Ministry questions legal status of online auctions

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.

Read more at Computerworld.

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