally, a one-click credit card order has fewer steps to allow the consumer to change her mind before the sale is completed. 7KHFUHGLWFDUGLVQRWZLWKRXWGLI¿FXOW\IRUWKH seller however. First, obtaining a merchant account LQRUGHUWRUHFHLYHFUHGLWFDUGVFDQEHGLI ¿FXOWIRU small merchants. In addition, credit cards take a percentage of every transaction from the payment thereby increasing the cost to the seller. Finally, a buyer can dispute a charge through their credit card company and the seller will receive a chargeback until the matter is resolved. While attractive to a buyer, this uncertainty in payment makes the credit card less attractive to a seller. From the buyer’s perspective, a credit card KHOSVUHGXFHWKHULVNVVLJQL¿FDQWO\)LUVWPDQ\ cardholder agreements give the right to the buyer to dispute charges. In these cases, the credit card company will issue a chargeback to the merchant pending resolution of the matter (Sorkin, 2001). Moreover, federal regulations in the United States give a cardholder the right to dispute charges and requires the credit card company to conduct a reasonable investigation, 12 CFR 226.13 (2006). Finally, a credit card eliminates any risk with changes in exchange rates since the transaction occurs almost instantly. Some buyers are however reluctant to relin- quish their credit card numbers online for fear of interception by nefarious parties. With the rise in awareness of identity theft, consumers are right- fully weary of releasing too much information to unknown parties online. There are ways to mitigate against this risk such as one-time use credit card numbers. These numbers are issued by the buyer’s credit card company and are linked to their primary account. The number can only be used for one transaction, thereby eliminating the 1897 Doing International Business Online for the Small and Medium Enterprise risk of future fraudulent charges on the same ac- count. Credit card companies continue to develop safer methods for online transactions. Online Payment Systems With the expansion of online commerce there has been a parallel expansion in forms of online payment. eBay’s PayPal 12 is the industry leader; however, on June 29, 2006, Google introduced a competing service, Google Checkout. 13 Typi- cally these services stand in between a buyer and a seller and help facilitate transfer of funds. In this sense, online payment systems resemble credit card transactions and have most of the same advantages and disadvantages. One added advantage is that although online payment companies do not serve as an escrow agent, 14 VHUYLFHVVXFKDV3D\3DOKDYHZHOOGH¿QHG dispute mechanisms. 15 If the parties conducted their transaction under the umbrella of eBay there LVWKHDGGHGEHQH¿WRIKDYLQJWKHDXFWLRQSD\PHQW and dispute mechanism all operated by the same corporate entity. The advantages of this will be further discussed in the third section. Cost is another advantage associated with online payment systems. For example, for interna- tional transactions under $3,000, PayPal charges the merchant 3.9% + $0.30. 16 Google Checkout is free through December 31, 2007, thereafter the charge will be 2% + $0.20 per transaction. 17 It is also relatively easy for a merchant to establish an account, comparatively easier than getting a credit card merchant account. The online payment system is equally attrac- tive to buyers. The transaction happens nearly instantaneously, they are well protected in the event that they do not get the goods they bargained for, and they do not have to relinquish their credit card numbers over the Internet. With an online payment system, their personal information is protected and their credit card number is not released to the merchant. Reducing Risk Final Comments Risk is something that cannot be completely eliminated from any transaction. Even in the simultaneous exchange on the playground, the SDUWLHVUXQULVNVVXFKDVODWHU¿QGLQJODWHQWGH- fects. They also face more immediate risks such as being beaten up and losing everything. In the online world there are unavoidable risks as well. However, by structuring the exchange and using proper payment systems, both buyers and sellers can limit these risks. Despite these efforts, should a problem arise, what recourses might our seller and buyer avail themselves of in this online world? The third section discusses the various methods available for dealing