Ministry questions legal status of online auctions

Discussion paper questions whether Consumer Guarantees Act applies

The status of on-line “auction” sites such as TradeMe in the light of the Consumer Guarantees Act and the legislation governing traditional live auctions is once again being questioned.
The Ministry of Consumer Affairs has issued a discussion paper on consumer law reform, which points out the Consumer Guarantees Act (CGA) does not apply to goods purchased at auction. The paper discusses whether TradeMe-like sales qualify as auctions and should not have CGA protection, in the light of the fact that many features of the traditional auction are missing; in particular it is usually not possible for an online customer to examine the goods physically before purchase.
The Auctioneers Act requires at least six people to be physically present for an auction to be valid and says the auction must be conducted by a “natural person”; most auctions on on-line trading arenas are conducted entirely automatically.
To complicate matters, some TradeMe-style transactions involve a single offer price to buyers – often called a buy now/confirm purchase transaction. This is not an auction, but may be considered a competitive tendering exercise, the paper says. The CGA does not apply to competitive tenders either.
Where no bids are forthcoming for an online auction item, it may default to the buy/now confirm purchase model. “For consumers and suppliers, the fact that the Consumer Guarantees Act may or may not apply depending on the transaction method used to obtain the good is confusing, illogical and arbitrary,” the report says.
Complicating matters, the CGA does not define “competitive tender” and that Act and the Auctioneers Act have different definitions of “auction”.
Traditional auctions conducted by a live licensed auctioneer these days sometimes have bidders operating online, says the discussion document; so consumers may again be confused to what framework is being used and what rights apply.
The discussion paper invites public replies on whether the distinction between traditional and TradeMe-style auctions is a valid one and if so, what methods could be used to signal clearly which framework is being applied.
The consultation is part of a broader Ministry project to clarify ambiguities and remove inconsistencies in consumer law and give customers one clear process through which to make complaints and inquiries; it is known as the “One Law One Door” concept.
In the light of the paper’s opening general reference to changes brought about in buying and selling as a result of computer and telecommunications technology, internet commentators are questioning its lack of mention of other legal internet matters such as the Unsolicited Electronic Messages Act, banning spam, and various codes governing telcos’ interaction with their consumers.
The discussion paper refers briefly to the possible risks of an online form of layby where scheduled deductions are made automatically from a nominated bank account before the item is shipped to the customer. This is one of several matters that may require some attention to the Layby Sales Act, the Ministry says.