When is a seller liable for cancelling an eBay auction early? A county court in Germany has held that a seller may cancel an eBay auction without liability to pay compensation, if the bidder places fake bids (26.6.2013 Az. 28 C 165/12).
Cancelling an eBay auction
This case concerned the right of a seller to cancel an eBay auction early. The seller was represented by e-commerce lawyers from Wilde Beuger Solmecke.
The court found that if a potential buyer has no real interest in purchasing an auctioned item and places false bids, those bids are ineffective. Consequently, the bidder has no right to compensation from the seller.
Liability for cancelling an eBay auction
If at the time an eBay auction is cancelled, a bid has been placed, the seller is usually bound by the contract (see § 10(1) of eBay’s terms and conditions).
However, a contract will not come into existence if the seller is legally entitled to withdraw the product from auction.
If the seller is not able to rely on a legal reason for withdrawing from the auction, but wishes nevertheless escape the contract, the seller will have to rely on the doctrine of mistake.
If the seller cannot rely on the doctrine of mistake or a legal reason to withdraw, the seller is obliged to perform the contract and hand over the product in return for the purchase price.
If the seller fails to hand over the product, compensation will become payable.
Fake bids on eBay
In the current case the seller withdrew an Apple iPhone 4S from auction before the time period for placing bids expired. He gave no reason for cancelling the auction.
The highest bidder at the time of the cancellation had offered €200; substantially lower than the market value of an iPhone 4S.
After requesting delivery of the iPhone and not receiving it, the bidder sued for compensation.
This turn of events was part of a pattern in which the bidder placed hundreds of bids for electronic products, all of which were significantly under the market value of the products being offered. When the sellers withdrew their products from the auctions the bidder brought claims for compensation.
The county court brought an end to this practice.
The court found that the bidder had placed low bids with the intention of bringing the auction to an early end so that he could bring claims for compensation.
Accordingly, the court held that the bidder had acted without any intention to purchase a product and therefore had no intention to create legal relations. As an intention to be bound is a pre-requisite of a contract for goods, and here there was no such intention, no contract was created.
The court also found that the claimant had made such low offers that in most he would have been outbid had the auction continued.
In addition, the court found that the intentional exploitation of mistakes by sellers is fraudulent and therefore not worthy of legal protection. Therefore, the bidder has no right to compensation.
This case is not the first of its kind. It seems that the exploitation of seller mistakes on eBay is developing into a regular business model.
The growth of this phenomenon is helped in part by eBay’s lack of transparency in handling the topic. It is easy for a seller to terminate an auction early; however, no clear indications are given as to the legal consequences or the possibility for the seller to rescind a contract.
eBay does inform users that when a seller ends an auction early a contract will exist between the seller and the highest bidder. The reference to the possibility for the seller to rescind the contract however, can only be found after clicking several links and eventually being led to eBay’s legal page.
It remains to be seen whether, following this court decision, eBay will provide more transparent information on sellers’ rights when ending auctions early.