with online disputes. DEALING WITH DISPUTES The short answer is that for the vast majority of online international transactions, if a dispute arises, the aggrieved party has already lost. By WKHWLPHWKHSDUW\KLUHVDODZ\HU¿OHVDFDVHDQG eventually prevails in court, the party will prob- ably have expended more than the value of the dispute. Moreover, even if the party prevails and obtains a judgment, enforcement of a judgment in the foreign jurisdiction of the other party will be prohibitively expensive if not altogether impos- sible. The traditional judicial system fails small and medium enterprises engaged in international transactions. Online Dispute Resolution (ODR) offers hope and better access to justice for these parties. There are many interpretations of the scope of ODR. This chapter will use the commonly cited $PHULFDQ%DU$VVRFLDWLRQGH¿QLWLRQ ODR is a broad term that encompasses many forms of alternative dispute resolution (ADR) that incorporate the use of the Internet, websites, email communications, streaming media and other 1898 Doing International Business Online for the Small and Medium Enterprise information technology as part of the dispute resolution process. Parties may never meet face to face when participating in ODR. Rather, they might communicate solely online. 7KLVGH¿QLWLRQPDNHVLWFOHDUWKDW2'5LVDZLGH concept contemplating a variety of methods of FRPPXQLFDWLRQ0RUHRYHU2'5LVDÀH[LEOH concept that will expand to include new forms of communication as they come into existence. ODR can be broadly divided into three cat- egories: online negotiation, online mediation, and online arbitration. This section will analyze these categories and evaluate them from the perspective of a small to medium enterprise. Advantages of ODR Over Traditional ADR ODR has many advantages over traditional ADR. First, ODR is convenient since it eliminates the need to travel great distances to meet face-to-face. It is also relatively inexpensive and generally much faster than its traditional counterparts. Moreover, most ODR methods do not require the assistance of an attorney. Finally, ODR offers an online environment already familiar to our online seller and buyer. They chose to enter into their relationship online; it only makes sense to resolve any disputes in the same environment. Online Negotiation At its essence, negotiation is no more than the parties discussing their dispute in an attempt to resolve it. If the parties can come to mutual understanding, they can end their dispute and perhaps continue their business relationship. Ponte (2005) argues that face-to-face negotia- WLRQLV³RIWHQDJDPHRIEULQ NPDQVKLSERWKVLGHV posture and make excessive demands and offers to settle…in short, a game of legal ‘chicken.’” Moreover, in face-to-face negotiation, people often employ pressure tactics and other strategies that make it very stressful. Online negotiation eliminates many of the problems. For example, intimidation tactics that rely on physical presence are obviated online. Online parties are forced to address the merits of the dispute rather than rely on other tactics. While online negotiation can be done entirely by the parties such as through an exchange of e-mail, there are two types of online negotiation WKDWLQYROYHWKHKHOSRIDWKLUG³SDUW\´ 18 : assisted negotiation and automated negotiation. Assisted Negotiation Assisted negotiation involves the use of informa- tion technology to help the parties organize their thoughts (Kaufmann-Kohler, 2004, p. 13). By way of example, Kaufmann-Kohler cites software that helps organize proposals from both sides. Normally the assistive software is designed to help the parties identify the issues and move towards a mutually agreeable settlement. Square- Trade 19 is an example of a site offering assisted negotiation services. At SquareTrade, assisted negotiation is free of charge. If the parties cannot reach a resolution, SquareTrade offers other ODR services for a charge. The advantage of assisted negotiation is that it is easy, free (in the case of SquareTrade), and has a very high success rate. According to Katsh and Rifkin (2001), SquareTrade direct negotiations have an 80% success rate (p. 24). SquareTrade is closely aligned with eBay and RIIHUVDSURFHGXUHWRVSHFL¿FDOO\DGGUHVVQHJDWLYH IHHGEDFNRQH%D\6TXDUH7UDGHDOVRRIIHUVD³VHDO program” that is similar to the trusted third party FHUWL¿FDWLRQGLVFXVVHG(VVHQWLDOO\6TXDUH7UDGH incorporates several of the strategies to help reduce risk and increase trust between parties. 