Going, going, gone : online auctions, consumers and the law 1875538364 9781875538362

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Going, Going, Gone Online auctions, consumers and the law

July 2006 A research report by Nick Moustakas for the Communications Law Centre Funded by the TPA Consumer Trust — 1 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

About the author Nick Moustakas is the Legal Officer of the Communications Law Centre (CLC) and part of the Centre’s Research Unit at the Law School of Victoria University. Nick provides legal advice, conducts research, and teaches in the area of communications law and policy. He is a solicitor for the Centre’s Oz NetLaw internet legal practice which provides free information and advice on internet and e-commerce related matters. He has completed a Master of Laws at the University of Melbourne on internet legal issues.

Acknowledgements The author would like to thank all those who participated in the survey and focus groups for this project, and those who gave their time and insights for this project. (see Appendix 6 for consultation list) Special thanks go to: Elizabeth Beal for her input as supervisor of the project; Dr Denis Muller for his work on the survey and focus groups; and Ginger Briggs and Jane Williams for their assistance in preparing the report. Thank you also to: Derek Wilding, Simon Curtis, Kurt Malcolm, and Peter Tsipas. The Communications Law Centre acknowledges the funds provided by the TPA Consumer Trust for this project.

Communications Law Centre The Communications Law Centre is an independent, non-profit, public interest organisation specialising in media, communications and online law and policy. In Victoria, the Communications Law Centre is a research unit within the Law School of Victoria University. Director: Elizabeth Beal Phone +61 (0)3 9600 3841 Fax +61 (0)3 9670 7902 Email [email protected] Web www.comslaw.org.au

Level 1, 283 Queen Street Melbourne VIC 3000 PO Box 14428 Melbourne VIC 8001 © Communications Law Centre Limited 2006 ABN 89 003 623 630 ISBN 1–875538–36–4

All rights reserved. Without limiting the rights under copyright preserved above, no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of the Communications Law Centre. The image on the front cover is by Don Farrall from the Photodisc Green Collection

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Contents EXECUTIVE SUMMARY

7

Issues in this report

7

Methodology and consultation

8

Key findings

9

Options and recommendations

12

Data collection

12

Complaint handling/ fraud investigations

14

Consumer education

14

The next step

15

Increased consumer protection

15

Survey and focus group key findings

16

Survey

16

Focus groups

16

Buying behaviour

17

Online auction risks

19

Problems encountered

21

Dispute resolution

21

Understanding of legal rights and obligations

22

Appropriateness of safety measures and legal information provided

23

1. BACKGROUND AND OVERVIEW

24

1.1 Why this project is important

24

1.1.1

Increasing popularity of online auctions

24

1.1.2

Lack of attention to legal issues

25

1.1.3

Lack of consumer information

27

1.1.4

Lack of research

28

1.2 Issues in this report

29

1.3 Aim and objectives

31

1.3.1

Aim

31

1.3.2

Objectives

31

1.4 Funding 1.4.1

32

Benefits beyond the funding period

32

1.5 Methodology and consultation

33

1.5.1

Project stages

33

1.5.2

Consultation

33

1.6 Report structure

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2. ONLINE AUCTION INDUSTRY

37

2.1 U2C and A2C e-auctions

37

2.1.1

U2C e-auctions

37

2.1.2

Business sellers at U2C e-auctions

38

2.1.3

A2C e-auctions

39

2.1.4

Fixed price sales

40

2.2 Sites and number of users

41

2.2.1

Specific sites

41

2.2.2

Other sites

43

2.2.3

Conclusion

46

2.2.4

Auctions and shopping online

47

3. ONLINE AUCTIONS, CONSUMERS AND THE LAW

49

3.1 Auction laws

49

3.1.1

Licensing auctioneers

49

3.1.2

Prohibited auction conduct

51

3.2 Consumer laws

52

3.2.1

Trade practices laws

53

3.2.2

Victoria – unfair contract terms

60

3.2.3

New South Wales – Contracts Review Act 1980 (NSW)

64

3.3 Contract and agency law

65

3.3.1

Contracts at online auctions

66

3.3.2

Agency law and online auctions

70

3.4 Criminal laws

72

3.5 E-Auction sites, sellers and consumers

73

3.5.1

Auction site operators

73

3.5.2

Business sellers at U2C e-auctions

80

3.5.3

Private sellers at U2C e-auctions

81

4. FRAUD, CONSUMER COMPLAINTS & PRIVATE DISPUTES

82

4.1 Problems

82

4.1.1

Fraud

82

4.1.2

Consumer complaints

83

4.1.3

Private disputes

84

4.2 Australia

84

4.2.1

Fraud

84

4.2.2

Consumer complaints

91

4.2.3

Private disputes

99

4.3 Overseas (United States)

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4.3.1

The Consumer Sentinal

102

4.3.2

eConsumer.gov

102

4.3.3

US National Fraud Information Center

102

5. USER KNOWLEDGE AND EXPERIENCE

104

5.1 Survey

104

5.2 Focus groups

107

5.3 Bidders and buyers

108

5.3.1

Buying behaviour

108

5.3.2

Risks involved

123

5.3.3

Problems encountered and dispute resolution

134

5.3.4

Understanding of legal rights and obligations

142

5.3.5

Appropriateness of safety measures and legal information provided

149

5.4 Sellers

153

5.4.1

Selling behaviour

153

5.4.2

Problems encountered

155

5.4.3

Sellers’ experiences

159

6. OPTIONS AND RECOMMENDATIONS

160

6.1 Data collection

163

6.1.1

Online auction fraud

163

6.1.2

Consumer complaints

164

6.1.3

National database

165

6.2 Complaint handling/fraud investigations

166

6.2.1

Low financial losses

166

6.2.2

Jurisdiction

167

6.2.3

Online auction industry

168

6.3 Consumer education

170

6.3.1

Risks and prevention

170

6.3.2

Consumer rights

172

7. CONSUMER SUGGESTIONS AND FEEDBACK

179

APPENDIX 1: SURVEY

189

APPENDIX 2: SURVEY RESPONDENTS

198

APPENDIX 3: ADDITIONAL SURVEY AND FOCUS GROUP RESULTS

201

5.3 Bidders and buyers

201

5.3.1

Buying behaviour

201

5.3.3

Risks involved

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5.3.3

Problems and dispute resolution

228

5.4 Sellers

232

5.4.1

Selling behaviour

233

5.4.2

Problems encountered

234

5.4.3

Sellers experiences

236

APPENDIX 4: FOCUS GROUP DISCUSSION OUTLINE

249

APPENDIX 5: AUCTION SITE OPERATOR QUESTIONNAIRE

251

APPENDIX 6: CONSULTATION LIST

253

BIBLIOGRAPHY

255

1. Articles/Books/Reports

255

2. Cases

255

3. Legislation

256

4. Other Sources

257

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Executive summary The Communications Law Centre (CLC) considers the project important because of the: •

increasing popularity of online auctions

•

lack of attention to online auction consumer legal issues

•

lack of online auction consumer information

•

lack of research in Australia in the area of online auctions and consumer protections.

Issues in this report This report considers whether the current law sufficiently protects Australian consumers who shop at online auctions, and whether legislative or other regulatory intervention is required. In determining this, the following key matters have been investigated: (a) • • •

•

•

(b) •

Legal and regulatory issues consumer issues for Australians in relation to retail shops operating on fixed prices at an auction website the legal position of individual online auction users in Australia (buyers and sellers) the potential risks, liabilities and obligations users may face the potential liability for online auction site operators for instances of fraud or deceptive and misleading conduct that occur through their online forums, and the possible implications for buyers or sellers who fall victim to fraudulent dealings the extent to which existing legislative, regulatory, co-regulatory and selfregulatory mechanisms adequately protect consumers. Consumer knowledge/experience the number of Australians who shop at online auctions

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• •

(c) • • •

(d) •

•

the level and types of fraud in online auctions where Australians have been victims consumers’ understandings of: i) the risks involved in online auctions; and ii) their rights and obligations when shopping at an online auction. Complaints/dispute resolution procedures the level and types of complaints Australians have made with respect to online auctions the level and types of disputes in online auctions that have resulted in online dispute resolution where at least one user is Australian the level and types of successful and unsuccessful online dispute resolution cases where at least one user is Australian. Future trends and developments future trends and developments in online auctions and related electronic commerce activities, and the potential consumer protection issues that may arise analysis of the experience of other jurisdictions where use of online auctions is particularly common (e.g. in the US).

Methodology and consultation Stage 1 For the purpose of collecting information regarding fraud, complaints, and disputes at internet auctions involving Australian consumers, the following organisations were consulted: 1. state and federal law enforcement agencies (e.g. Australian High Tech Crime Centre, Victoria Police, Federal Police) 2. state and federal Consumer Departments (e.g. ACCC, Consumer Affairs Victoria) 3. auction site operators (Appendix 5 provides a copy of the questionnaire sent to auction site operators) 4. consumer interest organisations (e.g. Australian Consumers’ Association). Online auctions users also provided information regarding fraud, complaints, and disputes at Internet auctions through online surveys and focus groups. (See chapter 5) — 8 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Stage 2 In order to examine industry practice regarding Internet auctions, auction site operators were consulted (Appendix 5 provides a copy of the questionnaire sent to auction site operators). Appendix 6 provides a full list of organisations consulted for this project. In addition, both sellers and individuals participating in Internet auctions were consulted. This occurred through an online survey and focus groups. (See chapter 5) Stage 3 Stage 3 involved investigating consumers’ understandings of: i) the risks involved in online auctions; and ii) their rights and obligations when shopping at an online auction. This occurred through solicitation of consumer experiences and understanding of Internet auction issues via online surveys and focus groups. (See chapter 5) Stage 4 A draft version of the report was sent for comment to relevant organisations including state and federal law enforcement agencies; state and federal consumer departments; online dispute resolution companies; auction site operators; credit card companies; and consumer interest organisations.

Key findings Popularity of online auctions •

Online auction sites are very popular in Australia and are becoming increasingly popular. More than 4.4 million people visited eBay Australia’s site in March 2006 alone. (See sections 2.2.3 and 2.2.4)

Significant number of business sellers at online auctions •

Many businesses are selling at online auction sites. (Section 2.1.2) For example, in May 2004, eBay stores selling at fixed-price sales accounted for 28% of eBay’s Australia’s gross merchandise sales. This indicates that there are a significant number of consumer transactions occurring at online auction sites. It also appears that consumer transactions at online auctions are increasing. — 9 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Significant number of non-auction sales at auction sites •

U2C e-auction sites (User-to-Consumer online auction sites: where any user of the site can act both as a buyer and a seller e.g. eBay – see section 2.1) allow items to be bought at a fixed price and through an auction sale. (See section 2.1.4) According to eBay, during the 4th quarter of 2005, fixed price sales of eBay’s auction sites globally accounted for 34% of total ‘gross merchandise volume’ (the total value of all successfully closed items on eBay’s trading platforms).1

Lack of consumer complaints/fraud data in Australia •

Data from law enforcement agencies is not helpful in ascertaining how many Australians are experiencing problems at online auctions because of the limitations in the agencies’ data collection processes. (Section 4.2.1.1)

•

Data from consumer government departments are not helpful in ascertaining how many Australians are experiencing problems at online auctions because auction users who experience problems rarely contact consumer government departments for assistance. (Section 5.3.3.2) Furthermore, there are problems with the consumer complaint data of consumer government departments, such as inconsistent complaint categories (e.g. the type of legislative breach) and in some instances the absence of an online auction complaint category. (Sections 4.2.2 and 6.1.2)

Lack of transparent fraud/complaints/disputes data from auction site operators •

Online auction site operators do not provide transparent information regarding the number of fraud/complaints/disputes involving users of their sites. (Sections 4.2.1.5, 4.2.2.10 and 4.2.3.2)

Overseas data shows online auctions is a leading fraud/consumer complaints category •

Overseas data, particularly from the United States, shows that: a leading fraud complaint category is online auctions. The data also shows that online auctions are one of the most common consumer complaints generally – of either online or offline consumer concerns. (Section 4.3)

eBay, eBay Fact Sheet (as of 31 December 2005), p 1, available at at 27 April 2006.

1

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•

Furthermore, data shows that online auction fraud is the leading type of fraud in the US, including both offline and online fraud. (Section 4.3)

Significant number of e-auction problems experienced by Australian users •

A significant portion of online auction users in Australia appear to be experiencing problems when shopping at online auction sites. (Section 5.3.3.1) For example, 48% of buyers surveyed experienced problems when buying something at an online auction website. Common problems include paying for items and not receiving them (22% of buyers surveyed) or receiving items that are different to what was advertised/described (almost 20% of buyers surveyed). These problems also indicate that online auction fraud is of particular concern.

High proportion of problems experienced by Australians are not being resolved successfully •

From the buyers surveyed who experienced problems at an auction site, 39% of them either never or only a few times successfully resolved problems they experienced. (Section 5.3.3.2)

Australian buyers are primarily contacting sellers, auction site operators and using online dispute resolution services to resolve auction site problems •

Of those buyers surveyed who experienced problems at an auction site, 79.8% contacted the seller directly, 50.7% contacted the auction site operator directly, and 31.9% used an online dispute resolution service to try to resolve these problems. (Section 5.3.3.2)

Australian consumers are generally not contacting the police or fair trading offices for help. A significant number of consumers are doing nothing to resolve problems experienced at an auction site •

Only 5.6% of buyers surveyed who have experienced problems at an auction site contacted the police, and only 1.9% contacted a government regulator like the ACCC. Furthermore, 16.9% of buyers surveyed who experienced problems at an auction site did nothing to try to resolve them. (Section 5.3.3.2)

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Australian e-auction consumers are not using courts or tribunals to enforce their rights •

Despite a significant portion of online auction users in Australia experiencing problems when shopping at online auction sites, consumers do not appear to be using courts/tribunals to enforce their rights. (Sections 4.2.2.11 and 5.3.3.2)

Uncertainty surrounding auction site operator liability •

Very little attention has been paid in Australia to legal issues relating to consumers using online auction sites. (Section 1.1.2)

•

There is some uncertainty surrounding the legal liability of U2C e-auction site operators. (Chapter 3) For example, how do the laws relating to auctioneers apply to online auction operators? (Sections 3.1 and 3.5.1.2) Are online auction site operators liable for misleading and deceptive information posted on their sites? (Sections 3.2.1.4 and 3.5.1.2) Is an online auction site operator an agent for the seller? (Sections 3.3.2 and 3.5.1.2) Are online auction sites exercising adequate ‘due care and skill’ in their operation of the site? (Sections 3.2.1.2 and 3.5.1.2)

Options and recommendations Based on the project findings we have made some recommendations which in our view industry participants, regulators and relevant stakeholders should take up. Furthermore, some issues have arisen from our findings that require further consideration.

We have provided some options that should be considered by

relevant stakeholders when considering these issues further.

DATA COLLECTION Online auction fraud RECOMMENDATION 1: Introduction of uniform online auction data collection systems by law enforcement agencies R1.1

Law enforcement agencies should develop data collection systems that identify online auction fraud.

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R1.2

Each law enforcement agency should develop data collection systems that are consistent so they can compare data and compile national data.

R1.3

An agency should be responsible for collecting, producing and reporting national data on online auction fraud annually.

Consumer complaints RECOMMENDATION 2: Introduction of uniform online auction data collection systems by consumer government agencies R2.1

Consumer government departments should develop data collection systems that identify online auction complaints.

R2.2

Each consumer government agency should develop data collection systems that are consistent so they can compare data and compile national data.

R2.3

A department should be responsible for collecting, producing and reporting national data on online auction complaints annually.

National database OPTION 1: Development of a national consumer complaints/fraud database O1.1

Law enforcement agencies and consumer government agencies could undertake a joint project to develop a database of complaints and fraud involving consumers. The database would include information on online auction matters.

O1.2

Relevant government agencies could access the national database to help them investigate and prosecute online auction unlawful activities. The database would also allow agencies to identify current trends in consumer complaints and fraud.

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COMPLAINT HANDLING/ FRAUD INVESTIGATIONS RECOMMENDATION 3: Review of complaint handling policies between law enforcement agencies and consumer government departments R3.1

Consumer government departments and law enforcement agencies should review their complaint handling policies to determine whether they are handling online auction complaints correctly. They should consider the issues raised in this report, particularly the legal issues in chapter 3.

R3.2

Consumer government departments and law enforcement agencies should agree on which organisation has jurisdiction to handle an online auction complaint, and when a matter should be referred to another agency/department/organisation. There will be circumstances when more than agency/department will have jurisdiction. The agreement should outline how these type of complaints should be handled so as to avoid duplicity and to save resources.

Online auction industry RECOMMENDATION 4: Review of complaint handling processes of auction site operators R4.1

Auction site operators should review their complaint handling processes and consider how they can improve them so that more problems experienced at auction sites can be resolved successfully.

CONSUMER EDUCATION RECOMMENDATION 5: Consumer education on e-auction risks and consumer rights R5.1

Law enforcement agencies, consumer government departments, auction site operators and other relevant organisations (e.g. consumer NGOs) should educate consumers to increase their awareness of the risks involved in shopping at online auctions, and better inform them about how to reduce those risks. Areas to focus on include: payment methods; completing transactions — 14 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

outside of the auction website; likelihood of experiencing a problem; overseas sellers; and interstate sellers. R5.2

Law enforcement agencies, consumer government departments, auction site operators and other relevant organisations (e.g. consumer NGOs) should educate consumers to increase their awareness and better inform them of their rights when shopping at an auction site. Areas to focus on include: business sellers; fixed price sales (no auction); and where to make a complaint.

THE NEXT STEP RECOMMENDATION 6: Relevant stakeholders to meet and discuss issues R6.1

Relevant stakeholders, through an appropriate forum, to meet and: consider how best to implement any of the recommendations made and options considered that are deemed appropriate; explore solutions regarding problems identified in this report that need further consideration and are complex.

R6.2

Relevant stakeholders should meet at regular intervals so as to examine the progress of any changes implemented and determine whether the desired outcomes of reducing the number of consumers experiencing problems at online auctions and increasing consumer confidence are being met.

INCREASED CONSUMER PROTECTION Relevant stakeholders should consider whether the regulatory approach to online auction should focus on consumer education only or whether increased consumer protection is also needed. If increased consumer protection is needed, some options that may be considered include:

OPTION 2: Improved verification of users’ identities O2.1

Legislatively prescribe higher standards for verifying users’ identities at online auction sites.

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OPTION 3: Introduction of an industry complaints body O3.1

Introduce an industry complaints body to handle complaints that is free to consumers and able to make binding decisions.

OPTION 4: Introduction of an online auctions industry body O4.1

Development of an industry body that develops codes that deal with consumer issues raised in this report like complaint handling and verification of users’ identities.

Survey and focus group key findings The objectives of the survey and focus groups were to examine: • •

the past experience of Australian consumers shopping at Internet auctions sites, including cases of fraud, complaints and disputes; and the understanding of Australian consumers regarding: i) the risks involved in online auctions; and ii) their rights and obligations when shopping at an online auction.

SURVEY A 67-question survey was developed to collect data regarding the experiences of Australian consumers shopping at Internet auctions sites regarding fraud, complaints and disputes and Australian consumers’ understanding of the risks involved and their rights and obligations when shopping at an online auction. The survey was available online to be completed from 9 January 2006 to 19 February 2006 (inclusive). There was a total of 510 survey respondents.

FOCUS GROUPS Focus groups were conducted in order to assist in analysing the survey results and to obtain a narrative of individual experiences and understanding of online auctions. There was a total of 29 focus group participants.

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BUYING BEHAVIOUR Frequency of buying 1. From the 510 survey respondents, 87% of them (442) had bought an item at an online auction site. 2. The majority of buyers surveyed (54%) had bought more than 10 times items at an auction site and 24% had bought more than 50 times. 3. For some buyers participating in online auctions is almost an addiction where they are online many times a day for several hours at a time, searching for bargains and checking the progress of auctions in which they had placed a bid. 4. For many buyers it is part of their daily routine to check what is happening at an online auction site. These buyers tend to be browsers who would impulsively bid for something that took their fancy, even if they had not previously considered purchasing such an item. 5. There are also buyers who are focused and only use online auction sites to buy specific items they are after. Collectors will visit online auctions frequently whereas other focused buyers’ visiting patters are episodic and depend on whether or not they want a specific item. Reasons for not bidding at an online auction sale 6. Of the respondents who had not bid at an online auction sale item (65 in total), the most popular reason (63% of non-bidders) was that users did not feel that they were adequately protected if something goes wrong. 54% of non-bidders said it was because they were afraid they may be subject to fraud. Amount spent 7. The majority of buyers (58%) had not spent more than $200 on the most expensive item they have bought at an auction site and 25% had spent between $201 and $500. Eighty-three per cent had not spent more than $500 on an item. 8. Buyers commonly buy relatively small value items, such as DVDs, CDs, textbooks, cosmetics, clothing and motor parts. — 17 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Buying preferences 9. Eighty-four per cent of buyers surveyed (442 buyers in total) had used direct bank deposit into the seller’s account to pay for an item bought on an online auction site. Thirty-one per cent of buyers surveyed had paid by cheque or money order. Seven per cent of buyers surveyed had sent cash directly to the seller. Only 1% had used an escrow service. 10. Three out of every four respondents (475 responses in total including some people who had not bought an item at an online auction site) do not care whether the seller is a business or an individual. Sixteen per cent prefer to buy from businesses and 5% prefer to buy from individuals. 11. Some buyers prefer to buy from a business because they get the benefit of a ‘brand’, including a warranty. Some prefer to buy from an individual because they think most people are prepared to ‘do the right thing’. 12. Some buyers prefer not to buy from a business because they think a business could be difficult to deal with and unresponsive to complaints. Some buyers prefer not to buy from an individual because they do not know who they are dealing with and the avenues for redress would be limited. Auction v fixed price purchases 13. Eighty-seven per cent of survey respondents had bid online for an item at an auction sale and 69% had bought an item at a fixed price. 14. Almost four out of every five buyers surveyed (78%) have bought an item both at an auction sale and at a fixed price. Only 1% of buyers had purchased a fixed price item only and 21% had bought an item online only at an auction sale. 15. Of the 31% survey respondents who had not purchased an item at a fixed price, the most popular reasons for this was that they could not find what they were looking for (26%); they were afraid that they may be subject to fraud (25%); that they don’t shop online generally (24%); and that they do not feel adequately protected if something goes wrong (23%). 16. Buyers are attracted to online auctions sales and prefer them to fixed price auction site purchases because they feel that they could get a bargain at auctions and because they find the bidding/auction process fun or exciting. Some buyers prefer a fixed price sale

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because they can get the item instantly and save time, and prefer this to the chance of getting a bargain.

ONLINE AUCTION RISKS Likelihood of problems 17. Eighty per cent of buyers surveyed thought that it was either not very likely or not at all likely that they would not receive the item they bought at an online auction website. Only 3% thought that it was very likely. 18. Seventy-one per cent of buyers surveyed thought that it was either not very likely or not at all likely that they would receive an item they bought that was different to the item advertised/described. Only 6% of respondents thought that it was very likely. 19. Fifty-five per cent of buyers surveyed thought that it was very likely or quite likely that a fake bid would be placed for an item they were bidding on at an online auction site, and 34% thought that it was not very likely or not at all likely. 20. Over a quarter (28%) of buyers surveyed thought that it was very likely or quite likely that they would be subject to fraud or unlawful activity at an online auction site, while 59% thought it was not very likely or not at all likely. 21. Some users are confident that they will ‘prevail’ over wrongdoers who misuse an online auction site. Some users had been wrongdoers themselves and did not feel guilty about this because they had suffered from someone else’s wrongdoing in the past. 22. Some buyers trust online auction sites because of their own experiences, their expectation that they will have more successes than failures overall, and what they see online auction sites doing to protect users (for example, more secure payment systems and a ‘feedback’ system). Buyers’ assessment of risks Feedback and rating systems 23. The vast majority of buyers surveyed (96.1%) thought that it was very important or quite important that the online auction site has a feedback facility where they can view sellers’ feedback and rating. Similarly, the vast majority of buyers surveyed (93.9%) said that a — 19 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

seller’s feedback is very important or quite important in deciding whether they will bid on/buy an item listed for sale by that seller. 24. There was also a widespread belief among focus group respondents that the feedback system was subject to manipulation and blackmail, and this was something they factored into their decisions about who to deal with. Despite this, the feedback system was an important part of their decision-making process. Awareness of risks 25. Commonly identified risks of online auction sites by focus group respondents were misrepresentation, goods not being delivered or arriving damaged, absence of a warranty, and potential misuse of personal information (the buyers’ name, address and credit card details). However, few of the respondents were bothered by these perceived risks. Further, the respondents appeared to take the view that all buying and selling had risks and that online transactions were no different. Minimising risks 26. Strategies used to minimise the risks associated with using online auction sites included using the ‘feedback’ system, using a particular method of payment (such as PayPal), limiting the amount that a buyer is prepared to spend online, and only buying from local sellers. Level of risk taken 27. Thirty-six per cent of buyers surveyed said that they would not bid for an item when the seller has no feedback/rating, and 35% of buyers said that they would. 28. The majority (58%) of buyers surveyed would prefer to buy from a seller located in Australia, and 19% would only buy from sellers located in Australia. Twenty-two per cent of buyers said they did not care where the seller is located. 29. Only 19.5% of buyers surveyed would prefer to buy from a seller located in the same state/territory as them, and only 2% would only buy from sellers located in the same state/territory as them. The majority (76.7%) of buyers said they did not care where in Australia the seller is located. 30. The vast majority of buyers surveyed (91%) said that, after experiencing problems at an online auction site, they were willing to accept the risk and would still buy an item there in the future.

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31. Almost one in every three buyers surveyed (31%) are prepared to go off an auction site to complete a purchase. Users were prepared to do this in circumstances where they feel they can trust the seller, they feel that the transaction is relatively safe, where the item is of low value, and where the item is difficult to purchase elsewhere or is not permitted to be sold on the auction site or in Australia. Most commonly, users are prepared to do this where they consider the risks to be relatively low.

PROBLEMS ENCOUNTERED Frequency and nature of problems 32. Forty-eight per cent of buyers surveyed had experienced problems when buying something at an online auction website, and 51% said they had not. 33. Forty-six per cent of buyers who had experienced a problem said that they paid for an item but did not receive it; 41% said they had received an item that was different (including being of lesser value) to what was advertised/described. 34. From all buyers surveyed (442), approximately 22% of them (98/442) did not receive an item that they paid for: this represents approximately one in every five buyers who did not receive an item. Further, almost 20% or approximately one in five (88/442) buyers surveyed received an item that was different (including being of lesser value) to the item that was advertised/described. 35. Nineteen per cent (approximately one in 5) of buyers surveyed have experienced a problem once when buying an item at an auction site, and 25% of buyers (or approximately one in 4) have experienced a problem two to five times when buying at an auction site. Fortyfour per cent of buyers have experienced a problem one to five times.

DISPUTE RESOLUTION Attempts at dispute resolution 36. The most common ways that survey respondents who had experienced a problem when buying at an auction site had tried to resolve these problems were: to contact the seller directly (79.8%), contact the auctioneer (50%), or use an online dispute resolution — 21 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

service (31.9%). 16.9% of the survey respondents said that they did not do anything. 37. Eighteen per cent of total buyers surveyed (or almost one in every five) have never or only a few times successfully resolved problems experienced when buying at an online auction site. Thirteen per cent of total buyers surveyed (more than one in 10) have never successfully resolved problems experienced when buying at an online auction site. 38. Users are not inclined to deal with problems that they encounter using an online auction site by reporting it to the police or using a legal process; they are more inclined to use online avenues of redress, which, although limited, are familiar and instantly accessible.

UNDERSTANDING OF LEGAL RIGHTS AND OBLIGATIONS Attention to terms of sale and shipping details 39. Nineteen per cent of buyers surveyed said that they consider all of the seller’s terms of sale, including the essential details and the ‘fine print’ applicable to warranty and return policies. Sixteen per cent said that they only consider the essential details. The majority (62%) carefully consider all of the seller’s terms of sale (the essential details and the ‘fine print’) and also try to determine the relative value of the item. 40. Four out of five buyers (81%) said that they would not bid on an item when the details of shipping and delivery fees are not specified.

Buyers’ understanding of their legal rights 41. Four out of every five buyers surveyed (81%) said that their legal rights are the same regardless of the way they purchase at an auction site. Eighteen per cent of buyers surveyed said that their legal rights are different depending on the way they purchase. 42. Some of the ways in which buyers considered that their legal rights might differ depending on they way they purchase at an auction site include: the difference in the assumption of risks; legal issues (depending on whether the seller is a business or an individual, contractual and online legal issues, and available remedies); where

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the goods are from and how they are paid for. Some users thought they might not have legal rights at all.

APPROPRIATENESS OF SAFETY MEASURES AND LEGAL INFORMATION PROVIDED Standard of safety measures 43. Sixty-seven per cent of respondents were of the view that providers of online auction sites do all they reasonably can to operate their sites/services in a way which is safe for users. Twenty-five per cent of survey respondents (or one in four) thought there were flaws which can and ought to be fixed. 44. Some of the ways that users of online auction sites think that auctioneers could improve flaws with online auction sites are: higher user protection and more information for users; higher standard of identification and higher security; the methods for postage and handling, payment and insurance should be made clearer; greater protection against fraud, including fake bidding, and the sale of counterfeit goods; harder line against people who misuse the online auction process; improved customer service/complaints process; and auction site operators should take more responsibility for the process.

Rules / terms and conditions 45. Half of the respondents (50.4%) said that they thought the online auction site they have used provided the right amount of information in terms of rules / terms and conditions. 46. Approximately one in every four survey respondents thought that these sites provide too much information (12.9%) or too little information (12.4%). 47. The majority of survey respondents (57%) said they could clearly understand the rules / terms and conditions of online auction sites they have used, while a quarter (24%) said they don’t clearly understand them. 48. The majority of respondents (70%) said they thought the rules / terms and conditions were fair to all parties, while 12.4% thought they were not fair to all parties.

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CHAPTER 1

Background and overview 1.1 Why this project is important The Communications Law Centre (CLC) considers the project important because of the: •

increasing popularity of online auctions

•

lack of attention to online auction consumer legal issues

•

lack of online auction consumer information

•

lack of research in Australia in the area of online auctions and consumer protections.

1.1.1

INCREASING POPULARITY OF ONLINE AUCTIONS

Many consumers shop online, and each year the number increases substantially. In 2002, 15% of Australian adults (2.2 million) purchased or ordered online goods or services for private use.2 This is a 34% increase in online consumer shopping since 2001.3 In 2001 consumers spent approximately $1.9 billion, and in 2002 at least $4 billion, on online purchases.4 A more detailed breakdown is available in chapter 2.

In any given week during 2002-2003 an average of approximately one million Australian consumers aged 14 years and over purchased a good or service online (Review of Building Consumer Sovereignty in Electronic Commerce, A Best Practice Model for Business, Discussion Paper, [2.1.1] Commonwealth Treasury, November 2003, available at . 3 Use of Information Technology [1301.0-2004], Australian Bureau of Statistics, 2004, available at . The number of consumers who have made an online purchase has increased by 147% from December 2000 to June 2003 (The Current State of Play, Department of Communications, Information Technology and the Arts, December 2003, available at . 4 Innovation and Technology Statistics Update – Bulletin No. 9, December 2003, Australian Bureau of Statistics, available at . 2

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The most popular online shopping destinations are online auction sites. Like traditional auction forums, online auction sites provide a medium for consumers to buy and sell goods and services using a bidding process. Some sites may also offer a classifieds or trading section where consumers can buy products at specified, predetermined prices. Unlike traditional auction houses, most online auction operators do not control transactions between buyers and sellers, nor are they ordinarily involved when buyers and sellers negotiate delivery and payment. The virtually unlimited number of potential buyers, sellers and range of goods and services available from all over the world has made sites such as eBay extremely attractive to consumers. Nielsen NetRatings reported that more than 1.6 million Australians visited internet auction websites during April 2003 (including www.ebay.com.au, www.sold.com.au and www.stuff.com.au). This was a 73% increase from April 2002.5 Based on the Nielsen NetRatings, eBay Australia is currently the leading Australian shopping website. In April 2004 alone, more than 2.4 million people visited www.ebay.com.au.6 More than 3.5 million Australians purchased something from eBay Australia’s internet auction site between May 2003 and May 2004. In that period, eBay’s Australian sales grew by 147%.7 Current figures are available in chapter 2.

