An online auction is an event that takes place on the Internet where an individual lists an item to sell that other users are allowed to bid on to buy. Like real world auctions (e.g., when you buy a house), there is usually a certain window of time that the users have to bid on the item. When that window closes, the last bidder to enter the highest bid is usually awarded the item. 

The most popular example of an online auction is the well-known website, eBay. On eBay, an individual or a business may choose to sell some kind of product. eBay will provide a page for them where they can fill out information about the product and it will then get posted for people to buy.

On the other side of the equation, the buyer will search through eBay’s website for a particular product. If they find what they are looking for and there is an ongoing auction attached to the product, they can bid a certain amount of money until the window closes. Once it closes, the highest bidder will receive the product and the auction will terminate.

From a legal standpoint, the sales transaction between the buyer and seller can be viewed as a contract. A contract is a legal agreement between two or more parties that binds their promise to perform services, or as is the case here, to sell goods. The elements required to form a contract are offer, acceptance, and consideration (i.e., something of value; usually money).

Applying that definition to an eBay auction, the seller in the above scenario becomes the offeror by selling or listing their item for auction. The seller is not locked in, however, until the bidding process ends. This means that they are generally free to revoke the offer beforehand. 

The bidder in this situation has the ability to accept or reject the offer. Reject here does not mean they can pull their bid after being awarded the item. For these purposes, reject just means they did not bid high enough to beat out other buyers. Thus, it can be said that the person who bids the highest “accepts” the offer and will have to pay consideration (e.g., money) to receive their product.

Therefore, the above conduct between the buyer and seller forms an enforceable contract in the eyes of the law. 

What are Signs that the Online Auction is a Fraud?

The frightening thing about online auctions is that people are not face to face with one another. For example, there is no broker between the parties like when placing bids for a house, to determine whether a house is really for sale or what it looks like, and no bank involved to ensure the seller gets paid real money.

Instead, an online auction has to either be built on trust or knowing what to look for in deciding whether or not there is fraud involved in the auction. The latter is the best method that consumers can use to protect themselves. 

The following are some general signs to look for that could mean that the online auction involves fraud:

  • If the website looks odd and is not hosted by a reputable company (e.g., it has a weird website address or is in a different language than the country it is being accessed from), then this might be a sign of fraud.
  • When an offer is too good to be true, it is important to collect as much information as possible about the website, its hosts, the items, etc., before agreeing to purchase. For example, if it is an auction for a baseball card worth a million dollars and they are selling it for $20, then it is most likely a fraudulent online auction.
  • In instances where the website host immediately demands the visitor’s banking or credit card information, it is very important to be cautious about providing it. They most likely are trying to steal the visitor’s identity or funds. 
  • There are also cases where the item might be credible, but the website host or seller never actually sends the item despite receiving payment. 

One final thing to keep in mind is that there are many genuine auction websites for expensive items, such as sports cars or livestock (i.e., farm animals), but they generally do not offer delivery for the items. In these situations, the buyer is often responsible for setting up their own delivery.

Thus, remember to think back to what was discussed above: if the offer is too good to be true—like winning the bid on a pricey classic car that also includes cross-country delivery fees—it probably involves a fraudulent transaction. 

What Can You Do If the Online Auction was a Fraud?

In the event that a person discovers the online auction did include some form of fraud, there are several steps they can take to try and remedy the situation. 

According to the guidelines provided by the Federal Trade Commission (“FTC”), which is a governmental agency that handles consumer fraud, they recommend the following tips:

  • First, try contacting the seller. It is possible that an item was lost or not shipped on time, or they may be able to resolve it in some other manner.
  • If the seller does not respond or cannot resolve the issue, then see if the website that hosted the online auction can help. Oftentimes, the seller will have certain guidelines that will address what to do when such a situation arises. 
  • Finally, file a dispute with the credit card company or other account that released the funds to purchase the item. They may be able to investigate the transaction or stop the payment from going through to the seller. 

If none of the above steps solves the issue, then it may be time to file a complaint with a government agency, such as the county or state’s consumer protection agency, the state’s Attorney General’s office, or even with the FTC. 

What Law Applies to an Online Auction?

Aside from laws relating to breach of contract or contract fraud claims, online auctions are also covered by various federal and state laws, including criminal statutes, different types of consumer fraud laws, and an assortment of other rules that may apply specifically to certain merchandise. 

For example, some states require that companies that hold online auctions must have a license. States like California and Missouri require a license for online auctions, whereas New York and Minnesota have no regulations in place. Laws change frequently, however, so it is important to continue checking the relevant jurisdiction. 

Some states have laws restricting auctions for jewelry to daylight hours, and most states have some type of statute to cover auctions for jewelry to prevent fake jewels from being sold.

Another example is if the seller is listing stolen property. They could be held criminally liable for both stealing and selling the items, depending on the situation. 

In most cases, however, contract law is the law that will primarily apply to online auctions. This means that the case will usually depend on state law and will be analyzed according to either the website and/or seller’s policies, or where the contract was formed.

Although contract law governs the majority of online auctions, the above discussion demonstrates how other areas of law can easily come into play. Again, unless there is an obvious statute that applies or blatant violation of the law, it may all depend on the facts involved in the matter.

What Can I Do If I Am a Victim of Online Auction Fraud?

If you think you are the victim of an online auction fraud and have already attempted the steps provided above, then you should consider contacting an experienced and local business attorney for further assistance.  

Keep in mind, however, that it may not always be in your best interest to use an attorney. For example, if it is a small item and you lost a minimal amount of funds, it may be better to attempt resolving it with the seller, the website, or your credit card company.

On the other hand, if it is a larger item like a house or a car, then that is when you should absolutely reach out to an attorney for help. You should also reach out if you received the item, but the document for the deed of sale or title registration is forged or fraudulent.