1899 Doing International Business Online for the Small and Medium Enterprise Automated Negotiation If the parties are disputing over a single issue such as price, automated negotiation can be a useful tool. Some scholars refer to automated negotia- W LRQ DV ³ EO L QGE LG GL QJ ´ 3R QWH & DYH QD J K p. 39). These systems allow the parties to enter their offers but do not reveal the amount to the RWKHUSDUW\³,IWKHRIIHUVDUHZLWKLQDFHUWDLQ range, often 30 percent, of each other, the parties [automatically] agree to settle and split the differ- ence” (Katch & Rifkin, 2001, p. 61). In addition to being simple and low cost or free, these systems also protect the offers in the event that no settlement is reached. In other words, a party is not forced to reveal its bottom line during the negotiations. Cybersettle 20 is an example of a site offering automated negotiation services. One limitation of automated negotiation is that it normally can handle cases with only one variable in dispute, such as price. If the parties are disputing price and an apology, the simple software cannot account for both variables. A relative new site called SmartSettle 21 has much more sophisticated software that allows for multivariable negotiations. Essentially, SmartSet- tle lets the parties assign their own values to the different variables. For example, one party might value an early payment more than a higher total payment. This party would be willing to accept a lower total payment if it was made relatively quickly. SmartSettle allows these interests to be taken into account and should result in better settlements than in traditional blind bidding would allow. Since SmartSettle is relatively new, there LVQRWHQRXJKGDWDWRGUDZDQ\¿UPFRQFOXVLRQV but it looks promising. Online Mediation Online mediation started in the United States in July 1996 (Kaufmann-Kohler & Schultz, 2004, S,QWKH¿UVWFDVHDQRQOLQHRPEXGVRI¿FH helped mediate a dispute between a Web site owner and a newspaper. 22 Within less than a month, the RPEXGVRI¿FHKHOSHGWKHSDUWLHVUHDFKDPXWXDOO\ agreeable solution. At its essence, online mediation is the use of a third party (a real person unlike assisted negotia- tion) to help resolve a dispute between two or more parties. Since this process necessarily involves a third party, the cost increases dramatically over the often free online negotiation process. In fact, sites such as SquareTrade offer negotiation free of charge, relying on online mediation to provide income to the company. Mediation can be helpful since the neutral third party can listen to both sides and offer suggestions to help move the parties to settlement. In the case of SquareTrade, an eBay seller can get negative feedback removed. Given the importance of the feedback rating to parties, this can be a strong motivation to use these services. The success rate of online mediation is dif- ¿FXOWWRDVVHVVVLQFHPRVWUHVROXWLRQVDUHFRQ¿- dential (Kaufmann-Kohler & Schultz, 2004, p. 26). Kaufmann-Kohler and Schultz estimate that RQOLQHPHGLDWLRQDWOHDVWDVRI³GRHVQRW appear to have scaled great heights. There are over 25 providers of online mediation, but none seems very active except SquareTrade” (p. 26 citation omitted). As of December 2006, accord- LQJWR6TXDUH7UDGHLW³KDVKDQGOHGRYHUPLOOLRQ disputes across 120 countries in 5 languages.” 23 Unfortunately, SquareTrade does not break down its cases in to negotiation and mediation. In any case, mediation can be a useful tool for resolving disputes. Given the increase in cost, it is more appropriate for larger disputes than for negotiation. The parties should try online negotia- tion, only if that fails should they escalate things to mediation. Online Arbitration The online negotiation and mediation methods result in a mutual agreement in successful cases. Arbitration is different; the parties submit their 1900 Doing International Business Online for the Small and Medium Enterprise cases to a third party for a ruling. In this sense, arbitration is more hostile in that both (and in some case neither) agree with the ultimate ruling. The process normally involves the parties submitting their cases to an arbitrator or a panel of arbitrators. The parties are required to set out both the facts and the legal basis for their