Alternative Dispute Resolution (ADR) - yeh or neh?

We regularly receive calls and emails from dealers who have been told they must participate in ADR. Often the dealers will receive a letter from one of the many ADR providers offering their services for a fee. Understandably dealers are miffed at having to pay a fee to negotiate with a consumer when a) they are car dealers and negotiate for a living and b) by the time mediation is offered, the dealer has already made their position clear to the consumer and so they do not want to waste more time in fruitless discussion.

To clarify, the only dealers who legally have to participate in ADR are those who are a member of a Trade Association which makes ADR compulsory. Those dealers have no choice as long as they remain affiliated to that particular Trade Association. If they leave the Trade Association, there is then no obligation to participate and they are then free to decide if it is something they want to use on a case by case basis.  

There will be some circumstances where it will be useful but generally once both parties have made their arguments and settled on their position, unless one or both rolls over, further mediation/negotiation is pretty futile.

By way of an example, in our recently reported case whereby the consumer won just £135 out of his £7k court claim, the parties were offered ADR. The cost to our client would have been £350 or, he was offered the chance to join the ADR organisation for £100 on top of which he would need to pay a case fee of a further £150. Our client was happy to go to court as he had faith in the car he sold and so was not prepared to offer the consumer anything like the £7K+ claimed. This made ADR was pointless. Fortunately, our client was not a member of a Trade Association which makes ADR compulsory and so he could legitimately say no. Had he agreed to ADR, the mediators may well have tried to get him to agree to meet the consumer somewhere in the middle. Look how costly that would have been on top of having to pay the ADR Providers fees!  

In short, in some circumstances ADR is appropriate but if the dealer is not allowed the choice of whether to participate, it could not only waste their time (ADR Providers suggest the process could take many weeks ) but it could lead to much larger than necessary pay-outs. We mustn’t forget either that free mediation is offered as part of the Small Claims process should the consumer issue a court claim for £10k or less.  Oh and just to add salt in the wounds, an ADR Provider’s decision is normally binding on the dealer so you are stuck with it but, the customer remains free to ignore any decision that doesn’t suit them and go off to court anyway.  


Authors: Nona Bowkis

Published: 26 May 2017


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