1.1.2

LACK OF ATTENTION TO LEGAL ISSUES

Despite the very large number of Australian consumers using an internet auction website to buy goods or services, very little attention has been paid to the legal issues relevant to these consumers.8 The freedom and relative anonymity of the internet have also allowed internet auction sites to become popular forums for fraud by both buyers and sellers.9 Overseas experience has shown that the majority of internet fraud complaints relate to online auctions. In the United States, the National Consumers League has found that over two-thirds of internet-based fraud is through

Jason Hill, ‘Auction action’, The Age, 24 July 2003. Gary Barker, ‘Shoppers tap into eBay’, The Age, 5 May 2004. 7 Between 2000 to 2001 Australian sales on eBay grossed $63.8 million (Paul Ham, ‘eBay's bazaar market place’, The Age, 2 July 2002). This number would be significantly higher today given the growth of the eBay between 2000 and 2004. 8 See, for example, Sorensen, ‘Internet auctions, consumer protection and the Trade Practices Act’, Deacons News and Insights, January 2004, available at ; Reynolds, ‘E-auctions: who will protect the consumer?’ (2002) 18 Journal of Contract Law 1. Both of these articles discuss internet auctions and consumer protection law, but fail to clarify the consumer position and/or do not address important issues discussed in this report. 9 See e.g. Sorensen, n 8 above.

5 6

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online auction sites.10 The Internet Fraud Complaint Centre 2002 Internet Fraud Report, prepared by the US National White Collar Crime Center and the Federal Bureau of Investigation, found that internet auction fraud was by far the most reported offence, making up 46% of total complaints. Complaints were mostly received from the US, but a proportion was from other countries including Australia.11 Current figures are available in chapter 4. There are many opportunities for fraud in online auctions. For example, during an auction, a seller (under a different name, or through accomplices) may lodge dummy bids to drive up the auction price; or a buyer may lodge a low bid, then (again, under a different name or through an accomplice) follow with an extremely high bid which he or she withdraws immediately before the auction closes, knocking down the price to the original low bid. After the auction, most problems occur with payment and delivery. For example, the seller receives the money but does not deliver the goods; the seller receives the money but delivers materially different and/or inferior goods to those described; there are delays in delivery; or the seller sends the goods, but never receives payment.12 Other violations of consumer protection laws may not amount to fraud but still can result in a consumer complaint. Regulators are becoming increasingly aware of misleading and deceptive activities conducted via the internet. For example, the ACCC, together with consumer protection agencies in over 20 countries, conducts the International Internet Sweep, looking for ‘shonky websites which mislead consumers.’13 Overseas experience has shown that a large proportion of consumer complaints relate to online auctions. For example, www.econsumer.gov, a joint project between consumer protection agencies from 19 countries (including Australia) reported that, between 1 January and 30 June 2004, consumers made 3,969 complaints. The second most common related to internet auctions (12%) ahead of complaints relating to lotteries, computer software and credit cards.14 Current figures are available in chapter 4.

Reynolds, n 8 above, at 3. IFCC 2002 Internet Fraud Report, 2002 available at

The US Internet Fraud Watch recorded online auctions as 89% of the total internet fraud complaints between January and December 2003. Total internet fraud complaints were 37,183 (Internet Scams, Fraud Trends January – December 2003, National Fraud Information Centre available at ). 12 Reynolds, n 8 above, at 8. 13 ACCC, ‘Preliminary sweep results show Internet scammers still out there’, Press Release, 16 February 2004 . 14 Data is available at . 10 11

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In Australia, there is no organisation or agency that collects all the Australian consumer complaints data about online auctions to determine what issues consumers face. The E-commerce Working Party of the Ministerial Council on Consumer Affairs, in a recent discussion paper, questioned whether available complaints data provide a good gauge of issues faced by consumers buying goods and services online.15

1.1.3

LACK OF CONSUMER INFORMATION

The consumer information that is currently available about online auctions does not address many important issues. As a consequence of this, fundamental questions remain unresolved, such as the potential liability of the auctioneer for fraudulent activity and what happens when there is a dispute about a purchase at an auction website. Online auction sites such as eBay describe themselves merely as forums for trade between individuals, and as such do not claim liability for fraudulent transactions that may occur via their facilities.16 The consumer information that is currently available generally represents the view that online auction sites are not usually liable for the actions of users.17 However, there may still be scope under the Trade Practices Act 1974 (Cth) for online auction operators to be liable for instances of fraud perpetrated on individual buyers or sellers using online auction sites. Such claims would depend on, for example, whether the claimant could establish that they were led to believe that the auction site, through its terms and conditions or through representations on the website, misled them as to the characteristics and security of the auction process.18 For instance, in 2001 the Victorian Civil and Administrative Tribunal found an online auction site liable for the loss incurred when a user purchased a computer that never arrived from an overseas seller. The user successfully argued that the auction site’s representation that it was safe

Online Shopping and Consumer Protection Discussion Paper, Standing Committee of Officials of Consumer Affairs: E-commerce Working Party, May 2004, p 14. 16 See eBay User Agreement, cl 3.3, available at 17 See e.g. Consumer Affairs Victoria, Online Auctions, eCommerce Fact Sheet, 2001 available at . ACCC, Internet auctions: what you should know before you bid or sell, August 2000. 18 Sorensen, n 8 above, at 4-5.

15

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overrode the terms of the user agreement that attempted to limit the amount of compensation available.19 Application of consumer protection laws to online auctions remains unclear, and due to the limited number of cases that have been litigated, there has been little opportunity for these laws to evolve. In such an environment, the rights and obligations of participants in online auctions are not well defined. An improved understanding of the rights and obligations of participants and auction site operators would help develop consumer confidence. Another important area concerns online auction dispute resolution mechanisms and the legal and practical effects such mechanisms have on consumers’ rights. For example, eBay encourages consumers to use online dispute resolution (mediation) when something goes wrong. EBay’s preferred mediator is SquareTrade.20 Further, retail shops operating on fixed prices at an auction website may misrepresent to consumers that the statutory warranties existing under the Trade Practices Act 1974 (Cth) do not apply because the goods were bought at an auction. In 2004, there were over 4,000 such shops available at eBay Australia, including big companies such as IBM.21 During that period, commercial retailers produced 28% of eBay’s Australian gross merchandise sales.22 Finally, alternative online payment schemes such as PayPal are frequently used in online auctions and may raise additional issues for consumers.23 In 2004, PayPal had 50 million user accounts worldwide.24

1.1.4

LACK OF RESEARCH

To date, very little consideration has been given in Australia to consumer issues relating to online auctions. A search located two Australian legal articles that discuss online auctions and consumer protection law.25 There appears to have been no Australian research on:

Evagora v eBay Australia & New Zealand Pty Ltd [2001] VCAT 49. If Something Goes Wrong: Overview, eBay, available at . 21 Garry Barker, ‘Shoppers tap into eBay’, The Age, 5 May 2004. 22 Ibid. 23 May Wong, ‘ PayPal problems persist,’ News.com.au, 13 October 2004, available at . 24 Ibid. 25 Sorensen, n 8 above; Reynolds n 8 above. 19

20

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•

the level and types of fraud in online auctions where Australians have been victims

•

the level and types of complaints Australians have made about online auctions

•

consumer issues for Australians in relation to retail shops operating on fixed prices at an auction website

•

the level and types of disputes in online auctions that have resulted in online dispute resolution where at least one user is Australian

•

the level and types of successful and unsuccessful online dispute resolution cases where at least one user is Australian

•

legal issues regarding consumers’ rights under Australian law where an online auction dispute is involved and/or dealt with through online dispute resolution

•

consumers’ understandings of: i) the risks involved in online auctions; and ii) their rights and obligations when shopping at an online auction.

Some limited consumer information from government consumer agencies provides practical tips on how to avoid fraud and where to direct complaints when there is a problem. However, this information does not consider the topics outlined above, which are fundamental to determining the legal issues facing Australian consumers who shop at online auctions. Furthermore, consumer agencies such as the ACCC and state/territory consumer affairs or fair trading departments currently provide information to consumers that does not adequately deal with the potential liability of online auction site operators to consumers/auction users.26 This issue needs examination.

1.2 Issues in this report This report considers whether the current law sufficiently protects Australian consumers who shop at online auctions, and whether legislative or other regulatory intervention is required. In determining this, the CLC has investigated the following key matters:

See, for example, Consumer Affairs Victoria, Online Auctions, eCommerce Fact Sheet, 2001. ACCC, Internet auctions: what you should know before you bid or sell, August 2000.

26

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(e) •

Legal and regulatory issues consumer issues for Australians in relation to retail shops operating on fixed prices at an auction website

•

the legal position of individual online auction users in Australia (buyers and sellers)

•

the potential risks, liabilities and obligations users may face

•

the potential liability for online auction site operators for instances of fraud or deceptive and misleading conduct that occur through their online forums, and the possible implications for buyers or sellers who fall victim to fraudulent dealings

•

the extent to which existing legislative, regulatory, co-regulatory and selfregulatory mechanisms adequately protect consumers.

(f)

Consumer knowledge and experience

•

the number of Australians who shop at online auctions

•

the level and types of fraud in online auctions where Australians have been victims

•

consumers’ understandings of: i) the risks involved in online auctions; and ii) their rights and obligations when shopping at an online auction.

(g) •

Complaints and dispute resolution procedures the level and types of complaints Australians have made with respect to online auctions

•

the level and types of disputes in online auctions that have resulted in online dispute resolution where at least one user is Australian

•

the level and types of successful and unsuccessful online dispute resolution cases where at least one user is Australian.

(h) •

Future trends and developments future trends and developments in online auctions and related electronic commerce activities, and the potential consumer protection issues that may arise

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•

analysis of the experience of other jurisdictions where use of online auctions is particularly common (e.g. in the US).

1.3 Aim and objectives AIM

1.3.1

This project aims to empower the many Australian consumers who shop at online auctions by providing public awareness and better understanding of the relevant consumer issues. The project will assist government agencies and other organisations to provide more useful

and

appropriate

information

to

consumers.

The

findings

and

recommendations of the project will also help industry participants to incorporate better consumer protection mechanisms into their internet auction processes. In addition, the project’s results will help both policy makers to determine whether legislative intervention would better protect consumers, and law enforcement agencies to decide whether to implement or improve policies relating to online auction fraud. The overall and long term benefit of this project will be safer ecommerce environment that increases consumer confidence to shop at online auctions.

1.3.2

OBJECTIVES

The project will increase knowledge of the risks associated with online activity by: •

reporting on the past experience of Australian consumers shopping at internet auctions, including cases of fraud, complaints and disputes

•

reporting on the understanding of Australian consumers regarding: i) the risks involved in online auctions; and ii) their rights and obligations when shopping at an online auction

•

analysing the current law at it relates to rights and potential liabilities of online auction site users in Australia, identifying any gaps or ‘grey areas’ that consumers should be aware of, and the potential liability of online auction sites regardless of disclaimers in current user agreements

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•

identifying gaps in consumer information and the development of consumer education initiatives that enable online auction users and site operators to be made more aware of the potential risks and liabilities in buying and selling

•

recommending (where appropriate) for legislative intervention, or other industry-based regulatory mechanisms, to provide more certainty and transparency in online auction transactions

•

analysing future developments and consumer protection issues that may arise.

1.4 Funding This report was funded by the TPA Consumer Trust. The TPA Consumer Trust was established to disperse money resulting from a court order made in an enforcement action taken by the ACCC and an enforceable undertaking provided to the ACCC. An independent trustee was appointed to oversee the trust and distribute funds. The trustee invited funding applications from eligible organisations that had expertise in consumer affairs and were independent of industry or government. TPA Consumer Trust projects are funded for the purpose of public education on trade practices and consumer issues through development of education materials or programs, research and the like. This project will achieve that purpose by: (a)

providing public awareness and better understanding of the consumer issues (including protections contained in the Trade Practices Act 1974 (Cth)) faced by Australians shopping at internet auctions

(b)

compiling an extensive report detailing findings and recommendations on consumer issues for Australians shopping at internet auctions

(c)

delivering public education to a wide range of consumer groups, legal centres and consumer affairs departments.

1.4.1

BENEFITS BEYOND THE FUNDING PERIOD

The sharp rise in popularity of new trading technology creates potential for the exploitation of consumer vulnerability. By undertaking a thorough investigation into the experience of consumers and the current practice of online auction sites, we are able to identify whether or to what extent consumers need greater protection.

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We expect that the findings of this report will inform and assist policy makers and regulators to develop consumer protection initiatives and future regulatory reform. The report will also assist community-based and mainstream legal service providers to better understand the legal environment for online auction use and the experiences of online auction users when providing advice and assistance. The findings of the investigation could also assist responsible online auction site operators to develop more effective in-house or industry-level consumer protection measures that better reflect the rights, liabilities and obligations of all stakeholders: buyers, sellers and operators. This may include recommendations on improved dispute resolution and complaint-handling procedures, and user agreements that more accurately reflect both the law and accepted consumer protection and fair trading principles.

1.5 Methodology and consultation 1.5.1

PROJECT STAGES

Stage 1: Preliminary research on fraud, complaints and disputes at internet auctions involving Australian consumers; and an examination of how many Australians use internet auctions. Stage 2: Examination of law and industry practice regarding internet auctions and Australian consumers. Stage 3: Investigation of consumers’ understandings of: i) the risks involved in online auctions; and ii) their rights and obligations when shopping at an online auction. Stage 4: Report of findings and making of recommendations based on Stages 1-3.

1.5.2 CONSULTATION Please see Appendix 6 for a full list of organisations we consulted. 1.5.2.1 Stage 1 To collect information about fraud, complaints, and disputes at internet auctions involving Australian consumers, the CLC consulted:

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1. state and federal law enforcement agencies (e.g. Australian High Tech Crime Centre, Victoria Police, Federal Police) 2. state and federal consumer departments (e.g. ACCC, Consumer Affairs Victoria) 3. auction site operators (Appendix 5 provides a copy of the questionnaire sent to auction site operators) 4. consumer interest organisations (e.g. Consumer Law Centre Victoria). We

also

consulted

internet

traffic

measurement

company

Hitwise

(www.hitwise.com.au) to help us determine how many Australians use internet auctions. Online auctions users also provided information regarding fraud, complaints, and disputes at internet auctions through online surveys and focus groups. (See chapter 5) 1.5.2.2 Stage 2 In order to examine industry practice regarding internet auctions, the CLC consulted auction site operators. (See Appendix 5 for the questionnaire we sent to auction site operators.) In addition, we consulted both sellers and individuals participating in internet auctions through both an online survey and focus groups. (See chapter 5) 1.5.2.3 Stage 3 We consulted consumers extensively via online surveys and focus groups. (See chapter 5) 1.5.2.4 Stage 4 The CLC sent a draft version of this report to relevant organisations including state and federal law enforcement agencies; state and federal consumer departments; online dispute resolution companies; auction site operators; credit card companies; and consumer interest organisations. We invited these organisations to comment on the report, and to consider: •

whether the current law sufficiently protects Australian consumers who shop at online auctions

•

whether legislative or other regulatory intervention is required

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•

what, if any, reforms are needed having regard to the findings contained in the draft report.

This draft highlighted some findings for organisations to particularly consider when making their comments. The draft report contained a summary only of some of the key findings of the survey conducted for this project. It contained information about some but not all of the findings regarding online auction buyers. Survey findings regarding sellers and results from the focus groups were not in the draft report sent out to organisations for comment. The complete findings of the survey and focus groups are contained in this report.

1.6 Report structure Chapter 2 examines the online auctions industry in Australia. In particular, it looks at the various types of online auctions, identifies those relevant to this report, and discusses their various features. This chapter also offers data about how many Australians use online auctions and which particular sites they prefer. Chapter 3 is a detailed examination of the laws that apply to online auctions – auction laws, consumer laws, contract and agency laws and criminal laws – with reference to the specific consumer issues that arise. We also review state-specific legislation. Chapter 4 details the actual problems that Australian consumers may face at online auctions. We look at fraud, complaints and disputes, and unravel the often complex differences between them. Chapter 5 draws on our research with online auction users to detail their day-to-day experiences. This includes problems users have encountered or created, their understanding of their rights and methods of redress, what they think of the safety measures auction sites provide, and their willingness to take financial risks on online auctions. Chapter 6 outlines the CLC’s recommendations and options to increase consumer confidence at online auctions and to better protect consumers from unfair or fraudulent activities. Chapter 7 again draws on user experiences, by listing their own suggestions about improving the safety on online auctions.

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Appendix 1 and 2 provide the survey we used and gives more information about the participants. Appendix 3 provides detailed transcripts of focus group discussion to illuminate some of the issues users face, while Appendix 4 outlines the structure of those group discussions and the prompt questions we used. Appendix 5 contains the questionnaire we sent to online auction site operators. Appendix 6 is a list of organisations/individuals that we consulted for this project.

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CHAPTER 2

Online auction industry This chapter examines the online auction industry in Australia. In particular, we discuss the types of online auctions covered in this report together with how many Australians use online auctions and which sites they use.

2.1 U2C and A2C e-auctions In this report, online auctions sites include sites that offer: •

User-to-Consumer online auctions (U2C e-auctions), such as eBay, where any user of the site can act both as a buyer and a seller. The user of the site can be a business selling in trade or commerce or a consumer selling an item in a private transaction

•

Auctioneer-to-Consumer online auctions (A2C e-auctions), where the operator of auction site lists items for sale on behalf of businesses and acknowledges to users that it operates as a traditional auctioneer acting as an agent for a business.

Because of our focus on consumer issues, sites that only permit or are primarily for businesses to purchase items at online auctions are beyond the scope of this research project. However, there will no doubt be some overlap between the issues covered in this report and the issues faced in relation to business auctions sites.

2.1.1

U2C E-AUCTIONS

For the purposes of this report, a U2C e-auction will have the following characteristics: •

Online bidding: items advertised for sale on a website can be purchased through bids submitted to the website, where the highest bidder can successfully purchase the item

•

Listing items for sale: any user of the site can potentially list an item for sale that may be purchased through online bidding. The user of the site can be a

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business selling in trade or commerce or a consumer selling an item in a private transaction •

Users of the site: anybody can become a user/member of the site. This includes businesses and individuals. Users of the site can purchase items and list items for sale

•

Auction site operator: the auction site operator does not have physical control over goods that are sold. The auction site operator claims not to be an auctioneer but a provider of a forum, trading centre or venue where users/members can meet to offer, sell or buy items

•

Payment: payment for items purchased at auction sites goes from the buyer directly to the seller. The auction site operator does not collect payment on behalf of the seller but may receive a percentage of/commission for the sale. The auction site operator may also receive a fee for listing items for sale on its website.

Australian

sites

that

offer

U2C

e-auctions

include

eBay

Australia

(www.ebay.com.au) and OZtion (www.oztion.com.au) and are discussed further below. AuctionTrader (www.auctiontrader.com.au) offers U2C e-auctions but this is not widely used and the site is primarily used for A2C e-auctions.27 Previous research in this area often referred to U2C e-auctions as consumer-toconsumer auctions (C2C online auctions). However, this description is problematic because many businesses in trade or commerce sell at these auction sites. (See 2.1.2 Business sellers). There is also some uncertainty as to whether the site operator of these types of sites is an auctioneer or not. (See chapter 3)

2.1.2

BUSINESS SELLERS AT U2C E-AUCTIONS

U2C e-auctions allow any user of the auction site to potentially list an item for sale that may be purchased through online bidding. The user of the site can be a business selling in trade or commerce or a consumer selling an item in a private transaction. (See 2.1.1 U2C e-auctions) The absence of any restriction on who can sell at U2C e-auctions, together with the popularity of online auctions, makes it inevitable that a portion of sellers at these sites would be businesses selling in trade or commerce. Australian auction sites eBay and OZtion for example, which offer U2C e-auctions, have a significant number of business sellers.

27 AuctionTrader was approached as part of the public consultations conducted for this project and indicated that its U2C e-auctions or member to member auctions are not widely used.

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2.1.2.1 eBay stores (http://stores.ebay.com.au) EBay permits users to set-up a virtual shop front (referred to as an ‘eBay store’) on its site where sellers can list items for sale at a fixed-price (for a discussion on fixedprice sales, see 2.1.4 Fixed price sales).28 It was reported that in May 2004 there were over 4,000 eBay stores on eBay Australia’s site selling fixed-price items, including big companies such as IBM.29 These retail shops comprise wholesalers (in many cases large warehouse operations), liquidators, retailers and individuals. In May 2004, eBay stores selling at fixed-price sales accounted for 28% of eBay’s Australian gross merchandise sales.30 2.1.2.2 Australian professional sellers at eBay As at December 2005 there were over 8,500 professional sellers using eBay’s Australian site.31 These professional sellers derive their primary or secondary source of income from selling on www.ebay.com.au: almost 2,500 sellers use eBay as their primary source of income and over 6,000 use eBay as a secondary source of income.32 2.1.2.3 Resellers at OZtion It has been reported that OZtion has targeted its service to computer resellers and as at 29 August 2005 it had attracted 1,000 ‘regular’ sellers and expected a further 3,000 regular users within a year.33

2.1.3

A2C E-AUCTIONS

For the purposes of this report, a A2C e-auction will have the following characteristics: •

Online bidding: items advertised for sale on a website can be purchased through bids submitted to the website, where the highest bidder can successfully purchase the item

•

Listing items for sale: the auction site operator can only list items for sale and does so as an agent on behalf of other businesses and/or individuals

See . Garry Barker, ‘Shoppers tap into eBay’, The Age, 5 May 2004. 30 Ibid. 31 According to ACNielsen research: eBay, eBay Fact Sheet (as of 31 December 2005), p 1, available at at 27 April 2006. 32 Ibid. 33 Fleur Doidge, ‘New online auction site aims at resellers’, IT News, 29 August 2005. 28 29

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•

Users of the site: anybody can become a user/member of the site, including businesses and individuals. Users of the site are only permitted to purchase items and cannot list items for sale

•

Auction site operator: the auction site operator is a licensed auctioneer and/or claims to be an auctioneer. The auction site operator may have physical control over goods that are sold

•

Payment: payment for items purchased at auction sites are made from the buyer to the auction site operator (auctioneer). The auction site operator collects payment on behalf of the seller.

Australian

sites

that

offer

A2C

e-auctions

include

GraysOnline

(www.graysonline.com.au) and AuctionTrader (www.auctiontrader.com.au). As we have already noted, AuctionTrader also offers U2C e-auctions, but the site is primarily used for A2C e-auctions.34 Previous research in this area often referred to A2C e-auctions as business-toconsumer auctions (B2C online auctions). However, this descriptor creates problems, as many businesses also sell at U2C e-auctions (see 2.1.1

U2C e-auctions). Further,

we prefer the term A2C to B2C because the auctioneer sells on behalf of businesses rather than businesses themselves selling to consumers.

2.1.4

FIXED PRICE SALES

At some auction sites, consumers can purchase items at a fixed price without bidding. With such purchases, the seller sets a sale price when listing the item for sale and the user successfully buys the item when consenting to pay that amount. EBay Australia and OZtion are examples of Australian auction sites that permit fixed price sales to occur (‘Buy It Now’ on eBay’s site and ‘Buy Now’ on OZtion’s site). Section 2.1.1

U2C e-auctions details sites that also offer U2C e-auctions. The fixed

price sale feature of these sites is either: •

an extra option at a U2C e-auction where the user can purchase the listed item through a successful auction bid or buy it immediately through fixed price sale, or

34 AuctionTrader was approached as part of the public consultations conducted for this project and indicated that its U2C e-auctions or member to member auctions are not widely used.

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•

a stand alone feature where a user can buy a listed item immediately through a fixed price sale and no auction bidding is available.

According to eBay, during the 4th quarter of 2005, fixed price sales of eBay’s auction sites globally accounted for 34% of total ‘gross merchandise volume’ (the total value of all successfully closed items on eBay’s trading platforms).35

2.2 Sites and number of users The CLC approached various online auction site operators to provide information for this project. Some organisations did not respond while others provided only limited or no information on the number of users (or no information on the number of buyers or sellers) their sites had. Information obtained from online auction site operators did not greatly assist in obtaining an accurate picture of: •

how many Australian consumers shop at online auction sites

•

the size of the online auctions market

•

what the market share of each auction site company is within Australia.

In the absence of any online auctions industry association in Australia and with only limited data available on online auction users, we had to use publicly available information, media reports and other research to determine the above.

2.2.1

SPECIFIC SITES

We could ascertain some information about the number of users (members or website

visitors)

of

eBay

Australia

(www.ebay.com.au)

and

OZtion

(www.oztion.com.au). 2.2.1.1 eBay Australia (www.ebay.com.au) Although online auction site companies are reluctant to disclose the number of their customers/users, eBay’s success in the online auctions industry and the media attention it receives means that some information is publicly available.

eBay, eBay Fact Sheet (as of 31 December 2005), p 1, available at at 27 April 2006.

35

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EBay began operations in Australia in October 1999.36 Nielsen NetRatings reported that over one million Australians visited www.ebay.com.au during April 2003.37 In April 2004 alone, more than 2.4 million people visited www.ebay.com.au.38 Between May 2003 and May 2004, eBay’s Australian sales grew by 147%.39 As at October 2004, there were over two million Australian eBay members (or one in every seven adult Australians).40 In 2004 the total value of goods traded on eBay Australia (gross merchandise volume) was $600 million, up 110% on the previous year.41 As at December 2005, there were over three million Australian eBay members (or one in every five adult Australians).42 In March 2006, eBay’s Australian site had a unique audience of 4,439,000.43 EBay has had tremendous growth in its consumer base, especially in the last 2-3 years: in April 2003 there were over one million visitors to eBay Australia’s site and by March 2006 there were 4,439,000 visitors. Furthermore, in just over six years since eBay began its operations in Australia, it has managed to obtain over three million Australian members. In addition to the tremendous growth eBay has experienced in the e-auctions industry, eBay is also a leading website generally. This is demonstrated by recent figures regarding website visitors: in March 2006 eBay was ranked the 5th most frequently visited site in Australia. (Microsoft, with 8,997,000 visitors, was the most frequently visited site.)44 2.2.1.2 OZtion (www.oztion.com.au) As at January 2006, OZtion claims to be the second largest online auction site in Australia.45 OZtion began operations in 200546 and since then has experienced significant growth, with more than 100,000 monthly visitors to its site as at

eBay, eBay Fact Sheet (as of 31 December 2005), p 1, available at at 27 April 2006. 37 Jason Hill, ‘Auction action’, The Age, 24 July 2003. 38 Gary Barker, ‘Shoppers tap into eBay’, The Age, 5 May 2004. 39 Ibid. Between 2000 and 2001 Australian sales on eBay grossed $63.8 million (Paul Ham, ‘eBay's bazaar market place’, The Age, 2 July 2002). This number would be significantly higher today given the growth of the eBay between 2000 and 2004. 40 Fran Foo and Munir Kotadia, ‘Crushing the Web's dark forces’ ZDNet Australia, 1 August 2005. 41 Ibid. 42 eBay, eBay Fact Sheet (as of 31 December 2005), p 1, available at at 27 April 2006. 43 Nielsen//NetRatings NetView (home and work panel measurement, March 2006). 44 Nielsen//NetRatings NetView (home and work panel measurement, March 2006). 45 OZtion, ‘OZtion Announces Results for First Year of Operation’ (Press Release 13 January 2006). 46 OZtion, What is OZtion? at 28 April 2006.

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November 2005.47 From October to December 2005, OZtion was ranked the 6th most frequently visited site in Australia in the ‘Shopping and Classifieds – Auctions’.48 In the second half of 2005 online auction listings grew by 296% to 47,300 simultaneous auctions, and in the three months up to 13 January 2006 membership to the OZtion site grew by 103%.49 2.2.1.3 GraysOnline (www.graysonline.com.au) As at 1 May 2006, GraysOnline claimed to have 320,000 unique website visitors each month and 220,000 registered buyers.50 During March 2006, GraysOnline was the 4th most frequently visited site in the ‘Shopping and Classifieds – Auctions’ industry. The top three most frequently visited sites in that month were eBay’s Australian, US and UK sites: see table C2.3 below.

2.2.2

OTHER SITES

It is difficult to obtain information about the number of Australian customers (or visitors) of other auction sites to determine the number of auction internet users, the size of the market, and the market share of each auction site company within Australia. Information was publicly available from eBay and OZtion that gave an indication on the number of Australians that used or visited their sites. However, there are other auction sites that Australians use. In the online survey for this research project, users of online auction sites were asked to select from a number of online auction services that they had used to make a bid or list an item for sale. If the site was not listed in the survey then the auction users were asked to provide the name/s of the other online auction website/s they have used. Of the 510 respondents surveyed, 462 listed the sites they have used. (See table C2.1 below)

47 OZtion, ‘OZtion Analyses Top 3 Australian Online Shopping Categories for Christmas’ (Press Release 23 November 2005). 48 The ranking is based on data from Internet traffic measurement company Hitwise (). See .

49

OZtion, ‘OZtion Announces Results for First Year of Operation’ (Press Release 13 January 2006). Figures were advertised on a GraysOnline listing at at 1 May 2006.

50

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Table C2.1

ONLINE AUCTION SERVICES USED TO MAKE A BID OR LIST AN ITEM FOR SALE

NUMBER TIMES SELECTED

eBay (ebay.com.au – Aus) 450 OZtion (oztion.com.au – Aus) 60 GraysOnline (graysonline.com.au – Aus) 29 Amazon Auctions (auctions.amazon.com – USA) 20 eroo.com.au 11 AuctionTrader (auctiontrader.com.au – Aus) 8 Yahoo Auctions (auctions.yahoo.com – USA) 7 ausauction.com 5 eBay overseas (e.g. UK, US etc) 5 Yahoo Auctions/sold.com.au (no longer exists) 4 aussiebids.com.au 3 Trademe.co.nz (New Zealand) 3 2bid 2 au.eBid.net 1 bidonline.com.au 1 Bidz 1 bigdeals.com.au 1 Broadcast Trader 1 club chef 1 emmx.com.au 1 Industry specific auction sites (e.g. those relating to speciality collectables) 1 Lot123 1 monkey.com.au 1 secure bidz 1 Stuff 1 textbook exchange 1 Yahoo Japan 1

% OF TOTAL USERS WHO RESPONDED (462)

97.4% 13.0% 6.3% 4.3% 2.4% 1.7% 1.5% 1.1% 1.1% 0.9% 0.6% 0.6% 0.4% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

Clearly, eBay is Australia’s market leader in online auctions. From the survey responses, we also found that 72% of the users who responded (462 in total) had only used www.ebay.com.au, and 25% had used www.ebay.com.au and other auction sites (including overseas eBay sites): see figure C2.2 below. Accordingly, 97% of users had used eBay’s Australian site to make a bid or list an item for sale and only 3% had used other sites and had not used www.ebay.com.au.

