Federal Internet Law & Policy
An Educational Project

Online Auctions

Dont be a FOOL; The Law is Not DYI

Among the social issues that the information revolution has resolved is a dramatic readjustment of the transaction costs involved with disposing of useless junk. In other words, the never ending world wide democratic discourse has morphed into the never ending world wide garage sale. The advantage of the real world garage sale is that you can kick the tires of any new acquisition before having to find space for it in your basement. Also, the transfer of payment and of new valued possession is largely simultaneous. On the Internet, the garage sale has located itself along the information superhighway but is devoid of that opportunity to kick the tires and ensure delivery. The number one complaint to the FTC for consumer fraud involves online auctions, failure to deliver, or delivery of a ware of not quite the same quality as was anticipated from the online representations.

The free market has responded. Online merchants commonly display trust seals demonstrating that they indeed offer the goods or services promised (this may be such programs as the Better Business Bureau or Truste). Companies such as eBay now have rating systems of their sellers; with "number of sales" and "customer satisfaction" comes better ratings.

Online auction fraud also falls within the ambit of the FTC. The FTC and prosecutors have taken an unkind view to such things as

  • Deceptive advertising;
  • Failure to deliver, or failure to timely deliver (within 30 days); [See ECommerce Delivery Rule]
  • Delivery of inadequate or different goods;
  • Shill bids; and
  • False testimonials.
  • Don't think that this is a comprehensive list.

    If you find yourself on the short end of a scam, the advice the FTC gives is as follows:

    If you run into a problem during your transaction, try to work it out directly with the seller or with the auction web site. If that doesn't work, file a complaint with the Federal Trade Commission by calling toll-free 1-877-FTC-HELPT (382-4357) or visiting the FTC's web site at Although the Commission cannot resolve individual problems for consumers, it can act against a company if it sees a pattern of possible law violations. You also may want to contact your state Attorney General or your local consumer protection office.

    In other words, with regard to getting your money back, you are largely on your own. Remember that you can resort to local courts including small claims court, but this assumes (a) that you can get jurisdiction over the defendant (the alleged bad guy) and (b) if you win, that you are able to get money out of the defendant (it is harder than it seems). This is one good reason for paying with a credit card where you can dispute the charges. Note also, however, that if the FTC brings its own action and succeeds, it has established a precedent against the defendant - you can now use this and will not have to reprove that the defendant was a snake oil sales man (of course, this is why so many companies settle instead of going to trial; in order to avoid a court order establishing this precedent).

    Online Auctions


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