, , , , , , , ,

AuctionWeb (soon after to be www.ebay.com) was opened for business September 5, 1995 and the first item sold via an online auction was a broken laser pointer for $14.83.

By 2007, upwards of $80,000 in goods and services sold on www.ebay.com every minute of every day. Today at various times just as much or more sells through a “Buy-it-now” format as does the competitive auction format.

In 2009 and ever since, there have been somewhat isolated efforts (in North Carolina, Pennsylvania, Ohio and other states) to require licensing of www.ebay.com itself and/or www.ebay.com sellers. We wrote extensively about that topic here: https://mikebrandlyauctioneer.wordpress.com/2009/12/20/are-ebay-sellers-auctioneers/

More recently, many auctioneers have added online bidding to their live auctions, and others have chosen to offer exclusive online events. The Michigan State University Auction Industry 2010 study noted that for auctioneers:

  • 78% conducted only live events
  • 15% conducted Live w/ online simulcast bidding
  • 6% conducted online-only events
  • 1% reported conducting some other …

With this increase in online-only auctions, the question of Internet auction laws now includes if those conducting online-only events should be required to be licensed as an auctioneer and/or be licensed in some related fashion.

As well, some states are suggesting that new laws are necessary to help protect online auction bidders and buyers. For example, if an online bidder finds out that the seller bid against him in a without reserve online auction, should that bidder have recourse to help mitigate his damages?

In this regard, there are already laws in all jurisdictions in the United States which deal with some of these issues regardless if the auction is live, both online and live, or online-only: The UCC 2-328

The current legislative winds seem to be blowing in the direction of one or both of two different types of regulating Internet auctions:

  • Licensing for the responsible person “conducting” the online auction
  • Legal remedies for bidders, buyers and sellers who are wronged while participating in an online auction

Our question today is, “Are Internet auction laws necessary?”

It might be fair to answer this question assuming that the above two “types” of Internet auction law are more-or-less the same — if licensing is required, such would likely include language for public protection; legislation solely dealing with public protection would likely lead to licensing.

But, are these types of laws necessary?

Those who argue that these types of laws are necessary typically site these reasons:

  • There is fraud and misrepresentation in online auctions which is not generally provided a remedy in current law
  • If live auctions require licensing, then online auctions should require the same type of licensing due to their similarities, including consignments, competitive bidding, control of funds, payment to clients …
  • There is increased secrecy (a lack of transparency and/or disclosure) in an online auction event, where the public cannot actually see the other bidders, know who is the auctioneer is, and/or fully inspect what is being put up for bid
  • An online auction more-so attracts a criminal element, selling stolen or latent-ridden property

Those who argue that these types of laws are not necessary typically site these reasons:

  • We do not need any further laws — and in fact — we need fewer laws regulating an industry which is largely operating legally, honestly and ethically
  • It’s difficult at best to identify the entity which is responsible for an online auction — is it the software provider, the seller, the owner of the online auction company, or someone else?
  • By requiring licensing or enacting regulation, these Internet auctions can easily move out of any state which takes such action and/or move out of the United States altogether
  • Less licensing and regulation is needed, as the market will take care of dishonest and unethical companies, including online auctions
  • There are already remedies for sellers, bidders and buyers who feel wronged — any can take legal action in court anywhere in the United States

Despite these above reasons, there may be another factor at play in some states in the United States. Currently 19 states are projecting budget shortfalls for fiscal year 2013, with a projected shortfall of $20.1 billion.

What do states do when they have budget shortfalls? Those states increase taxes, cut expenditures, and look for ways to raise money — and one way states can possibly raise money is to increase licensure requirements; this would of course, mandate that the license fees exceeded the cost of administration.

It will be interesting to watch what states choose to do (or the federal government chooses to do) in the coming years regarding Internet auctions. Outside the budgetary incentives for states to enact such regulation, the argument for and against such laws seems well balanced.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.