arguments. This often requires the assistance of legal counsel, further adding to the costs. The DUELWUDWRUVZLOOUHYLHZWKH¿OLQJVWDNHHYLGHQFH through videoconference or other means, and render a judgment. The primary problem, aside from cost, is the fact that enforcement of the agreement is not assured. In the case of a mutually agreed upon resolution through negotiation or mediation, it is more likely that the parties will comply with the DJUHHPHQWVLQFHWKH\DI¿UPDWLYHO\DJUHHGWRLW In arbitration, the parties may disagree with the DUELWUDWRU¶V¿QGLQJVDQGUHIXVHWRFRPSO\ZLWKWKH decision. The issue of enforcement of an arbitral award is similar to enforcement of a court deci- sion. In both cases, small or medium businesses ZLOO¿QGWKDWHQIRUFHPHQWLVERWKH[SHQVLYHDQG in many cases nearly impossible. Ultimately, online arbitration suffers from too many of the shortcomings of traditional courts to be of much use to small and medium businesses doing international business. These businesses are advised to try to solve their disputes through negotiation or mediation. CONCLUSION Returning to the Kenyan seller and foreign buyer, in order for their transaction to occur, they must overcome the problems of lack of trust and high risk. To address these problems, before the transac- tion occurs, both parties can take steps to increase their trustworthiness. Further, once they agree to proceed with the transaction, there are steps they can take to reduce the risk to both sides. If a problem arises, the buyer and seller can UHVROYHWKHLUGLVSXWHHI¿FLHQWO\DQGWRWKHVDWLV- faction of both parties through the use of online dispute resolution. A seller should look at joining a private marketplace that offers all of these services. For example, eBay has ways to track reputation and offers good methods of communication through both asynchronous and synchronous communica- tion methods. eBay’s ownership of PayPal offers a r e l a t i v e l y r i s k f r e e m e t h o d o f e n s u ri n g p a y m e n t f o r goods. Finally, eBay also has a relationship with SquareTrade, allowing sellers to avail themselves RI WKLUGSDUW\ FHUWL¿FDWLRQRQOLQHQHJRWLDWLRQ and online mediation services. This integrated approach makes online marketplaces such as eBay very attractive for merchants. One problem that this reveals is that online justice is increasingly becoming privatized. This privatizing of justice has caused some to argue W K DW ³H %D\ OD Z´ LV GH YHO RS LQ JR XW VL GH RI W KH SXE OL F legal system. Common disputes are being resolved FRQ¿GHQWLDOO\DQGZLWKRXWRYHUVLJKWE\WKHMXGLFLDO branch. Without feedback over the problems, the courts and the legislature cannot react and make the necessary changes to laws. Although the legal system has failed the small and medium enterprise engaged in online inter- national transactions, should the private sector provide private justice? While less of a concern to the enterprises, this should be a concern for policy makers. FUTURE RESEARCH DIRECTIONS The Traditional Economy This chapter has focused on traditional transac- tions involving the sale of goods between remote parties. Online payments and dispute resolution systems will continue to evolve to help facili- tate these types of transactions. As this area is still relatively undeveloped, there will be many changes. 1901 Doing International Business Online for the Small and Medium Enterprise $VDQHHGLVLGHQWL¿HGSDUWLHVZLOOUXVKWR provide services such as is the case with e-escrow services. Many of these services will be similar in nature to existing services. There will also be LQQRYDWLYHPHWKRGVRIDGGUHVVLQJWKHVSHFL¿F concerns with online commerce. Researchers should look for needs that need to be addressed and consider their own innovative methods of solving them. The Virtual Economy Although this chapter addressed transactions in the traditional economy, increasingly, trade is being done in virtual goods. As commerce expands into the virtual space, so will disputes. )RU H[DPSOH PDQ\ FRPSDQLHV KDYH RI¿FHV LQ the virtual world of Second Life. Moreover, as recently as September 2006, according to Colin Rule, eBay’s Director of Dispute Resolution, the most often traded commodity on eBay consists of virtual goods. These virtual goods range from gold for online games such as World of Warcraft to real estate in other virtual worlds. Online, virtual dispute resolution will eventually come