No more Reserves!

[Rebel*1*]

Afternoon all. Sorry, but I went walk-about down the south coast to cool off for a while. Anyway, a few more thoughts:

LOL, hope you took your fishing rod.  Touche !! wanna play?

I've been looking into the definition of "main subject matter" in contracts and I think you are over complicating it Philip.

"Main subject matter"  refers to the particular type of product that the contract is for.  This means a consumer cannot later challenge as unfair the particular type of good or service that they knowingly signed up to.  i.e. they can't say that they didn't realise they were involved in an 'Auction'.  (See Wirraway Example)

As I've said previously, nobody is disputing that ebay, in hosting online auctions, is providing a service - the provision of a venue for  auction - to both sellers and buyers. 

In fact that aspect has been defined very well by Victorian Law which this new legislation will rely on to set the bar. Evagora v Ebay not only upheld and acknowledged the 'Main Subject Matter' of Ebay's contract, but defined it to a point where Ebay can't dispute that they are a SERVICE PROVIDER for the purpose of a Fair Trade Dispute. 

Irrespective of 'Main Subject Matter', (i.e. the provision of an Auction Service to both buyers and sellers) in that case, Ebay was still considered to have an obligation to its consumers to ensure that any limitations associated with the use of its online auction facility are clearly notified to prospective users. It is not sufficient to have a 12 page User Agreement with numerous clickable links that in many respects contradicts the clear representations contained on the homepage and the "bidding" page.  Where limits apply they must be clearly spelt out Evagora v Ebay

In my laypersons view, I would consider that the "main subject matter" of ebay's contract came into play in Evagora v Ebay and rather than excuse Ebay from any responsibility therein, it actually defined them as a 'Service Provider', for the purpose of a Fair Trade Dispute and reinforced their obligations to consumers under Fair Trading Laws.  The Wirraway example went one step further and defined Ebay as a 'Species of Auction'.  So as far as our laws are concerned they are engaged in the provision of an Auction Service.

Looks like an auction house, walks like an auction house, acts like an auction house, must be an auction house?  The French regulators certainly think so, and I'm with them.  But not according to Ebay when it comes to accountability.

Overall however, One would have to conclude that the Main subject matter of Ebay's contract does not excuse them from the terms of the UCT laws or consumer protection standards.  They are still a service provider, for the purpose of any Fair Trade Dispute, irrespective of the 'main subject matter' of their contract.  That is already in precedent and can't now be ignored.

But as I've said, if Ebay's contract is not exempted, and they are forced to acknowledge consumers, then where does that leave Sellers?  The provisions of this legislation do not include them, and that's why I've posed the question of whether Ebay will develop a fair commercial agreement for business sellers.  For Hobbie Sellers, it would seem that they will be included in the provisions of this legislation as consumers, as they sell only for personal household interests i.e. collecting or garage sales.

However, that shouldn't excuse even hobby sellers from adhering to fair trading guidelines if they choose to sell, so ebay would have to include that in their main UA. 

But again, where does that leave legitimate business sellers?  Small Business is the backbone of Australia, and we need to support these people so they don't get run out of business under an unfair contract.   They hire other Australians and they pay taxes, wages and all manner of other business related expenses, (which assists our economy) and not the least of which is Ebay's ever increasing fees, under an ever changing contract. 

[Philip.Cohen]

G’day all, sorry for the delay in offering a further response.

We seem still to be somewhat at crossed purposes. I am not arguing that eBay is not an auction house nor that eBay’s UA may not be “unfair” in many respects, or whatever; I have no doubt that they are an “auctioneer” in respect of their “auctions” and that they have a statutory responsibility to not be deliberately and criminally facilitating shill bidding fraud on buyers. But “auction” is not here relevant as the same contractual arrangement between seller and buyer ensues even if the sale is by BIN fixed price.

It’s simply basic contract law: both the seller and the buyer have previously agreed with eBay that they will be bound by a contract of sale whereby the seller agrees to provide something for a consideration and the buyer agrees to pay that consideration. These aspects would be a main subject matters over which the ACL will have no affect. Unless a court decides otherwise all other aspects of the agreement may probably be minor subject matters and will thereby be subject to the ACL.

All I am saying is that a minor subject matter that may be found to be unfair and voidable may only itself be voided and unless that so voided minor subject matter has such a material affect on the contract to the point that without it the contract cannot be performed then the main subject matter(s) of the contract will remain standing.

