eBay Feedback Changes Prompts Fair Outcomes
This week we take a look at a new Web-based service designed to help sellers reclaim their reputation when a dispute arises.

On the very same day that eBay rolled out changes to its Feedback process, Boston-based Fair Outcomes, Inc. launched a new service called Fair Reputations that helps buyers and sellers monetarily resolve their e-commerce disputes. Devised by a diverse team of computer scientists, game theorists and attorneys, Fair Reputations provides an independent online system that is designed to help repair an online seller's damaged reputation.

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.

Fair Reputations: A First Look
The system itself is very straightforward and painless to use. If a buyer claims you did not handle a transaction in a professional manner, or if he or she submitted any type of negative feedback under your username, you can log on to the Fair Reputations Web site and start the dispute and resolution process by issuing a confidential settlement offer and a deadline for a response. The second party, who would most frequently be the buyer in an e-commerce transaction, is then contacted and asked to use the Fair Reputations system to accept or suggest changes to your proposed offer.

Damage Control: Resolve disputes with Fair Reputation. (Click for larger image.)

When testing the Fair Reputations system I created a fictitious invitation. The first step was to provide my own information including my name, username, e-mail and mailing address. I also was prompted to provide the name, e-mail address and mailing address of the other party. With this information, a case number and password was automatically generated. Next, I verified the information, then prepared a Term Sheet where I provided the transaction information (e.g. the e-commerce site transaction number or eBay auction number), the date the offer would be valid until, and then I used the Define Monetary Amount Page to specify, in dollars, my terms for resolution.

In this test I entered in $32 and then was able to preview the information that would be sent to the second party. The form is straightforward and indicates that the party may use the Fair Reputations system for free to settle. The party would then specify the dollar amount it is willing to accept — your offer is not shown. If the party enters in an amount that is lower or equal to your terms, the dispute is resolved and you then fulfill your settlement obligation.

If the matter is not settled in the first two steps, Fair Reputations offers the responding party the option of going to Final-Offer Arbitration. If the party accepts the offer to go to Final-Offer Arbitration, then he must elect at that time to be bound regardless of whether he wins or loses, or to honor the outcome only if he wins. While this may sound biased in favor of the buyer, in theory it is not. If the buyer loses, it is not binding on either side and both parties walk away, but the seller comes out with proof they tried to fairly resolve the issue

This type of buyer is an unfair buyer that will be weeded out by the Fair Reputations system. In this case, the seller's reputation is still restored and the buyer walks away with nothing.

If the matter is settled prior to the deadline or results in an agreement to go to arbitration, the Fair Reputations system will give each party a "Success Certificate." Failure to reach a settlement results in a "Failure Certificate." The certificate can be used to show to the e-commerce site that you resolved the issue when you file to obtain a recalculated reputation score, or on some marketplaces, file to have a negative feedback removed.

Putting The Game Theory to Work for E-commerce
What is most interesting is the theory upon which the Fair Reputations system is based, called the Game Theory. The Game theory is actually a mathematical way to analyze what choices rational individuals will make, when the result will completely depend on the combination of all players' choices. In a conversation with Ecommerce-Guide.com, Ring said that the Game Theory addresses the manner in which people bargain — just like in chess game where you anticipate the opponents move.

In the e-commerce world, with a system such as Fair Reputations, neither the buyer or seller is favored by the system, nor can the outcome be anything but fair, he said. For example, a seller will have to submit a fair monetary value. If the buyer enters a value that they feel is fair, but it is not equal or lower to the seller's number, arbitration will automatically side with the party who has come closest to the fair value. Sellers trying to pay out the least amount they can rather than the fair value will lose — as will buyers trying to get the most money out of a seller.

Ring said, "The structure of our system is such that any seller has strong incentive to be fair and propose a reasonable fair number. A buyer has incentive to participate, and this system deprives buyers of any incentive or excuse to not make a reasonable proposal by the deadline. After using the service, sellers can demonstrate their willingness to resolve the issue and their reputation should be restored."

The Fair Reputations System 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. When you open a case with the Fair Reputation system (called an Invitation) there is a $10 fee and second parties proceed through the system without incurring any fee.

While this may not be a part of the Game Theory, being free is yet another incentive for a buyer to play fair and try to resolve the dispute after receiving a Fair Reputations invitation from an online seller.