to these online worlds. These online worlds exist in a grey area in terms of legal enforcement. Courts are reluctant to enforce contracts for virtual goods. In fact, in early 2007, eBay decided to ban the sale of virtual items from online games (Pham, 2007). eBay’s an- nouncement underscores the legal uncertainties, ³:HFDQ¶WVD\GH¿QLWHO\LILW¶VOHJDORULOOHJDO´ Who is the actual owner of these virtual goods, the company providing the environment or the ³FLWL]HQV´WKHPVHOYHV"+RZVKRXOGDFRQWUDFW be enforced in an online world? This virtual economy and its real disputes is an area ripe for additional research. REFERENCES American Bar Association Task Force on E-Com- merce and ADR. (2002). Addressing disputes in electronic commerce. Final Report and Recom- mendations. Retrieved December 9, 2006, from www.law.washington.edu/ABGA-eADR Barrett, R. (2004). Take the money and run: Fake online escrow services target big-ticket buyers. Consumer Reports. Retrieved September 8, 2006, from http://www.consumerwebwatch. org/dynamic/e-commerce-investigation-take-the- money-and-run.cfm Black’s Law Dictionary (6 th ed.). (1990). Saint Paul: West Publishing. Chauhan, J. (2003). Online dispute resolution systems: Exploring e-commerce and e-securi- ties. Windsor Review of Legal and Social Issues, 15, 99. Edelman, B. (2006, September 6). Adverse Selec- WLRQ LQ RQOLQH ³WUXVW´ FHUWL¿FDWLRQV. Retrieved from http://www.benedelman.org/publications/ advsel-trust-draft.pdf Epstein, L. (2001). Symposium: Alternative dis- SXWHUHVROXWLRQLQWKHWZHQW\¿UVWFHQW XU\&\EHU e-mail negotiation vs. traditional negotiation: Will cyber technology supplant traditional means of settling litigation? Tulsa Law Journal, 36, 839. Ewing, G. P. (2002). Technology and legal prac- tice symposium issue: Using the Internet as a resource for alternative dispute resolution and online dispute resolution. Syracuse Law Review, 52, 1217. Katsh, E., & Rifkin, J. (2001). Online dispute UHVROXWLRQUHVROYLQJFRQÀLFWVLQF\EHUVSDFH San Francisco: Jossey-Bass. Kaufmann-Kohler, G., & Schultz, T. (2004). Online dispute resolution challenges for con- temporary justice. The Hague, The Netherlands: Kluwer Law International. 1902 Doing International Business Online for the Small and Medium Enterprise Lodder, A. R., & Zeleznikow, J. (2005). Article: Developing an online dispute resolution environ- ment: Dialogue tools and negotiation support sys- tems in a three-step model. Harvard Negotiation Law Review, 10, 287. My virtual life: A journey into a place in cyber- space where thousands of people have imaginary lives. Some even make a good living. Big adver- tisers are taking notice. (2006, May 1). Business Week. O g u n n a i k e , L . ( 2 0 0 6 , N o ve m b e r 2 6 ). ‘ Yo u r s t r u l y ’ The e-variations. New York Times. Retrieved December 9, 2006, from http://www.nytimes. com/2006/11/26/fashion/26email.html?ex=1165 726800&en=dcac567c9dbefa8a&ei=5070 Pham, A. (2006, February 3, 2007). eBay bans auctions of virtual treasures: Players of online games spend big on digital loot. But the site is worried about legal issues. Los Angeles Times, p. Business 1. Ponte, L., & Cavenagh, T. D, (2005). CyberJustice online dispute resolution (ODR) for e-commerce. Upper Saddle River, NJ: Pearson Education, Inc. Rao, R. (2001). Tradenable reaches the end of the road. Online reporter. Retrieved September 2007, from LexisNexis (3183239). Rule, C. (2002). Online dispute resolution for business B2B, e-commerce, consumer, employ- PH QW L QVXUD QFH DQGRW K HUFRP PHUFL DO FRQ ÀL FW V. San Francisco: Jossey-Bass. Rule, C. (2006). Comments at Center for Informa- tion Technology and Dispute Resolution Cyber- week conference Sept. 25-29, 2006. http://www. odr.info/cyberweek2006/program.php Selis, P., Ramasastry, A., & Wright, C. S. (2002, June). Bidder beware: Toward a fraud-free mar- ketplace—Best practices for the online auction industry. :DVKLQJWRQ 6WDWH $WWRUQH\V 2I¿FH Retrieved December 9, 2006, from http://www. atg.wa.gov/consumer/Publications/auction_best_ practices082302.doc Shah, A. (2004). Using ADR to resolve online disputes. Richmond Journal of Law & Technol- ogy, 10, 25. Sorkin, D. E. (2001). Payment methods for con- sumer-to-consumer online transactions. Akron Law Review, 35, 1. Tusser, T. (1557). Five hundred points of good hus- bandry. Liverpool, UK: Kessinger Publishing. Whitman, M. (2006). Keynote