Now, what is a main subject matter, or matters, of a contract. I think the precedents clearly show that these matters are necessarily those matters that are the primary purpose of the contract; those terms that, unambiguously, without which, the contact would serve no purpose.

For example:
?   The primary purpose of the contract: a clear and accurate description of the good or service to be provided by the supplier;
?   The consideration therefor to be paid by the user/buyer;
?   Any other term(s) that a court may consider to be of essence to the performance of the contract.

As far as the Wirraway matter is concerned, I don’t think that the fact that it was an auction has any relevance; the same enforceable contractual situation would have ensued had it been a fixed price sale.

In that respect the users’ agreement with eBay is like any other that is usually entered into by principals with any selling/buying agent(s), eg, estate agent, consignment sellers.

We have to understand that the ACL is never going to interfere with the established statutory and common law basics of contract law; only in maters of perceived “unfairness” in “standard agreements” for those “buying for personal use” does the ACL appear have any affect that I can see—which is, in an overall sense, disappointing.

eBay will do nothing that is not directly in their interests unless forced to do so by consumer law; and even then most reluctantly.

As I said before more lobbying obviously needs to be done to hopefully expand the scope of the ACL—at the discretion of the court—to “business” where the court is satisfied that there is a clear imbalance of power between the parties.

Regardless, ultimately it is only the court that can make a definitive finding of “unfairness”, so unless you have the funds to pursue the matter yourself, we have to rely on the ACCC to take up the matter and threaten court proceedings, to get eBay to toe the line over any particular perceived unfairness.

The ACCC have clearly stated to me that they are not interested in doing anything about eBay’s ongoing blatant criminal facilitation of shill bidding fraud on buyers, so I see no reason why they would be any more effective for  consumers in matters simply of a little unfairness—unless they are hit with a tidal wave as was the case in the earlier PayPal matter.

With respect to the Vero matter and eBay removing a couple of thousand listings without due process or notice, to the great detriment of the seller, that surely borders on unconscionable conduct by eBay and eBay maybe could be sued for damages under the law of contract.

[mandurahmum]

Good afternoon Philip,

This is an interesting concept actually. Do you know whether the exemptions to this policy also included Rare Aircraft?  i.e. I wonder if the seller in the case below, was prevented from setting a reserve on his auction because of this ebay policy? If he was able to set a reserve, the ensuing legal action may have been avoided.

On the other side of the coin, if he was able to set a reserve as an exempted category,and decided not to, then it's down to Caveat Venditor.  Either way, a reserve on this type of item would seem to be common sense, and any traditional auction house would make that option available, if not recommend it. 

Going, going, gone? Online auctions and Smythe v Thomas [2007] NSWSC 844
21 January 2008
http://www.minterellison.com/public/connect/Internet/Home/Legal+Insights/Newsletters/Previous+Newsletters/A-B-Online+auctions+and+Smythe+v+Thomas

Online auctions are increasingly replacing the humble garage sale as the way for people to trade in ordinary (and occasionally not-so-ordinary) items. In the recent case of Smythe v Thomas [2007] NSWSC 844, the New South Wales Supreme Court weighed in on the contractual validity of an online auction, in the context of a not-so-ordinary item.

Background

In August 2006 Thomas, the defendant, listed a Wirraway Australian Warbird aircraft on eBay. Thomas set a minimum bid of $150,000 with an auction duration of 10 days. The plaintiff, Smythe, placed a bid on the aircraft in accordance with eBay rules, in the amount of $150,000. However, following the expiry of the auction period, Thomas decided that he did not wish to proceed with the sale and was entitled to withdraw because no binding contract had been formed between the parties.

Smythe v Thomas is the first Australian case to address online auctions and to consider whether an online auction is akin to a traditional auction, and further, whether an online auction is capable of forming a contract between vendor and purchaser.

Summary of claims

Smythe claimed that as a result of Thomas being the highest bidder and his bid equalling the minimum bid set by Thomas, a contract for the sale of the aircraft was entered into between himself and Thomas.

Thomas disputed that a contract had been entered into between the parties. He claimed that the only contracts on foot were between himself and eBay and between eBay and Smythe, and that those parallel agreements did not amount to a contract between the parties. While Thomas acknowledged that both parties had accepted eBay's terms and conditions, he contended that the mutual acceptance of those terms and conditions did not create a contract between Thomas and Smythe. Alternatively, Thomas argued that listing the goods on eBay was akin to placing a classified advert in a newspaper, and was thus merely an ‘invitation to treat’ (as opposed to an offer that had been accepted by Thomas).

