When the pandemic hit, Channing Qian knew he would have to do something extra to keep customers safe and his business afloat. His three coffee shops in Victoria were being impacted by provincial restrictions.
He purchased geodesic domes from a manufacturer in China to put over individual tables on the patio of one of his cafes. The idea caught the attention of other small businesses.
"We were hoping people would love them," Qian told Go Public.
So Qian and two friends created an account on the e-commerce platform Shopify to sell the domes as the Wigloo Tent Company.
The popular, Ottawa-based subscription service allows merchants around the world to set up an online store and, according to its site, "sell, ship and process payments anywhere."
In May 2021, Wigloo sold 10 domes for $18,113.90 to a buyer in Ontario, but the pandemic delayed delivery for months.
So the customer initiated a chargeback — a consumer protection tool similar to a refund — with his bank, thinking the domes weren't coming.
They arrived in late September, but the chargeback was approved.
It shouldn't have been. Once Bank of Montreal started its investigation, Qian and his partners sent Shopify ample evidence the domes had been delivered.
But Shopify didn't send that evidence, or enough of it, to BMO, nor did it question the bank's decision.
After hearing from Go Public, Shopify admitted fault and credited Wigloo the full amount.
"Shopify should have been the one in their corner, helping them to sort of dispute this," said industry expert Corinne Pohlmann of the Canadian Federation of Independent Businesses.
Pohlmann says the credit and debit card industry is a web of complicated relationships and that unclear policies for chargeback disputes often result in decisions against the merchant.
Raymond Young, who owns the company Lifestyles Management Inc., was keen to host camping events throughout the summer where customers could rent the domes.
Wigloo told him they'd likely arrive in six to eight weeks.
But major delays followed because of COVID-19 closures and the B.C. wildfires. Still domeless on Sept. 1, Young filed the chargeback with his credit card company, BMO.
Three weeks later, the domes arrived, and Young started to use some of them immediately.
And yet, on Sept. 29, Shopify notified Wigloo it had withdrawn $18,113.90 out of the company's account ahead of BMO's investigation.
Wigloo still didn't know why the investigation had started.
"Shopify told us that the product was damaged, or unacceptable. Those are the only words that we received from Shopify," said Nataliya Kapitanova, one of Qian's partners. "We had questions. We wanted to know why, because the customer never reached out to us saying something was wrong."
Meanwhile, at least some of the domes were featured on Young's Airbnb website.
"He's profiting from a product that he hasn't paid for," said Kapitanova. "He's charging $197 per night to stay in that dome."
Jumping through hoops
Wigloo gathered all the documentation they had, like photos, emails and the delivery report that showed Young had picked up the domes. They said that Shopify had strict criteria on how to submit it.
"I had to jump through the loops," said Kapitanova, including putting all the evidence in a single PDF and compressing it to a certain size, so it could be faxed to BMO.
WATCH | Shopify's requirement for merchant in chargeback dispute:
BMO ruled in Young's favour.
For months Wigloo had been trying to understand what happened.
In March, the company threatened legal action if Young did not pay what he owed.
Young says while he did receive the items, they were not worth the original price. Young says the doors on all 10 domes were defective and he spent $4,000 to replace them.
He also says four of them had tears in the windows.
"It's not like I'm trying to make money on something I'm not paying for. The money is ready and available to be sent to him. I just want some sort of concession for the doors," said Young.
LISTEN | An excerpt of Go Public's audio interview with Raymond Young:
Qian says he asked Young to send photos of the alleged damage for months, but never received any. Young says he sent them via text message. He later sent photos of the damaged domes to Go Public, but not proof that he had sent them to Wigloo.
Kapitanova says Shopify was no help.
"Shopify said, 'Well, we're kind of like a middleman between the banks,'" and that Wigloo must take it up with MasterCard and BMO, she said.
"I did call our bank … and they said, 'Well, we don't see anything but Shopify. You have to call Shopify.' So we went in a full circle."
Eventually, Wigloo contacted BMO's ombudsman and, in April, got details about the bank's investigation.
According to BMO, Shopify had two chances to provide evidence on behalf of Wigloo — on Nov. 8 and Dec. 19, 2021.
Shopify "did not provide sufficient evidence or documentation to refute the chargeback at first instance," BMO wrote in an email to Wigloo.
It then "accepted the claim at the second stage instead of disputing further."
BMO said that while it empathized with Wigloo, Mastercard's chargeback policy does not allow the bank to reopen the chargeback claim.
'Isolated technical issue'
Go Public approached Shopify with this information. Shopify admitted it made a mistake — and credited Wigloo the full $18,113.90.
"Upon further investigation, we discovered that the documents submitted by the merchant were not forwarded to the issuing bank due to an isolated technical issue that was not caught due to human error," wrote a Shopify spokesperson in an email to Go Public.
It's unclear if Shopify forwarded any of Wigloo's evidence. Neither BMO nor Shopify would specify what was, or wasn't, sent.
Wigloo is "very happy," about the result "but we still feel it's not right," said Qian.
"How could you make this kind of mistake?"
Shopify apologized to Wigloo and told Go Public that the reimbursement would not affect Young's chargeback, meaning he will keep the money that was returned to him.
Young admits the chargeback may not have been approved if Shopify had submitted Wigloo's evidence but, in an email sent via his assistant, said that "would not resolve the issues with the damage and loss of revenue."
Asked if he still intends to pay Wigloo for the domes, Young says yes, but stresses that Wigloo should not expect the full price because of the damage.
Pohlmann, the industry expert, says, when it comes to chargeback disputes, banks very often rule in favour of the customer.
"I think it may stem a little bit from the fact that consumer protection is sort of in place, to make sure that consumers are always protected when there's these types of disputes," she said.
But there's no corresponding protection for small businesses. "So they're kind of left dangling a little bit," she said.
WATCH | Industry expert explains the role of the middleman:
She says part of the problem is that the parties involved in chargeback disputes aren't always dealing with the same people. The seller often has to deal with a middleman like Shopify, whereas the buyer deals directly with their bank — a relationship web that leaves room for mistakes.
"That makes it difficult for smaller merchants to really understand, 'Who am I dealing with and why is it happening this way?'" she said.
According to a Canadian Federation of Independent Business survey of 4,399 of its members last June, 12 per cent of respondents said they had to deal with a chargeback in the last year.
Canada's code of conduct for the credit and debit card industry doesn't have a concise policy on chargebacks specifically. It says merchants must have "access to a clear dispute resolution process that provides for an investigation and timely response of complaints."
But in practice, that's not always the case, says Pohlmann.
"Right now, even if you do everything you can, there's still the risk that this can happen," she said.
Shopify has a page on its website about "the typical process for a chargeback," but the steps don't match up with what Shopify told Wigloo to do.
Wigloo says they've stopped using Shopify and continue operating through word of mouth and social media.
"It all could [have been] figured out, providing Shopify had our back," Katinova said. "They did not."
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