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Figure C2.2 Auction Sites Used to Make a Bid or List Item for Sale

3% eBay (ebay.com.au Aus) Only

25%

eBay (ebay.com.au Aus) and Other Site(s) Other Auction Site Only 72%

Results from internet traffic measurement company Hitwise in March 2006 also confirm eBay’s dominance of the Australian online auctions industry. Table C2.3 Top 10 sites in the ‘Shopping and Classifieds – Auctions’ online industry for March 2006 based on visits. RANK

WEBSITE

DOMAIN

MARKET SHARE

FEB ‘06

JAN ‘06

DEC ‘05

1

eBay Australia

www.ebay.com.au

72.60%

1

1

1

2

eBay

www.ebay.com

17.53%

2

2

2

3

eBay UK

www.ebay.co.uk

1.15%

3

4

4

4

www.graysonline.com.au

1.13%

4

5

5

5

GraysOnline Auctioneers eBay Motors

www.ebaymotors.com

0.65%

5

7

8

6

Pickles Auctions

www.pickles.com.au

0.62%

7

8

9

7

Andale

www.andale.com

0.54%

6

9

7

8

www.fowles.com.au

0.49%

8

10

10

9

Fowles Auction Group – Australia Taobao.com

www.taobao.com

0.33%

11

26

27

10

TradeMe

www.trademe.co.nz

0.31%

13

14

14

Source: Hitwise (www.hitwise.com.au)

During March 2006 (and the previous three months), eBay Australia was the number one ranking site in the ‘Shopping and Classifieds – Auctions’ online industry and had 72.6% of the market share (based on website visits). However, when you take — 45 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

into account eBay’s US and UK sites (including its specialty motor site), eBay’s market share jumps to 91.93%. The top 10 sites make up 95% of the market share (based on visits). However, some of the sites listed in table C2.3 are not online auction sites for the purposes of this project: •

www.pickles.com.au: this site operates like a traditional auction rather than an online auction site. Users can bid online during live auctions taking place elsewhere. It is similar to using a telephone to participate and bid during a live auction

•

www.andale.com: this site offers tools for online auctions but does not conduct online auctions

•

www.fowles.com.au: this is an offline auctioneer advertising its service online. It does not conduct any online auctions

•

www.taobao.com: this is China’s leading online auction site, but it is not available in English.

2.2.3

CONCLUSION

Although it is difficult to accurately ascertain the number of auction users within Australia and the market size and share of the auction industry and its participants, we can conclude that: •

figures regarding members and visitors of eBay Australia’s site help illustrate the phenomenal growth online auctions have had in recent years in Australia. In April 2003 there were over one million visitors and in March 2006 there were 4,439,000 visitors. In just over six years since eBay began its operations, over three million members have joined (or one in every five adult Australians)

•

eBay Australia is the leading auction site in Australia and has an extremely large market share – by far the majority. It could be over 90% and as high as 97%, but we cannot determine this with complete accuracy from the data we have. In addition to having over three million members, it had 4,439,000 site visitors in March 2006

•

eBay figures help to ascertain the minimum number of online auction users in Australia – at least three million. This is based on eBay’s members as at December 2005. The number of users could be higher due to the rapid growth of auction site users in the last few years and because a portion of Australian — 46 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

users have used other sites and not eBay. However, we cannot determine the exact portion from the information available •

other online auction site companies make up a relatively small portion of the market but still attract a significant number of users. For example, OZtion had over 100,000 monthly visitors as at November 2005, and for the period of October to December 2005 it was ranked the 6th most frequently visited site in the ‘Shopping and Classifieds – Auctions’ industry. As at 1 May 2006, GraysOnline claimed to have 320,000 unique website visitors each month and 220,000 registered buyers, and in March 2006 was ranked the 4th most frequently visited site in the ‘Shopping and Classifieds – Auctions’ industry (following eBay’s Australian, US and UK sites)

•

in March 2006, OZtion was not ranked in the top 10 sites in the ‘Shopping and Classifieds – Auctions’ industry, and dropped out of the top 10 in the three months from December 2006. Further, there were several auctions sites that existed in recent years that no longer operate for various reasons (e.g. www.sold.com.au – domain acquired by eBay after Yahoo withdrew from the Australian market; www.stuff.com.au – no longer offers auctions). There appears to be a fluctuation in market share by the smaller online auction companies. This may be because of intense competition in the industry and/or difficulties in competing with eBay’s market dominance

•

after eBay’s sites (including its US and UK sites), GraysOnline Auctioneers was the next most popular auction site visited in March 2006. The next most visited auction site for the purposes of this project was TradeMe (based on website visits).

2.2.4

AUCTIONS AND SHOPPING ONLINE

In recent years there has been significant growth in online shopping generally (not just in online auctions). In 2002, 15% of Australian adults (2.2 million) purchased or ordered online goods or services for private use.51 This is a 34% increase in online consumer shopping since 2001.52 In 2001, Australian consumers spent approximately

51 In any given week during 2002-2003 an average of approximately one million Australian consumers aged 14 years and over purchased a good or service online (Review of Building Consumer Sovereignty in Electronic Commerce, A Best Practice Model for Business, Discussion Paper, [2.1.1] Commonwealth Treasury, November 2003, available at ). 52 Use of Information Technology [1301.0-2004], Australian Bureau of Statistics, 2004, available at

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$1.9 billion, and in 2002 at least $4 billion, on online purchases.53 More than 3.5 million Australians purchased something online between May 2003 and May 2004.54 In August 2004 to June 2005, of all Australian adults aged 18 years or over, an estimated 31% (or 4.7 million adults) purchased or ordered goods or services via the internet for private use.55 As at December 2005, eBay had more than three million members, which is estimated to represent 64% of all Australian adult online shoppers (3 million / 4.7 million = 64%).56 This illustrates the tremendous impact that eBay has had on online shopping in Australia, with almost two in every three Australian online shoppers being eBay members.57 From these figures it can be concluded that many Australian consumers currently shop online and a significant portion of them (it could be as many as two in every 3) could also shop at online auction sites. In addition, the number of users of online auction sites and number of online shoppers generally are both substantially increasing each year as shown by the growth in online shoppers and auction users in recent years. (See sections 2.2.1.1 to 2.2.1.3)

The number of consumers who have made an online purchase has increased by 147% from December 2000 to June 2003 (The Current State of Play, Department of Communications, Information Technology and the Arts, December 2003, available at ). 53 Innovation and Technology Statistics Update – Bulletin No. 9, December 2003, Australian Bureau of Statistics, available at . 54 Ibid. 55 Australian Bureau of Statistics, Household Use of Information Technology (2004-2005, 8146.0) p 27 – 28. 56 This figure is an estimation based on the 4.7 million estimated adult online shoppers between August 2004 to June 2005 (3,000,000/4,700,000=64% (rounded up)). There is however limited value to these figures: e.g. eBay members may not all be active as at December 2005 or the dates of the two statistics do not coincide exactly. However, the figure still helps illustrate the popularity of eBay in Australia. 57 Based on the estimated 4.7 million Australians shoppers between August 2004 and June 2005 and eBay’s members, which were more then three million as at December 2005. — 48 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

CHAPTER 3

Online auctions, consumers and the law Despite the very large number of Australian consumers using internet auctions to buy goods or services, very little attention has been paid to the legal issues relevant to these consumers.58 Below is a discussion of the laws that apply to online auctions and specific consumer issues that arise.

3.1 Auction laws There are statutory laws that specifically regulate auctions in primarily two ways: 1)

to license auctioneers in order to regulate their conduct at auctions

2)

to prohibit certain conduct at auctions (e.g. mock auctions).

3.1.1

LICENSING AUCTIONEERS

The regulation of auctioneers in Australia is not uniform. For example, in some jurisdictions a licence is required to carry on the business of an auctioneer generally.59 In other jurisdictions, the licensing of auctioneers is specific to particular types of property such as real property (e.g. residential homes and land)60 and livestock.61 Criteria in the relevant legislation set out who should have an auctioneer license, but generally legislative licensing requirements focus on traditional auctioneers who sell goods on behalf of others, which often involves the auctioneer taking part in the sale of an item at auction. For example, section three of the Auctioneers Act 1996 (NT) defines an auctioneer as ‘…a person who sells by auction or offers for sale by auction.’ This definition appears to target people who actively sell items on behalf of

See e.g. n 7 above. Both of these articles discuss internet auctions and consumer protection law, but fail to clarify the consumer position and/or do not address important issues. 59 See e.g., Auction Sales Act 1973 (WA); Auctioneers and Real Estate Agents Act 1991 (TAS); Property Agents and Motor Dealers Act 2000 (QLD); Auctioneers Act 1996 (NT). 60 See e.g., Estate Agents Act 1980 (VIC). 58

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others, which may include having possession of the goods offered for sale, accepting bids from prospective buyers and accepting payment on behalf of the seller. However, the definition is not certain enough to exclude operators of U2C e-auctions sites where auctioneers play a much more passive role. Operators of A2C e-auction sites normally claim to be auctioneers62 and/or are licensed auctioneers.63 Operators of U2C e-auction sites normally claim not to be auctioneers,64 because of the site operator’s lack of involvement in the actual sale of items. For example, U2C e-auction site operators do not receive payment from the buyer on behalf of the seller and also do not have possession at any time of goods sold. Instead of being auctioneers, operators of sites offering U2C e-auctions claim to only provide a venue for members to offer items for sale or buy items. It appears that regulators have accepted the view that at U2C e-auctions, site operators (such as eBay) are not auctioneers for the purpose of any legislation that requires an auctioneer to be licensed. This is based on the fact that no legal action has been found in Australia against any U2C e-auction site for not having an auctioneer licence and the industry practice of U2C e-auction site operators not being licensed. However, as no case before a court has considered this issue, there appears to be some uncertainty in the law on this point. 3.1.1.1 Licensing auctioneers to protect consumers The National Competition Council summarised the consumer benefits of licensing auctioneers: Governments’ objectives for licensing auctioneers include increasing consumer confidence in the auction system, protecting vendors and purchasers from specific unfair and anticompetitive conduct at auctions, and preventing and tracing the sale of stolen or diseased livestock at auctions.65

See e.g., Property, Stock and Business Agents Act 2002 (NSW). See e.g., AuctionTrader, Merchant Services Terms and Conditions at 7 May 2006. 63 See e.g. GraysOnline Auctions – Bidder Agreement, clause 12.1(d) at 7 May 2006. 64 See e.g., eBay Australia, User Agreement, clause 3 at 7 May 2006; Oztion User Agreement, clause 6.1 7 May 2006. 65 National Competition Council, Assessment of governments' progress in implementing the National Competition Policy and related reforms: 2003 – Volume two: Legislation review and reform (2003), AusInfo, Canberra, page 5.40 citing: Victoria University Public Sector Research Unit, Auction Sales Act 1958 National Competition Policy review report, (1999); and Ministry of Fair Trading (Western Australia), Draft National Competition Policy review of the Auction Sales Act 1973, Draft report (2000). 61

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In Queensland, auctioneers of personal property must be licensed66 and must comply with certain record keeping requirements including keeping a record of the reserve price, item description, date of auction, sale price, buyer’s name and address and the name and address of the seller.67 These requirements protect consumers by making auctions more transparent and easier to prove that unfair practices occurred at an auction sale. U2C e-auction site operators are not licensed and do not have to comply with these requirements.

3.1.2

PROHIBITED AUCTION CONDUCT

Several jurisdictions, but not all, have legislation that prohibits certain conduct at auctions, namely ‘mock auctions’68 and ‘collusive practices at auction sales’.69 The legislation of each jurisdiction dealing with mock auctions and collusive practices at auction sales is not uniform and there are some differences regarding the scope of the conduct at auctions that is prohibited. Section 30 Fair Trading Act 1999 (VIC) prohibits mock auctions as follows: (1) A person must not promote or conduct or assist in the promotion or conduct of an auction— (a) at which— (i)

a lot is sold or purported to be sold at a price lower than the highest bid

for that lot; or (ii) part of the price for the sale or purported sale of a lot is repaid or credited to the person to whom the lot is sold or purported to be sold or is stated to be so repaid or credited; or (b) at which the right to bid for any lot is restricted or is stated to be restricted to persons who have bought or who have agreed to buy other goods or services; or (c) at which any goods or services are given away or offered as gifts.

(2) Sub-section (1)(a) does not apply where the lower price, repayment or credit is— (a) because of a defect discovered after the highest bid has been made and it is a defect of which the person conducting the auction was unaware when the bid was made; or (b) because of damage sustained after the bid has been made.

Property Agents and Motor Dealers Act 2000 (QLD). Property and Motor Dealers Regulation 2001 (QLD), s 33. 68 See e.g. Fair Trading Act 1999 (VIC), s 30; Fair Trading Act 1987 (SA), s 28. 69 See e.g. Auctioneers and Real Estate Agents Act 1991 (TAS), s 14; Collusive Practices Act 1965 (VIC), s 3.

66 67

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The prohibition of collusive practices at auction sales includes the following prohibited conduct: …inducing or attempting to induce other persons to abstain from bidding generally or for any particular lot, or to bid to a limited extent, or to do anything which might prevent or tend to prevent free and open competition, by means of a promise that if the person making the promise is the successful bidder at the auction he or she will give the other person the right to purchase all or any of the property at the auction price or agree to decide by tossing, drawing lots or some other method which of them should become the owner of all or any of the property.70

Whether legislation in jurisdictions that prohibit certain conduct at auctions such as ‘mock auctions’ and ‘collusive practices at auction sales’ apply to e-auctions is uncertain. In particular, it is unclear whether online auctions in general are covered by the relevant legislation. For example, the prohibition against mock auctions in Victoria pursuant to the Fair Trading Act 1999 (VIC) defines auctions as:71 … any sale of goods or services at which some or all of the persons present compete for the purchase of goods or services, whether by way of increasing bids or by the offer of goods or services to be bid for at successively decreasing prices or otherwise.

At e-auctions, people are not ‘present’ when the auction occurs, so prohibition against mock auction may not apply in Victoria to online auctions (both A2C and U2C). Furthermore, even if A2C auctions are covered, U2C e-auction site providers are not auctioneers for the purposes of the legislation, given the passive role site operators have in auction sales. As there is no case that has considered these issues, it appears that there is some uncertainty in the law in this area.

3.2 Consumer laws Consumers are protected by legislation for unconscionable or deceptive practices. At the federal level, there is the Trade Practices Act 1974 (Cth) which prohibits misleading and deceptive conduct in trade or commerce. At the state level, there are various Fair Trading Acts which mirror the Trade Practices Act 1974 (Cth). The states have additional consumer protection legislation. For example, in New South Wales the Contracts Review Act 1980 (NSW) provides that unjust contracts can be set aside

70 71

Halsbury’s Laws of Australia (at 2 May 2006) 30 Auction, ‘Collusive Practices at Auction Sales’ [30-95]. Fair Trading Act 1999 (VIC), s 3. — 52 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

and in Victoria Part 2B of the Fair Trading Act 1999 (VIC) permits consumers to seek redress for terms of contracts that are unfair. We will examine the Trade Practices Act 1974 (Cth) below to identify consumer protections that are relevant to online auctions. We will not look at state Fair Trading Acts which mirror the Trade Practices Act 1974 (Cth) except to the extent that they contain material differences to those contained in the Trade Practices Act 1974 (Cth).

3.2.1

TRADE PRACTICES LAWS

The trade practices legislation impacts on online auctions in the following areas: (a) implies warranties into certain transactions (b) prohibits unconscionable conduct and contracts (c) prohibits misleading or deceptive conduct. 3.2.1.1 Who does trade practices legislation apply to? The Trade Practices Act 1974 (Cth) generally applies to corporations rather than individuals. It will apply to individuals who are engaging in interstate trade or commerce or aiding or abetting a breach of the Act by a corporation. The actions of individuals engaging in trade or commerce are otherwise covered by equivalent state or territory trade practices legislation. Conduct will breach trade practices legislation provided that it is not incidental to the business but occurred while the business was engaged ‘in trade or commerce’. An activity or transaction is ‘in trade or commerce’ if its nature bears a trading or commercial character.72 If an organisation is incorporated in or carries out business within Australia, it is bound by trade practices legislation. Breach of trade practices legislation by a corporation or individual may result in significant fines and in some cases criminal liability.

In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, the High Court held that the phrase ‘in trade or commerce’ in section 52 has a restricted operation. It said that ‘it is plain that section 52 was not intended to extend to all conduct, regardless of its nature, in which a corporation might engage in the course of, or for the purposes of, its overall trading or commercial business. The reference to conduct in ‘trade or commerce’ in section 52 can be construed as referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character.’ 72

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3.2.1.2 Terms implied into consumer contracts by trade practices legislation (TPL) The TPL implies into all consumer contracts a number of non-excludable conditions and warranties. Any term of a contract that has the effect of excluding, restricting or modifying rights or liability under these implied terms will be void. The definition of consumer includes a purchaser of goods or services for less than AU$40,000 or, if the price exceeds AU$40,000, where the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption.73 (a) •

Warranties and conditions implied in relation to goods include: a condition that goods supplied by description will comply with that description (this right does not apply if goods were sold at auction).74 In Victoria this non-excludable condition also applies to goods sold at auctions involving consumers.75 In some jurisdictions the law implies this condition into goods sold to consumers at auction but permit its exclusion by express agreement76

•

a condition that goods will be of ‘merchantable quality’. This means the goods should be fit for their purpose, taking into account any description the seller applied to them, the price and any other relevant circumstances. (This right does not apply if goods were sold at auction or if the relevant defect was specifically drawn to the consumer’s attention before the contract was made, or the consumer examined the goods prior to sale, and that examination should have revealed the defect.)77 In Victoria this nonexcludable condition also applies to goods sold at auctions involving consumers.78 In some jurisdictions the law implies this condition into goods sold to consumers at auction but permits its exclusion by express agreement79

Trade Practices Act 1974 (Cth), s 4B. To fall within the definition, the person must not have acquired the goods for the purpose of resupply or to use them in a process of production, manufacture or repair. 74 Trade Practices Act 1974 (Cth), s 70. 75 Fair Trading Act 1999 (VIC), s 32H. 76 Sale of Goods Act 1896 (QLD) ss 16, 56. 77 Trade Practices Act 1974 (Cth), s 71(1). More specifically, goods are of ‘merchantable quality’ if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances (s 66(2)). 78 Fair Trading Act 1999 (VIC), s 32I. 79 Sale of Goods Act 1896 (QLD), ss 17, 56. 73

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•

a condition that, where the purpose is made known, the goods are fit for the purpose (this right does not apply if goods were sold at auction).80 In Victoria this non-excludable condition also applies to goods sold at auctions involving consumers.81 In some jurisdictions the law implies this condition into goods sold to consumers at auction but permits its exclusion by express agreement.82

(b)

Warranties and conditions implied in relation to services include:

•

a warranty that services will be rendered with due care and skill83

•

a warranty that any materials supplied in connection with the services will be reasonably fit for the purpose for which they are supplied84

•

if the consumer makes known any particular purpose for which they require the services, a warranty that the services and materials supplied will be reasonably fit for that purpose (unless the consumer does not rely, or it is unreasonable for him or her to rely, on the skill or judgment of the corporation).85

Where any of the above conditions and warranties are breached the consumer has a right to take action for breach of contract rather than an action for breach of the trade practices legislation.86 Given that the definition of consumer is so broad, these conditions and warranties will be implied into a large number of contracts and cover contracts between businesses. In cases where the cost of the goods or services in question does not exceed AU$40,000, and the goods or services are other than those ordinarily acquired for personal, domestic or household use, the legislation permits suppliers to limit their liability to the replacement or repair of the goods, or the cost of their replacement or repair or, in the case of services, to the resupply of the services or the cost of resupply.87 This is subject to an overriding test of fairness. In determining what is fair,

Trade Practices Act 1974 (Cth), s 71(2). This condition will not apply where the circumstances show that the consumer does not rely, or it was unreasonable for him or her to rely, on the skill or judgment of the vendor. 81 Fair Trading Act 1999 (VIC), s 32IA. 82 Sale of Goods Act 1896 (QLD), ss 17, 56. 83 Trade Practices Act 1974 (Cth), s 74(1). 84 Trade Practices Act 1974 (Cth), s 74(1). 85 Trade Practices Act 1974 (Cth), s 74(2). 86 E v Australian Red Cross Society (1991) 27 FCR 310. 87 Trade Practices Act 1974 (Cth), s 68A. 80

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a court will consider all the circumstances of the case, including the strength of the bargaining positions of the respective parties and whether the buyer knew or ought reasonably have known of the existence of the limitation. 3.2.1.3 Unconscionable conduct The TPL imposes on corporations a general duty to trade fairly by prohibiting them from engaging in unconscionable conduct: •

in the supply of domestic goods or services to consumers88

•

in the supply or acquisition of goods or services worth up to A$3 million to businesses that are not listed companies.89

The term unconscionable is not defined in the Act but is defined by the courts. Whether a court will identify conduct as unconscionable will depend on all the circumstances of the case. Generally unconscionable conduct occurs whenever one party to a transaction is at a special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affecting his or her ability to preserve his or her own interests, and the other party unconscionably takes advantage of this opportunity.90 While the courts can take into account whatever considerations they see fit, the legislation sets out various issues to be taken into account in determining whether conduct was unconscionable. The list differs slightly for unconscionable conduct in relation to consumers as opposed to businesses. For consumers, the factors to be considered include: •

the relative bargaining power of the parties

•

whether conditions imposed by the supplier were reasonably necessary for the protection of its legitimate interests

•

whether the consumer was able to understand the documentation

•

whether undue influence was exerted, or unfair tactics used

•

the amount for which and circumstances under which the consumer could have acquired equivalent goods or services from a third party.

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For businesses, the factors include those listed above as well as: •

the extent to which conduct was consistent with conduct in similar transactions with like customers

•

the requirements of any industry code applicable to the supplier

•

any risks to the business consumer arising from the supplier’s intended conduct that the supplier should have foreseen that would not be apparent to the business customer

•

the extent to which the supplier was willing to negotiate the terms and conditions of any contract of the supply of goods and services

•

the extent to which the parties acted in good faith.

The above considerations are not exhaustive. The circumstances in which a court might find conduct unconscionable are very broad. They include, for example, lack of education or lack of assistance or explanation in circumstances where assistance or explanation are necessary. Remedies available for unconscionable conduct include remedial orders (such as rescission of the relevant contract entered) and injunctions.91 The court has a wide discretion to make orders as it thinks fit. A party who has suffered loss or damage as a result of a contravention can apply for relief, or the Australian Competition and Consumer Commission (ACCC) may apply on the party’s behalf. 3.2.1.4 Misleading or deceptive conduct Trade practices legislation make misleading or deceptive conduct illegal. With regard to the internet, misleading or deceptive conduct may occur, for example, where a consumer is or is likely to be mislead or deceived by a statement on the website or if it is unclear that one website is connecting to another. The use on websites of internal and external links, frames, metatags, the location and prominence of disclaimers, and content generally must not be misleading or deceptive to the extent that goods or services of A are passed off as those of B.92 The prohibition applies to unintentional misleading or deceptive conduct whether

Blomley v Ryan (1956) 99 CLR 362 per Kitto J (at 415). Trade Practices Act 1974 (Cth), ss 80 and 87(1A). 92 See generally B Finch ‘Consumer Protection on the Internet’ in Going Digital 2000: Legal Issues for Ecommerce, Software and the Internet (2000). 90

91

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through silence or gratuitous expression of opinion. A contract cannot affect this prohibition. Under the TPL, it is not necessary to prove that customers have actually been misled.93 Whether conduct is ‘misleading or deceptive’ is a question of fact and will be determined with reference to the relevant surrounding facts and circumstances. Generally the prohibition includes acts, omissions or silence. A court considers the following issues when deciding whether conduct is misleading or deceptive:94 •

the relevant section of the public that is misled or that is likely to be misled must be identified

•

the matter must be considered by reference to all people who come within that section of the public including the astute and the gullible, the intelligent and not-so-intelligent, the well-educated and the poorly-educated

•

evidence that some person has in fact formed an erroneous conclusion is not conclusive of misleading or deceptive conduct but may be persuasive

•

it is necessary to inquire why the misconception has arisen.

Given that the internet can be viewed by anyone in the world with a computer and a modem, the first step may be difficult to apply. Predictions or statements about the future may be misleading and deceptive unless the company has reasonable grounds to believe the statement to be true at the time of making it.95 Disclaimers and exclusion clauses It is not possible to avoid liability under trade practices legislation by using exclusion clauses or disclaimers. Although a disclaimer may go some way towards demonstrating that reliance on a representation was unreasonable, a disclaimer hyperlink at the bottom of a website in tiny print, for example, will not be enough.96

Applied Business Technology Pty Ltd v Grandmaster Computers [1999] FCA 36. Taco Co Of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177. 95 Trade Practices Act 1974 (Cth), s 51(A). 96 Henderson v Pioneer Homes Pty Ltd (1990) ATPR 40-159. 93

94

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Misleading information posted by users An issue that is not clear is whether auction site operators are liable for misleading and deceptive information posted on their internet service. Generally any organisation or person who relays misleading or deceptive information may be found liable under the ancillary liability provisions of the trade practices legislation.97 An auction site operator may be liable in this situation if it has some knowledge of the content or the nature of the misleading or deceptive information. Defences It is a defence if an organisation establishes its business to publish or arrange for the publication of advertisements and receives the advertisements for publication in the ordinary course of business. The organisation must demonstrate that it had no reason to suspect that the publications would contravene the legislation.98 This defence may assist auction site operators who publish advertisements on their websites as part of their business. 3.2.1.5 Other relevant provisions of the TPL Information that is considered misleading or deceptive99 may also be subject to liability under other provisions of the trade practices legislation including: (a)

making false or misleading representations about attributes of goods or services or about the corporation’s relationship with others100

(b)

offering gifts, prizes and free items without the intention of supplying them101

(c)

engaging in misleading conduct about the nature, characteristics, suitability or quantity of any services102

Section 75B Trade Practices Act 1974 (Cth) imposes liability on a person or organisation who has aided, induced or conspired in a contravention of the legislation or who has been directly or indirectly knowingly concerned in or party to it. 98 Trade Practices Act 1974 (Cth), s 85(3). 99 Under the Trade Practices Act 1974 (Cth), s 52 and state and territory equivalents. 100 Trade Practices Act 1974 (Cth), s 53. See Trumpet Software Pty Ltd v Ozemail Pty Ltd (1996) 34 IPR 481; Applied Business Technology Pty Ltd v Grandmaster Computers [1990] FCA 36. 101 Trade Practices Act 1974 (Cth), s 54. 102 Trade Practices Act 1974 (Cth), s 55A. See ACCC v Internic (1998) ATPR 41-646. 97

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(d)

offering goods or services for a price if the corporation reasonably believes it will not be able to do so103

(e)

accepting payment for goods or services where, at the time of the acceptance the intention is not to supply the goods or services or to supply goods or services materially different from the goods or services in respect of which the payment is accepted. It is also prohibited to accept payment when there are reasonable grounds for believing that supply of the goods or services will not be able to occur within the period specified or, if no period is specified, within a reasonable time.104

3.2.2

VICTORIA – UNFAIR CONTRACT TERMS

In Victoria, unfair terms in consumer contracts are prohibited under Part 2B of the Fair Trading Act 1999 (VIC). 3.2.2.1 When is a term unfair? Section 32W of the Fair Trading Act 1999 (VIC) defines an unfair term: A term in a consumer contract is to be regarded as unfair if, contrary to the requirements of good faith and in all the circumstances, it causes a significant imbalance in the parties’ rights and obligations arising under the contract to the detriment of the consumer.

A term that is unfair under section 32W is void (s 32Y(1)). In assessing whether a term is unfair, section 32X provides guidance: Without limiting section 32W, in determining whether a term of a consumer contract is unfair, a court or the Tribunal may take into account, among other matters, whether the term was individually negotiated, whether the term is a prescribed unfair term and whether the term has the object or effect of– (a) permitting the supplier but not the consumer to avoid or limit performance of the contract; (b) permitting the supplier but not the consumer to terminate the contract; (c) penalising the consumer but not the supplier for a breach or termination of the contract;

103 104

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(d) permitting the supplier but not the consumer to vary the terms of the contract; (e) permitting the supplier but not the consumer to renew or not renew the contract; (f) permitting the supplier to determine the price without the right of the consumer to terminate the contract; (g) permitting the supplier unilaterally to vary the characteristics of the goods or services to be supplied under the contract; (h) permitting the supplier unilaterally to determine whether the contract had been breached or to interpret its meaning; (i) limiting the supplier’s vicarious liability for its agents; (j) permitting the supplier to assign the contract to the consumer’s detriment without the consumer’s consent; (k) limiting the consumer’s right to sue the supplier; (l) limiting the evidence the consumer can lead in proceedings on the contract; (m) imposing the evidential burden on the consumer in proceedings on the contract.

Terms can also be prescribed as unfair in the regulations and such terms are void when they are contained in a standard form contract (ss 32U, 32Y(2), 165(1)(ab)). There are also offences regarding the use105 and attempted enforcement of a prescribed unfair term in a standard form contract. 3.2.2.2 Clearly presented terms – section 163 In addition to the introduction of Part 2B, section 163 was amended providing minimum standards in the presentation of consumer contractual documentation. Section 163(3) provides that a consumer contract: (a)

must be easily legible

(b)

to the extent that it is printed or typed, must use a minimum 10 point font

(c)

must be clearly expressed.

S 32Z(1), (2) respectively. The penalty for these offences is $1,000 for individuals and $2,000 for corporations for each standard form contract containing the prescribed unfair term: s 32Z(1), (2); Sentencing Act 1991 (VIC) s 110; see also, Consumer Affairs Victoria, Preventing unfair terms in consumer contracts, November 2003, p 30. 105

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Consumer Affairs Victoria has indicated that the following factors, derived from section 163, may influence the unfairness of a contractual term for the purposes of section 32W:106 •

use of a point size or typeface that is difficult to read

•

excessively long sentences, clauses, or paragraphs

•

important clauses being buried in the ‘fine print’

•

use of technical terms, jargon, legal, or other forms of language other than plain English

•

extensive cross-referencing, especially to documents not provided on the spot

•

failure to define key terms.

3.2.2.3 Application of part 2B and section 163 to ‘consumer contracts’ The provisions referred to above, prohibiting the use of unfair terms (s 32W) and requiring terms to be presented clearly (s 163), apply to consumer contracts. They do not, however, apply to contracts governed by the Consumer Credit (Victoria) Act 1995 (VIC) (ss 32V, 163(2)). Furthermore, the prohibition of unfair terms does not apply to contractual terms ‘ … that are required or expressly permitted by law, but only to the extent required or permitted’ (s 32V(b)). A ‘consumer contract’ is defined in section three as: … an agreement, whether or not in writing and whether of specific or general use, to supply goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption, for the purposes of the ordinary personal, domestic or household use or consumption of those goods or services.

The term ‘consumer’ in a consumer contract, for the purposes of Part 2B, is defined as ‘a person to whom goods or services have been or are to be supplied under the contract’ (s 32U). 3.2.2.4 Proposed uniform laws prohibiting unfair terms In January 2004, the Unfair Contract Terms Working Party of the Standing Committee of Officials of Consumer Affairs (SCOCA) released a national discussion paper seeking for community feedback from consumers and business about the need

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for regulation of unfair contract terms.107 The Working Party received 73 responses108 and subsequently provided a report to the Ministerial Council on Consumer Affairs (MCCA), which comprises commonwealth, state, territory and New Zealand ministers responsible for fair trading and consumer protection laws. As a consequence, on 22 April 2005 the MCCA stated that it:109 …has agreed to progress a national regulatory response to unfair contract terms as a matter of urgency, following extensive consultation by the national working party with consumers and business and successful implementation of unfair contract terms legislation in Victoria. MCCA has noted that the preferred option of the working party for regulation is nationally consistent state and territory legislation in line with unfair contract terms provisions in the Victorian Fair Trading Act. Stakeholders will be given an opportunity to comment further on the option following public release of the final RIS, expected to be in September 2005.

