Industry-based dispute resolution

Effective complaint handling and dispute resolution schemes which have broad support from industry members can significantly improve business and advance the claims of the industry to become self-regulating.

This note deals with the features of an effective dispute resolution scheme. It focuses on how industry groups can deal with problems which cannot be solved by a trader's own complaint handling process.

For any industry group interested in establishing its own dispute resolution process, Consumer Protection may be able to provide advice on how to set it up and operate it. In the meantime, the following points will help you.

Features of an effective dispute resolution scheme

An effective dispute resolution scheme should include the following features:

Access should be inexpensive or free, quick, simple and flexible.
The scheme should be able to cope with any special needs of individual customers.
The scheme should aim to provide timely resolution of disputes.
There should be clearly defined procedures for handling disputes. These should describe the relationship between the way original complaints are handled and more extended procedures available for handling disputes which cannot be resolved at this level.
The scheme must be publicised effectively so that there is a reasonable opportunity for people to use it.
The precise nature of the scheme is something to be decided by the industry organisation providing it, but may contain the following stages:
- direct negotiations between customer and supplier, possibly within appropriate procedures or guidelines (the Ministry has a separate note on complaint handling);
- review by the industry association if there is no satisfactory resolution in stage one;
- an independent industry-sponsored body to deal with disputes not resolved at the earlier levels. This might be:
  - an independent referee with conciliation powers;
  - an ombudsman who can make binding decisions; or
  - an independent committee with an independent chair and one representative from each of industry and consumer groups.
Fairness and natural justice must be observed at all times. The principles of natural justice require that:
- there must be due inquiry;
- the parties must know what is alleged about them;
- each must have the opportunity to be heard; and
- the decision must be honestly arrived at in the light of what the parties have said.
Sanctions or determinations should be realistic and have real prospects of being applied effectively and, where necessary or desirable, enforced.
Any compensation should be realistic and take account of the nature of the goods or services provided by the businesses to which it applies.
Remedies may include restitution, repair, compensation.
Independence must be assured. Steps should be taken to preserve and to demonstrate that independence, including:
- administration by a body which is independent of industry and which is not dominated by industry representatives;
- recruitment of the referee, ombudsman or chair from outside the industry;
- selection of a person recognised for independence and possibly with no previous association with the industry;
- adequate resources, including support staff, should be made available 'without strings'. (It would be advisable to allow the referee, ombudsman or chair to have control over selection and dismissal of staff and management of their daily operations);
- provision for hearings on neutral territory;
- the referee's, ombudsman's or chair's position should have limited fixed tenure; and
- provisions in the scheme which safeguard its essential features e.g. terms of reference, powers of the relevant body or bodies, from one-sided change by industry.
The findings and determinations of the relevant bodies should be published and made available to affected parties.
The dispute or complaints body should be required to publish reports regularly in a way which allows public scrutiny of its operations.
The body administering the scheme should be able and encouraged to make recommendations which are intended to help an industry resolve problems or change practices which give rise to complaints. Such recommendations could be made either separately, as a perceived need to do so arises, or in the body's regular reporting, or both.
There should be adequate provision for the process to be monitored so as to ensure that it is effective. Evaluation of its effectiveness should include consideration of its fairness and whether it complies with the above principles.
People must always retain the right of access to conventional dispute resolution procedures, such as the courts, either as an alternative to the industry's own procedures or in addition to them.

Important points to remember

An industry-based scheme will be most effective if it covers most or all of the members of the industry, and all those aspects of the industry which relate to customers.
A scheme might contain eligibility criteria which need to be satisfied before access by either a member or a customer is given.
A complaints and disputes body run entirely by association members without outside input runs the risk that justice may not be seen to be done. Likely public perception would be that members were looking after their own interests, even where that wasn't the case.
A dispute resolution scheme can also form part of a more general code of conduct for an industry organisation.

More information

Standards Australia can provide information about standards for complaint handling within businesses. It has developed a standard (AS 4269-1995) for this purpose.
The previous Trade Practices Commission (now the Australian Competition and Consumer Commission) published some draft guidelines for establishing codes.
Consumer Protection may be able to give advice on other aspects of developing a dispute resolution scheme. Contact the manager of the branch you normally deal with, call our advice line on 1300 30 40 54 or send an email. Our full contact details can be found in the Contact us section.