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China’s ‘People’s Courts’ Resolve Online Disputes at Tech Firms

You can imagine how annoying this would be: A customer ordered garlic oysters from a restaurant through Chinese ecommerce giant Meituan’s delivery app, but when the order arrived, most of the oysters didn’t have any garlic. So, according to the newspaper Zhejiang News, the user filed a complaint through the app’s dispute resolution service, which launched in January 2020.

A volunteer group of users—a “kangaroo jury,” named for the service’s mascot—was asked to weigh in. The restaurant owner countered that the order had been for ordinary oysters, and that the resulting bad review hurt the business. Seventy-four people considered the evidence—a photo of the garlic-free oysters, a copy of the original order—and a slim majority found in favor of the customer, according to the Zhejiang News account. The user got a refund.

Across Meituan’s services—which include online shopping, a Yelp-like review site, ride-hailing and bike shares—volunteer jurors resolved 500 to 700 cases a day in 2021, according to the company. In one case, a user posted a review complaining of poor service at a buffet restaurant after a worker reminded the customer not to waste food. The jury sided with the restaurant and the post was removed.

A little over a decade ago, as ecommerce took off in China, the country lacked structures like widespread credit scores and effective consumer protection agencies to build trust among online buyers and sellers. Companies responded by creating innovative workarounds. For example, at the time, cash was used for most transactions, so tech giants such as Alibaba and Tencent developed their own systems for digital payments. Ant Group, Alibaba's financial affiliate, also created Sesame Credit, its own version of a credit score, that could help assess a buyer or seller’s trustworthiness.

To deal with disputes between buyers and sellers, companies experimented with crowdsourced forms of justice. In some cases, platforms established online juries of users to resolve the small-scale irritations that aren’t worth taking to court—petty disagreements over how much cilantro was in a noodle dish or the price of a tube of toothpaste—but might make someone think twice about using a service again.

Lizhi Liu, a professor at Georgetown, says these systems built trust among buyers and sellers and helped resolve questions of jurisdiction when the buyer, seller, and platform are located in three different places.

When ecommerce initially emerged, China had yet to create strong rule of law to undergird markets, Liu and Barry Weingast of Stanford argue in a forthcoming paper. Instead, they say, the government effectively outsourced legal functions such as contract enforcement and fraud prevention to trusted companies.

In the early days of ecommerce, US firms wrestled with similar problems. Beginning in 2003, online marketplace eBay used a combination of company mediators and automated systems to handle complaints that often crossed international borders. eBay still uses a version of this system, as does Amazon Marketplace; customers who use credit cards can dispute charges through the card issuer.

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Colin Rule, who set up eBay’s system, says the company experimented with a community court in India about a decade ago. The pilot program didn’t catch on, but he says that a presentation on the system in Hong Kong caught the attention of Alibaba, and may have helped to inspire what’s likely the first large-scale online jury program.

In 2012, Alibaba’s shopping platform Taobao introduced a kind of a “people’s court”—officially the platform’s User Dispute Resolution Center—to handle customer complaints of poor products or copyright infringement as well as complaints that a user was unfairly penalized by the platform. A jury of 31 unpaid volunteers—buyers and sellers who’ve used the site for at least three months and had their names verified—decided cases based on a simple majority vote.

Alibaba says Taobao no longer uses the system for user disputes, and its customer service department manages those complaints. But a similar program persists on the company’s secondhand marketplace, Xianyu. Seventeen anonymous users weigh in on disagreements over, say, whether a seller accurately described the wear and tear on a used handbag. The system resolves 95 percent of customer disputes, according to research published by Alibaba last year.

Customers on Chinese marketplaces generally pay using digital wallets, which don’t have the sort of purchase protection that credit card companies offer. Instead, Alibaba’s ecommerce sites—like many across Asia—rely on an escrow model: Buyers pay the marketplace, and the money is only released to the seller after the buyer has confirmed they’ve received a satisfactory product.

“This is a way to design a transaction system where you don't need consumer protections, because the buyer is in control all the way along,” says Rule, the former eBay executive. When sellers open stores on Taobao, they’re required to provide a deposit, which can be used to refund buyers. Sellers must comply with dispute resolution decisions to continue using the platform, but they can appeal decisions or take the case to a government-run court.

In 2018, Tencent’s chat and services app WeChat introduced a system of peer review to combat xigao, a practice that loosely translates as “article laundering”—lightly rewording an article and passing it off as your own, a practice that violates the platform’s standards of conduct, if not the law. Someone who believes their work was copied can file a complaint, pointing to things like similarity in structure or repeating words from a headline. Both sides submit their arguments, and volunteers, who are experienced content creators on WeChat, weigh in. If at least 70 percent of the panel believe article laundering took place, the offending article is removed and replaced with the original author’s piece.

Until recently, big companies were largely free to create these systems, often with implicit consent from authorities, says Georgetown’s Liu. Online services were critical to growing China’s economy, and the bureaucracy can be slow to innovate because of vested interests and conflicting priorities.

Now, though, “public regulations are catching up,” she says. The country’s ecommerce law, which went into effect in 2019, requires companies to respond swiftly to consumer complaints and holds them responsible for fake goods sold on their platforms.

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The government also developed a more streamlined system to handle online commerce disputes. In August 2017, China’s first Internet Court opened in Hangzhou, home to Alibaba, to settle conflicts related to online commerce and copyright violation as well as disputes between users and internet companies; the entire process takes place online and over video. The next year, similar courts were set up in Beijing (home to Baidu) and Guangzhou (near Huawei’s home base in Shenzhen).

These courts operate independently from the tech platforms, but their services can still be involved. Alibaba consulted with the government on the design of Hangzhou’s court and provides cloud services. It also created a single-click way to transfer evidence to the internet court from its ecommerce sites.

Richard Susskind, who wrote Online Courts and the Future of Justice and visited the Hangzhou Internet Court in 2017, says that online dispute resolution systems—whether set up by companies or the government—could be a good start toward more expansive legal reforms in China because they “give people more confidence in the ability to use the law.”

But he warns that when private companies run their own systems for resolving disputes with individuals, the perception is that “the playing field is nowhere near level,” because companies will often look for ways to tip the scales in their favor.

Still, these imperfect systems helped China’s ecommerce grow to be the world’s largest, with transactions worth $2.29 trillion in 2020, according to the US International Trade Administration. Some merchants complain that decisions too often favor buyers who say they’ve been wronged. But the customer is not always right.

In another case brought before a Meituan kangaroo jury, a customer who was eating spicy soup in bed spilled the dish and stained the blanket. Should the restaurant be responsible for faulty packaging? No, the jury found.

Updated, 1-18-22, 2:15pm ET: An earlier version of this article incorrectly said Alibaba created Sesame Credit.


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