On 2 September 2005, the MCCA:110 … noted the significant benefits consumers in Australia were obtaining from the ongoing implementation of Victoria’s unfair contract terms legislation. State and Territory Ministers reaffirmed their agreement to progress a national regulatory response to unfair contract terms as a matter of urgency. Ministers noted the impact of the national regulatory impact assessment process and requested SCOCA and ORR to take all necessary and appropriate steps to expedite the successful completion of this RIS by 1 November 2005.

The MCCA set June 2006 as the date by which a national regulatory regime dealing with unfair terms is to be implemented.111 Whether the Victorian provisions contained in Part 2B of the Fair Trading Act 1999 (VIC) become uniform throughout the states and territories is not certain at this stage. But this is a real possibility given the above, the fact that this was the preferred option of the SCOCA working party, and the MCCA’s indication that the Victorian unfair terms regulation has provided a

Standing Committee of Officials of Consumer Affairs, Unfair Contract Terms Working Party, Unfair Contracts Terms Discussion Paper (2004). 108 Office of Fair Trading (Qld), Unfair Contract Terms Discussion Paper: What do you think about unfair contract terms? at 14 December 2004 at 13 May 2006. 109 Ministerial Council on Consumer Affairs, Joint Communique (22 April 2005). at 13 May 2006. 110 Ministerial Council on Consumer Affairs, Joint Communique (2 September 2005) at 13 May 2006. 111 Ministerial Council on Consumer Affairs, Strategic Agenda (September 2005) [1.5].

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significant benefits to consumers. The MCCA is, however, waiting for the outcome of the national regulatory impact assessment before it concludes whether Victoria’s unfair terms laws should become national.

3.2.3

NEW SOUTH WALES – CONTRACTS REVIEW ACT 1980 (NSW)

The Contracts Review Act 1980 (NSW) (CRA) gives the court a discretion to grant relief in relation to a contract, or provision of a contract, where it finds the contract or provision to be ‘unjust in the circumstances relating to the contract at the time it was made’ (s 7). The term ‘unjust’ is not restricted in scope, but is defined to include conduct that is ‘unconscionable, harsh or oppressive’ (s 4(1)). The operation of the CRA is restricted, broadly speaking, to contracts entered into by consumers; however, this limitation has been interpreted somewhat liberally.112 Where a court finds a contract, or provision of a contract, to be unjust within the meaning of the CRA, it may grant one or more of a number of wide ranging forms of relief including: refuse to enforce any or all of the provisions of the contract; declare the contract void in whole or in part, or; vary, in whole or in part, any provision of the contract (s 7). In determining whether the contract or provision is ‘unjust’, the court is required to have regard to ‘the public interest and to all the circumstances of the case ...’ (s 9(1)), including a number of (non-exclusive) specific enumerated factors ‘to the extent that they are relevant to the circumstances’ (s 9(2)). The CRA ‘shopping list’ of enumerated factors is designed to prompt consideration of a range of both procedural and substantive issues. The s 9(2) factors, summarised, are: •

whether there was any material inequality in bargaining power between the parties (s 9(2)(a))

•

whether provisions of the contract were the subject of negotiation (s 9(2)(b))

•

whether it was reasonably practicable for the party seeking relief to negotiate for the alteration of, or to reject, any provisions of the contract (s 9(2)(c))

•

whether any provisions imposed conditions that were unreasonably difficulty to comply with or not reasonably necessary for the protection of legitimate interests of any party (s 9(2)(d))

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•

whether any party (or their representative) was not reasonably able to protect their interests because of age or physical or mental capacity (s 9(2)(e))

•

the relative economic circumstances, educational background and literacy of the parties (or a representative) (s 9(2)(f))

•

the physical form and intelligibility of language of written contracts (s 9(2)(g))

•

whether or not the party seeking relief had obtained independent legal or other expert advice (s 9(2)(h))

•

the extent to which provisions were explained to, and understood by, the party seeking relief (s 9(2)(i))

•

whether undue influence, unfair pressure or unfair tactics were used against the party seeking relief (s 9(2)(j))

•

the conduct of the parties in relation to similar contracts or courses of dealing (s 9(2)(k))

•

the commercial or other setting, purpose and effect of the contract (s 9(2)(l)).

In addition, s 10 allows the court, on application of the NSW Minister for Fair Trading or the Attorney General, to prescribe or otherwise restrict the terms of future contracts entered into by a class of persons. Section 10 states: Where the Supreme Court is satisfied, on application of the Minister or the Attorney General, or both, that a person has embarked, or is likely to embark, on a course of conduct leading to the formation of unjust contracts, it may, by order, prescribe or otherwise restrict, the terms upon which the person may enter into contracts of a specified class.

3.3 Contract and agency law In addition to legislation and criminal laws, online auction participants are governed by relevant general laws (i.e. common law and equity). Of particular relevance to online auctions are laws governing contracts and agency law.

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3.3.1

CONTRACTS AT ONLINE AUCTIONS

At online auctions (both A2C e-auctions and U2C e-auctions) there are primarily three contracts that are relevant to each transaction:113 1. the contract between the auction site operator and the consumer (auction site/consumer contract) 2. the contract between the auction site operator and the seller (auction site/seller contract) 3. the contract between the consumer and the seller (seller/consumer contract). Auction site/consumer contract This contract stipulates the conditions with which the consumer can use the service of the auction site operator. It includes the auction rules (e.g. when a consumer is a successful bidder). The contract may also outline the rules regarding the use of the auction site (e.g. copyright and privacy issues). At A2C e-auctions the agreement will establish a relationship of auctioneer and consumer. At U2C e-auctions the agreement usually stipulates that the auction site operator is not an auctioneer or agent of the seller, and that the site operator is not involved in the transactions that take place on its site. Instead of being an auctioneer or agent, the site operator normally stipulates that it provides a service, venue or marketplace where members can sell and buy items. At U2C e-auctions the agreement may also provide rules regarding posting feedback on the site about other members and when the consumer can make a claim to the auction site operator for a transaction that went wrong. Auction site/seller contract The Auction site/seller contract stipulates the conditions upon which the seller can use the service of the auction site operator, and includes the auction rules (e.g. when a consumer is a successful bidder). At A2C e-auctions the agreement will establish a relationship of auctioneer and seller. At U2C e-auctions the agreement usually stipulates that the auction site

Cases regarding offline auctions which resemble A2C e-auctions see: Chelmsford Auctions Ltd v Poole [1973] QB 542 at 548-9; [1973] 1 All ER 810; [1973] 2 WLR 219 per Lord Denning MR, CA; Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631 at 638-9 per Sheppard J. There do not appear to be cases regarding U2C e-auctions.

113

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operator is not an auctioneer or agent of the seller, and that the site operator is not involved in the transactions that take place on its site. Instead of being an auctioneer or agent, the site operator normally stipulates that it provides a service, venue or marketplace where members can sell and buy items. At U2C e-auctions the Auction Site/Seller contract will normally stipulate the rules regarding listing items for sales and what the listing fees are. The contract at U2C e-auctions may also outline the rules regarding the use of the auction site (e.g. listing items for sale, copyright and privacy issues), as the seller will access the site to list items for sale. At U2C eauctions the agreement may also provide rules regarding posting feedback on the site about other members. Seller/consumer contract At both A2C and U2C e-auctions this agreement will outline the terms of sale between the consumer and the seller (i.e. the terms and conditions upon which the consumer has bought the item from the seller). This will normally include description of the item for sale, postage/shipping details/costs, payment details and options such as insurance. It may also include warranties, refund/return polices and a reserve price. If the sale is a non auction sale (e.g. ‘Buy It Now’ feature on eBay) then the price will also be set. The price at sales by auction is not set as this will depend on the amount offered by the successful bidder. Adequate notice of terms and conditions There are various contract law issues to consider at an online auction, such as when an offer and acceptance occurs and whether there has been a breach of the contract. It is beyond the scope of this report to discuss these issues, as the focus of this report is on consumer issues, and the primary protections for consumer are found in consumer laws. However, an issue of particular relevance to consumers using online auctions is whether there is adequate notice of terms and conditions under contract law. This issue is of particular relevance because consumer laws generally do not regulate when there has been adequate notice and contract law is relied upon to determine this issue.114 Terms and conditions (or disclaimers) must be drafted and incorporated into an online agreement in a manner that makes them legally enforceable and binding on a user. A user must have notice of the terms in order to be bound by them. Given that

114 But see Fair Trading Act 1999 (VIC) Pt 2B and s 163 where a term in a standard form agreement may be considered unfair if it is detrimental to a consumer and it has not been adequately brought to the consumer’s attention.

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the terms are generally included to limit potential liability, ineffective or unenforceable terms will significantly increase the potential legal liability of whoever is relying on them. At online auctions, the potential liability of the auction site operator and the seller may be significantly increased if there are ineffective or unenforceable terms, as it is the auction site operator or seller who generally drafts the terms of the agreements used (as discussed above, three contracts are used at auctions: Auction Site/Consumer; Auction Site/Seller; and Seller/Consumer). Notice of online terms and conditions to consumers usually occur by: •

a link at the bottom of the web page labelled ‘legal notices’

•

a pop-up screen with the relevant terms when a user clicks on a part of the website which gives rise to a liability that the site operator is attempting to limit or disclaim

•

an intermediary screen with the terms and conditions that automatically loads when a user attempts to go from homepage to content for the first time

•

clickwrap agreement: provides a system that prevents a user from carrying out an action on the website until they have agreed to the terms and conditions of use. The terms and conditions of use generally pop up in a new window with a button to signal acceptance of these terms, or a party is required to agree to terms and conditions by clicking on an ‘I AGREE’ icon or button before they proceed to use a service or buy a product.

For terms and conditions to be incorporated into a contract, reasonable notice of them must be provided otherwise they are unenforceable.115 Thus, in order for an auction site operator or seller to rely on its terms and conditions, it has to show that it did all that was reasonable in the circumstances of the case to bring the terms and conditions to the attention of the consumer.116 Where a consumer knows that the website or webpage contains terms and conditions, the consumer will be bound by those terms and conditions even if they have chosen not to read them.117 If a consumer was not aware that there were terms and conditions, the court will look at whether the nature of the transaction is such that a reasonable person would

115 See e.g., Parker v South Eastern Railway Co (1877) 2 CPD 416; Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379; Causer v Browne [1952] VLR 1. 116 See e.g. Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379 at 386; 7 SR (NSW) 372; 13 ALR 249 per Griffith CJ. 117 See Parker v South Eastern Railway Co (1877) 2 CPD 416 at 423 per Mellish LJ.

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expect to find terms and conditions contained in the documents.118 It will not matter if the consumer has not read the terms and conditions on the website if the court finds that a reasonable person would expect to find terms and conditions. The consumer will still be bound because they are deemed to have had reasonable notice of the terms and conditions.119 The court will look at the way in which a web page/document is delivered to the consumer and determine if there was reasonable notice of the existence of the terms and conditions even if the consumer did not know of the terms and conditions.120 Reasonable notice of the terms and conditions must be given to the consumer prior to or contemporaneously with entry into the agreement.121 In Australia, the ‘ticket cases’ have provided important principles regarding incorporation of terms and conditions into an agreement by reasonable notice. They primarily deal with cases where there are written but unsigned terms stated or referred to in a document (often on a ticket) containing exclusion of liability clauses.122 In addition to the principles outlined above, ticket cases require that, for terms and conditions to apply, the consumer must have the ability to reject the terms and negotiate the terms of the contract.123 Furthermore, where an exclusionary term is widely drafted, not usual in the class of contract, or is stringent, then it must be brought to the attention of the consumer in the most explicit manner.124 The above is a simple analysis of the law regarding incorporation of terms into an agreement by reasonable notice. The case law in this area does not provide uniform principles and there is no Australian authority regarding incorporation of terms and conditions by reasonable notice in the online context (including at online auctions). Accordingly, it is difficult to determine with any certainty whether particular methods used by auction site operators and sellers to communicate their terms and conditions to the consumer will satisfy the reasonable notice requirement. Although not binding on Australian courts, foreign cases may provide guidance on how Australian courts may handle these issues. For example, US cases dealing with

Causer v Browne [1952] VLR 1 at 4 per Herring CJ. See Parker v South Eastern Railway Co (1877) 2 CPD 416 at 423 per Mellish LJ. 120 Ibid. 121 See e.g. Olley v Marlborough Court Ltd [1949] 1 KB 532; [1949] 1 All ER 127; Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163; [1971] 1 All ER 686; [1971] 2 WLR 585; Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; 79 ALR 9; 62 ALJR 389. 122 See e.g.Parker v South Eastern Railway Co (1877) 2 CPD 416; Causer v Browne [1952] VLR 1. 123 See Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169-70; [1971] 1 All ER 686; [1971] 2 WLR 585, per Lord Denning MR. 124 See Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163; [1971] 1 All ER 686; [1971] 2 WLR 585; Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 229; 79 ALR 9 at 31; 62 ALJR 389 per Brennan 118

119

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‘Shrinkwrap

Agreements’,125

‘Clickwrap

Agreements’126

and

‘Browsewrap

Agreements’127 are all useful in obtaining guidance of what constitutes reasonable notice in circumstances that are applicable to online contracts.128 However, it is beyond the scope of this report to examine these issues.

3.3.2

AGENCY LAW AND ONLINE AUCTIONS

An auctioneer is a form of agent and the principles that determine the authority of an agent also apply to auctioneers.129 As agents, auctioneers under the general law have duties to sellers (and to a certain degree buyers) that arise under contract, in tort law and in equity (e.g. fiduciary duties).130 At A2C e-auctions, site operators claim to be auctioneers and thus the duties that normally apply to agents (i.e. auctioneers) will apply the A2C e-auction site operators. At U2C e-auctions, site operators claim to only provide a venue for members to offer items for sale or buy items, and expressly state that they are not auctioneers or agents of the seller (and the buyer).131 However, the law determines when someone is an agent (auctioneer), which depends on the nature of the agreement or the circumstances of the relationship between the parties.132 Courts will find that there is an agency relationship even if the contract expressly stipulates that an agency (e.g. auctioneer) relationship does not exist.133 An agency relationship exists when there is a party that has an authority or capacity to create or affect legal relations between a principal and third parties.134 As

J; Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433; [1988] 1 All ER 348; Shearson Lehman Hutton Inc v Maclaine Watson & Co Ltd [1989] 2 Lloyd’s Rep 570 at 612-13. 125 Shrinkwrap agreements occur when a party purchasers a product (usually software) and the terms and conditions are contained inside the shrink-wrapping. The party will only receive the terms and conditions when they receive the product which is after the product was purchased. 126 Clickwrap agreements provide a system that prevents a user from carrying out an action on the website until they have agreed to the terms and conditions of use. The terms and conditions of use generally pop up in a new window with a button to signal acceptance of these terms or a party is required to agree to terms and conditions by clicking on an ‘I AGREE’ icon or button before they proceed to use a service or buy a product. 127 Browsewrap agreements occur when the terms and conditions do not appear on the screen and the user is not required to agree to the terms or view the terms before proceeding into a transaction or use. 128 See e.g. Ticketmaster Corporation v Tickets.com Inc, 54 USPQ 2d 1344 (2000); and Caspi v Microsoft, 732 A 2d 528 (1999). 129 Halsbury’s Laws of Australia (at 2 May 2006) 30 Auction, ‘Authority as agent’ [30-140]. 130 For a discussion of these duties see generally, Halsbury’s Laws of Australia (at 2 May 2006) 30 Auction, ‘Auctioneers’ Duties and Liabilities’ [30-180]. 131 See e.g. clause 3 of eBay Australia’s User Agreement at 14 May 2006. 132 See generally, Halsbury’s Laws of Australia (at 2 May 2006) 15 Agency, ‘Meaning of ‘agency’’ [15-5]. 133 See e.g. South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611. 134 International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644; 32 ALJ 160 ; Petersen v Moloney (1951) 84 CLR 91; 25 ALJR 566. — 70 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

discussed above, at U2C e-auctions there are primarily three contracts that are between the: Auction Site/Consumer; Auction Site/Seller; and Seller/Consumer. At a U2C e-auction a seller will list an item for sale and the only reason why a binding legal contract will exist is because the auction site operator has an authority or capacity to create or affect legal relations between the principal (seller) and third parties (consumers/successful bidders). For example, the Auction Site/Seller contract at eBay Australia’s site stipulates: Binding Bids. …if you receive at least one bid at or above your stated minimum price (or in the case of reserve auctions, at or above the reserve price), you are obligated to complete the transaction with the highest bidder upon the item’s completion, unless there is an exceptional circumstance, such as: the buyer fails to meet the terms of your listing (such as payment method); or you cannot authenticate the buyer’s identity.135

The Auction Site/Consumer contract at eBay Australia’s site stipulates: Bidding and Buying. You are obligated to complete the transaction with the seller if you purchase an item through one of our fixed price formats or are the highest bidder as described below, unless the transaction is prohibited by law or this User Agreement. If you are the highest bidder at the end of an auction (meeting the applicable minimum bid or reserve requirements) and your bid is accepted by the seller, you are obligated to complete the transaction with the seller …. By bidding on an item you agree to be bound by the conditions of sale included in the item’s description so long as those conditions of sale are not in violation of this Agreement or unlawful. Bids are not retractable except in exceptional circumstances such as when the seller materially changes the item’s description after you bid, a clear typographical error is made, or you cannot authenticate the seller’s identity.136

From these two clauses above, it can be seen that, when the seller lists an item on eBay, the seller is in fact permitting eBay to create a binding legal contract between the seller and the consumer and thus permitting eBay to create or affect legal relations between the principal (seller) and third parties (consumers/successful bidders). Without the above two terms, the seller would not be contractually obligated to send an item listed to a successful bidder (who is a third party). Put another way, acceptance of the bid occurs as a consequence of the contract eBay has with consumers. It thus can be argued that eBay is in fact an agent of the seller.

135 Clause 5.2 of eBay Australia’s User Agreement at 14 May 2006. 136 Clause 4 of eBay Australia’s User Agreement at 14 May 2006.

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However, there is currently no Australian authority that examines this issue. If this issue went before a court, a different conclusion may be reached. Whether a site operator of U2C e-auctions is an agent or not is important because there are responsibilities to buyers and sellers that arise as a consequence of the agency relationship. Amongst those responsibilities include fiduciary duties that the agent (auction site) has to the seller. However, many of the liabilities (both seller and consumer) that arise from the agency relationship can be excluded and this will depend on the contractual relationships amongst the parties (e.g. auction sites’ disclaimers and indemnities) and the nature of the relationships amongst them. It is difficult to determine what the liability of a site operator of U2C e-auctions may be because it is a situation which courts have not considered in Australia and quite unique from traditional agency relationships. Furthermore, as already mentioned, courts may determine that there is no agency relationship. This issue is thus raised for the purpose of further discussion and debate.137

3.4 Criminal laws Under the Australian system of Government, all Australian states and territories have a general power to enact criminal laws to operate within their own borders. The Commonwealth is limited to enacting criminal laws which fall within one of its enumerated heads of constitutional power, although within these heads of power it can enact law which is applicable across the country and extraterritorially. The Commonwealth’s constitutional power to enact laws with respect to ‘telephonic, telegraphic and other like services’ is of particular relevance in the context of cyberspace crime. In many areas, including cyberspace crime, commonwealth and state and territory offences exist and operate side by side, with the state and territory offences applying generally to wrongful conduct within that jurisdiction and the Commonwealth offences targeting particular aspects (for example, offences involving computers owned

or

leased

by

the

Commonwealth,

and

offences

involving

a

telecommunications carriage service). Of particular relevance to online auctions are fraud and computer offences. For example, the Commonwealth Criminal Code prohibits:

For a discussion of agents duties and liabilities see generally, Halsbury’s Laws of Australia (at 2 May 2006) 15 Agency [15-165 – 15-200, 15-255-15-355]. See also, Halsbury’s Laws of Australia (at 2 May 2006) 30 Auction, ‘Auctioneers’ Duties and Liabilties’ [30-180 – 30-210].

137

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•

using a telecommunications network (e.g. the internet) with intention to commit a serious offence (including fraud)138

•

dishonestly obtaining or dealing in personal financial information (e.g. credit card details)139

•

unauthorised access to, or modification of, restricted data (restricted by an access control system associated with a function of the computer – e.g. access by password).140

Laws dealing specifically with computer fraud have also been established under state legislation.141

3.5 E-Auction sites, sellers and consumers 3.5.1

AUCTION SITE OPERATORS

3.5.1.1 A2C e-auction site operators Auctions site operators that conduct A2C e-auctions must comply with the applicable laws discussed in the preceding sections: •

auction laws (section 3.1)

•

consumer laws (section 3.2)

•

contract and agency law (section 3.3)

•

criminal law (section 3.4).

As A2C e-auction site operators operate as, and claim to be, auctioneers, they may be required to be licensed and comply with the regulations relevant being licensed auctioneers. This will depend on which jurisdiction the auctioneer trades in as the laws in this area are not uniform across the nation, and in some jurisdictions there is no requirement to be licensed. (See section 3.1.1)

Criminal Code Act 1995 (Cth), s 417.14. Criminal Code Act 1995 (Cth), s 480.4. 140 Criminal Code Act 1995 (Cth), s 478.1. 141 See e.g. Crime Act 1958 (VIC), Div 3(6). 138

139

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In addition, several jurisdictions but not all have legislation that prohibits certain conduct at auctions, namely ‘mock auctions’ and ‘collusive practices at auction sales’. (See section 3.1.2) There is some uncertainty in the law as to whether these prohibitions apply to online auctions generally (both A2C and U2C e-auctions). There is little indication from previous research (including overseas), data from regulators, or from results in the project survey and focus groups that there are any consumer concerns regarding A2C e-auction sites. (See chapters 3 and 4) This may be because of the operators at these sites act as traditional auctioneers and are actively involved in the auction sale. However, during consultations Consumer Affairs Victoria stated that sites that offer both A2C and U2C e-auctions have raised in some instances concerns for consumers. In particular, some transactions are not clear as to whether the seller is the auction site operator (auctioneer) or another user of the site. 3.5.1.2 U2C e-auction site operators Auctions site operators that conduct U2C e-auctions must comply with the applicable laws discussed in the preceding sections: •

consumer laws (section 3.2)

•

contract (section 3.3.1)

•

criminal law (section 3.4).

Auction laws There is some uncertainty in the law regarding whether operators of U2C e-auctions should be licensed. (See section 3.1.1) Pursuant to industry practice, operators of U2C e-auction sites are not licensed. In addition, several jurisdictions but not all have legislation that prohibits certain conduct at auctions, namely ‘mock auctions’ and ‘collusive practices at auction sales’. (See section 3.1.2) There is some uncertainty in the law as to whether these prohibitions apply to online auctions generally (both A2C and U2C e-auctions) and if they do whether they apply to U2C e-auctions. (See section 3.1.2) Consumer laws U2C e-auction site operators are required to comply with the applicable consumer laws discussed in section 3.2 above. At U2C e-auctions both the buyer and the seller are consumers of the site operator (both are using the service) and have rights against the site operator pursuant to consumer laws. — 74 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Of particular relevance to consumers are the following: Misleading and Deceptive Conduct; Warranties that services will be rendered with due care and skill; and Unfair Terms. Safeguards offered: Whether consumer laws discussed here are not being complied with by U2C e-auction site operators depends on the safeguards offered to users by the site operators. For example, whether a site operator is engaging in misleading and deceptive conduct for misrepresenting the safety of the site will depend on the information available for users on the site including consumer education material. The same is true for whether a site operator is failing to render its service with due care and skill. If the site operator has provided tools for users to use to avoid fraud and users choose not to use them then the site operator may be deemed to have rendered its service with due care and skill. EBay Australia was asked what consumer safeguards its site has in place and how these are communicate/disseminated to the public (to users and potential users of the site). The consumer safeguards that eBay Australia listed that it provided included buyer protection programs, trust and safety initiatives, member tools, online dispute resolution, phishing/account protections and education. With regard to buyer protection programs, eBay Australia stated that: eBay has a Buyer Protection Program pursuant to which members can be eligible for a payment of up to $375 in the unlikely event that something goes wrong. PayPal, the eBay online payment system, also has a Buyer Protection Program that covers qualified transactions on eBay.com.au up to $1,500 where an item has been purchased using PayPal and it was not received or was significantly not as described.

With regard to its trust and safety initiatives, eBay Australia stated that: eBay has zero tolerance for any wrong doing and our commitment to what we call Trust and Safety extends through everything we do. At eBay we employ the top people, systems and state of the art technology. There are more than 1,000 employees at eBay and PayPal dedicated to making eBay one of the safest places in the world to trade. They have backgrounds in law enforcement, customer support, advanced computer engineering and analysis. eBay’s Trust and Safety people, systems and technology are there to help minimise risk. eBay: • monitors key areas of the site and will proactively suspend members for wrongdoing

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• will investigate complaints brought to its attention by members • will suspend members that have not fulfilled their obligations • works closely with law enforcement and regulatory agencies to address any wrongdoing and help bring any offenders to justice

The member tools offered by eBay Australia were described as follows: eBay has a variety of tools available to all members to safeguard their trading and online experiences. Member tools include: • Feedback – This allows members to assess each other’s online reputation. The positive, neutral and negative comments provided by other members of the eBay community help to evaluate a seller’s previous trading history and gain an understanding of their reputation. This is similar to walking into a department store and asking to read all of the customer feedback surveys. • Member profiles – This allows members to assess each other’s online trading histories, the types of items they have previously sold/bought and the types of items they are currently selling. • Email forwarding system – This provides members with the ability to contact other members via ‘Ask seller a question’ and ‘Contact Member’ tabs associated with all item listings pages or Member Profile pages respectively. Importantly the email forwarding system can be used to keep members’ email addresses confidential yet allow for direct communication between the parties. • PayPal – eBay’s online payment service that keeps account holders’ financial information secure and masked from the account holders’ trading partners. This service provides important peace of mind in using a credit card for online purchases. PayPal also chooses to provide a Buyer Protection Program to help protect members even further.

With regard to online dispute resolution eBay Australia stated that: • Members in a transaction with each other have the ability to utilise one of eBay’s free online dispute resolution services, including ‘Item not received or significantly not described’, ‘Unpaid item’ and ‘Mutual Feedback withdrawal’ disputes. • Members can also utilise a third party online dispute resolution service. eBay's preferred dispute resolution provider is SquareTrade. SquareTrade, offers two services: a free web-based forum which allows users to attempt to resolve their differences on their own or if necessary, the use of a professional mediator. There is a USD$20 charge for a professional mediator (eBay subsidises the rest of the cost). — 76 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

EBay Australia explained its phishing/account protections offered as follows: • eBay’s Live Help allows members to liaise directly and in real-time with customer support in the event of a suspected or actual account take over. • The eBay Toolbar featuring Account Guard (free to download) helps make sure you are on a legitimate eBay site. The Account Guard turns green if you are on a legitimate eBay website and red when you need to use caution. • A spoof reporting service – if someone receives a suspicious email purporting to come from eBay it can be sent to [email protected] and eBay will get back to them within 48 hours to confirm if it is a legitimate email. • My Messages, a message inbox in My eBay where messages originating from eBay systems can be checked. If it affects an eBay member’s account, it's in My Messages. • eBay also works proactively with domain registrars once spoof and phishing sites are detected to have these sites removed from the DNS and shut down.

The education provided to its users was described by eBay as follows: At eBay we are committed to educating consumers on how they can protect themselves when shopping online. Some of the methods we use to educate our members include: • eBay Security Centre – Our online Security Centre is packed with useful safe shopping tips and information, as well as links to third party resources such as law enforcement and government agencies – visit ebay.com.au/securitycentre • Transactional messaging –Information on how members can protect themselves when trading on eBay is provided throughout ebay.com.au. Importantly, strong educational messages on safe shopping practices are delivered at key moments during a transaction, such as prior to members confirming a bid on an item. • Email – eBay regularly educates its community on safe shopping practices and consumer safeguards via email. • e-Commerce Safety Guide – Earlier this year, Attorney-General Philip Ruddock launched

eBay’s

e-Commerce

Safety

Guide

(http://pages.ebay.com.au/securitycentre/safetyguide.html). The Guide is part of eBay Australia's continuing effort to educate consumers on how to shop safely online. The Guide has been distributed to consumers along with a broad crosssection of media and government agencies in an effort to educate the public and key-influencers on safe online shopping practices. To date approximately 35,000 copies have been distributed, including by government agencies and politicians. — 77 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

• Offline advice columns – eBay has produced a number of columns in weekend newspapers and women’s’ magazines on safe online activity and shopping practices. • Collaboration with and participation in industry forums – to reinforce important consumer safety messaging to the public • eBay recommends the use of a reputable escrow service, particularly for large amounts in excess of either the eBay ($375) or PayPal ($1,500) Buyer Protection Programs. An escrow service holds a buyer's money in trust until the buyer has had the opportunity to receive, inspect and approve the goods. eBay recommends the use of a reputable escrow service, like Escrow Australia.

When eBay Australia was asked what consumer safeguards, if any, it has considered using on its site but has not used, and the reason why it has not used such safeguards, it provided the following response: eBay regularly assesses new ways to protect our community. We also work closely with regulators such as the Australian Competition and Consumer Commission (ACCC) and state offices of fair trading, as well as law enforcement agencies, to ensure there are ample consumer safeguards available to the eBay community.

When eBay Australia was asked what previous consumer safeguards, if any, it has removed or changed from its site, and the reason why these were removed or changed, it provided the following response: eBay regularly assesses new ways to protect our community and if anything we have only made improvements to existing consumer safeguards. A recent example is the modification to eBay’s Feedback system, whereby we now remove all feedback from users who are indefinitely suspended within 90 days of registration. The modification followed community consultation which helped us form the view that members who are indefinitely suspended within 90 days of their registration were never truly members of the Community. Therefore, their feedback should not count.

Misleading and deceptive conduct: In 2001 the Victorian Civil and Administrative Tribunal found a U2C e-auction site operator liable for the loss incurred when a user purchased a computer that never arrived from an overseas seller. The user successfully argued that the auction site’s representation that it was safe overrode the terms of the user agreement that attempted to limit the amount of compensation available.142 The significant rise in popularity in Australia with the U2C e-auction site eBay in recent years (see chapter 2), together with a significant portion of consumers

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appearing to be experiencing problems at U2C e-auctions (see chapters 4 and 5), suggests that consumers have a level of confidence in the safety of shopping at these types of sites that is higher than it should be if the risks involved were properly taken into account. Whether this is due misrepresentations made by the auction site operators or a lack of understanding of the risks by consumers, or both, is not clear. Regardless of the answer, it appears that consumers need to be better educated about the risks involved. Warranty that services will be rendered with due care and skill:143 This is a nonexcluded warranty that auction site operators need to comply with, as they are either corporations and/or businesses offering services in trade or commerce. It appears that this warranty may be being breached by U2C e-auction site operators as there are a significant number of problems (including fraud) experienced by its users, (particularly buyers) (see Chapters 4 and 5) and auction site operators are aware of these problems and are not taking adequate steps to prevent them. For example, U2C e-auction site operators may implement better registration mechanisms that provide verification of users’ identities in a manner that reduces fraud by making potential perpetrators fearful of getting caught. The site operator may also be required to better inform consumers of the risks involved with using the site. The protections that may legally be required to be imposed by U2C e-auction site operators will depend on the circumstances of each e-auction site operator. There is no case in Australia that has considered this issue in the context of online auctions and therefore the law is uncertain in this area. Unfair terms: As discussed in section 3.2.2, unfair terms are prohibited in Victoria. Auction site operators in Victoria, or sites that have users in Victoria, need to comply with the Victorian prohibition against unfair terms. It appears that there are several terms in the User Agreements of U2C e-auction site operators that may be unfair. Particular types of terms that are commonly unfair include disclaimer, indemnity, termination, suspension, variation and jurisdictional clauses. This issue is currently only of particular relevance to Victoria businesses and consumers but, as discussed in section 3.2.2, there is a real possibility that uniform laws prohibiting unfair terms will be introduced as per Victoria’s Fair Trading Act 1999 (VIC). Agency law Whether a site operator of U2C e-auctions is an agent or not of the Seller is not clear. (See section 3.3.2) It can be argued that the seller at an U2C e-auction by listing an

142

Evagora v eBay Australia & New Zealand Pty Ltd [2001] VCAT 49. — 79 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

item is permitting the auction site operator to create a binding legal contract between the seller and the consumer. This may be considered an agency relationship because the auction site operator is permitted to create or affect legal relations between the seller and third parties (consumers/successful bidders). The law is unclear in this area and as a consequence it is unclear whether U2C e-auction site operators have additional duties imposed by a possible agency relationship. This issue requires further consideration.

