Abstract
Recent EU legislation has mandated the extension of comprehensive coverage of consumer dispute resolution (CDR) throughout the EU. The extension of CDR has given rise to a range of questions about the theoretical and practical implications of these changes. The field of CDR is underexplored in academic literature and only a few studies provide an overview of this rapidly developing area. There is a need to base CDR schemes on empirical evidence to inform practice and to provide justice. Tyler’s procedural justice model of public compliance with the law might be beneficial in this inquiry. This exploratory study tests whether Tyler’s well-established normative model of social regulation holds true in the CDR context by applying it to the ombudsman. In doing so, this paper seeks to contribute to a richer understanding of how to assess consumer acceptance of an ombudsman model of CDR. The study finds that Tyler’s model cannot be fully translated to the UK ombudsman case study. The current dearth of comparative empirical evidence on the effectiveness of CDR in Europe fuels the need for further inquiry and re-evaluation of its theoretical foundations.
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Notes
CDR is used in this paper to define a distinct development and field in its own right, that of consumer disputes distinguishing it from the more general field of alternative dispute resolution (ADR). Therefore, CDR is used throughout the paper except when referring to legislation “directive on consumer ADR,” although the author sees it as CDR.
A noteworthy driver of the new legislation on CDR is evidence of a large number of unresolved complaints. A study by UK Consumer Focus in 2012 estimated that out of 6.4 million consumer complaints to business in the UK, 2 million remained unresolved http://www.consumerfocus.org.uk/publications/consumer-detriment-2012.
In this paper, the term user and consumer are used interchangeably.
In 1809, the first ombudsman was established in Sweden.
Legitimacy here is understood to be a universalistic claim, in line with procedural justice theory, rather than as “legitimacy in context.”
This study takes the compliance with the “top-down” EU legal quality requirements for CDR bodies as a given. The choice of case study emphasizes this. The primary interest is in users’ perception of fairness and building legitimacy. For future research on other CDR bodies, the compliance with procedural quality criteria might need to be established before turning to matters of users’ perceptions.
This paper is the starting point for a larger comparative project on users’ perceptions of CDR ombudsmen in Europe.
Mediation is a procedure based on the voluntary participation of the parties, in which an intermediary (or multiple intermediaries) with no adjudicatory powers systematically facilitate communication between the parties with the aim of enabling the parties to themselves take responsibility for resolving their dispute.
Joined cases C-317-320/08 [2010] 3 C.M.L.R. 17 ECJ.
Which states that “…everyone is entitled to a fair and public hearing….”
It is important to make the distinction here that mediation is one technique of ADR but the Mediation Directive is not understood as CDR.
Directorate General Health and Consumers of the European Commission.
Hodges et al. 2012b pp. 29–30. Mediation: mediation is conducted confidentially and consists of an independent third party actively assisting the parties in working towards a negotiated agreement of a dispute. Conciliation: this is a process similar to mediation but in which the neutral third party takes a more active role in putting forward terms of settlement or an opinion on the case. Arbitration: in arbitration, an independent third party considers both sides in a dispute, and makes a decision that resolves the dispute. In most cases, the arbitrator’s decision is legally binding on both sides. Adjudication: like arbitration, adjudication involves an independent third party considering the claims of both sides and making a decision. This usually produces a decision that is binding on the company but not on the consumer. Ombudsman schemes: ombudsmen are independent, impartial intermediaries who consider complaints. The particular mechanisms of ombudsman schemes vary but they often combine neutral fact-finding, mediation, and adjudication in various tiers. Legal mechanisms: formal legal action is usually the last resort employed by consumers to obtain redress. Consumers can, however, take legal action without going through other mechanisms if they wish.
Position of the European Parliament adopted at first reading on 12 March 2013 with a view to the adoption of Directive 2013/11/EU of the European Parliament and of the Council on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR).
It is outside of the scope of this paper to map and evaluate the details of developments leading to the final 2013 ADR directive and its minimum standards quality criteria.
In this paper, the quality principles (expertise and impartiality, transparency, effectiveness, fairness, independence, legality, liberty, and representation) are treated as a unit of procedural criteria. A more detailed analysis of the individual principles is subject to future studies and is not in the scope of this paper.
This approach has many limitations (e.g., according to this model, if two procedures have comparable outcomes, they would be equally just).
The objective here is not to test if, in fact, a specific CDR procedure meets the procedural requirements (quality criteria), rather it is to consider the importance of user participation in the procedure that will lead to consumer satisfaction, as well as build legitimacy. As established above, this study presumed that a (perceived) fair procedure is made up of high-quality standards and user participation. Furthermore, if these procedural criteria are met, they have the ability to build legitimacy. For the sake of this analysis, it is assumed that the quality standards are met in the chosen case study, which leaves us to study user participation.
In depth comparisons and analysis of other ombudsman schemes are not yet possible as the empirical data is not available. The author is in the process of gathering primary data including actual evidence of user behaviour to be able to gain a better understanding of different ombudsman procedures in various European States and to test various hypotheses.
Preliminary analysis of existing consumer satisfaction results from UK schemes (Financial Ombudsman Service and Legal Ombudsman) reinforce the trend observed in the case study presented below, that there is no clear evidence of procedural fairness being judged independent of outcome fairness.
