Online auctions and the law

It's a muddy area. Goods bought at auction or competitive tender are not covered by the Consumer Guarantees Act.

Instead, auctions are covered by the Auctioneers Act, passed in 1928, which prohibits any unlicensed person from conducting an auction. But this Act defines an auction as a sale in the presence of six or more people, in a place accessible to the public, where a licensed auctioneer bangs his gavel to signal its completion. Obviously the Act did not envisage the possibilities of the internet. Thus online auctions do not fit the statutory definition of what an auction is. We're calling for an urgent update to the laws to recognise this new way of doing business.

Currently, your rights will depend upon whether you are buying from a one-off, private seller or from a professional trader.

Buying from a private seller

Online auctions where you buy from a one-off, private seller are regarded as "private sales". You have limited protection, since private sales are not covered by either the Fair Trading Act or the Consumer Guarantees Act.

However, contract law does apply: for example, the seller can't refuse to supply, or supply the wrong thing; and buyers must pay up.

You may also have some protection from the Contractual Remedies Act, but you'd need to be able to prove that:

• you bought an item based on information provided by the seller, and
• that information provided by the seller was wrong, and
• the false information provided by the seller meant you have lost money.

The terms and conditions on any auction site will be binding unless they contravene your statutory rights.

Buying from a professional trader

Who is a professional trader?

The definition of professional trader under statutes is very broad and basically covers every regular online auction seller. It doesn't matter if you think of it as a hobby or if you've kept your day job - regular traders are professional traders regulated by law.

To get an idea if the seller is a professional trader, look at their previous sales. If they have several listings for the same type of item, or if they have sold similar items in the past, they are probably a professional trader. It doesn't matter if they think of it as a hobby or if they've kept their day job.

Your rights

In most situations, professional traders selling through online auctions have exactly the same responsibilities as people selling through traditional methods like shops or mail order. These are set out in the Fair Trading Act (FTA), Consumer Guarantees Act (CGA) and Secondhand Dealers and Pawnbrokers Act.

The Fair Trading Act

Under the Fair Trading Act:

• The goods must be accurately described on the original listing and in any communications with the seller.
• Price comparisons must be valid. The seller must be able to show where in New Zealand the goods sell at the claimed price. They can only make comparisons with actual retail prices, not with recommended prices or overseas prices.
• Unless the price is clearly GST-exclusive, the seller cannot add GST after the price is agreed.
• Sellers cannot use fine print, policies or terms and conditions to change the deal. Anything that isn't explained in the original listing can't be added later.
• See our guide to the Fair Trading Act for more information.

The Consumer Guarantees Act (CGA)

The CGA only applies in an online auction when:

• You buy everyday goods for personal use;
• And you pay a set price or the opening price equals the Buy Now price;
• And you buy from a professional trader.

If you place a bid for an item rather than buying at a fixed or Buy Now price, the CGA does not apply.

Your rights under the Act:

• Sellers guarantee the goods do their designed job, are free from defects and are safe.
• Importers, including small-scale and parallel importers, have the same responsibilities as manufacturers. Unless they specifically tell you otherwise before the sale, importers or NZ manufacturers guarantee to provide repair services and spare parts for a reasonable time after the sale.
• See our guide to the Consumer Guarantees Act for more information.

Disputes

What if the seller lets me down?
If you don't receive the goods you've paid for, or you have a problem with a sale:

• Ask the seller why - there may be a good explanation.
• Inform the site administrator (they may not be able to help you, but they could ban the trader).
• Post negative feedback against the seller involved.
• If the other party lives in New Zealand, you can take them to a Disputes Tribunal.
• You may also be able to make a complaint of criminal fraud to the police.

What if I change my mind?
In placing a bid you are making an offer. If the seller accepts, you are in a legally binding contract, and unless the product is faulty, stolen, or has a security registered against it, you will be obliged to complete the purchase.

Likewise, if you are the seller you can't just change your mind after accepting an offer on an item you had for sale.

As with any contractual situation, go into it with your eyes open. Read the terms and conditions, make sure you understand exactly what you are buying and how, use an escrow service to protect your money, and keep in touch with the person you are trading with.