3.5.2

BUSINESS SELLERS AT U2C E-AUCTIONS

Business Sellers at U2C e-auction sites must comply with the applicable laws discussed in the preceding sections: •

consumer laws (section 3.2)

•

contract (section 3.3.1)

•

criminal law (section 3.4).

Consumer laws A significant portion of sellers at U2C e-auctions are businesses. Sellers that are either corporations and/or list items for sale in trade or commerce (including individuals in trade or commerce) are required to comply with the applicable consumer laws discussed in section 3.2. This includes: accepting payment without intending or being able to supply as ordered (including not supplying at all, supplying a good materially different, or supplying the good after the specified period) (see section 3.2.1.5); and not engaging in misleading and deceptive conduct (see section 3.2.1.4). The leading consumer complaints regarding U2C e-auctions are not receiving an item purchased; receiving an item that is materially different to what was purchased; receiving the purchased item late (see chapters 4 and 5). These consumer complaints appear to be able to be covered under the consumer laws. However, the reasons why these are still the leading complaint categories may be because: a) sellers at U2C e-auctions can easily (and many do) not disclose that they are a business; and b) many consumers are not aware that consumer laws apply to U2C e-auctions (evidenced by the low number of consumers who have contacted Fair Trading agencies – see chapters 4 and 5).

143

Trade Practices Act 1974 (Cth), s 74(1). — 80 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Warranties and conditions implied in relation to goods (see section 3.2.1.2) As discussed in chapter 2, U2C e-auction sites allow items to be bought at a fixed price and through an auction sale. Business sellers must comply with the following conditions in relation to goods sold at U2C e-auction site at a fixed price (where there is no bidding, e.g. ‘Buy It Now’ feature on eBay): •

a condition that goods supplied by description will comply with that description (this right does not apply if goods were sold at auction)

•

a condition that goods will be of merchantable quality (this right does not apply if the relevant defect was specifically drawn to the consumer’s attention before the contract was made, or the consumer examined the goods prior to sale, and that examination should have revealed the defect)

•

a condition that, where the purpose is made known, the goods are fit for the purpose.

Business sellers in Victoria or businesses selling to consumers in Victoria must contain these conditions in relation to goods sold at U2C e-auctions sites by auction. In other jurisdictions, the law implies these condition into contracts relating to goods sold to consumers at auction but permits their exclusion by express agreement. (See section 3.2.1.2) It is not clear whether ‘auction’ would include U2C e-auctions as the term is generally not defined.

3.5.3

PRIVATE SELLERS AT U2C E-AUCTIONS

Private sellers (i.e. individuals not selling in trade or commerce) at U2C e-auctions sites must comply with the applicable laws discussed in the preceding sections: •

contract law (section 3.3.1)

•

criminal law (section 3.4).

If a consumer experiences a problem with a private seller, then a private action for breach of contract can be pursued in order to enforce the consumer’s rights. If there is fraudulent conduct, the consumer can also contact the police for assistance. The consumer may still have rights pursuant to consumer laws that can be enforced against the U2C e-auctions site operator when a problem has been experienced with a private seller. (See section 3.5.1.2)

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CHAPTER 4

Fraud, consumer complaints & private disputes Despite the large number of Australian consumers using online auctions to purchase goods or services, we have heard little about the issues those consumers face. This section examines the types of problems experienced by consumers at online auctions, how many Australian consumers are experiencing these problems, and the experiences of overseas consumers.

4.1 Problems Consumers we spoke to frequently complained about problems relating to payment and delivery.144 For example, the seller takes the money but does not deliver the goods; the seller takes the money but delivers goods that are materially different and/or inferior to those described; there are delivery delays; or the seller sends the goods, but never receives payment.145 The circumstances surrounding the problem experienced at an online auction will determine whether there has been: •

•

•

4.1.1

fraud a consumer complaint a private dispute.

FRAUD

There are many opportunities for fraud at online auctions. This is largely due to the freedom and relative anonymity the internet provides, and allows online auction sites to become popular forums for fraud by both buyers and sellers.146 For example, during an online auction, a seller (under a different name, or through accomplices) may lodge a dummy bid to drive up the auction price. Or a buyer may lodge a low bid, then (again, under a different name or through an accomplice) follow with an

See Chapter 4. Reynolds, n 8 above, at 8. 146 See e.g. Sorensen, n 8 above. 144 145

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extremely high bid which is then withdrawn immediately before the close of the auction, knocking down the price to the original low bid. I was selling on eBay, someone withdrew their bid. Some Play Station game I had on there was going for about eighty bucks, and then the highest bidder retracted their bid, and it had about a day to go or something, and it went from eighty dollars back down to about twenty-six. Just because they’ve retracted their bid, they’ve knocked all the bids down. Focus group participant

In addition to fraudulent bidding activities, sellers at online auctions can list items for sale with the intention of receiving payment and never sending the item to the successful bidder. Buyers can also successfully bid on an item with ever intending to receive it or pay the seller. There are various types of fraud that can occur at online auctions. It is not necessary to exhaustively list them here. What is important is that fraud at online auctions is the most serious type of problem that consumers can experience as it involves a breach of the criminal law, and the consumer can as a consequence suffer the most detriment. (For a discussion of criminal laws at online auctions, see section 3.4 of chapter 3.)

4.1.2

CONSUMER COMPLAINTS

As we have noted, common problems relate to payment and delivery.147 These problems may not amount to fraud because there may not be the requisite element required to constitute a crime. For example, if a seller received payment from a successful bidder but mistakenly did not send the item to the buyer then fraud would not have occurred – the requisite element of receiving payment with the intention of not sending the item is not satisfied. Although these problems may not constitute fraud, they still can breach consumer laws and permit an online auction user to make a consumer complaint regarding those laws (e.g. lodge a complaint to the relevant fair trading or consumer affairs department (e.g. ACCC) or make a complaint in a tribunal (e.g. VCAT). Consumer laws apply to auction site operators and business sellers, so consumers can make complaints against them regarding breaches of consumer laws. (See section 3.5 of chapter 3)

147

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4.1.3

PRIVATE DISPUTES

Private sellers, however, do not have to comply with consumer laws but only have to comply with criminal and contract laws. To seek legal redress for disputes with private sellers that do not constitute fraud, consumers must turn to private disputes. Even if there has been no fraud or breach of consumer laws, a consumer can still have a legal claim regarding a problem experienced at an auction. This legal claim will be a private dispute between the consumer and the auction site operator or – more usually – the seller. Often, this will be a contractual dispute – see section 3.3.1 of chapter 3.

4.2 Australia This project involved researching the level and types of fraud, consumer complaints, and private disputes at online auction sites involving Australian consumers. We consulted many organisations, including: state and federal law enforcement agencies; state and federal consumer government departments (e.g. ACCC); consumer/public interest organisations; buyers and sellers at online auction sites; and online auction site operators. Attempts were also made to consult with other types of organisations (e.g. online dispute resolution and online payment providers).

4.2.1

FRAUD

4.2.1.1 Law enforcement agencies’ data and recording systems We asked state and federal law enforcement agencies to provide any data or information that may help determine the level and types of fraud, complaints, and disputes at online auction sites involving Australians. Law enforcement agencies were unable to provide any data, primarily because their systems may not specifically record information about online auctions, or the agencies may not be able to accurately retrieve that information. For example, in response to request for data regarding online auctions, the Queensland Police Service stated that ‘…this type of information is not specifically collated for recording purposes.’ The fact that law enforcement agencies do not have data/record systems that are able to provide information about online auctions is a problem that needs addressing. For example, in its response to our request for information, the Tasmania Police stated as follows: — 84 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Tasmania Police does have access to such information within our record systems, but there are inherent difficulties in retrieving specific data with any accuracy. Issues of standardisation and consistency across Australian law enforcement agencies regarding e-crime have been on the agenda of the Commissioners of Police for some time. Development of appropriate standards will alleviate some of the difficulties currently experienced in the retrieval of such data. The Australian Police Ministers’ Council (APMC) has taken an active interest in this area and at their meeting on 17 November 2004 resolved, amongst other issues, to instruct the National Crime Statistics Unit (NCSU) to seek, through the National Centre for Crime and Justice Statistics (NCCJS), standardised collection of fraud data by law enforcement agencies, courts and corrections services.

The National Centre for Crime and Justice Statistics (NCCJS) – a centre of the Australian Bureau of Statistics (ABS) – does not currently collect information on online auction fraud. When providing information for this project, it stated that: Extensive consultation with NCCJS data users has identified a need to improve national statistical information about fraud and electronic crime. A plan to deliver improvements is outlined in the National Information Development Plan for Crime and Justice Statistics (NIDP), due to be released 21 June 2005. Two activities described in the NIDP … are: The area is not well defined in our current offence classification (the Australian Standard Offence Classification) and has been flagged as important in an upcoming review of the offence classification to begin mid-2005. An e-crime framework has been developed in conjunction with the Australian High-Tech Crime Centre (AHTCC).

Law enforcement and government agencies do appear to be taking steps to overcome problems in collecting and recording e-crime data. However, these steps do not appear to be sufficient for the purposes of data on crimes involving online auctions. For example, the Tasmania Police in its response to our request for information stated that: … Tasmania Police is monitoring an arrangement in South Australia regarding the enhanced capture of e-crime statistics. South Australia Police have developed a new dataset to identify e-crime which now means that all police incident reports will indicate whether the incident involves ecrime. New data recording will assist in understanding the breadth, depth and nature of the e-crime problem in that State.

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Tasmania Police is monitoring this project with interest and understand that South Australia Police will undertake an analysis later in 2005, with an undertaking that the results will be shared in the appropriate forums.

When providing information for this project, the South Australia Police stated that: The South Australia Police (SAPOL) Electronic Crime Section (ECS) conducts investigations into a wide range of Electronic Crime Offences including some complex Internet Auction Fraud matters and also provides training and guidance to other investigation areas within SAPOL on the conduct of these types of investigations. … Statistical data gathered by SAPOL covers the broad category of Electronic Crime offences and is contingent on whether a computer or other electronic device was either a tool or a target with respect to the reported offence. ‘Internet Auction Fraud’ is not independently recorded in the collected data, and it would therefore not be possible to provide data on this specific category without dedicating significant resources to manually search across Electronic Crime data.

From the above, it can be seen that the South Australia Police have developed a new system for collecting e-crime data (potentially a leading system within Australia) which does not separately identify crimes involving online auctions. 4.2.1.2 Law enforcement agencies’ view on online auction fraud One law enforcement agency held the view that internet fraud or online auction fraud is not a significant problem in Australia. When providing information for this project, the Western Australia Police Service stated that: We do not collect internet auction data however since national reporting protocols were agreed to by police and eBay (Oct 2004), Western Australia has not had a referral of fraud from eBay. We believe that of the overall transactions conducted on line, only a very small percentage are fraudulent.

It is difficult to accept the view that internet fraud and online auction fraud is not a significant problem without any data from any of the law enforcement agencies. The Western Australia Police Service, when stating this view, admitted to not knowing the level and types of fraud and complaints regarding online auction sites involving Australians. Interestingly, in its response to our request for information, the Department of Consumer and Employment Protection in Western Australia (DOCEP) stated that: Major Fraud Squad in the WA Police Service have advised DOCEP that that there are no publishable figures about complaints relating to internet auction fraud. Anecdotally, the number of contacts with the WA Police Service by individuals about internet auctions is increasing. The perception of the Major Fraud Squad is — 86 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

that complaints about internet sites will increase as more transactions are conducted online. Further, there is an increasing trend towards stolen goods being traded on internet auction sites.

4.2.1.3 Complaint handling and investigations by law enforcement agencies A federal agent and member of the Australian High Tech Crime Centre (AHTCC)148 told the CLC that the AHTCC generally does not handle complaints or investigate online auction fraud. Instead, the AHTCC refers these matters to state law enforcement agencies. However, the AHTCC member’s view was that there was a high volume of crime at online auctions, but usually involving transactions (and losses) that were relatively low in value. For this project, the CLC conducted an online survey to collect data about the experiences of Australian consumers shopping at online auction sites. The survey asked respondents to select approximately what value was the most expensive item was that they have bought at an online auction website, either by auction or at a fixed price. We found that the majority of buyers (58%) had not spent more than $200. Twenty-five per cent had spent between $201 and $500 on the most expensive item they have bought at an auction site, and 83% had not spent more than $500 on an item they have bought at an auction site. The survey findings are consistent with the AHTCC member’s view that online auction crimes usually involved losses that were relatively low in value. The federal agent went on to say that law enforcement agencies usually have an internal threshold regarding the amount of loss from a crime that must be met before investigating. As a consequence, the AHTCC member suspects that state law enforcement agencies do not investigate most online auctions crimes because the internal threshold is not met. A member of the NSW Police, when providing information for this project, stated that complaints regarding online auctions are usually referred to the relevant office of fair trading. Findings from the project survey, however, showed that more people had contacted the police (5.6% of survey respondents who had experienced a problem) rather than a government regulator like the ACCC (1.9% of survey respondents who had experienced a problem).

The AHTCC is hosted by the Australian Federal Police and consists of representatives from federal and all Australian state and territory police forces. For information on the AHTCC, see .

148

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4.2.1.4 Reporting of online auction crimes A member of Victoria Police, when providing information for this project, stated that people do not usually report online auction fraud. This may explain why only 5.6% of survey respondents who had experienced a problem at an auction site had contacted the police in order to try to resolve the problem. When providing information for this project, Tasmania Police stated that: Tasmania Police and all other state and territory law enforcement agencies are aware of the implications regarding internet based auctions and are a party to ongoing collaborative arrangements for the reporting and investigation of these crime types. Of particular interest to you will be the relationship being developed with eBay Australia and New Zealand and, in that regard, may I suggest you contact them directly if you have not already done so.

The Western Australia Police Service provided the following information: We do not collect internet auction data however since national reporting protocols were agreed to by police and eBay (Oct 2004), Western Australia has not had a referral of fraud from eBay.

When eBay Australia was asked what policies, if any, it has in place regarding reporting fraud at its site to law enforcement agencies, it said: eBay has zero tolerance for any wrong doing and our commitment to what we call Trust and Safety extends through everything we do. eBay has in place strict policies in line with Australian law and societal norms. eBay will at times refer matters to government agencies and works closely with law enforcement agencies to help them bring alleged offenders to justice.

When eBay Australia was asked what arrangements, if any, it has in place with government and/or third party organisations regarding reporting fraud at its site, it stated: Where matters are being investigated by police or government agencies, eBay will provide an information package including victim details, complete background information of the person under investigation and advice on what may be required for any search warrants. Our ability to help law enforcement in this way means that any attempt to commit wrongdoing on eBay can be more easily dealt with than offline crime.

From the information provided by both eBay and law enforcement agencies, it appears that, with regard to reporting crimes at its auction site, all eBay does is provide information to law enforcement agencies for law enforcement purposes. Put another way, eBay provides information to law enforcement agencies about the — 88 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

activities of its members when it must do so by law. This is consistent with eBay’s privacy policy which provides:149 eBay may lawfully disclose your personal information for law enforcement or regulatory purposes. eBay cooperates with law enforcement inquires and other third parties to enforce laws, intellectual property and other rights. We can (and you authorise us to) disclose any information about you to law enforcement or other governmental officials as we, in our sole discretion, believe necessary, appropriate or as otherwise permitted under the Privacy Act 1988 (Cth), in connection with an investigation of fraud, intellectual property infringements, piracy or other activity that is illegal or may expose us to legal liability.

4.2.1.5 Online auctions industry AuctionTrader When the CLC asked AuctionTrader how many of its Australian buyers have been subject to fraud and what was the nature of those frauds, it responded: There is the potential for two types of fraud on the website. The greatest danger is in the member to member area. A recent incident affected some 20+ buyers who all suffered losses when buying from another member. Alternatively the company can be in jeopardy through the fraudulent use of credit cards. To date no such occurrence has happened in the past two years.

When we asked AuctionTrader what trends, if any, have emerged with respect to fraud at its site, it told us: No apparent trends are obvious.

eBay Australia The CLC asked eBay Australia how many of its Australian buyers have been subject to fraud and to explain the nature of those frauds. It told us: The overwhelming majority of transactions on eBay are trouble-free. Less than 1/100th of 1% of items listed on eBay result in a confirmed case of fraud (worldwide). Importantly eBay applies a broader definition to fraud than standard legal definitions. eBay’s definition includes issues around seller non-performance such as misrepresentation and an item not being received as a result of being lost in transit.

149

eBay Privacy Policy, at 7 June 06 (See — 89 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

When we asked eBay Australia what trends, if any, have emerged with respect to fraud at its site, eBay responded: The overwhelming majority of transactions on eBay are trouble-free. In fact despite eBay’s phenomenal growth, fraud on eBay has remained consistently low – less than 1/100th of 1% of items listed on eBay result in a confirmed case of fraud (worldwide). It must be pointed out that eBay’s definition of fraud includes not only criminal fraud but also misrepresentation or misleading practices.

EBay Australia’s response is not very helpful in determining how many consumers who use its service have been subject to fraud. EBay’s response focuses on the number of items listed on eBay that resulted in a confirmed case of fraud. A ‘confirmed case of fraud’ is not defined by eBay but can potentially mean any case which has resulted in a criminal conviction. As we have seen above, many online auction crimes may not be investigated by police because they involved losses that are relatively small in value. Accordingly, a conviction may not eventuate even if there was fraud involved. In addition, as discussed above, it is likely that many online auction users may not report auction fraud to the police. This does not mean that eBay has not been made aware of the crime on its site. In fact, 50.7% of survey respondents who had experienced a problem at an auction site indicated that they had contacted the auction site in order to try and resolve the problem. If eBay relied on cases of fraud that it was made aware of rather than confirmed cases of fraud then the number of crimes reported on its site is likely to be significantly higher. In addition, if eBay relied on the number of users that were subject to fraud, rather than how many items listed result in fraud, again the number of crimes reported on its site is likely to be significantly higher. For example, if every member on eBay had each bought 10 listed items and for every member one of those purchases was subject to fraud, the percentage of fraud based on how many items listed would be 10%. However, 100% of the members have been subject to fraud. Other auction sites Other auction sites were approached for this project, such as GraysOnline, Amazon Auctions and Yahoo Auctions, but they did not provide a response.

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4.2.2

CONSUMER COMPLAINTS

In Australia, there is no organisation or agency that collects all the Australian consumer complaints data regarding internet auctions to determine the issues faced by consumers. In a recent discussion paper, the E-commerce Working Party of the Ministerial Council on Consumer Affairs questioned whether current complaints data provide a good gauge of issues faced by consumers buying goods and services online.150 For this project, we asked government consumer affairs and fair trading organisations in every jurisdiction to provide data and information that may assist in determining the level and types of consumer complaints at online auctions where at least one party is an Australian consumer. In addition, we asked online auction site operators to provide information regarding complaints from their site users. 4.2.2.1 Federal With regard to consumer complaints at online auctions, the Australian Competition and Consumer Commission (ACCC) provided the following information: Definition For the purpose of this summary, the term ‘internet auctions’ refers to auctions that operate online. Not all the auction sites operate in the same way. Some of the online auctions describe themselves as more of a forum or online marketplace where buyers and sellers can negotiate their own prices, while others act directly on behalf of the vendor. Scope This summary is an account of the information received by the ACCC from complainants and is not intended to be a definitive analysis of internet auctions. Overview For the period 1 April 2004 to 31 March 2005 approximately 283 complaints and inquires on the ACCC’s database related to internet auctions. The number of complaints regarding internet auctions has increased steadily since 2003. This can be illustrated by comparing the October quarter for 2003 with the same quarter in 2004. In 2003 the complaints received numbered 24, while in 2004 complaints numbered 60.

150 Online Shopping and Consumer Protection Discussion Paper, Standing Committee of Officials of Consumer Affairs: E-commerce Working Party, May 2004, p 14.

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Top five conducts for matters in relation to internet auctions ** Conduct

Count

Percentage

Part V Section 58 Accepting payment not intending to supply

61

21.5%

Part V-2 Section 69 – 74 Retail warranties

25

8.8%

Part V Section 52 Misleading and deceptive conduct: On line services (internet)

17

6.0%

Part V Section 52 Misleading and deceptive conduct: Advertising – internet

17

6.0%

Part V General no breach: Contractual dispute

16

5.7%

** this information is based on that which is provided by complainants and does not represent a proved or probable breach.

4.2.2.2 Victoria Consumer Affairs Victoria (CAV) provided the following information: Online Auction Complaints and Enquiries TIME PERIOD

SEP 03 – JUN 05

No. of Enquiries

327

No. of Complaints

144

Total

471

This table provides the total amount of complaints and enquiries in the period. CAV also provided for this project a quarterly analysis. Consumer Affairs Victoria also indicated that, of the complaints and enquiries it has received regarding online auctions, the most common problems that consumers face are in relation to payment and delivery. That is, the money is received by the seller but the goods are not delivered; the seller receives the money but the goods delivered are materially different and/or inferior to those described; there are delays in delivery; or the seller sends the goods, but never receives payment. Consumer Affairs Victoria has found that a significant number of businesses trading at online auction sites are not complying with the statutory non-excludable consumer

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warranties and conditions – see section 3.2.1.2 for information on these warranties and conditions. 4.2.2.3 New South Wales The NSW Office of Fair Trading (NSW OFT) provided the following information: The Office of Fair Trading received a total of 29, 758 complaints during the financial year ending 30 June 2004. These were complaints about a diverse range of matters which included home building. Fair Trading collates certain information about the complaints that it receives. This information is recorded into categories that relate to issues like the type of complaint, what area of business it dealt with and the type of product or service etc. Currently Fair Trading does not have a distinct category for complaints that result from a transaction carried out through an internet auction. However information is gathered on the type of complaint received and it is possible to collate data on internet auctions, when that information has been recorded. Consequently, according to the data collected, from January 2003 until June 2005, Fair Trading received approximately 171 complaints about matters where the transaction was carried out via an internet auction. Whilst this figure is not comprehensive, it does indicate that complaints of this nature are a very minor percentage of the overall complaints received. The following is a list of issues for these complaints; Accept payment without intent to supply (7) Availability of goods/parts/repair (2) Cancellations/cooling off (2) Compliance with legislation (1) Conduct not listed/Miscellaneous (21) Defective goods (1 9) Failure to account (I) Failure to supply information/product/documents (3) Harassment/coercion (1) Information/publications/applications (21) Misleading/deceptive (10) Misrepresentation/not listed (2) Non/Partial supply (37) Overcharging/charges above quote (6) Pricing/charges not listed (5) Quality Misrepresentation (2) Refunds (11) Repairs/Maintenance (1) — 93 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Supply incorrect/unsatisfactory goods (5) Unconscionable (2) Unsatisfactory/Non performance of service (6) Warranties (1) There does not appear to be any specific consumer issues associated with complaints other than that the higher percentage of complaints are in regard to supply of the goods.

4.2.2.4 Western Australia The Department of Consumer and Employment Protection in Western Australia (DOCEP) provided the following information: The Consumer Protection Call Centre does receive calls about internet auction sites. To date, calls have generally been considered to be matters between private individuals, and not matters that qualify as ‘commerce or trade’, which would allow further investigation by the Department for Consumer and Employment Protection (‘DOCEP’). Callers are typically encouraged to seek legal advice and/or raise the matter with the WA Police Service. No publishable numbers of contacts relating to this issue are available. However, anecdotal evidence from Call Centre operators suggests that the number of calls about internet auction sites is steadily increasing. DOCEP is currently revising the assessment process for calls relating to internet auction sites to better identify conduct by a person or corporation that may breach the Fair Trading Act 1987 (WA) or the Trade Practices Act 1974 (Cth), especially those provisions that relate to: •

accepting payment for goods and services where there is an intention not to supply those goods

•

misleading or deceptive conduct

•

making false or misleading representations.

Consideration may also be given to identifying a category on the data collection system that relates to internet trading sites in due course. To date there has only been one formal complaint lodged with DOCEP by a consumer about a transaction on an internet auction site. DOCEP is investigating a matter where a consumer sent $1 020 to an internet auction site member registered in Queensland. The required goods were not provided. I understand that the consumer has attempted to remedy this situation by contacting the internet auction site operator. The site operator has indicated that they can refund approximately $350 through their public relations arrangements — it is not a matter for which they are culpable. This is not an acceptable situation to

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the consumer. The matter is under investigation at the time of writing and there are a number of issues to consider in this one case. DOCEP honours the ‘home authority principle’ established by the Fair Trading Officers Advisory Committee (‘FTOAC’). Under this principle, for example, a qualifying complaint made by a consumer living in another jurisdiction against a WA business selling on an internet auction site would be investigated by DOCEP.

4.2.2.5 Tasmania The Consumer Affairs and Fair Trading (Tasmania) provided the following: All our enquiries and the one complaint we have received, relate to eBay specifically. …[the manager of our Advisory and Compliance Branch] emphasised that he does not consider that this is a reflection on eBay, but rather a lack of understanding of eBay’s policy or problems with the goods being auctioned. The one complaint we received related to misleading practice. We have also received a total of 59 enquiries which can be broken down as follows: Policy (8) Self help (28) Representation (5) Contract (8) Sales methods (2) Advertising (2) Quality (4) Scam (1) Warranties (1)

4.2.2.6 Northern Territory The Consumer Affairs (Northern Territory) gave us this information: On reviewing our enquiries/complaints database, we have received five complaints about money sent for goods advertised on eBay since July 1 2004. During that period we also received one complaint about a vehicle that had been sold illegally (it was owned by someone else), one about a phone that was locked to one phone network, and one from someone who had received a cheque for goods sold when he had not sold anything. All these relate to eBay; we have had no complaints about any other internet auction site. We have not progressed any of these complaints into disputes, as consumers using eBay should be aware of the risks involved, and eBay provides a comprehensive system of advice and support to users. — 95 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

4.2.2.7 Australian Capital Territory With regard to consumer complaints at online auctions, the ACT Office of Fair Trading in the period 1 July 2003–13 April 2005 stated that it had: •

19 Inquiries

•

16 Written Complaints.

The 16 Written Complaints comprised of: •

1 Alleged Trader did not refund 30% of $1000 paid for tickets that were not supplied

•

2 Alleged Consumer purchased item on internet but never received the goods

•

2 Alleged Trader will not give refund for faulty product

•

11 complaints against individual Trader not supplying goods. Matters referred to AFP fraud squad.

The 16 written complaints accounted for approximately 2.5% of all complaints received by the ACT Office of Fair Trading. 4.2.2.8 South Australia On 29 July 2005, a representative of the Office of Consumer and Business Affairs (South Australia) provided us with the following information: I have searched our consumer complaint data system and advise that the amount of complaints received by this agency relating to this issue are insignificant and I don’t believe would contribute to your project. Whilst we don’t record internet auctions specifically, since 1 January 2004 we have recorded a total of 10 general auction complaints, and only two of those appear to relate to the internet.

4.2.2.9 Queensland The Department of Tourism, Fair Trading and Wine Industry Development (Queensland) choose not to provide information for this project.

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4.2.2.10 Online auctions industry AuctionTrader When we asked AuctionTrader how many, and what type of, complaints it has received from Australian buyers (including bidders) using its site, it responded: Our records show that we have received about 40 email complaints in the last six months. Typically complaints include: •

Difficulty in navigating the website

•

Reserves not being shown

•

Shipping costs to high

•

Times that lots close i.e. early am

•

No opportunity to buy multiple quantities

•

Too many emails/notices etc

•

Incorrectly described

•

Item delivered does not work and/or not as described

When we asked AuctionTrader what trends, if any, have emerged with respect to complaints at its site, AuctionTrader responded: Given the number of visitors to our website no apparent trend is obvious.

When we asked AuctionTrader how complaints are handled at its site, it told us: Most email complaints are addressed to [email protected]. Occasionally they are sent to support which are then diverted to admin. Every effort is made to responding to the complaint within a couple of hours. Most can be dealt with by answering/responding to their question. In some few instances they are passed onto our IT administrator.

eBay Australia When we asked eBay Australia how many, and what type of, complaints it has received from Australian buyers (including bidders) using its site, it responded: eBay does not disclose the quantity of complaints it receives. The overwhelming majority of transactions on eBay are trouble-free. Complaints to eBay can vary, however the types of online dispute resolution services available on eBay are indicative of their nature. These include ‘Item not received or significantly not as described’, ‘Unpaid item’ and ‘Mutual Feedback withdrawal’ dispute resolution services. — 97 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

When the CLC asked eBay Australia what trends, if any, have emerged with respect to complaints at its site, eBay Australia responded: In eBay’s experience the vast majority of difficulties are resolved by open and direct communication between a buyer and seller. As such eBay has in place a number of systems and tools to facilitate communication between members, such as eBay’s Online Dispute Resolution console. eBay will also notify a member (through ‘My eBay’) if another member has filed a dispute with them.

When asked how it handles complaints at its site, eBay Australia responded: In the first instance members are encouraged to utilise one of eBay’s online dispute resolution services: Members in a transaction with each other have the ability to utilise one of eBay’s free online dispute resolution services, including ‘Item not received or significantly not described’, ‘Unpaid item’ and ‘Mutual Feedback withdrawal’ disputes. Complaints are also handled through eBay’s Customer Support team. eBay members can contact Customer Support via the ‘Contact Us’ tab in Help at: http://pages.ebay.com.au/help/contact_us/_base/index.html

Other auction sites Other auction sites approached for this project, such as GraysOnline, Amazon Auctions and Yahoo Auctions, did not provide a response. 4.2.2.11 Courts and tribunals In Australia, only one case was found where a user of an online auction site had claimed a breach of consumer protections laws through legal proceedings – Evagora v eBay Australia & New Zealand Pty Ltd [2001] VCAT 49. In that case, the Victorian Civil and Administrative Tribunal found a U2C e-auction site operator liable for the loss incurred when a user purchased a computer that never arrived from an overseas seller. The user successfully argued that the auction site’s representation that it was safe overrode the terms of the user agreement that limited the amount of compensation available. (See chapter 3 for a discussion of consumer laws at online auctions.) When asked to comment on this case, eBay Australia responded: As a business policy, eBay does not comment on court decisions. Since this case eBay has been successful in all other tribunal proceedings.

However, we could not find another tribunal (or court) proceeding in Australia involving eBay and a breach of consumer protection laws.

