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Allen Arneson, of Ludington, Mich., is an eBay pro. He has perfected the art of sniping — eBay lingo for winning auctions. All 42 of his transactions had gone smoothly. Then he purchased a laptop from a seller in New Jersey. It arrived without any packing stuffing. When he opened the box, the laptop’s screen was cracked. After a brief and fruitless e-mail exchange with the seller, Arneson became worried. “I said, ‘Oh man, I’m in trouble now. I’m out 500 bucks on a machine that doesn’t work,’” he recalls. So he tried a new tactic: online dispute resolution. He contacted the New Jersey resident through SquareTrade, an option listed on eBay’s Safe Harbor page where customers go for help on deals gone awry. The company is providing this service to eBay as a pilot program until the end of June. “I had nothing to lose,” Arneson says. SquareTrade is one of a handful of companies in what may prove to be a hot new market: settling disputes on the Web. Many of these, such as clickNsettle and Cybersettle, focus on monetary disputes and insurance claims. SquareTrade is working in the auction arena. As online mediation gains acceptance by many in the e-commerce industry, lawyers may adopt it as well. Although Steve Abernathy, SquareTrade’s chief executive, is from the business world (he was a McKinsey & Co. associate), he has legal bigwigs behind him. On SquareTrade’s advisory board is legal studies professor Ethan Katsh, of the University of Massachusetts — perhaps the leading expert on online dispute resolution — and David Johnson, a partner at Washington, D.C.’s Wilmer, Cutler & Pickering, and a cyberexpert himself. Cyberauctions are certainly a good source of incendiary conflicts. The Federal Trade Commission received more than 10,700 complaints in 1999 stemming from online auction transactions — up from 106 in 1997. According to Delores Gardner, a Federal Trade Commission attorney, many people claim that they didn’t receive their goods. Others insist that the merchandise is less valuable than they expected. “Someone says they have a rare Beanie Baby, and then they mail you one that is worth $10,” Gardner says. Now Beanie Baby fanatics have somewhere to turn. eBay users generally rely on user feedback (the online evaluations they give to the people they do business with) as a form of regulation. eBay itself has taken a hands-off approach, forwarding complaints directly to the FTC. But the company is starting to explore more assertive options, like the SquareTrade alliance. “An eBay user will file a fraud complaint, and we find that it’s a dispute between buyer and seller and not necessarily fraud,” says Kevin Pursglove, a spokesman at eBay. “Oftentimes it will be something as small as the color of what was being described. You want to take advantage of all the services you can to arrive at resolution.” When Arneson filed his complaint and the New Jersey seller agreed to participate, an automatic e-mail was sent to both parties, giving them passwords for a secure site. Then a mediator looked at the case and e-mailed both parties. The parties communicated with the mediator through a text-based program on the site, not e-mail. According to Jessica Notini, a former lawyer based in San Francisco who works part time as one of SquareTrade’s 150 mediators, a neutral go-between is a good alternative to direct contact. “You take what’s a hostile message and totally reword it, and try to convey the essence of the concern,” she says. This can be especially useful in lieu of e-mail, which is all too often off-the-cuff and uncensored. “Online, the hostility level is higher,” Notini says. “Because people are not looking at each other in the eye, they have not shaken hands and formed some initial basis for trusting each other. You feel unprotected in the Internet world.” Where consumers saw vulnerability, companies like SquareTrade see opportunity. So far the company has raised $9 million in venture capital. But unless it raises more by early next year, it will have cash flow problems of its own. SquareTrade partnered this month with Onvia, a marketplace for small businesses. To make a profit, SquareTrade will eventually charge eBay users a fee for their services: $10 to $15 plus 2 percent to 5 percent of the total transaction. It remains to be seen whether eBay veterans who live for a bargain will mind the fee. Arneson was satisfied with the deal he worked out through SquareTrade. Although the service is free during the pilot, he says that he wouldn’t mind paying $10 or $15. In the end, the New Jerseyan bought him another laptop on eBay. Arneson replaced the broken one himself, and there was no bad blood between the two. “We ended up leaving positive feedback for each other,” he says. Ebay users can complain to the FTC, at www.ftc.gov/ftc/complaint.htm, or they can settle their disputes through SquareTrade, located at www.squaretrade.com.

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