We believe unscrupulous traders are exploiting a legal loophole in online auctions.

We’ve found traders selling hundreds of new computers on Trade Me with a “Starting bid” price of just $1 less than the “Buy Now” price. Clicking on the “Place bid” button means your consumer rights instantly disappear. Clicking on the “Buy Now” button means you have the full protection of the Consumer Guarantees Act (CGA). In our view, unscrupulous traders are using this legal loophole to avoid the CGA.

The Ministry of Consumer Affairs is reviewing consumer law and this includes clarifying the position of online auctions under the CGA. A spokesperson said, "The Ministry is aware of the issues surrounding online auctions and that functions like 'Buy Now' on Trade Me do not fit the usual or common understanding of what an auction is. It appears to be a loophole - in the sense that consumer goods are now traded in ways unanticipated when the Consumer Guarantees Act was made law."

"Some traders are selling by online auction or tender in a way that means they do not have to provide any quality guarantees. The Ministry is working through all of these issues."

"We currently advise consumers to ask a trader to agree to provide a remedy if the goods are not of acceptable quality before they go ahead with a bid. This way they have some protection if things go wrong because they have made a quality guarantee a term of the contract."

It’s estimated to be 18 months or more before the Act is changed.

We’re pleased that something’s being done about this legal loophole – although we’d like to see it closed much sooner. Consumers shouldn’t lose their money and their rights because the law inadvertently protects one method of purchasing but not another.

More from consumer.org.nz

• Auctions online - how they work, your rights, and our advice
• Consumer Guarantees Act - our guide to your rights

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