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4.2.3

PRIVATE DISPUTES

4.2.3.1 Courts and tribunals No Australian case was found from a court or tribunal that involved a private dispute between individuals (e.g. proceedings for breach of contract). 4.2.3.2 Online auctions industry AuctionTrader When asked how many and what types of disputes have occurred between customers (buyers and sellers) of its site where at least one of those customers is located in Australia, AuctionTrader responded: Our member to member service is closely monitored and not widely used, therefore the level of disputation is minimal.

When we asked AuctionTrader what trends, if any, have emerged with respect to disputes at its site, AuctionTrader stated that: The website contains are lot of information which is intended to act as warnings to intended buyers. As commissioned agents for the vendor’s we have many such terms and conditions. Inevitably users do not read this information.

When we asked AuctionTrader how user disputes are handled at its site (e.g. free online dispute resolution), it told us that they are handled in the same manner as the complaints from users – AuctionTrader receives and deals with the complaint. This is probably because most of the transactions on AuctionTrader are A2C e-auction sales where the operator of the auction site lists items for sale on behalf of businesses and acknowledges to users that it operates as a traditional auctioneer acting as an agent for a business. (See chapter 2 for a discussion on A2C e-auctions.) Acting in the way a traditional auctioneer acts entails dealing with complaints and disputes from buyers and bidders. eBay Australia When we asked eBay Australia how many and what types of disputes have occurred between customers (buyers and sellers) of its site where at least one of those customers is located in Australia, it told us: eBay does not disclose the quantity of disputes that occur.

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The overwhelming majority of transactions on eBay are trouble-free. Complaints to eBay can vary, however the types of online dispute resolution services available on eBay are indicative of their nature. These include ‘Item not received or significantly not as described’, ‘Unpaid item’ and ‘Mutual Feedback withdrawal’ dispute resolution services.

When asked what trends, if any, have emerged with respect to disputes at its site, eBay Australia responded by reference to its answer to the question regarding trends involving complaints, where it was stated that: In eBay’s experience the vast majority of difficulties are resolved by open and direct communication between a buyer and seller. As such eBay has in place a number of systems and tools to facilitate communication between members, such as eBay’s Online Dispute Resolution console. eBay will also notify a member (through ‘My eBay’) if another member has filed a dispute with them.

When asked how user disputes are handled at its site (e.g. free online dispute resolution), eBay Australia responded: There are numerous ways in which disputes can be handled on eBay. In the first instance, all members have the ability to contact other members via ‘Ask seller a question’ and ‘Contact Member’ tabs associated with all item listings pages or Member Profile pages respectively. Members in a transaction with each other also have the ability to utilise one of eBay’s free online dispute resolution services, including for disputes concerning ‘Item not received or significantly not as described’, ‘Unpaid item’ and ‘Mutual Feedback withdrawal’. Members can also utilise a third party online dispute resolution service. eBay’s preferred dispute resolution provider is SquareTrade. SquareTrade offers two services: • •

a free web-based forum which allows users to attempt to resolve their differences on their own; or if necessary the use of a professional mediator. There is a USD$20 charge for a professional mediator (eBay subsidises the remainder of the cost).

Other auction sites Other auction sites approached for this project, such as GraysOnline, Amazon Auctions and Yahoo Auctions, did not provide a response. Online dispute resolution When asked about the consumer safeguards offered, eBay Australia in its response referred to SquareTrade, an online dispute resolution company: — 100 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Members can also utilise a third party online dispute resolution service. eBay's preferred dispute resolution provider is SquareTrade. SquareTrade, offers two services: a free web-based forum which allows users to attempt to resolve their differences on their own or if necessary, the use of a professional mediator. There is a USD$20 charge for a professional mediator (eBay subsidises the rest of the cost).

We then asked SquareTrade provide information regarding disputes between eBay buyers and sellers. SquareTrade declined to disclose the requested information due to a confidentiality agreement it has with eBay: Thank you for contacting us about the study you are doing to evaluate Australian consumers' experiences with online transactions and auctions. It is certainly a worthwhile project. Unfortunately, the information that you are requesting cannot be disclosed due to our confidentiality provisions with eBay concerning data regarding their users. Additionally, even if it weren't confidential information, we don't have the staff resources to extricate the detailed data that you are requesting.

We asked eBay for permission to receive data from SquareTrade for this project. Because of the importance of this data to the project, the CLC was also prepared to modify our request to accommodate SquareTrade’s staffing issues. However, eBay Australia did not provide consent. PayPal When asked about the consumer safeguards offered, eBay Australia referred us to PayPal, an eBay online payment service provider: PayPal, the eBay online payment system, also has a Buyer Protection Program that covers qualified transactions on ebay.com.au up to $1,500 where an item has been purchased using PayPal and it was not received or was significantly not as described.

We asked eBay Australia for help obtaining data from PayPal. EBay Australia did not provide assistance with regard to this request.

4.3 Overseas (United States) Experience overseas, particularly in the United States shows that: •

a leading fraud complaint category is online auctions

•

online auctions are one of the most common consumer complaints generally (of either online or offline consumer concerns).

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4.3.1

THE CONSUMER SENTINAL

The Consumer Sentinal is a complaint database developed and maintained by the US Federal Trade Commission (FTC). Consumer Sentinel collects information about consumer fraud and identity theft from the FTC and over 150 other organisations. In January to December 2005 over 685,000 consumer fraud and identity theft complaints were received by the Consumer Sentinal database. In 2005, a total of 431,118 Consumer Sentinel complaints were fraud-related. Internet Auctions was the leading fraud complaint category with 12% of the overall complaints. Following internet auction complaints were: foreign money offers (8%); shop-at-home/catalogue sales (8%); prizes/sweepstakes and lotteries (7%); internet services and computer complaints (5%); business opportunities and work-at-home plans (2%); advance-fee loans and credit protection (2%); and telephone services (2%).151 Accordingly, in the US the leading fraud complaint category (including both offline and online fraud) is internet auctions. This does not include identity theft complaints, which are in a separate category to fraud.

4.3.2 ECONSUMER.GOV Econsumer.gov is a joint project between consumer protection agencies from 20 countries, including Australia, which gathers and shares information regarding cross-border e-commerce consumer complaints. Between 1 January and 31 December 2005, it received 10,179 econsumer complaints. Shop-at-home/catalogue sales was the most common complaint category and made up 44% of the complaints. The second most common type of complaint related to lotteries (10%) and following close behind at third most common complaint category was internet auctions at 9%.152

4.3.3

US NATIONAL FRAUD INFORMATION CENTER

In the US, in January to December 2005, the National Fraud Information Center’s Internet Fraud Watch operated by the National Consumers League (NCL) received a

151

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total of 12,315 complaints regarding internet scams. Online auctions was the leading complaint category with 42% of the complaints received being about online auctions where goods were never delivered or were misrepresented. The average loss for the online auctions complaints was US$1,155. The NCL predicts that online auctions could in fact represent as high as 71% of complaints, as they explain here:153 In the fall of 2003, online giant eBay removed the link from its Website to fraud.org. As a result, the number of auction complaints reported to NCL’s fraud center dropped to 1/6 its previous level. Based on statistics prior to eBay’s action, NCL estimates that there would have been 30,720 auction complaints in 2005, representing 71 percent of complaints overall.

The Internet Fraud Watch information above is taken from: National Consumers League, Internet Scams Fraud Trends January-December 2005 available at at 19 June 2006.

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CHAPTER 5

User knowledge and experience In Australia, little consideration has been given to consumer issues surrounding online auctions. There has also been no Australian research on consumers’ understandings of the risks involved in online auctions, or their rights and obligations when shopping at online auctions. This project examined these issues through surveys and focus group discussions with users. Initially, this was the only purpose of the project survey and focus groups. However, our public consultations with relevant organisations failed to provide sufficient data on: 1. the level and types of fraud in online auctions where Australians have been victims 2. the level and types of complaints Australians have made about online auctions 3. the level and types of disputes in online auctions that have resulted in online dispute resolution where at least one user is Australian 4. the level and types of successful and unsuccessful online dispute resolution cases where at least one user is Australian. As a result, the scope of the issues that we wanted to examine through the user survey and focus groups increased, with the extra objective of examining the past experience of Australian consumers shopping at internet auctions sites, including cases of fraud, complaints and disputes.

5.1 Survey The CLC developed a 67-question survey to collect data regarding the experiences of Australian consumers shopping at Internet auctions sites regarding fraud, complaints and disputes and Australian consumers’ understanding of the risks involved and their rights and obligations when shopping at an online auction. The survey questions were mostly multiple-choice and close-ended, rather than open-

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ended questions and were designed to take approximately 15 minutes to complete. Appendix 1 contains the survey used for this project. In the first instance, the CLC approached Australian internet auction site operators eBay Australia (www.ebay.com.au), Grays Online (www.graysonline.com.au) and AuctionTrader (www.auctiontrader.com.au) with a view to gaining their cooperation in advertising the survey to their site users. By this means, it was intended to build a self-selecting sample of users of online auction sites, with controls for multiple responses, which would have been subsequently weighted to reflect the incidence in the Australian population generally of certain demographic characteristics such as age and gender.

eBay Australia indicated that it was

interested in assisting in the promotion of the survey to its users but, before agreeing to do so, eBay Australia wanted to be assured that the survey methodology was satisfactory and that the questions were not worded to favour or lead to any particular results. An independent expert (Qualified Practising Market Researcher Australian Market and Social Research Society)154 was commissioned who reviewed the survey methodology and the questionnaire.

After some modifications, he

assessed them as satisfactory. Efforts were then made to contact eBay Australia so as to discuss the online survey and an eBay link to it but we received no responses to any of our communications. Eventually the survey proceeded without the involvement of eBay, and an alternative means was used to distributed the questionnaire. Instead of being made available via the eBay website, it was made available

via

two

non-auction

websites,

www.comslaw.org.au

and

www.oznetlaw.net. Both of these websites are associated with the Communications Law Centre. The same self-selection process, with controls for multiple responses, was used. The survey was available online to be completed from 9 January 2006 to 19 February 2006 (inclusive). During that period, the survey was advertised on the two websites. During the survey period, a hyperlink to the survey was also placed at the following web page: http://shopping.ninemsn.com.au (shopping home page of the NineMSN website).155 In addition to advertising the survey on the three mentioned sites, during the survey period approximately 64,988 emails were sent to Victoria University (VU)

Dr Denis Muller. During the month of February, the shopping page of NineMSN (where the survey link was placed) had 413,688 unique browsers. Source: MSN, Media Centre citing Nielsen SiteCensus at 21 April 2006.

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staff and students (approximately 3,326 emails were sent to VU staff and 61,662 to VU students).156 The survey was hosted on a VU server which was protected by a firewall and could only be accessed and modified by a user name and password and by one VU IT officer who was responsible for the security of the server.

The user name and

password was only available to the principal researcher of this project. The survey questionnaire could not be modified through the use of the user name and password when the survey became active. The survey became active and remained active from the beginning until the end period specified before the survey began (which was the survey period of 9 January 2006 to 19 February 2006). At all times the principal researcher had access to the survey results that were automatically generated from the surveys submitted (and these results could not be modified), but did not have access to the survey data. At the end of the survey period, the survey data was delivered to the principal researcher by the VU IT officer. There was a total of 510 survey respondents. There were respondents from all over Australia, except the Northern Territory, with the majority (82%) from Victoria. It is most likely that the majority of respondents were from Victoria because the survey was promoted to VU staff and students via email (in addition to the advertisements on the NineMSN shopping portal and the CLC’s two websites, as discussed above). This body of respondents clearly is not representative of the total population of online auction site users. Even so, the data is useful as being indicative of the attitudes and experiences of this population on the issues canvassed. It is indicative because there is no reason to suppose that even though the majority of respondents were from Victoria, their attitudes or experiences were likely to differ significantly from members of this population in other parts of Australia. Online auction sites can be accessed anywhere in Australia. The issues canvassed in this survey are not geographically specific or geographically dependent. In terms of gender, the majority of respondents were female (63%). The modal age group was 19-23 (38%), although there were a significant proportion of respondents in older age groups (20% were between 26-33; 18% were between 36-43; 13% were between 46-33; and 8% were over 36). Although the survey methodology adopted cannot produce results that have a measurable sampling variance, the results are substantially similar to a survey

A portion of the emails were undelivered and returned usually because the recipient’s address could not be found (this may have been because a student or staff member no longer was part of the University but the database had not been updated yet). 156

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conducted in 2001 in the United States where a random sample of this population of interest was used, yielding a sampling variance of plus or minus 3 per cent.157 Some of these consistencies will be mentioned when our survey findings are being discussed. There are also some survey findings that were consistent with information received from organisations during consultations for this project. Some of these consistencies will be mentioned when our survey findings are being discussed.

5.2 Focus groups Focus groups were conducted in order to assist in analysing the survey results and to obtain a narrative of individual experiences and understanding of online auctions. Participants were limited to Victoria University staff and students. A focus group advertisement was placed on a VU student email login webpage. Emails were also sent to University staff and students advertising the focus groups. To participate in a focus group, VU staff and students had to register using their VU username and password and then fill-out a registration form. The registration form required the person to stipulate whether they were a VU student or staff member, whether they had bought an item at an auction site, and whether they had sold an item at an auction site. 184 people registered for the focus groups. The primary criterion for selecting a focus group participant was whether the person had both bought and sold an item at an auction site. The secondary criterion was whether the person had either bought or sold an item at an online auction site. Focus group participants were selected from students and staff of VU who responded to an open invitation to participate. Selection was made on the basis of the stated criteria, and so that there was a mixture of female and male participants, and from various campuses of the university. Four focus groups were created. Focus group 1 was made up of VU staff who had each bought an item at an online auction site but only half (4 out of 8) had also sold an item at an online auction site. Focus Groups 2 to 4 were made up of VU students who had each both bought and sold an item at an online auction site. There was a total of 29 focus group participants: Group 1 (VU Staff) had 8 participants; Groups 2 to 4 (VU students) each had 7 participants. 3 participants that were selected did not

Harris Interactive survey commissioned by the National Consumers League (US) and released on 31 January 2001, available at at 7 July 2006.

157

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show up to attend the focus group. Focus group attendees were each given $50 for participating. The focus groups were held on 1 and 2 March 2006 in the evenings (2 each day: 5:307:00 pm and 7:30-9:00 pm) and each ran for approximately 1.5 hours. The Qualified Practising Market Researcher who was commissioned to evaluate and assess the survey and its methodology (see above, section 5.1) also conducted the focus groups. The focus groups were conducted with open-ended questions: see the discussion outline used for the focus groups at Appendix 4.

5.3 Bidders and buyers This section looks at the issues faced by users of online auction sites who bid for and/or purchase items at an auction site. It considers: •

consumers’ buying behaviour, including the frequency of buying, the amount they spend, their buying preferences and whether they prefer auction or fixed price sales (5.3.1)

•

consumers’ understanding of the risks involved with using on-line auctions (5.3.2)

•

problems encountered by consumers using online auctions and how they attempted to resolve these problems (5.3.3)

•

consumers’ understandings of their legal rights and obligations with regard to online auction sites (5.3.4)

•

consumers’ views on the appropriateness of the safety measures undertaken by, and legal information provided by, auction site operators (5.3.5).

5.3.1

BUYING BEHAVIOUR

5.3.1.1 Frequency of buying From the 510 survey respondents, 87% of them (442) had bought an item at an online auction site. All 29 of the focus group participants had bought an item at an online auction site.

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Number of times items purchased The 442 survey respondents who had bought an item at an online auction site (buyers) told us how many times they had bought items.

Table C5.1 NUMBER OF TIMES SURVEY RESPONDENTS HAD BOUGHT ITEMS AT AN ONLINE AUCTION WEBSITE:

PERCENTAGE OF BUYERS (442 IN TOTAL)

Once

7%

2-5

20%

6-10

19%

11-20

15%

21-50

16%

51-100

11%

over 100

13%

* Percentages have been rounded and may not equal 100

A small portion of buyers (7%) had only bought an item at an auction site once. We consider these people buyers with little experience. A significant portion of buyers (39%) had bought items at an auction site between two and 10 times inclusive. The majority of buyers surveyed (54%) had bought more than 10 times items at an auction site. The majority of buyers surveyed have thus had a significant amount experience with buying at auction websites. Figure C5.2

Number of Times Buyers Have Purchased an Item at an Auction Site

Once 7% Once Over 10 times 54%

2-10 times 39%

2-10 times Over 10 times

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Interestingly, a significant portion of buyers surveyed (24%, or almost one in every four buyers surveyed) had bought more than 50 times at an auction site. These buyers are experienced at purchasing and are regular users of online auction sites. Focus group discussion During the focus groups, we sought to discover why buyers at online auction sites bought items as frequently as they did. We found that, for some, participating in online auctions had become almost an addiction – they were online many times a day for several hours at a time, searching for bargains and checking the progress of auctions in which they had placed a bid. For many, it was part of their daily routine to check what was happening, but they usually confined this to one visit a day. These people tended to be browsers who would impulsively bid for something that took their fancy, even if they had not previously considered purchasing such an item. The focus group participants provided the following responses: Question: How often do you do it? Weekly. Always. – Group 1 (Staff)

I probably look on eBay every day, or every second day. I’ve got the eBay bar at the top, so it’s just there. You can type in while you’re doing whatever. Meant to be doing an assignment or something, you’ve got eBay there, so (laughs) you know, procrastination tool. – Group 2 (Students)

Question: Do you do it every day? Yes, I will do it every day. I will check my email, and it will have an eBay icon, and something’s been emailed to me and I’ll click on it and see what I have bid on. And it’ll be something I bid on and totally forgot. ‘Oh that sounds familiar.’ I want it, start bidding for it. – Group 3 (Students) Question: What about others of you? How often would you go on? Probably once a day, or every couple of days, when I’m selling things, to see what the prices are at. – Group 2 (Students) — 110 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Question: Has it turned into an obsession with you? Yes, over a period of time. It depends on how bored I am. It depends on internet access as well. If you’ve got internet access and you’ve got absolutely nothing to do – and that includes all your homework – you just quickly browse and that browsing turns into hours of bidding. – Group 3 (Students)

I have a look every day, but I might spend five minutes, I might spend an hour. If there’s something there I wanted to buy, I’d spend an hour, finding ones in the right place. If it’s something that just crossed my mind, I might just go and have a look at it, just go and check how much those things cost. But then, having said that, I’ve bought probably four things on line today. Once you put a bid on, you’re pretty much on there until the end of the bidding. – Group 2 (Students)

A few of the focus group participants were collectors for whom online auctions offered a rich source of goods. They were frequent but focused visitors. That’s the beauty of it for a collector. You can spend years crawling through stores or whatever. You’ll find it on eBay within a week probably. – Group 1 (Staff)

I think that’s one of the problems of comparing it to off-line auctions. It doesn’t just replace off-line auctions, it’s a place like collectors’ fairs and small shops and a lot of the things. And you can actually put things in the ‘watch’ list. I’ve found when I go to collectors’ fairs, I’ve always just grabbed everything. – Group 1 (Staff)

Others went online to look specifically for something they wanted. Their visiting patterns were episodic. When they were looking for something specific, their visits were frequent; but they might go for weeks or months without visiting at all. I’ve done it [purchased something] four times. Over six months. But it was six specific things, to save money [and] after I went through all the shops and I couldn’t get what I wanted. -- Group 1 (Staff)

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It’s quite sporadic for me. It’s basically whenever I need something, or whenever I have something that I want to sell. One of the things that I bought last year was a digital camera. So I spent maybe a few hours researching different models of cameras, then looked on eBay to see if people were selling them and to see what they sold for previously. My main motivation is to buy something cheaply, so if I can buy it cheaper at a shop or at a swap meet or some other source, then I won’t buy from eBay. -- Group 2 (Students)

I wouldn’t use it just for browsing. I’d use it if I needed something, or if I had an item that I wanted to sell. -- Group 4 (Students)

I do every now and again to see what’s up, see if there’s anything I might consider buying. Could be once a week, could be twice a month. Depends on what I’m after or how much time I have. -- Group 4 (Students)

Respondents who had not bid for an item For the 65 respondents (13% of all survey respondents) who had not bid for an auction sale item online, the survey allowed them to select from eight reasons why they have not bid for an item. They were permitted to select as many answers as they liked. These respondents selected the following reasons for not bidding at an online auction sale: Table C5.3 IF YOU HAVE BID FOR AN ONLINE AUCTION SALE ITEM, GO TO QUESTION 7. IF YOU HAVE NOT, WHY NOT? SELECT AS MANY ANSWERS AS YOU LIKE: I do not feel that I am adequately protected if something goes wrong (e.g. no refund or exchange for receiving damaged goods or items different to what was advertised etc) I am afraid that I may be subject to fraud I don’t shop online generally I don't trust the internet as a way of buying or selling online I find online auctions confusing I am not interested in purchasing an item at an online auction

NUMBER OF TIMES SELECTED

Other (please see question 6) I did not find what I was looking for

41

% OF NONBIDDERS (65 IN TOTAL) 63%

35 29 18 16 11

54% 45% 28% 25% 17%

7 2

11% 3%

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The most popular reason (selected 41 times; 63% of non-bidders) for not bidding for an auction item was that users did not feel that they were adequately protected if something was to go wrong (e.g. no refund or exchange for receiving damaged goods or items different to what was advertised etc). The second most popular reason (selected 35 times; 54% of non-bidders) was because users were afraid that they may be subject to fraud. Seven survey respondents selected ‘other’ reasons for not bidding. They were subsequently asked to specify reasons for not bidding (see survey Question 6 in Appendix 1) and responses included: I do not think there are adequate privacy protections in place. I feel you have to have a credit card to buy online. I don’t own a credit card. I'm not sure what I'd be up for with postage costs. I like to be able to personally inspect the object I am about to buy. Frequency of buying 1. From the 510 survey respondents, 87% of them (442) had bought an item at an online auction site. 2. The majority of buyers surveyed (54%) had bought more than 10 times items at an auction site and 24% had bought more than 50 times. 3. For some buyers participating in online auctions is almost an addiction where they are online many times a day for several hours at a time, searching for bargains and checking the progress of auctions in which they had placed a bid. 4. For many buyers it is part of their daily routine to check what is happening at an online auction site. These buyers tend to be browsers who would impulsively bid for something that took their fancy, even if they had not previously considered purchasing such an item. 5. There are also buyers who are focused and only use online auction sites to buy specific items they are after. Collectors will visit online auctions frequently whereas other focused buyers’ visiting patters are episodic and depend on whether or not they want a specific item.

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Reasons for not bidding at an online auction sale 6. Of the respondents who had not bid at an online auction sale item (65 in total), the most popular reason (63% of non-bidders) was that users did not feel that they were adequately protected if something goes wrong. 54% of non-bidders said it was because they were afraid they may be subject to fraud. 5.3.1.2 Amount spent The survey asked buyers to select the approximate value of the most expensive item they have bought at an online auction website, either by auction or at a fixed price. Table C5.4 MOST EXPENSIVE ITEM BOUGHT AT AN ONLINE AUCTION WEBSITE, EITHER BY AUCTION OR AT A FIXED PRICE

% (OUT OF 442)

$1-$50

16.74%

$51-$100

20.36%

$101-$200

21.72%

$201-$350

13.35%

$351-$500

11.31%

$501-$1000

8.82%

$1001-$2000

3.62%

$2001-$3000

3.17%

$3001-$5000

0.45%

Over $5000

0.45%

* Percentages may not add to 100 due to rounding The majority of buyers (58%) had not spent more than $200. Twenty-five per cent had spent between $201 and $500 on the most expensive item, and 83% have not spent more than $500 on an item. Only 8% of buyers had spent over $1000.

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Figure C5.5

Most expensive item bought at an online auction website, either by auction or at a fixed price Over $1000 8% $501-$1000 9% $201-$500 25%

$1-$200 $201-$500 $1-$200 58%

$501-$1000 Over $1000

2001 US survey Auction users in the 2001 US survey also recorded relatively low value online auction purchases. (The 2001 US survey is detailed in section 5.1 above). In the 2001 US survey, the majority (75%) of auction users had spent an average of US$100 or less on items bought at an online auction.158 Focus group discussion During the focus groups, we sought to better understand what types of items people were buying at online auction sites. Respondents in the focus groups spoke positively about their buying experiences. The types of items they had bought commonly were relatively small value items, such as DVDs, CDs, textbooks, cosmetics, clothing and motor parts. However, some people had bought consumer durables and some quite expensive items, including a pair of sunglasses for $400. One or two men had also bought cars (although for relatively low prices). Some purchases were obscure, such as a page from a Greek magazine advertising cigarettes bearing the name of the buyer’s daughter. One young man bought a breathalyser. Responses from focus group discussions are contained in section 5.3.1.2 of Appendix 3.

See results of question eight of Harris Interactive online auction survey commissioned by the National Consumers League (US) and released on 31 January 2001, available at at 7 July 2006.

158

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Amount spent 1. The majority of buyers (58%) had not spent more than $200 on the most expensive item they have bought at an auction site and 25% had spent between $201 and $500. Eighty-three per cent had not spent more than $500 on an item. 2. Buyers commonly buy relatively small value items, such as DVDs, CDs, textbooks, cosmetics, clothing and motor parts. 5.3.1.3 Buying preferences Payment method The survey asked what payment methods buyers have you used to purchase an item at an online auction website, either by auction or at a fixed price. As the table below (C5.5) shows, the most popular payment method (selected by 84% of buyers surveyed) was direct bank deposit into the seller’s account. The least popular payment method was an escrow service: only 1% of buyers had used this to buy an item at an auction site. Interestingly, 7% of buyers had sent cash directly to the seller. Table C5.5 PAYMENT METHODS USED TO BUY AN ITEM AT AN ONLINE AUCTION WEBSITE, EITHER BY AUCTION OR AT A FIXED PRICE:

NUMBER OF TIMES SELECTED

PERCENTAGE OF BUYERS (442 IN TOTAL)

Bank deposit (directly into the seller’s account)

370

84%

Online payment service provider (e.g. PayPal) where sellers don’t see credit card details

264

60%

Cheque or money order

138

31%

Credit card (card details given to seller)

101

23%

Cash on delivery (C.O.D) (e.g. payment occurs at an Australia Post branch where item is picked up)

66

15%

Cash sent directly to seller

29

7%

Escrow Service

4

1%

* Percentages may not add to 100 due to rounding * Percentages do not add to 100 because multiple answers were possible

2001 US survey In the US survey, sending a cheque or money order to the seller was the most common payment method used (69%). The second most common payment method — 116 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

was the use of an online payment service provider (44%). The third most popular payment method was by credit card where the seller is given the credit card number.159 Bank deposit was not an option in the US survey. However, since 2001 online banking has become quite popular, which may explain why payment through a bank deposit was the most popular payment method amongst Australian survey respondents. Six per cent of US survey respondents had used an escrow service. This is slightly higher than then the number of Australian survey respondents (1%).

Business or individual We asked survey respondents whether, when buying at an online auction site, they prefer to buy from a business or an individual or whether they do not care who they buy from. Figure C5.7 contains the results: Figure C5.7

Preference for Individual v Business Auction Sellers

I don't know Business 4% 16% Individual 5%

I don't care 75%

Due to an error in the survey, respondents who had not bought an item at an auction site were also asked to complete this question (Question 43), rather than being referred to Question 46 (where the Seller questions began). Accordingly, some respondents who had not bought an item at an auction site answered this question. There were 442 survey respondents that had bought an item at an auction site and 475 survey respondents answered this question.

See results of question nine of Harris Interactive online auction survey commissioned by the National Consumers League (US) and released on 31 January 2001, available at at 7 July 2006. 159

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From 475 who answered Question 43, the majority by far (75%, or three out of every four respondents) do not care whether the seller is a business or a private individual when buying at an auction site. Sixteen per cent said they prefer to buy from a business and only 5% said that they preferred to buy from an individual. Focus group discussion We asked focus group participants the same question. Overall, there was no clear preference for buying items from either individuals or businesses – for every person who reported a good experience or offered a positive reason for dealing with one or the other, someone else reported a bad experience or offered a negative reason. The respondents who prefer to deal with a business argued that this usually meant they were getting the benefits of a ‘brand’, including a warranty. Others countered this by saying that businesses could be difficult to deal with and unresponsive to complaints. The respondents who preferred to deal with individuals argued that most people were prepared to ‘do the right thing’ and make good any deficiencies without demur. Others countered this by saying you really didn’t know who you were dealing with and that avenues of redress would be limited. Responses from focus group discussions are contained in section 5.3.1.3 of Appendix 3.

Buying preferences 1. Eighty-four per cent of buyers surveyed (442 buyers in total) had used direct bank deposit into the seller’s account to pay for an item bought on an online auction site. Thirty-one per cent of buyers surveyed had paid by cheque or money order. Seven per cent of buyers surveyed had sent cash directly to the seller. Only 1% had used an escrow service. 2. Three out of every four respondents (475 responses in total including some people who had not bought an item at an online auction site) do not care whether the seller is a business or an individual. Sixteen per cent prefer to buy from businesses and 5% prefer to buy from individuals. 3. Some buyers prefer to buy from a business because they get the benefit of a ‘brand’, including a warranty. Some prefer to buy from an individual because they think most people are prepared to ‘do the right thing’. 4. Some buyers prefer not to buy from a business because they think a business could be difficult to deal with and unresponsive to complaints. Some buyers prefer not to buy from an individual — 118 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

because they do not know who they are dealing with and the avenues for redress would be limited. 5.3.1.4 Auction v fixed price purchases Online auction websites sometimes provide users with the feature of purchasing items both at auction sales (where bidding is involved) and also fixed price sales (where there is no bidding, e.g. the ‘Buy It Now’ feature on eBay). Fixed price purchases at online auction sites are similar to regular e-commerce transactions, where the user can buy an item after agreeing to pay for it at the price specified by the seller. Respondents who have purchased fixed price items From the 510 survey respondents, 87% of them had bid online for an item at an auction sale (87% of survey respondents had also bought an item at an auction site either by auction or at a fixed price). From the 510 survey respondents, 69% of them had bought an item at an online auction site at a fixed price (where there is no auction or bidding). From the total buyers surveyed (442), 1% had purchased a fixed price item only and 21% had only bought items online at an auction sale. The majority by far (78%) had bought items both at an auction and at a fixed price sale. Accordingly, almost four out of every five buyers have bought an item at a fixed price at an online site in addition to having bought an item at an auction. Figure C5.8

Auction Items vs Fixed Priced Purchases at Auction Sites Fixed Price Only 1% Auction Sale Only 21%

BOTH Fixed Price and Auction Sale 78%

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Focus group discussion The focus group participants also responded to questions about whether they preferred to buy an item through the auction process or at a fixed price. For some, the benefit of the fixed price sale was that they could have the item instantly, and they were prepared to pay more for this benefit. When opting for a fixed price purchase, these respondents were aware that they were forgoing the chance to get a real bargain, but were more concerned with saving time. (Section 5.3.1.4 of Appendix 3 further details the responses.) For others the preference was for auction sale items rather than fixed priced items because of the fun and excitement of bidding: Not so much competitive but just a little bit of fun. Like you put an offer forward, and if you’re lucky, you win. You sort of get an adrenaline rush, especially when you’ve got someone else there directly bidding against you and you’ve got 41 seconds and, 21 seconds, and you’re upping the bid and all that sort of stuff. You cheer like you’ve won it and you know you’ve got to pay. That’s what also makes it exciting, the idea that you’re getting people from all around the world fighting for that one thing you want. It’s that feeling of being connected. – Group 2 (Students)

Respondents who had not bid for an item at a fixed price The 31% of respondents who had not bought an item at a fixed price at an online auction website for a fixed price were asked to select from a number of reasons why they have not bought items for a fixed price (see table C5.9 below).160

Results to this question included respondents who had never bought an item at an auction site in addition to respondents who had bought items online at an auction sale only.