address. Proceed- ings of eBay shareholders convention. Audio transcript of the keynote available at: http://www. wsradio.com/internet-talk.cfm/radio/ebay-key- note-2006.htm CASES Bruckman v. Parliament Escrow, 190 Cal. App. 3d 1051 (Cal. Ct. App. 1987) Farago v. Burke, 262 N.Y. 229 (N.Y. 1933) Moore v. Trott, 156 Cal. 353 (Cal. 1909) REGULATIONS 12 CFR 226.13 (2006) ADDITIONAL READING Fisher, R., & Brown, S. (1988). Getting together building relationships as we negotiate. New York: Penguin. Fisher, R., & Ury, W. (1991). Getting to yes: Negotiating agreement without giving in. New York: Penguin. Ury, W. (1993). Getting past no negotiating your way from confrontation to cooperation. New York: Bantam. 1903 Doing International Business Online for the Small and Medium Enterprise Web Resources Center for Information Technology and Dispute Resolution, http://www.odr.info/ Center for Information Technology and Dispute Resolution has a very comprehensive listing of materials in their online library, http://www.odr. info/library.php International Forum on Online Dispute Resolu- tion, http://www.odr.info/liverpool/ Findlaw is an excellent site for getting general OHJDOLQIRUPDWLRQKWWSZZZ¿QGODZFRP The United States Small Business Administra- tion has very good information for small business owners; http://www.sba.gov/ ENDNOTES 1 $³92, 3PH´EXW WRQLV DO LQ NRQD :HESD JH that allows a user to instantly commence a voice over IP ( VOI P) telephone c all with the party. Skype is one such VOIP service. 2 http://www.bbbonline.org/ 3 http://www.webassured.com/ 4 http://www.squaretrade.com/ 5 For example, TRUSTe (http://www.truste. org /³LVDQLQGHSHQGHQWQRQSUR¿WHQDEOLQJ trust based on privacy for personal informa- tion on the Internet. We certify and monitor web site privacy and email policies, monitor practices, and resolve thousands of consumer privacy problems every year.” 6 ³6HFRQG/LIHLVD'YLUWXDOZRUOGHQWLUHO\ built and owned by its residents.” It offers an environment where people can sell vir- tual goods for online currency that can be H[FKDQJHGIRU³UHDO´FXUUHQF\KWWSVHFRQ- dlife.com/ 7 ³(VFURZ$OHJDOGRFXPHQWVXFKDVDGHHG money, stock, or other property delivered by the grantor, promisor or obligor into the hands of a third person, to be held by the latter into the happening of a contingency or performance of the condition, and then by him [or her] delivered to the grantee, promisee or obligee. A system of document transfer in which a deed, bond, stock, funds, or other property is delivered to a third per- son to hold until all conditions in a contract IRUIXO¿OOHGHJGHOLYHU\RIGHHGWRHVFURZ agent under installment land sale contract until full payment for land is made.” Black’s Law Dictionary, sixth edition, page 545, West publishing Co. 1990, Henry Campbell Black, M. A. 8 For example see https://www.escrow. com/solutions/escrow/process.asp (visited September 8, 2006). 9 https://www.escrow.com/support/calculator. asp (visited September 8, 2006). 10 http://www.iccwbo.org/incoterms/id3045/ index.html Also see http://www.iccwbo. org/incoterms/wallchart/wallchart.pdf for a handy chart depicting the differences in the terms. 11 Sorkin cites Andy Roe, E-Payment Reluc- tance, AuctionWatch.com (Mar. 2, 2001), at http://www.auctionwatch.com/awdaily/ features/reluctance/ (noting that over 80% of eBay sales involve payment by personal check, money order, or cashier’s check); National Consumers League, supra note 2 (noting that 69% of buyers pay by check, money order, or cashier’s check). 12 http://www.paypal.com/ 13 https://checkout.google.com/ 14 For example, in PayPal’s help section WKH\VSHFL¿FDOO\VWDWHWKDWWKH\DUHQRWDQ escrow agent. https://www.paypal.com/ cgi-bin/webscr?cmd=_help-ext&nodeid OHD¿G SULRUBWUDQVDFWLRQB id=33405&answer_id=16777216 (accessed December 9, 2006). . stand in between a buyer and a seller and help facilitate transfer of funds. In this sense, online payment systems resemble credit card transactions and have most of the same advantages and. NPDQVKLSERWKVLGHV posture and make excessive demands and offers to settle…in short, a game of legal ‘chicken.’” Moreover, in face-to-face negotiation, people often employ pressure tactics and other strategies. for personal informa- tion on the Internet. We certify and monitor web site privacy and email policies, monitor practices, and resolve thousands of consumer privacy problems every year.” 6