Summary of decision

The New South Wales Supreme Court (Rein AJ) held that a binding contract existed between the parties and that this contract should be enforced. Rein AJ made a number of observations in relation to the issue of online auctions.

First, His Honour observed that when a purchaser and vendor agree to accept the terms and conditions of an online auction service, the parties accept 'that the online auction will have features that are both similar and different to auctions conducted in other forums'. The decision was held that an online auction is a 'species of auction'.

Second, His Honour stated that, in an eBay auction, there exists not only contracts between eBay and each of the purchaser and vendor. Rather, as in a traditional auction, contracts exist between:

  * the vendor and eBay;
    * the vendor and purchaser; and
    * eBay and the purchaser,

and that these contractual arrangements 'can sit together' to create a binding contract of sale.

The judge held that placing the item for sale on eBay did not constitute merely an invitation to treat, but was rather an offer to sell the aircraft.

Impact of the decision

The decision categorises online auctions, such as those conducted on eBay, as a species of auction. Moreover, in an online auction, a binding contract between the vendor and purchaser may come into existence. By affirming the contractual validity of 'peer to peer' online auctions, the decision in Smythe v Thomas greatly enhances the ability of purchasers and vendors to enforce sale of goods contracts made in an online auction environment and neutralises an argument that could have been problematic for a multi-million dollar industry.

International developments

France's regulatory authority, the Council of Sales, has recently issued proceedings against eBay arguing that eBay should be held to the same strict standards as French auction houses. eBay has asserted that it should not be considered an auction house, but rather should be considered a mere intermediary in the sales process, as it has no role in the negotiation of contracts and it is customers who decide whether or not to put items up for sale.   

What is most interesting in the summary of the above Australian case, is the finding that:
"as in a traditional auction, contracts exist between  * the vendor and eBay;* the vendor and purchaser; and* eBay and the purchaser"

However, when it comes to the French Regulatory Authority arguing that Ebay should be accountable to its strict auction standards, eBay assert that they are not an auction house but, a mere intermediary in the sales process with no role in the negotiation of their own legally binding contracts ? Interesting.

Moral: In the absence of any reserve price, Don't list rare items, antiques or collectibles on Ebay for anything less than the price you wish to achieve for them, and make sure to include any waivers, or conditions, including the option for 'offers' (so as to make the best use of Ebay's over priced fees). 

I have studied Consumer Law - and it was the right decision.  Thanks for highlighting this case to me

[mandurahmum]

Philip - I often enjoy your posts - but only the first one on a thread - you seem to take criticism of your agruments too personally, granted some are a bit personal - but most of the time its the argument that is being criticised.

Now I think its a real shame because you are very passionate about consumer affairs relating to ebay - and you do all the research to back it up.  And I for one have learned from you, but once it gets down to the bickering - I leave the thread.

You are a very smart man - you know that when someone says no offensive meant - it means the opposite.

[Philip.Cohen]

Hi mandurahmum,

Re Wirraway (Smythe v Thomas [2007] NSWSC 844)

I agree with Rebel*1*’s summation of this case (except that it was Smythe that was the highest bidder, not Thomas).

I don’t know if this item was listed on eBay “Motors”, in which case it should have been possible to set a reserve, or if it was listed on the general part of eBay, in which case it is not possible to set a reserve, only a starting price.

You can still set a reserve on the general eBay site in the US. eBay removed the ability to set a reserve in Australia, other than on Motors, some years ago.

Anyway, Thomas did set a minimum of $150,000. I understood that the problem arose when, after the auction, someone else offered $250,000 for the item and Thomas then wanted to avoid the auction “contract”.


The OP of this thread was indeed simply my cynical reminder of eBay’s most obviously disingenuous reasons for removing that ability; as are obviously disingenuous the reasons that eBay gives for doing just about everything that they do.

Sorry if I get a bit obstreperous at times, but having been in business for 40 years I, very early on, recognized that I needed an understanding of the basics of mercantile law and I obtained same via a very good primer (Yorston and Fortescue's “Australian mercantile law" 1981) that covers the basics of all forms of mercantile law. An interesting read.