160

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Table C5.9 IF YOU HAVE BOUGHT GOODS OR SERVICES ON AN ONLINE AUCTION WEBSITE FOR A FIXED PRICE, GO TO QUESTION 10. IF YOU HAVE NOT, WHY NOT? PLEASE TICK AS MANY ANSWERS AS YOU LIKE:

NUMBER OF TIMES SELECTED

% OF RESPONDENTS THAT HAVE NOT BOUGHT AN ITEM AT A FIXED PRICE (159 IN TOTAL)

I did not find what I was looking for

41

26%

I am afraid that I may be subject to fraud

39

25%

I don’t shop online generally

38

24%

I do not feel that I am adequately protected if something goes wrong (e.g. no refund or exchange for receiving damaged goods or items different to what was advertised etc)

37

23%

I find online auctions confusing

14

9%

I don't trust the internet as a way of buying or selling online

13

8%

I am not interested in purchasing an item at an online auction

8

5%

Other

49

31%

Don’t Know/Not Established

16

10%

* Percentages may not add to 100 due to rounding * Percentages do not add to 100 because multiple answers were possible The most popular answers were: that the buyer could not find what they were looking for (26%); they were afraid that they may be subject to fraud (25%); that they don’t shop online generally (24%); and that they do not feel adequately protected if something goes wrong (23%). Interestingly, 31% of these respondents (49 respondents) specified ‘other’ as the reason for not buying an item at an online auction website for a fixed price. These respondents were asked to explain. The majority of the reasons specified (30 respondents out of 49, or 60% of the reasons provided) were that the users felt that they can get a better bargain by buying the item online at an auction. Other reasons were: Excitement of auction / preference for auction I like the thrill of the auction process. It's more ‘fun’ to wait for the auction bidding to cease. No fun in bidding on fixed price goods. I prefer to bid for items. — 121 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

I prefer to try my chances in the bidding process rather than opting for the 'buy now' option. I would prefer to bid rather than pay a fixed price. I prefer the auction format. Did not know of fixed price I didn't know that online auction sites had 'fixed price' sales. Payment mechanism I feel you have to have a credit card to buy online. You need a credit card to do buy it now, which I don’t have.

Auction v fixed price purchases 1. Eighty-seven per cent of survey respondents had bid online for an item at an auction sale and 69% had bought an item at a fixed price. 2. Almost four out of every five buyers surveyed (78%) have bought an item both at an auction sale and at a fixed price. Only 1% of buyers had purchased a fixed price item only and 21% had bought an item online only at an auction sale. 3. Of the 31% survey respondents who had not purchased an item at a fixed price, the most popular reasons for this was that they could not find what they were looking for (26%); they were afraid that they may be subject to fraud (25%); that they don’t shop online generally (24%); and that they do not feel adequately protected if something goes wrong (23%). 4. Buyers are attracted to online auctions sales and prefer them to fixed price auction site purchases because they feel that they could get a bargain at auctions and because they find the bidding/auction process fun or exciting. Some buyers prefer a fixed price sale because they can get the item instantly and save time, and prefer this to the chance of getting a bargain.

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5.3.2

RISKS INVOLVED

5.3.2.1

Likelihood of problems

Likelihood of experiencing a problem The survey asked buyers how likely they thought it was that they would not receive an item they had bought on an online auction website, and how likely they thought it was that the item they would receive would be different to the item that had been described. The responses were: Table C5.10 HOW LIKELY DO YOU THINK IT IS THAT YOU WILL NOT RECEIVE AN ITEM YOU BOUGHT AT AN ONLINE AUCTION WEBSITE?

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

Not very likely

267

60%

Not at all likely

87

20%

Quite likely

46

10%

Don't know

25

6%

Very likely

15

3%

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

Not very likely

277

63%

Quite likely

80

18%

Not at all likely

40

9%

Very likely

27

6%

Don't know

15

3%

* Percentages may not add to 100 due to rounding Table C5.11 HOW LIKELY DO YOU THINK IT IS THAT YOU WILL RECEIVE AN ITEM YOU BOUGHT AT AN ONLINE AUCTION WEBSITE THAT IS DIFFERENT TO WHAT WAS ADVERTISED/DESCRIBED?

* Percentages may not add to 100 due to rounding The majority of buyers surveyed (80%) thought that it was either not very likely or not at all likely that they would not receive the item they bought at an online auction website. Only 3% thought that it was very likely that they would not receive an item bought at an online website. Similarly, the majority of buyers surveyed (71%) thought that it was either not very likely or not at all likely that they would receive — 123 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

an item they bought that was different to the item advertised/described. Only 6% of buyers surveyed thought that it was very likely that they would receive an item that was different to the item advertised/described. The type of problem likely to be experienced The survey asked buyers how likely they think it is that a fake bid would be placed on an item they were bidding on, and how likely they think it is that they will be subject to fraud or unlawful activity at an online auction. The responses were: Table C5.12 HOW LIKELY DO YOU THINK IT IS THAT A FAKE BID WILL BE PLACED ON AN ITEM YOU ARE BIDDING FOR AT AN ONLINE AUCTION WEBSITE?

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

Quite likely

145

33%

Not very likely

132

30%

Very likely

99

22%

Don't know

44

10%

Not at all likely

16

4%

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

Not very likely

222

50%

Quite likely

94

21%

Don't know

54

12%

Not at all likely

38

9%

Very likely

30

7%

* Percentages may not add to 100 due to rounding Table C5.13 HOW LIKELY DO YOU THINK IT IS THAT YOU WILL BE SUBJECT TO FRAUD OR UNLAWFUL ACTIVITY AT AN ONLINE AUCTION WEBSITE?

* Percentages may not add to 100 due to rounding The majority of the buyers surveyed (55%) thought that it was very likely or quite likely that a fake bid would be placed for an item they were bidding on at an online auction site, although 34% thought that it was not very likely or not at all likely. However, over a quarter (28%) of buyers surveyed thought that it was very likely or quite likely that they would be subject to fraud or unlawful activity at an online auction site and the majority (59%) thought it was not very likely or not at all likely. — 124 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

2001 US survey The confidence displayed by Australians in receiving what they bought at an auction site is similar to the confidence displayed by US auction users in the 2001 US survey. In that survey, the majority (94%) were very or somewhat confident that if they are the winning bidder they will receive from the seller what they pay for.161 Focus group discussion Respondents in the focus groups were also asked questions about how much they trusted the online auction process and their experiences with some of the problems they had encountered. The general attitude appeared to be that users felt that they would ‘prevail’ over wrongdoers who misuse the site. A number of the respondents also revealed that they had been wrongdoers themselves and that they had sometimes ‘prevailed’ and sometimes had not. These respondents showed little shame or guilt about misusing the online auction site, and it appeared that the guiding principle was caveat emptor (let the buyer beware). For example, many of the respondents reported that they had been ‘ripped off’ when they first started using an online auction site, but then they learnt to ‘survive and prosper’ and seemed to have no hesitation in ‘ripping off’ others. This attitude was not universal, but it was quite widespread. We sold a lot of movies. We’d watch for a new movie or a new game that would come out, and then we’d burn it and sell them. Question: You’d sell the copies? Yeah, ha! Question: Would you advertise them as copies? Nah! -- Group 3 (Students)

The focus group respondents’ sense of trust when using an online auction site seemed to be influenced by three factors: their own experiences; a tacit expectation that, in the long run, they would have more successes than failures; and what they saw the online auction site doing to protect users. In relation to eBay, for example,

See results of question four of Harris Interactive online auction survey commissioned by the National Consumers League (US) and released on 31 January 2001, available at at 7 July 2006. 161

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the site operator was seen to have tightened up its procedures, to have introduced insurance to protect buyers, and to have aligned itself with the PayPal system of payments. These, in addition to the ‘feedback’ system, appear to be what buyers’ trust rested upon.

Likelihood of problems 1. Eighty per cent of buyers surveyed thought that it was either not very likely or not at all likely that they would not receive the item they bought at an online auction website. Only 3% thought that it was very likely. 2. Seventy-one per cent of buyers surveyed thought that it was either not very likely or not at all likely that they would receive an item they bought that was different to the item advertised/described. Only 6% of respondents thought that it was very likely. 3. Fifty-five per cent of buyers surveyed thought that it was very likely or quite likely that a fake bid would be placed for an item they were bidding on at an online auction site, and 34% thought that it was not very likely or not at all likely. 4. Over a quarter (28%) of buyers surveyed thought that it was very likely or quite likely that they would be subject to fraud or unlawful activity at an online auction site, while 59% thought it was not very likely or not at all likely. 5. Some users are confident that they will ‘prevail’ over wrongdoers who misuse an online auction site. Some users had been wrongdoers themselves and did not feel guilty about this because they had suffered from someone else’s wrongdoing in the past. 6. Some buyers trust online auction sites because of their own experiences, their expectation that they will have more successes than failures overall, and what they see online auction sites doing to protect users (for example, more secure payment systems and a ‘feedback’ system).

5.3.2.2 Buyers’ assessment of risks Feedback facility We asked buyers how important it is to them that the online auction site they use has a feedback facility where they can view sellers’ feedback and rating and, if there is

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such a facility, how important a seller’s feedback is in deciding whether to bid on or buy an item listed by that seller. The responses were:

Table C5.14 HOW IMPORTANT IS IT TO YOU THAT THE ONLINE AUCTION WEBSITE YOU ARE USING HAS A FEEDBACK FACILITY, WHERE YOU CAN VIEW USERS' FEEDBACK/RATING OF SELLERS?

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

Very important

370

83.7%

Quite important

55

12.4%

Not very important

10

2.3%

Don't know

2

0.5%

Not at all important

0

0.0%

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

Very important

282

63.8%

Quite important

133

30.1%

Not very important

18

4.1%

Don't know

2

0.5%

Not at all important

1

0.2%

* Percentages may not add to 100 due to rounding Table C5.15 WHEN THERE IS A FEEDBACK FACILITY, HOW IMPORTANT IS THE SELLER'S FEEDBACK TO YOU IN DECIDING WHETHER YOU WILL BID ON/BUY AN ITEM LISTED BY THE SELLER?

* Percentages may not add to 100 due to rounding Feedback facilities at auction sites allow buyers to view a seller’s track record and assess through comments and feedback posted by other buyers whether they are a good seller or not. This is a particularly valuable feature of online auctions because buyers and sellers do not conduct transactions in person and in real time. Accordingly, trust is needed for a buyer for example to send money to a seller for an item purchased before the seller can send the item to the buyer. Buyers recognise the importance of feedback facilities: the vast majority of buyers surveyed (96.1%) thought that it was very important or quite important that the online auction site has a feedback facility where sellers’ feedback/rating can be viewed; similarly, the vast majority of buyers (93.9%) said that a seller’s feedback is very important or quite

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important in deciding whether they will bid on/buy an item listed for sale by that seller

Focus group discussion Focus group respondents were asked about the risks they perceived to exist using an online auction site. The most commonly identified risks were misrepresentation, goods not being delivered or arriving damaged, absence of a warranty, and potential misuse of personal information (the buyers’ name, address and credit card details). However, few respondents were bothered by these perceived risks. The respondents appeared to take the view that all buying and selling had risks and that online transactions were no different. In particular, risks associated with intellectual property rights, such as pirated versions of CDs or ‘rip-offs’ of designer-label clothing, were considered of no account (and some respondents had traded in pirate goods themselves). The only risk that did matter to some respondents was that they might be caught and suspended from the online auction site, and it appears that for some the risk was considered low enough to be worth taking. There was also a widespread belief among focus group respondents that the feedback system was subject to manipulation and blackmail, and this was something they factored into their decisions about who to deal with. Despite this, the feedback system was an important part of their decision-making process. Other than feedback, the respondents used a variety of strategies to minimise risk: chief among these was the use of PayPal (so that money was not transferred to the seller until the buyer had received the goods in a satisfactory condition). Another strategy was having a maximum amount of money that they were prepared to spend online. Some respondents also preferred to deal with local sellers so they could view the item or collect it personally. Nearly all of the focus group respondents read the seller’s terms and conditions carefully, especially the terms regarding cost of postage and handling. One of the respondents appeared to have developed a kind of tactical aggressiveness that was designed to put the other party on the ‘back foot’ and thus ensure that the transaction was completed to her satisfaction.

Feedback and rating systems 1. The vast majority of buyers surveyed (96.1%) thought that it was very important or quite important that the online auction site has a — 128 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

feedback facility where they can view sellers’ feedback and rating. Similarly, the vast majority of buyers surveyed (93.9%) said that a seller’s feedback is very important or quite important in deciding whether they will bid on/buy an item listed for sale by that seller. 2. There was also a widespread belief among focus group respondents that the feedback system was subject to manipulation and blackmail, and this was something they factored into their decisions about who to deal with. Despite this, the feedback system was an important part of their decision-making process. Awareness of risks 3. Commonly identified risks of online auction sites by focus group respondents were misrepresentation, goods not being delivered or arriving damaged, absence of a warranty, and potential misuse of personal information (the buyers’ name, address and credit card details). However, few of the respondents were bothered by these perceived risks. Further, the respondents appeared to take the view that all buying and selling had risks and that online transactions were no different. Minimising risks 4. Strategies used to minimise the risks associated with using online auction sites included using the ‘feedback’ system, using a particular method of payment (such as PayPal), limiting the amount that a buyer is prepared to spend online, and only buying from local sellers. 5.3.2.3 Level of risk taken Feedback facility Buyers surveyed were asked whether they would ever bid for an item when the seller who has listed that item has no feedback or rating. The results are contained in table C5.16 below.

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Table C5.16 NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

No

160

36%

Yes

155

35%

I don’t know

125

28%

WOULD YOU EVER BID FOR AN ITEM WHEN THE SELLER HAS NO FEEDBACK/RATING:

* Percentages may not add to 100 due to rounding The answers to this question were very even: 36% of buyers said that they would not bid for an item when the seller has no feedback/rating.

Just over a quarter of

respondents (28%) said that they did not know. 35% of buyers surveyed said that they would bid for an item when the seller has no feedback/rating. This a very large proportion of buyers that are prepared to do this. However, this may be because buyers are willing to deal with new sellers who have yet to establish a track record. It does not appear to be because of a lack of consumer understanding or awareness of feedback facilities because of the high number of buyers that consider feedback facilities as important. 2001 US survey In the 2001 US survey, 29% of survey participants selected that they would bid on items even if there was no information about the seller’s track record on the auction site.162 This is similar to the 35% of Australian buyers surveyed for this project who would bid for an item when the seller has no feedback/rating. Location of seller When asked whether they preferred that a seller was located in Australia, whether they would only buy from a seller in Australia, or whether they did not care where the seller was located, buyers surveyed answered as per table C5.17 below.

See results for question six of Harris Interactive online auction survey commissioned by the National Consumers League (US) and released on 31 January 2001, available at at 7 July 2006. 162

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Table C5.17

THINKING NOW ABOUT THE SELLER'S LOCATION, WHICH ONE OF THE STATEMENTS BELOW COMES CLOSEST TO YOUR VIEW?

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

I would PREFER to buy from someone located in AUSTRALIA

258

58.4%

I DON'T CARE where the seller is located

98

22.2%

I would ONLY buy from someone located in AUSTRALIA

84

19.0%

I don't know

2

0.5%

* Percentages may not add to 100 due to rounding The majority (58%) of buyers would prefer to buy from a seller located in Australia, and 19% would only buy from sellers located in Australia. Twenty-two per cent of buyers said they did not care where the seller is located. Where a seller is located in Australia, when asked whether they preferred that the seller was located in the same state or territory as them, whether they would only buy from a seller in the same state or territory as them, or whether they did not care where the seller was located, buyers surveyed answered: Table C5.18 NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

I DON'T CARE where in Australia the seller is located

339

76.7%

I would PREFER to buy from someone located in the same STATE/TERRITORY as me

86

19.5%

I would ONLY buy from someone located in the same STATE/TERRITORY as me

9

2.0%

I don't know

2

0.5%

IF THE SELLER IS LOCATED IN AUSTRALIA, WHICH ONE OF THE STATEMENTS BELOW COMES CLOSEST TO YOUR VIEW?

* Percentages may not add to 100 due to rounding Only 19.5% of buyers would prefer to buy from a seller located in the same state/territory as them, and only 2% would only buy from sellers located in the same state and territory as them. The majority of buyers (76.7%, or about three out of every 4) said they did not care where in Australia the seller is located.

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Tolerance of problems We asked buyers who reported that they had experienced a problem (see discussion in section 5.3.3.1 below) whether, after they had experienced problems, they stopped buying items at an online auction website or whether they were willing to accept the risk and would still buy an item. The responses were: Table C5.19

NUMBER TIMES SELECTED

% OF RESPONDENTS WHO EXPERIENCED A PROBLEM (213 IN TOTAL)

% OF TOTAL BUYERS (442 IN TOTAL)

Because of the problems I've experienced at an online auction website I have stopped buying items there

19

9%

4%

Even though I've experienced problems at an online auction website I am willing to accept the risk and still would buy an item there

194

91%

44%

WHICH OF THE STATEMENTS BELOW COMES CLOSEST TO YOUR VIEW?

* Percentages may not add to 100 due to rounding The vast majority of buyers (91%) said that, after experiencing problems at an online auction site, they were willing to accept the risk and would still buy an item there in the future. Completing transactions outside of the auction website We asked buyers whether, if a seller invited them to, they would be prepared to complete a transaction outside of the online auction site. The responses were: Table C5.20 SOMETIMES A SELLER MAY INVITE YOU TO GO OFF AN ONLINE AUCTION WEBSITE AND COMPLETE THE TRANSACTION ELSEWHERE. WOULD YOU:

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

Never be prepared to do this

249

56%

Be prepared to do this only in certain circumstances (invited to explain when)

110

25%

I don't know.

55

12%

Always be prepared to do this

26

6%

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Only a small percentage of buyers surveyed (6%) said that they are always prepared to complete a purchase off the auction site based on the seller’s invitation. One quarter of buyers (25%) are prepared to do the same in certain circumstances. This means that almost one in every three buyers (31%) is prepared to go off an auction site to complete a purchase. The majority of buyers (56%) said that they are never prepared to do this. Those who selected that they are prepared to complete a purchase off the auction site only in certain circumstances based on the seller’s invitation were invited to explain when they were prepared to do so. It appears from the survey responses that buyers are prepared to complete a transaction outside an online auction website in circumstances where: they feel they can trust the seller (e.g. from previous dealings or from communications with the seller, the seller is a business, or based on the seller’s feedback); they feel that the transaction is relatively safe (e.g. there is a safe payment mechanism or payment is made upon item delivery or pick-up); to save money (e.g. avoiding listing fees or item is offered cheaper); the item is difficult to purchase elsewhere; the item is of low value (e.g. less than $20); or in order purchase items that are not permitted to be sold on the auction site or in Australia. More commonly the responses were ones where the buyer appeared to have assessed the risks and judged them to be relatively low (i.e. the buyer felt that they can trust the seller or they felt that the transaction is relatively safe). The remaining responses were mostly ones where the buyer appeared to have assessed the risks and judged them to be significant or high, but were willing to accept the risks for various reasons, including avoiding transaction fees, buying the item cheaply, the item is difficult to purchase elsewhere or because the item is of low value (and so loss would also be low).

Level of risk taken 1. Thirty-six per cent of buyers surveyed said that they would not bid for an item when the seller has no feedback/rating, and 35% of buyers said that they would. 2. The majority (58%) of buyers surveyed would prefer to buy from a seller located in Australia, and 19% would only buy from sellers located in Australia. Twenty-two per cent of buyers said they did not care where the seller is located. 3. Only 19.5% of buyers surveyed would prefer to buy from a seller located in the same state/territory as them, and only 2% would only buy from sellers located in the same state/territory as them. The — 133 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

majority (76.7%) of buyers said they did not care where in Australia the seller is located. 4. The vast majority of buyers surveyed (91%) said that, after experiencing problems at an online auction site, they were willing to accept the risk and would still buy an item there in the future. 5. Almost one in every three buyers surveyed (31%) are prepared to go off an auction site to complete a purchase. Users were prepared to do this in circumstances where they feel they can trust the seller, they feel that the transaction is relatively safe, where the item is of low value, and where the item is difficult to purchase elsewhere or is not permitted to be sold on the auction site or in Australia. Most commonly, users are prepared to do this where they consider the risks to be relatively low.

5.3.3

PROBLEMS ENCOUNTERED AND DISPUTE RESOLUTION

5.3.3.1 Frequency and nature of problems Frequency of problems From the buyers surveyed who had bought something at an auction site either by auction or at a fixed price (442 buyers in total), 48% of them said they had experienced problems when buying something at an online auction website. Fiftyone per cent of respondents had not experienced a problem. We asked the survey respondents who had experienced a problem when buying something how many times they had experienced problems. Their responses were: Table C5.21

NUMBER TIMES SELECTED

% OF RESPONDENTS WHO EXPERIENCED A PROBLEM (213 IN TOTAL)

% OF TOTAL BUYERS (442 IN TOTAL)

Once

85

40%

19%

2-5

112

53%

25%

6-10

10

5%

2%

11-20

3

1%

1%

Over 20 times

3

1%

1%

HOW MANY TIMES HAVE YOU EXPERIENCED ANY OF THESE PROBLEMS?

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Nineteen per cent of buyers surveyed (approximately one in five) have experienced a problem once when buying an item at an auction site and 25% of buyers (or approximately one in four) have experienced a problem two to five times when buying at an auction site. Additionally, 44% of buyers have experienced a problem one to five times when buying. This is relatively high when you take into account that 60% of buyers surveyed have purchased an item at an auction site up to 20 times. (See table C5.1 in section 5.3.1.1) 2001 US survey In the 2001 US survey, 41% of buyers have experienced problems at an online auction.163 This is similar the number of Australian online auction buyers who had experienced a problem when buying something at an auction site (48%). Nature of problems The survey respondents who have experienced a problem when buying something using an online auction site were asked which problems they had experienced: Table C5.22

NUMBER OF TIMES SELECTED

PERCENTAGE OF BUYERS WHO EXPERIENCED A PROBLEM (213 IN TOTAL)

Paid for an item and did not receive it

98

46%

Received an item that was different (including being of lesser value) to what was advertised/described

88

41%

Purchased an item and received it late

80

38%

Received a damaged item

64

30%

There were fees I was not made aware of (hidden) (e.g. taxes or shipping and delivery charges)

40

19%

Other (see Question 19)

35

16%

Discovered that there were fake bids placed on the item I bought

18

8%

I was not able to return an item

12

6%

WHICH, IF ANY, OF THE FOLLOWING PROBLEMS HAVE YOU EXPERIENCED? PLEASE TICK AS MANY ANSWERS AS YOU LIKE:

See section with heading ‘Online Auction Buyers’ Experiences’ of Summary of Findings: Harris Interactive online auction survey commissioned by the National Consumers League (US) and released on 31 January 2001, available at at 7 July 2006. 163

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I was not made aware of all the relevant information or terms of sale

11

5%

I was required by the seller to pay for the costs of returning the item and/or a ‘restocking fee’

11

5%

* Percentages may not add to 100 due to rounding * Percentages do not add to 100 because multiple answers were possible Of the survey respondents who have experienced a problem when buying something, 46% said that they paid for an item but did not receive it and 41% said they had received an item that was different (including being of lesser value) to what was advertised/described. From all buyers surveyed (442), approximately 22% of them (98/442) did not receive an item that they paid for: this represents approximately one in every five buyers who did not receive an item. Further, almost 20% or approximately one in five of the buyers surveyed received an item that was different (including being of lesser value) to the item that was advertised/described. Survey respondents also specified ‘other’ problems they experienced as a buyer (Question 19). There were 36 responses which generally fell into one or more of the categories listed in Question 18. (See table C5.22 above) Below are some of the responses provided that helped add further detail to the problems buyers may experience (divided into themes):

Auctioneer unhelpful Computer was missing graphics card. Seller left eBay. EBay didn't help. Delays Delay in receiving the item – received the item over a month after it was paid for, had difficulty with contacting the seller – local seller (based in VIC). Hidden terms Found out it was coming from overseas after the auction. Had to pay in foreign currency for AUD bids. I bid on and won something that was supposed to be shipped worldwide from an overseas seller but found out they no longer ship overseas when I requested my total including shipping. I had emailed about the shipping b4 but no reply in time b4 bidding.

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Fraud Fraudulent sellers who stole other people's accounts to sell and then did not send items. Scam auction. Seller was using eBay to advertise products but item could only be made via direct contact and payment to them via Western Union. Received bogus e-mail from eBay saying transaction was secure. Seller's account was hacked into and a false item was displayed. Fake/counterfeit items Item was fake. Received counterfeit goods. DVD's were fake copies. Pirate copies of software that stated to be the original thing. The program was pirated. Intermediaries: Financial service providers Had problems with Western Union where I sent the money and it was not received. Still continuing action on this matter. PayPal has been a hassle to use. Misleading and deceptive conduct/misrepresentation Selective photography that hides defects. Seller refused to supply unless I paid double end price. Seller would not answer queries about the item/shipping other than first response that said to refer to their page, which did not contain the required shipping information. Item was of silk fabric and much thinner and smaller than expected. Ended up paying more than the goods worth. Received an item that wasn’t quite what I expected.

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Warranties and returns Did not receive item paid for. Seller claims item was lost in post. Seller offered 50% refund on sale price. Returned a used item that was listed as new (at my expense, but seller agreed to refund). No item was sent back to me. The item damaged several days later but there is no warranty. Incomplete item and they refused to resend missing item. Seller error/negligence Items missing from packages (seller neglected to double check before posting). Paid for registered post and seller sent it ordinary post. Seller didn't fill out my address details properly. Was given wrong bank details which resulted in sending money to a stranger’s bank account. Other Seller infringed on my intellectual property rights and copied my items for sale. 2001 US survey In the 2001 US survey, the most common experienced by buyers at auction sites was that they purchased an item and received it ‘much later than expected’ (20%). Approximately the same number of Australian online auction buyers surveyed (18%) had also received an item late. A similar number of buyers also receiving damaged items purchased at an online auction (10% of US buyers, 14% of Australian buyers). However, there were differences in the number of buyers who experienced the following problems: receiving items that were different than promised (11% of US buyers, 20% of Australian buyers); and never receiving the items (10% of US buyers, 22% of Australian buyers). There may be increased levels of online auction fraud occurring today than in 2001 when the US survey occurred. This would explain why more Australian online auction buyers surveyed than US buyers had paid for an item but did not receive it or received an item that was different (including being of lesser value) to what was advertised/described. — 138 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

In addition, from the data provided from the ACCC for this project regarding consumer complaints involving online auctions, it was found that the most common complaint was ‘Part V Section 58 Accepting payment not intending to supply’. (See section 4.2.2.1) This is consistent with the results from the survey conducted for this research project, where the most common problem experienced by Australian online auction buyers was not receiving an item paid for.

Frequency and nature of problems 1. Forty-eight per cent of buyers surveyed had experienced problems when buying something at an online auction website, and 51% said they had not. 2. Forty-six per cent of buyers who had experienced a problem said that they paid for an item but did not receive it; 41% said they had received an item that was different (including being of lesser value) to what was advertised/described. 3. From all buyers surveyed (442), approximately 22% of them (98/442) did not receive an item that they paid for: this represents approximately one in every five buyers who did not receive an item. Further, almost 20% or approximately one in five (88/442) buyers surveyed received an item that was different (including being of lesser value) to the item that was advertised/described. 4. Nineteen per cent (approximately one in 5) of buyers surveyed have experienced a problem once when buying an item at an auction site, and 25% of buyers (or approximately one in 4) have experienced a problem two to five times when buying at an auction site. Fortyfour per cent of buyers have experienced a problem one to five times. 5.3.3.2 Attempts at dispute resolution What methods were used to resolve problems We asked the buyers surveyed who have experienced problems at an auction site what, if anything, they did to try to resolve these problems. Table C5.23 below provides the responses given.

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Table C5.23

NUMBER OF TIMES SELECTED

PERCENTAGE OF BUYERS WHO EXPERIENCED A PROBLEM (213 IN TOTAL)

Contacted the seller directly

170

79.8%

Contacted the auctioneer

108

50.7%

Used an online dispute resolution service (e.g. SquareTrade)

68

Did nothing

36

16.9%

Other

18

8.5%

Contacted the Police

12

5.6%

Reversed my credit card charge (chargeback)

12

5.6%

Used insurance provided by a third party (e.g. Australia Post C.O.D insurance)

12

Used insurance provided by the auctioneer

12

5.6%

Contacted a government regulator (e.g. ACCC)

4

1.9%

Used a lawyer/solicitor

2

0.9%

Used an escrow service

1

0.5%

WHAT, IF ANYTHING, DID YOU DO IN ORDER TO TRY AND RESOLVE THESE PROBLEMS? PLEASE TICK ALL THAT APPLY:

31.9%

5.6%

* Percentages may not add to 100 due to rounding The most common way that the respondents tried to resolve the problems were: to contact the seller directly (79.8%), contact the auctioneer (50%), or use an online dispute resolution service (31.9%). Just 16.9% of the survey respondents said that they did not do anything. Only small numbers of respondents either contacted the police (5.6%), contacted a government regulator (1.9%) or used a lawyer (0.9%). Of the respondents who specified that they used ‘other’ methods to attempt to resolve the problem, posting negative feedback was an alternative method used: Gave a very poor assessment rating of the experience for publication on eBay. Gave the seller a bad rating on eBay. Negative feedback. Noted the problem in the feedback for that transaction. Posted negative feedback about seller.

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How many times were problems successfully resolved The survey respondents who have experienced a problem when buying something were asked how many times they had successfully resolved a problem experienced using an online auction site (when buying either by auction or at a fixed price). The responses were: Table C5.24 HOW MANY TIMES WOULD YOU SAY YOU HAVE SUCCESSFULLY RESOLVED ANY PROBLEMS YOU'VE HAD WHEN BUYING THINGS AT AN ONLINE AUCTION WEBSITE, EITHER BY AUCTION OR AT A FIXED PRICE?

NUMBER TIMES SELECTED

% OF RESPONDENTS WHO EXPERIENCED A PROBLEM (213 IN TOTAL)

% OF TOTAL BUYERS (442 IN TOTAL)

A few times

24

11%

5%

Every time

69

32%

16%

Most times

58

27%

13%

Never

59

28%

13%

* Percentages may not add to 100 due to rounding Eleven per cent of respondents who experienced a problem when buying at an auction site have a few times successfully resolved their problems. Over a quarter (28%) of the respondents who experienced a problem when buying have never successfully resolved their problems. The number of respondents who have either never or only a few times resolved the problems they experienced using an online auction site (39%) represent 18% of total buyers surveyed (or almost one in every five). Further, the 28% of respondents who have never resolved the problems represents 13% of total buyers surveyed (more than one in 10). This means that there could potentially be a lot of buyers using online auction sites who never resolve problems: e.g. if there are three million online auction users, 390,000 of them may have experienced problems and never have successfully resolved any of them. Focus group discussion We asked focus group participants about the way they dealt with problems they encountered using an online auction site. These respondents generally were not inclined to deal with problems by reporting them to the police or using a legal process. They recognised that the online avenues of redress were limited but, — 141 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

because they were familiar and instantly accessible, they preferred this way of attempting to resolve disputes.

