What Is an Online Auction?

Online auctions are a relatively recent phenomenon, beginning in 1995. Buyers have a “virtual” market in which to choose items to purchase from anywhere in the world. Likewise, sellers have a huge market in which to sell their goods.

What Are the Risks Involved?

Online auctions can be risky. The Federal Trade Commission (FTC) receives thousands of consumer fraud complaints annually, and many of them consist of those dealing with online auctions. Some complaints include:

  • Late shipments
  • No shipments
  • Shipments of products that are not the same quality as advertised
  • Bogus online payment or escrow services
  • Fraudulent dealers who lure bidders from legitimate auction sites with seemingly better deals (“bid siphoning”)
  • Complaints against buyers

Are There Rules for Online Auctions?

Internet auctions are different from business-to-person sites where the site has the merchandise. In Internet auctions, the seller has the merchandise. Internet auction sites have their own rules and requirements for buyers and sellers. It is important to check the rules of the auction site.

What Can I Do to Protect Myself?

Buyers and sellers can protect themselves from fraud. Tips include:

  • Tips for Buyers
    • Before bidding – Become familiar with the auction site and its rules. Find out what protections are offered by the auction site. Be aware of what you are bidding on.  Discover all you can about the seller (many auction sites have “feedback ratings” based on comments by other buyers). E-mail or call the seller with any questions.
    • When bidding – Stick to your top price for an item. Do not bid on an item you do not intend to buy. Save all transaction information.
    • Before paying – Know and understand what form of payment is accepted by the seller. Protect your privacy (do not provide any identifying information until you have checked out the seller). Check out the escrow or online payment service that the seller has indicated.
  • Tips for Sellers
    • Know your legal obligations – You must advertise your product or service and terms of the sale honestly and accurately. You cannot auction illegal goods. You must ship merchandise within the time frame specified or within 30 days (if not specified).
    • Advertising – State whether your item is new, used, or reconditioned. Try to answer buyers’ questions in your description of the item. Try to include a photograph of the item. Specify the minimum bid and who will pay for shipping. State your return policy.
    • Dealing with bidders – Respond quickly to buyers’ questions. Print all information about transactions. Contact the “winning” bidder as soon as possible to confirm costs and payment.
    • Arranging for payment – If accepting credit card payments, bill the account only when you have shipped the product. Check out any escrow or online payment service that the buyer insists on using.

Is There Somewhere I Can Go for Help?

If you have a problem with an online auction, you should try to work them out with the seller, the buyer, or the site operator.  If there is no resolution, you can file a complaint with:

  • Your state’s Attorney General’s office
  • Your county or state consumer protection agency
  • The Better Business Bureau
  • The FTC

Do I Need a Lawyer Experienced with Online Auctions?

A lawyer may be helpful in dealing with government agencies that you may need to turn to for help. An experienced business lawyer may alert you of your rights and obligations in an online auction transaction.