Heavyweights Unveil B2B Dispute Protocol

A host of corporate titans including Microsoft (Nasdaq: MSFT), PepsiCo, DaimlerChrysler, and AT&T have signed a new protocol designed to eliminate some of the pitfalls of business-to-business (B2B) e-commerce.

The American Arbitration Association (AAA), which announced the "eCommerce Dispute Management Protocol: Principles for Managing Business-to-Business Relationships" on Thursday, said that with more companies entering B2B e-commerce, "business disputes are inevitable and threaten to disrupt the continuity of the B2B supply chain."

However, the New York City-based group hopes the new code of conduct will help companies solve their disputes before they degenerate into costly and time-consuming litigation.

"This protocol is an educational wake-up call," said William K. Slate II, president and CEO of the AAA. "Setting a global standard will give practitioners the necessary confidence and trust in online transactions to be successful in B2B e-commerce."

A Few Good Principles

Giving a nod to the benefits of alternative dispute resolution (ADR), which Slate said benefits companies by providing less expensive resolutions and allowing them to preserve relationships, the new protocol calls for:

• The use of neutral dispute resolution providers,

• A range of options and cost-effective methods to resolve disputes at the earliest possible stage,

• An emphasis on continuity of business through isolating disputes and resolving them with minimal disruption to other transactions, and

• A commitment to use appropriate technology to aid dispute resolution.

As part of its commitment to technology, the AAA said it is developing a new technology-focused dispute resolution service.

Courting Companies in Dispute

The AAA, which charges businesses for using its services -- in contrast to the courts, which provide resolution services using taxpayer dollars -- did not say what increase in costs, if any, businesses would face when using its tech-enhanced services.

While alternative resolution services can reduce costs for some companies, for other businesses, the courts provide a less expensive forum for resolving disputes.

Banking on B2B

As more companies, driven by the need to cut expenses, turn to B2B e-commerce, disputes resolution in the B2B e-arena will become increasingly important.

A report released in November by eMarketer said that the B2B sector currently accounts for 79.2 percent of total e-commerce spending, but will grow to 87 percent of total e-commerce by 2004.

Another study released in October by the Boston Consulting Group (BCG) predicted that, while revenue from business-to-business (B2B) e-marketplaces will approach $9 billion in 2005, companies stand to benefit even more by the increased productivity generated by such marketplaces.

BCG predicts that by 2004, B2B e-commerce will bring about productivity gains equivalent to 1 to 2 percent of sales. By 2010, that figure could grow to 6 percent.

Even the U.S. Federal Trade Commission (FTC) is bullish on B2B. Commenting on a FTC report issued in October, chairman Robert Pitofsky said B2B marketplaces offer great promise in terms of cutting costs, better organizing business processes, and improving competition.