Mr Thomas should have read something similar too; and even later he should have gotten better legal advice and saved himself the undoubted considerable additional cost of further arguing this matter.
(http://www.biblioz.com/search.php?a=79&i=20231733)

Having said that I have not “studied” consumer law per se but I understand the logic involved: it is generally about ensuring “fairness” in dealings between those with power and those with little power (usually “consumers for personal use”).

Contract law, on the other hand, is not about fairness, but about certainty, and unless a court finds something materially unconscionable about a contract between supposedly otherwise “equals”, the main subject matter(s) of a contract will in all likelihood stand. 

Let’s face it, if the main subject matters of eBay’s UA, and the like, were not logically enforceable the whole concept of online commerce simply could not work. People should be aware that in most cases (real estate transactions almost universally statutorily excepted) when they press that button they may be entering into an enforceable contract. For anyone to think otherwise is, in my opinion, naivety in the extreme.

Undoubtedly, we have all probably been naïve about some matter at some time (I know I have, and it cost me a great deal of money); one can only hope that one learns from the experience, as I hope Mr Wallace has, and not repeat the same mistake.


Do I have to then get every logical point across in the OP? That could be taxing. If I had to worry about that, I might never get to post anything in the first place. But, don’t worry, I too feel like leaving particular threads at times. Still, it’s not as bad as it used to be playing with the children in the old eBay “sand box” …

[mandurahmum]

Thanks for that Philip.

I am going to go out on a limb and say I hate reserves - and vendor bidding.  I think that if you have a reserve that a seller wants - then let the auction start at that price, and let the market decide if its worth it.  Otherwise it is just a waste of time for the most bidders.

I have the book you refer to - but a much later edition and the other text book most use - Commercial Law by Gibson and Fraser (both heavy books to be carrying around)  I also have the sale of goods act and the trade practises act and the fair trading act (WA).  All very good reference material and great if you have insomnia lol.  But something everyone in Business should have a good understanding of.

Its good to have you here telling us about the changes ebay tries to sneak past the goal post

[Rebel*1*]

Still, it’s not as bad as it used to be playing with the children in the old eBay “sand box

LOL - hear hear !!

[Philip.Cohen]

Agreed. Let the vendor express the minimum he is prepared to accept in the starting price. That is the equivalence of a vendor lawfully making a DISCLOSED vendor bid—with which I have no problem—and then letting the market have its say …

The problem with a set reserve and a nominal start is, as always, that there are probably going to be more shills bidding initially (they knowing what the reserve is) than genuine bidders—if any, so that an appearance of interest in the item can be created without any risk of a shill being the successful bidder, albeit at the cost of the fee for setting a reserve.

Of course, exactly the same problem exists at a traditional auction, and there is absolutely no way of stopping such activity from happening at a traditional auction. But, at an online auction there is every chance of stopping it because there is an auditable, analyzable, data trail.

Unfortunately, eBay is not interested in doing anything about this problem undoubtedly because they know that to do so would detrimentally affect their bottom line—indeed, I suspect that the problem is so pervasive that any effective solution thereto would devastate their bottom line.

So, there is the conundrum. I have no doubt that, whether or not eBay did something proactive about the problem of shill bidding, combined with the Chief Headless Turkey’s plan for “turning eBay around” (whatever that plan actually it is), eBay is going to continue its journey down the toilet. It’s only a shame that so many small merchants are going to be hurt, and buyers disappointed, along the way.

RIP eBay …

[Philip.Cohen]

As a matter of interest a US user, serious_coder (5614) said:
 
Regarding reserve fees, eBay has a partial excuse for its behavior.

Originally, there was no fee for a reserve. But many dealers would list an item with a low starting bid and a high reserve to see how high the bids would go. If they didn't meet the reserve, the dealer would contact the bidder outside of eBay (this was before anonymous bidding) to avoid the eBay fees. So eBay put in a reserve fee, refundable if the item sold, to discourage this behavior.

Later they took the refundable part away.

[*Brum6y*]

.... Later they took the refundable part away.

EBay seems to have a penchant for the two-step ploy.  Another recent example: Include dispute counts as a buyer satisfaction metric and then instruct buyers to raise disputes as a first step.


If I recall correctly, there are a number of examples of this type of manipulation.

[Philip.Cohen]

Some more interesting US consumer law cases regarding eBay/PayPal at:

http://blog.ericgoldman.org/archives/2010/07/ebay_venue_sele.htm

Funny, I don’t see Visa/Mastercard, or their underlying banks, having any of these sorts of problems.