The pre-arbitration stage might follow a representment or dispute response if the merchant succeeds in validating the original transaction. Pre-arbitration is used if new cardholder information has surfaced or the reason for the dispute has changed, turning the merchant’s temporary win into a loss.
Called pre-arbitration by Visa and an arbitration chargeback by Mastercard, these cases are sometimes thought of as a second chargeback. The process is initiated after the merchant has successfully challenged the initial chargeback and is used to address a new issue. Pre-arbitration does revoke revenue that has been temporarily recovered, but it doesn’t impact the chargeback-to-transaction ratio a second time.
Pre-arbitration is slightly different for allocation disputes. For allocation disputes, merchants don’t have the chance to submit a dispute response since liability has already been established. Rather, the dispute response is considered pre-arbitration.