Since then, OS have successfully resolved over 65,000 complaints.
OS:C deals with 75% of the telecom complaints, there is another telecom CDR scheme CISAS (http://www.cisas.org.uk/) which creates some problems. See: Hodges, C et al. (2012a).
Approved by Ofgem, the UK gas and electricity regulator, to provide redress under the terms of the Consumers, Estate Agents and Redress Act, 2007.
Approved by the Office of Fair trading (OFT) as an estate agent redress scheme, work meets the requirements of the Consumers, Estate Agents and Redress Act, 2007.
Resolve complaints about bodies that either own or administer the licensing of copyright materials on behalf of third parties.
If a complaint can be considered by OS:C, the service will issue a complaint form for the complainant to sign and return. The complaint form gives the participating company permission to release any information it holds on the customer.http://www.ombudsman-services.org/downloads/Communications%202011%20AR.pdf
The fact that OS covers several sectors provides a unique chance to learn from collected data and experience and implement changes across sectors; react to the market and feedback to companies and regulators, thereby influencing behaviour.
Criteria in the 2013 directive are expertise, independence, and impartiality; transparency; effectiveness; fairness; liberty; and legality.
Mediation is an oral procedure and conciliation a written one.
OS:C only looks at a grievance if the company complained about has dealt with it first, or the company has not replied within an appropriate timeframe. This applies to all other CDR schemes.
Feedback is a valuable tool to improve behaviour. OS has a system to capture all incoming complaints and aggregate the information. Through this, complaint trends can be identified and directly fed back to the companies to help them improve their arrangements as well as to regulators to make them aware of market developments. This does not only regulate behaviour but increases customer satisfaction and helps business improve.
This approach also includes collaboration with member companies to predict complaints.
“We cannot afford to use old techniques. The cost of the Local Government Ombudsman has just been cut by the government by 37% but areas of jurisdiction have been added. There is an expectation and impatience by customers to get a quick resolution: we are required by the regulator to complete energy and communication disputes within 6 weeks.” Lewis Shand Smith, Chief Ombudsman Services (2011).
Calls are normally recorded, when a complaint is accepted for resolution, OS:C will assess the information and decide the most appropriate way to proceed.
The official term OS:C use is decision, but adapted to the definition of techniques; this paper defines it as settlement.
During 2010/11, approximately 29% of OS:C cases were resolved through MAS. The remainder went through to formal investigation, where a case file is requested from the participating company and an investigation officer issues a report. It is expected that the number of informally resolved cases will rise as the process becomes embedded (annual report 2011).
The response rate has grown over the years: In 2004, 159 enquirers and 131 complainants were surveyed by post and 21 complainants were interviewed by telephone. In 2005, some 203 enquirers and 289 complainants were surveyed by post and a further 98 enquirers were interviewed by telephone. In 2005, some 203 enquirers and 289 complainants were surveyed by post and a further 98 enquirers were interviewed by telephone. In 2006, some 205 enquirers completed a postal survey and 98 telephone interviews with enquirers were also undertaken. In 2008, a total of 307 enquiries and 498 complainants responded to the survey representing response rates of 31% and 50%, respectively.
In 2010, a total of 375 complainants and 181 enquirers were surveyed using a self-completion method (postal and web options were offered)—representing response rates of 37% and 18%, respectively. A total of 209 website visitors responded to a survey held on the Otelo website. In addition, 21 member companies completed a web survey and 4 of these took part in a telephone follow up. In 2011, research was undertaken between February and April 2011. A total of 365 complainants and 214 enquirers were surveyed using a self-completion method (postal and web options were offered)—representing response rates of 37% and 21%, respectively.
This is also an observed phenomenon in other CDR schemes. For example, two German CDR bodies (Insurance Ombudsman and the Conciliation Body for Public Transport) receive phone calls and letters from consumers who have been told that they do not have a case or who received an unfavourable outcome. These consumers have thanked the ombudsmen for the time they took to listen to them and to explain the reason behind the refusal of their cases or the unexpected outcome. However, there is no reliable documentation of numbers of these cases.
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Acknowledgments
Dr Naomi Creutzfeldt, ESRC Research Fellow, Centre for socio-legal studies University of Oxford. Naomi.creutzfeldt@csls.ox.ac.uk.
This work was supported by the Economic and Social Research Council [grant number ES/K00820X/1].
An earlier version of this paper was presented to the CRN 10 panel on Civil Justice and Disputing Behaviour at the Law & Society Association Annual Conference in Boston, 31 May 2013. I am very grateful to Christof Berlin, Anne-Marie Carstens, Rebecca Money-Kyrle, Simon Halliday, Petra Mahy and Rhonda Tombros for helpful comments and feedback on earlier drafts of this paper. I extend my gratitude to the anonymous reviewers for their sharp and constructive comments and suggestions for improvement.
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Creutzfeldt, N. How Important is Procedural Justice for Consumer Dispute Resolution? A Case Study of an Ombudsman Model for European Consumers. J Consum Policy 37, 527–546 (2014). https://doi.org/10.1007/s10603-014-9269-x
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DOI: https://doi.org/10.1007/s10603-014-9269-x