Traders may be forced out of online auctions

Traders may be forced out of online auctions

Recent calls for added protection for buyers using online auctions are in conflict with the rationale behind the auction system, and may mean full-time traders are forced out, says the Motor Trade Association (MTA).

The suggestion of making full-time traders that sell via an online auction, subject to the Consumer Guarantees Act (CGA), is simply adding cost and complexity to a selling process that has worked well for many years. People buy at auction for a range of reasons, but for most it’s about being able to secure a ‘bargain.’ Consumers assess the risk of buying in this way against the perceived benefits and choose to take part in the auction, or not.

Having to meet CGA requirements could mean that many full-time traders would no longer be able to afford to sell goods in this way - being required to carry all the risk on what are often lower value items. An unintended consequence of this move to provide CGA coverage to goods sold in online auctions is that ultimately, traders could be forced out, thereby denying many buyers access to what has been an effective marketplace.

MTA spokesman Ian Stronach says “MTA supports online auctions as a bona fide commercial selling tool, but believes there is an urgent need to clarify the situation surrounding the rights and responsibilities surrounding online auctions.”

Both the Commerce Commission and the Motor Vehicle Disputes Tribunal have advised they consider that online auctions do not meet the qualifying requirements of an auction; missing elements include there being no Licensed Auctioneer controlling the auction, and that six members of the public are required to be physically present at the auction. They instead regard online auctions as a tender and are therefore excluded from coverage under the CGA.

Aside from these technical differences, it is unclear from a participant’s perspective as to what makes an online auction different from an ordinary ‘under the hammer’ auction. In both cases, potential buyers are free to take part or not and they can usually see or arrange to have the goods checked out before purchase. Some online auction systems even provide the added security of a rating system of sellers, thus allowing buyers to better assess their risk before entering an auction.

The public clearly regard online auctions as just that – an auction. For many thousands of New Zealanders, this is an established and convenient way to buy and sell goods. There are already a significant number of sales transacted in online auctions - indicating that many New Zealanders are already prepared to search out a ‘bargain’ and in doing so, forgoing any consumer protection.

Adding the costs and responsibilities of the CGA to those cars that registered traders sell via online auctions would likely see many dealers forced out of that market, especially for lower value vehicles. Instead those cars would be offered through other channels such as ‘under the hammer’ auctions where the CGA does not apply. Not all consumers have easy access to formal auction situations, and would lose some opportunities to purchase vehicles that would otherwise be available via an online auction.

Ian Stronach said “If these changes come to pass, it would be something of a ‘having your cake and eating it too’ scenario for buyers. They would get all the advantages but share none of the risk. The online auction system exists, because it meets the needs of both the buyer and seller. Currently, there is a balance between risk and reward. If you make the seller responsible for all the risk, then they will probably choose to find other avenues in which to carry out business.”

MTA believes buyer experiences in online auctions could be improved by clearly spelling out what their rights are at the time of sale. One criticism of current online auctions is that buyers can pass from an auction into a ‘buy-now’ or ‘negotiated sale’ without being fully aware of what their rights are within each of the online sales formats. MTA believes that insisting that the consumer’s rights be made clear within each online sale mechanism would result in better informed buyers.

In an age of increasing e-commerce, moves to limit the application of online auctions are contrary to the very real advantages offered by e-commerce and the auction format itself.

ENDS

© Scoop Media