Attempts at dispute resolution 1. The most common ways that survey respondents who had experienced a problem when buying at an auction site had tried to resolve these problems were: to contact the seller directly (79.8%), contact the auctioneer (50%), or use an online dispute resolution service (31.9%). 16.9% of the survey respondents said that they did not do anything. 2. Eighteen per cent of total buyers surveyed (or almost one in every five) have never or only a few times successfully resolved problems experienced when buying at an online auction site. Thirteen per cent of total buyers surveyed (more than one in 10) have never successfully resolved problems experienced when buying at an online auction site. 3. Users are not inclined to deal with problems that they encounter using an online auction site by reporting it to the police or using a legal process; they are more inclined to use online avenues of redress, which, although limited, are familiar and instantly accessible.

5.3.4

UNDERSTANDING OF LEGAL RIGHTS AND OBLIGATIONS

5.3.4.1 Attention to terms of sale and shipping details When buyers were asked how carefully they consider the seller’s terms of sale at an online auction site, they answered: Table C5.25 WHICH OF THE FOLLOWING BEST DESCRIBES HOW YOU CONSIDER THE SELLER'S TERMS OF SALE?

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

I only consider what I think are the ESSENTIAL details (e.g. current bidding price item photo and shipping/delivery fees)

72

16%

I carefully consider ALL the seller’s terms of sale including any ‘fine print’ applicable warranty and return policy

85

19%

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I carefully consider ALL of the above AND also try to determine the relative value of the item (e.g. I check the value of the item at a price comparison site) I don't know

274

62%

7

2%

* Percentages may not add to 100 due to rounding Almost one in five buyers surveyed (19%) said that they consider all of the seller’s terms of sale, including the essential details (e.g. current bidding price, item photo and shipping/delivery fees) and the ‘fine print’ applicable to warranty and return policies. Sixteen per cent said that they only consider the essential details. The majority of buyers (62%) said that they carefully consider all of the seller’s terms of sale (the essential details and the ‘fine print’) and also try to determine the relative value of the item. Buyers were also asked if they would bid on an item when the details of shipping and delivery fees are not specified. As table C5.26 below shows, four out of five buyers (81%) said that they would not bid on an item when the details of shipping and delivery fees are not specified. Only 11% of buyers said that they would bid in these circumstances.

Table C5.26 WOULD YOU BID ON AN ITEM WHEN THE DETAILS OF SHIPPING AND DELIVERY FEES ARE NOT SPECIFIED?

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

No

357

81%

Yes

47

11%

I don’t know

34

8%

* Percentages may not add to 100 due to rounding Attention to terms of sale and shipping details 1. Nineteen per cent of buyers surveyed said that they consider all of the seller’s terms of sale, including the essential details and the ‘fine print’ applicable to warranty and return policies. Sixteen per cent said that they only consider the essential details. The majority (62%) carefully consider all of the seller’s terms of sale (the essential details and the ‘fine print’) and also try to determine the relative value of the item. 2. Four out of five buyers (81%) said that they would not bid on an item when the details of shipping and delivery fees are not specified. — 143 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

5.3.4.2 Buyers’ understanding of their legal rights We asked buyers whether they thought that their legal rights were different or the same when they bought an item at an online auction site by auction sale compared to a fixed price sale. The responses were: Table C5.27 THINKING NOW ABOUT YOUR LEGAL RIGHTS WHEN BUYING GOODS OR SERVICES AT AN ONLINE AUCTION WEBSITE, EITHER BY AUCTION OR AT A FIXED PRICE, WOULD YOU SAY THAT, AS FAR AS YOU KNOW:

NUMBER TIMES SELECTED

% OF TOTAL BUYERS (442 IN TOTAL)

My LEGAL RIGHTS are DIFFERENT depending on the way I purchase (see question 42)

81

18%

My LEGAL RIGHTS are the SAME regardless of the way I purchase

360

81%

* Percentages may not add to 100 due to rounding Four out of every five buyers (81%) surveyed said that their legal rights are the same regardless of the way they purchase at an auction site. Eighteen per cent of buyers surveyed said that their legal rights are different depending on the way they purchase. When asked how their legal rights would be different, they provided the following responses (broken up into themes): Assumption of risk and buyer responsibility That I might be accepting the risk of a fraud simply by participating. That there is no tangible evidence that the sale would be safe – perhaps nowhere to go to complain as say there would be in a shop. There is some risk if you have not properly researched your item you wish to purchase. Especially where items are second hand, there may be unexpected faults or damage. You are bidding to by what is written on the screen, if you misunderstand the item to be something it is not, your fault, hard to return, and if the item was defect in some manner hard to return all you can do is bed feedback. Auction rules – buyer beware or aware. Caveat emptor would be more applicable in online auctions – rather than buy an item from a store.

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Far more ‘buyer beware’. Generally at auction one expects that the item is purchased as-is. Auctioneer rules/liability Depends on conditions the website covers you with (e.g. eBay). I would only be eligible for financial reimbursement from auction sites such as eBay if I paid by the recommended methods such as PayPal, escrow, money order. The responsibility is placed directly on the buyer if an item is purchased outside of the auction, yet if a purchase is completed within the auction any misfortunes can be placed on the auctioneers and the sellers for misconduct or so. You sign away the right to hold the auction site responsible (eBay). Business v private sale A business is required to offer a warranty, a private customer isn't. As the item may have a warranty if purchased at a licensed store, i.e. buying a billabong wallet privately compared to from a surf shop. Auction sales have different rules compared to a private sale. Depends if it's a retail outlet or private person selling excess goods. I'm not buying from a company or business so I don't have the same recourse if there are problems. It depends whether the transaction is considered to be a private sale or a transaction between a business and a buyer. Not covered by fair trading in many circumstances. Sellers often aren't merchants. I suspect that may have some effect on my rights. The seller is not a ‘shop’. It is like buying something from a garage sale. Contractual issues Depending on if I read and agreed to the terms. Might according to seller terms.

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Not sure if my rights are the same, but I will accept the terms specified by the vendor, or not buy at all. Stipulated by the terms stated. When purchasing online, you are entering into written contract with brings with it different clauses than that of purchasing over the counter. Different laws apply online I presume that the laws relating to the internet in general are not current as a general rule! I think that perhaps that the internet is not governed by the same laws as it is 'fishy' what jurisdiction it comes under. I may be talking crap here but that is the impression I am under. Online buying is a law unto itself. The internet is so difficult to regulate, and therefore a lot of laws that should exist regardless of the medium (technology), don't in the case of transactions on the net. Enforcement/regulatory issues I am not sure what my legal rights are but my guess is that the remedy is more difficult because of the anonymity of eBay. I do not know the location of the seller nor any details but email address. It's intangible and hard to protect both buyers’ and sellers’ rights in the transactions. There is no specific contract in a form that is acceptable to a court. Even though they should refund faulty goods, goods not as described, they probably won’t and nothing will be done. Likewise when you pay for an item that isn’t received. Nothing gets done. Nobody wants to help when an online sale goes wrong or badly. There is no where to turn to. Police are unwilling to get involved when online fraud is reported – they referred me back to eBay administrators. Jurisdictional issues Dependent on country of origin for the goods.

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Depending on what state or territory laws. Different jurisdiction (i.e. OS or not Vic law). Different laws on what can be shipped to Australia. I believe my legal rights would vary if the seller was in another country, in the legislation, such as the Fair Trading Act would not apply. I believe that it would be subject to the state or territories laws where the items are coming from. If the auction site is owned by foreign company then foreign law applies??? – I think. If the seller lives overseas then my legal options are reduced. It would differ based on where the seller is located. Not sure really. I would guess that they would be the similar, but probably not applicable for overseas transactions. Overseas sellers. Not sure that contract laws/rights hold in the same way. Little or no rights I don’t seem to have any protection against disputed buying. I don't think I would have many legal rights!! I have no legal rights. Past experience has proven I have NO PROTECTION AT ALL!!! Probably no legal rights. The seller can be a fraudulent one and you will never see the money again. And eBay don't care. You really have no recourse for refund or exchange. All you can really do is report the seller to the site admin and then leave poor feedback in order to warn other buyers. Payment mechanism Depending on way of payment, i.e. COD, bank deposit, PayPal etc. There is more protection using payment facilities like PayPal or direct deposit as you have proof of payment.

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Your ability to recover if you do not receive the goods is different according to the way you select to pay. EBay do not cover certain methods of payment and therefore I only like to pay by direct debit now. Otherwise I can have no proof of purchase. Overseas people are also hard to track down. Method of payment, value of item. New/fixed v used/auction purchases Buying second hand goods, caveat emptor. Need to ask questions before bidding and buy only items indicated as new or in as new condition. Depending if goods are new or used, depending on payment method. If the item is second hand from a personal seller (not a shop/store) I believe my legal rights are a bit different but if the item is new then I think they would be the same. Legal rights are different when items are purchased through an auction and some are different for second hand items. Cooling off period Auction sales are final and cannot be cancelled, other sales have cooling off period. Does not know I don’t understand. Less secured buying online the goods being traded might not be the same. Caveat emptor is true in any case, however, the sellers' terms may differ from vendor to vendor. Don't know. EBay buyer protection is a crock. Finding seller. I do not trust the internet not safe a lot easy to get rip off. I don’t know. I have little knowledge of what my rights are.

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I think a fair bit of trust goes into the transaction particularly if the sellers have had negative feedback. Other Conditions of return if not satisfied or damaged vary especially if at own cost. The right to the 3 R's – of my choice – is gone. There’s always a loophole. Not covered by warranty (dependent on the product); not always possible to return goods; difficult when purchases are made from other countries as you don't know what your legal rights are in that country. Something to do with consumer protection law? They are not different No.

Buyers’ understanding of their legal rights 1. Four out of every five buyers surveyed (81%) said that their legal rights are the same regardless of the way they purchase at an auction site. Eighteen per cent of buyers surveyed said that their legal rights are different depending on the way they purchase. 2. Some of the ways in which buyers considered that their legal rights might differ depending on they way they purchase at an auction site include: the difference in the assumption of risks; legal issues (depending on whether the seller is a business or an individual, contractual and online legal issues, and available remedies); where the goods are from and how they are paid for. Some users thought they might not have legal rights at all.

5.3.5

APPROPRIATENESS OF SAFETY MEASURES AND LEGAL INFORMATION PROVIDED

5.3.5.1 Standard of safety measures We asked survey respondents whether they think that the providers of online auction sites do all they reasonable can to operate their sites safely or whether there are flaws in the way these sites operate that can and ought to be fixed: — 149 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Table C5.28 NUMBER TIMES SELECTED

% OF TOTAL SURVEY RESPONDENTS (510 IN TOTAL)

Providers of online auction websites do all they reasonably can to operate their sites/services in a way which is safe for users

343

67%

There are flaws in the way online auction websites operate which can and ought to be fixed (see Q 62)

126

25%

WHICH OF THE FOLLOWING STATEMENTS BEST REFLECTS YOUR VIEW?

* Percentages may not add to 100 due to rounding The majority of survey respondents (67%) were of the view that providers of online auction websites do all they reasonably can to operate their sites/services in a way which is safe for users. Twenty-five per cent of survey respondents (or one in four) were of the view that are flaws in the way online auction websites operate which can and ought to be fixed. The 25% of survey respondents who held the view that there are flaws in the way online auction websites operate were asked to provide what, in their view, ought to be done by auctioneers to remedy these flaws. The survey respondents’ responses include the following: there should be higher user protection and more information for users; there should be a higher standard of identification and higher security; the methods for postage and handling, payment and insurance should be made clearer; there should be greater protection against fraud, including fake bidding, and the sale of counterfeit goods; a harder line should be taken against people who misuse the online auction process; the customers service/complaints process should be improved; and auction site operators should take more responsibility for the process.164 Some of the 25% of survey respondents who held the view that there are flaws in the way online auction websites operate were not sure what ought to be done by auction site operators. Survey responses are contained in chapter 7.

Standard of safety measures 1. Sixty-seven per cent of respondents were of the view that providers of online auction sites do all they reasonably can to operate their sites/services in a way which is safe for users. Twenty-five per cent of survey respondents (or one in four) thought there were flaws which can and ought to be fixed.

164

There were 120 responses provided in total. — 150 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

2. Some of the ways that users of online auction sites think that auctioneers could improve flaws with online auction sites are: higher user protection and more information for users; higher standard of identification and higher security; the methods for postage and handling, payment and insurance should be made clearer; greater protection against fraud, including fake bidding, and the sale of counterfeit goods; harder line against people who misuse the online auction process; improved customer service/complaints process; and auction site operators should take more responsibility for the process. 5.3.5.2 Rules and terms and conditions We asked survey respondents whether they think the rules / terms and conditions of online auction sites they have used contain the right amount of information, too much information, too little information, or whether they don’t know. As table C5.29 below shows, half of the survey respondents (50.4%) thought the online auction site they have used provides the right amount of information in terms of rules / terms and conditions. Approximately one in every four survey respondents thought that these sites provide too much information (12.9%) or too little information (12.4%). Eight per cent of survey respondents did not select an answer. Table C5.29 THINKING ABOUT THE RULES / TERMS / CONDITIONS OF ANY ONLINE AUCTION SITE YOU'VE USED, IN GENERAL, WOULD YOU SAY THEY CONTAIN:

NUMBER TIMES SELECTED

% OF TOTAL SURVEY RESPONDENTS (510 IN TOTAL)

The right amount of information

257

50.4%

Don't know

83

16.3%

Too much information

66

12.9%

Too little information

63

12.4%

No response

41

8%

* Percentages may not add to 100 due to rounding We also asked survey respondents whether they think the rules / terms and conditions of online auction sites they have used are written in a way that they can clearly understand, that they don’t understand, or whether they don’t know. As table C5.30 below shows, the majority of survey respondents (57%) selected that they could clearly understand the rules / terms and conditions of online auction sites they have used, while about one quarter (24%) said they don’t clearly understand them. 12% of survey respondents didn’t know. Seven per cent of survey respondents did not select an answer. — 151 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Table C5.30 WOULD YOU SAY THAT THE RULES / TERMS / CONDITIONS OF ANY ONLINE AUCTION SITE YOU'VE USED, IN GENERAL, ARE WRITTEN IN A WAY THAT YOU: Can clearly understand Don't clearly understand Don't know No response

NUMBER TIMES SELECTED 292 120 61 37

% OF TOTAL SURVEY RESPONDENTS (510 IN TOTAL) 57% 24% 12% 7%

* Percentages may not add to 100 due to rounding We asked survey respondents whether they think the rules / terms and conditions of online auction sites they have used are generally fair to all of the parties, not fair to all of the parties, or whether they don’t know. As table C5.31 below shows, the majority of respondents (70%) said they thought the rules / terms and conditions were fair to all parties. Only 12.4% thought they were not fair to all parties. Some 9.6% of survey respondents selected that they didn’t know. Eight per cent of survey respondents did not select an answer. Table C5.31 NUMBER TIMES SELECTED

% OF TOTAL SURVEY RESPONDENTS (510 IN TOTAL)

Generally FAIR to all parties

357

70.0%

NOT FAIR to all parties

63

12.4%

Don't know

49

9.6%

No response

41

8.0%

DO YOU THINK THE RULES / TERMS / CONDITIONS OF ANY ONLINE AUCTION SITE YOU'VE USED, IN GENERAL, ARE:

* Percentages may not add to 100 due to rounding Rules / Terms and Conditions 1. Half of the respondents (50.4%) said that they thought the online auction site they have used provided the right amount of information in terms of rules / terms and conditions. 2. Approximately one in every four survey respondents thought that these sites provide too much information (12.9%) or too little information (12.4%). 3. The majority of survey respondents (57%) said they could clearly understand the rules / terms and conditions of online auction sites they have used, while a quarter (24%) said they don’t clearly understand them. — 152 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

4. The majority of respondents (70%) said they thought the rules / terms and conditions were fair to all parties, while 12.4% thought they were not fair to all parties.

5.4 Sellers This section looks at the issues faced by sellers who use online auction sites. It considers: •

sellers’ behaviour, including the frequency of selling and the amount they sold items for (5.4.1)

•

the problems encountered by sellers, including the type of problems encountered and sellers’ experiences with dispute resolution (5.4.2)

•

experiences as sellers (5.4.3).

5.4.1

SELLING BEHAVIOUR

5.4.1.1 Frequency of selling Number of times items sold Forty-four per cent of survey respondents (225 sellers) had sold an item at an auction site. Sellers surveyed were asked how many times they had sold items at online auction sites. Just over one third (36%) of sellers surveyed had done so between one and five times. However, a quarter (24%) of sellers surveyed had done so more than 100 times. This indicates that a substantial minority of sellers have used this form of transaction a considerable number of times. Table C5.32 NUMBER OF TIMES HAVE YOU SOLD ITEMS AT AN ONLINE AUCTION WEBSITE?

TOTAL % (OUT OF 225)*

1 to 5

36

6 to 10

12

11 to 20

9

21 to 50

9

51 to 100

9

101 to 250

8 — 153 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

251 to 500

6

More than 500

10

* Percentages may not add to 100 due to rounding Respondents who had not sold an item The majority of the survey respondents (56%) had never sold an item at an online auction site. When asked why, these respondents gave the following responses: Table C5.33 IF YOU HAVE SOLD GOODS OR SERVICES ON AN ONLINE AUCTION WEBSITE, GO TO QUESTION 13. IF YOU HAVE NOT, WHY NOT? PLEASE TICK AS MANY ANSWERS AS YOU LIKE:

NUMBER OF RESPONSES

% OF NONSELLERS (285 IN TOTAL)*

I don’t sell things online generally

121

42%

I am not interested in selling an item at an online auction

86

30%

Other (please see Question 12)

60

21%

I do not feel that I am adequately protected if something goes wrong (e.g. the buyer falsely claims to not have received the sold item and a credit card chargeback reverses the transaction)

54

19%

I find online auctions confusing

43

15%

I am afraid that I may be subject to fraud

34

12%

I don't trust the internet as a way of buying or selling online

10

4%

* Percentages may not add to 100 due to rounding * Percentages do not add to 100 because multiple answers were possible The most common response (42% of all non-sellers) was that they do not sell things online generally. The next most common response (30% of all non-sellers) was that they are not interested in selling an item at an online auction. Nineteen per cent of non-sellers said they do not feel that they are adequately protected if something goes wrong. Only 4% of respondents said that they do not trust the internet as a way of buying or selling online. Twenty-one per cent of non-sellers gave ‘other’ as their response to being asked why they had not sold goods or services at an online auction site. These answers included: that the process of listing items was too difficult, expensive or confusing or that they do not trust the process or think they would not get a good price; they have nothing to sell; or that they intend to list something for sale at an online auction site in the future (or would consider doing this) but just has not done this yet. — 154 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

5.4.1.2 Amount the item was sold for We asked sellers about the most expensive item they had sold at an online auction site. A quarter of sellers (24%) had only sold items for between $1 and $50. One in five sellers (20%) had sold items between $51 and $100. Only 15% of sellers had sold items for more than $500. Table C5.34 APPROXIMATELY WHAT VALUE WAS THE MOST EXPENSIVE ITEM YOU HAVE SOLD AT AN ONLINE AUCTION WEBSITE, EITHER BY AUCTION OR AT A FIXED PRICE?

TOTAL % (OUT OF 225)

$1 to $50

24

$51 to $100

20

$101 to $200

17

$201 to $350

11

$351 to $500

11

$501 to $1000

8

$1001 to $2000

3

$2001 to $3000

2

$3001 to $5000

2

More than $5000

*

Don’t know/not estimated

1

* Denotes less than 1% Percentages may not add to 100 due to rounding

5.4.2

PROBLEMS ENCOUNTERED

5.4.2.1 Frequency and nature of problems Frequency of problems We asked sellers surveyed whether they had ever experienced problems selling items at an online auction site. Forty-one per cent of sellers surveyed said they had experienced problems, and 56% said they had not (4% did not know).

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Table C5.35 HAVE YOU EXPERIENCED ANY PROBLEMS WHEN SELLING AN ITEM AT AN ONLINE AUCTION WEBSITE EITHER BY AUCTION OR AT A FIXED PRICE?

TOTAL % (OUT OF 225)

Yes

41

No

56

Don’t know/Not Established

3

* Percentages may not add to 100 due to rounding We then asked these sellers how many times they had experienced problems. Thirtytwo per cent of the sellers had only experienced problems once and 36% had experienced problems two to five times. Five per cent said they had experienced problems more than 50 times. Table C5.36 HOW MANY TIMES HAVE YOU EXPERIENCED ANY OF THESE PROBLEMS?

TOTAL % (OUT OF 92)

Once

32

2 to 5 times

36

6 to 10 times

13

11 to 20 times

10

21 to 50 times

2

More than 50 times

5

Don’t know/Not Established

1

* Percentages may not add to 100 due to rounding.

Nature of problems We asked the sellers what type of problems they had experienced. Responses are contained in table C5.37 below.

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Table C5.37 IF YOU ANSWERED ‘NO’ OR ‘I DON'T KNOW’ TO QUESTION 48, GO TO QUESTION 58. IF YOU ANSWERED ‘YES’, WHICH, IF ANY, OF THE FOLLOWING PROBLEMS HAVE YOU EXPERIENCED? PLEASE TICK AS MANY ANSWERS AS YOU LIKE:

NUMBER OF TIMES SELECTED

% OF SELLERS (215 IN TOTAL)

% OF SELLERS WHO EXPERIENCED A PROBLEM (92 IN TOTAL)

Received payment late for purchased item

56

26%

61%

Did not send item because payment was not made or was invalid (e.g. cheque was not honoured or credit card was stolen)

48

22%

52%

Other

29

13%

32%

Did not receive payment for item I sent

25

12%

27%

Was unfairly suspended or banned from the site

9

4%

10%

The buyer reversed the credit card charge (chargeback) with no valid complaint and the item was not returned

2

1%

2%

The item was not sent because the buyer reversed the credit card charge (chargeback) with no valid complaint

2

1%

2%

* Percentages may not add to 100 due to rounding * Percentages do not add to 100 because multiple answers were possible The most common response was that the seller had received payment late for an item they had sold (26% of total sellers surveyed). Twenty-two per cent of sellers said they did not send the item they had sold because payment was either not made or was invalid. Twelve per cent of sellers said they did not receive payment at all. Thirteen per cent of sellers surveyed selected ‘other’ as a response to what problems they experienced as when selling at an auction site (Question 50). Section 5.4.2.1 in Appendix 3 contains some of the survey responses provided regarding the problems sellers have experienced when selling items on an online auction site.

5.4.2.2 Attempts at dispute resolution What methods were used We asked sellers what, if anything, they had done to try to resolve any problems they had experienced when using an online auction site. The responses were as per table C5.38 below. — 157 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Table C5.38 WHAT, IF ANYTHING, DID YOU DO IN ORDER TO TRY AND RESOLVE THESE PROBLEMS? PLEASE TICK ALL THAT APPLY: (IF YOU DID NOT DO ANYTHING TO TRY AND RESOLVE THESE PROBLEMS THEN PLEASE GO TO QUESTION 57)

NUMBER OF TIMES SELECTED

% OF SELLERS (215 IN TOTAL)

% OF SELLERS WHO EXPERIENCED A PROBLEM (92 IN TOTAL)

Contacted the buyer directly

79

36.7%

86%

Contacted the auctioneer

33

15.3%

36%

Used an online dispute resolution service (e.g. SquareTrade)

30

14.0%

33%

Other (see Question 53)

8

3.7%

9%

Contacted the police

1

0.5%

1%

Sued in a court/tribunal

1

0.5%

1%

Used an escrow service (where a trusted third-party holds payment and sends it to the seller after the buyer has received and approved the item e.g. Escrow Australia)

1

0.5%

1%

* Percentages may not add to 100 due to rounding * Percentages do not add to 100 because multiple answers were possible The most common response given by sellers who had experienced a problem (86%) was to contact the buyer directly. Just over a third of sellers who experienced a problem (36%) said they contacted the auctioneer and a third (33%) said they used an online dispute resolution service. Only 1% said they contacted the police and another 1% said they had sued in a court or tribunal. None of the sellers had contacted a government regulator or used a lawyer to try and resolve problems experienced when selling at an auction site. Nine per cent of sellers who experienced a problem selected ‘other’. These responses included the following: Asked buyer to return item and gave full refund. Came to a compromise with the buyer. Payment was received but not in my preferred method. Can't do anything. Emails to try and resolve issue. Filled in Australia Post ‘find my parcel’ form. I didn't find out about it until after collection was being made against me for the reversed charges. I filed bankruptcy. — 158 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Relisted the item. Started UID with eBay to claim back my FVF Mutually agreed to have neg feedback removed with buyer. Tried to contact eBay but they allow this so couldn’t follow up with them despite fact that their policy says if you withdraw bid for this reason you must rebid or account will be suspended. Customer still has account intact. Utilised the auction providers ‘unpaid item’ procedure. How useful were methods used to resolve problems When sellers who had experienced a problem selling an item at an online auction site were asked how many times they had successfully resolved any problems, approximately one in four (27%) said they had resolved their problem every time, 46% said they had resoled their problem most times, 16% said they had resolved their problem only a few times, and 15% said they had never solved their problem. Table C5.39 HOW MANY TIMES WOULD YOU SAY YOU HAVE SUCCESSFULLY RESOLVED ANY PROBLEMS YOU'VE HAD WHEN SELLING ITEMS AT AN ONLINE AUCTION WEBSITE, EITHER BY AUCTION OR AT A FIXED PRICE?

NUMBER TIMES SELECTED

% OF SELLERS (215 IN TOTAL)

% OF SELLERS WHO EXPERIENCED A PROBLEM (92 IN TOTAL)

Every time

25

11.6%

27%

Few Times

15

7.0%

16%

Most times

42

19.5%

46%

Never

14

6.5%

15%

* Percentages may not add to 100 due to rounding

5.4.3

SELLERS’ EXPERIENCES

The focus group participants were asked about their experiences as sellers. For many respondents, selling online provided a good opportunity to get rid of unwanted goods that other people wanted. For others, such as collectors, it was just another means of exchange. Responses from focus group discussions are contained in section 5.4.3 of Appendix 3.

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CHAPTER 6

Options and recommendations Based on the project findings we have made some recommendations which in our view industry participants, regulators and other relevant stakeholders should take up. Furthermore, some issues have arisen from our findings that require further consideration. We have provided some options that should be taken into account by relevant stakeholders when considering these issues further. This project aims to empower the many Australian consumers who shop at online auctions by helping them better understand the relevant consumer issues. We want to help government agencies and other organisations provide more useful and appropriate information to consumers. The findings (in previous chapters) and options and recommendations (below) of the project can be used by industry participants to incorporate better consumer protection mechanisms into their internet auction processes. In addition, the project’s results can assist both policy makers to determine whether legislative intervention could better protect consumers, and law enforcement agencies to decide to implement or improve policies relating to online auction fraud. The overall and long term benefit of this project will be increased consumer confidence to shop at online auctions as a result of a safer e-commerce environment. In recommending strategies to pursue these aims, we have kept in mind the following key findings: Popularity of online auctions •

Online auction sites are very popular in Australia and are becoming increasingly popular. More than 4.4 million people visited eBay Australia’s site in March 2006 alone. (See sections 2.2.3 and 2.2.4)

Significant number of business sellers at online auctions •

Many businesses are selling at online auction sites. (Section 2.1.2) For example, in May 2004, eBay stores selling at fixed-price sales accounted for 28% of eBay’s Australia’s gross merchandise sales. This indicates that there — 160 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

are a significant number of consumer transactions occurring at online auction sites. It also appears that consumer transactions at online auctions are increasing. Significant number of non-auction sales at auction sites •

U2C e-auction sites (User-to-Consumer online auction sites: where any user of the site can act both as a buyer and a seller e.g. eBay – see section 2.1) allow items to be bought at a fixed price and through an auction sale. (See section 2.1.4) According to eBay, during the 4th quarter of 2005, fixed price sales of eBay’s auction sites globally accounted for 34% of total ‘gross merchandise volume’ (the total value of all successfully closed items on eBay’s trading platforms).165

Lack of consumer complaints/fraud data in Australia •

Data from law enforcement agencies are not helpful in ascertaining how many Australians are experiencing problems at online auctions because of the limitations in the agencies’ data collection processes. (Section 4.2.1.1)

•

Data from consumer government departments are not helpful in ascertaining how many Australians are experiencing problems at online auctions because auction users who experience problems rarely contact consumer government departments for assistance. (Section 5.3.3.2) Furthermore, there are problems with the consumer complaint data of consumer government departments, such as inconsistent complaint categories (e.g. the type of legislative breach) and in some instances the absence of an online auction complaint category. (Sections 4.2.2 and 6.1.2)

Lack of transparent fraud/complaints/disputes data from auction site operators •

Online auction site operators do not provide transparent information regarding the number of fraud/complaints/disputes involving users of their sites. (Sections 4.2.1.5, 4.2.2.10 and 4.2.3.2)

eBay, eBay Fact Sheet (as of 31 December 2005), p 1, available at at 27 April 2006. 165

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Overseas data shows online auctions is a leading fraud/consumer complaints category •

Overseas data, particularly from the United States, shows that: a leading fraud complaint category is online auctions. The data also shows that online auctions are one of the most common consumer complaints generally – of either online or offline consumer concerns. (Section 4.3)

•

Furthermore, data shows that online auction fraud is the leading type of fraud in the US, including both offline and online fraud. (Section 4.3)

Significant number of e-auction problems experienced by Australian users •

A significant portion of online auction users in Australia appear to be experiencing problems when shopping at online auction sites. (Section 5.3.3.1) For example, 48% of buyers surveyed experienced problems when buying something at an online auction website. Common problems include paying for items and not receiving them (22% of buyers surveyed) or receiving items that are different to what was advertised/described (almost 20% of buyers surveyed). These problems also indicate that online auction fraud is of particular concern.

High proportion of problems experienced by Australians are not being resolved successfully •

From the buyers surveyed who experienced problems at an auction site, 39% of them either never or only a few times successfully resolved problems they experienced. (Section 5.3.3.2)

Australian buyers are primarily contacting sellers, auction site operators and using online dispute resolution services to resolve auction site problems •

Of those buyers surveyed who experienced problems at an auction site, 79.8% contacted the seller directly, 50.7% contacted the auction site operator directly, and 31.9% used an online dispute resolution service to try to resolve these problems. (Section 5.3.3.2)

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Australian consumers are generally not contacting the police or fair trading offices for help. A significant number of consumers are doing nothing to resolve problems experienced at an auction site •

Only 5.6% of buyers surveyed who have experienced problems at an auction site contacted the police, and only 1.9% contacted a government regulator like the ACCC. Furthermore, 16.9% of buyers surveyed who experienced problems at an auction site did nothing to try to resolve them. (Section 5.3.3.2)

Australian e-auction consumers are not using courts or tribunals to enforce their rights •

Despite a significant portion of online auction users in Australia experiencing problems when shopping at online auction sites, consumers do not appear to be using courts/tribunals to enforce their rights. (Sections 4.2.2.11 and 5.3.3.2)

Uncertainty surrounding auction site operator liability •

Very little attention has been paid in Australia to legal issues relating to consumers using online auction sites. (Section 1.1.2)

•

There is some uncertainty surrounding the legal liability of U2C e-auction site operators. (Chapter 3) For example, how do the laws relating to auctioneers apply to online auction operators? (Sections 3.1 and 3.5.1.2) Are online auction site operators liable for misleading and deceptive information posted on their sites? (Sections 3.2.1.4 and 3.5.1.2) Is an online auction site operator an agent for the seller? (Sections 3.3.2 and 3.5.1.2) Are online auction sites exercising adequate ‘due care and skill’ in their operation of the site? (Sections 3.2.1.2 and 3.5.1.2)

6.1 Data collection 6.1.1 ONLINE AUCTION FRAUD Although it appears that online auction fraud is a problem in Australia, our findings show that data from law enforcement agencies is not helpful in ascertaining how many Australians are experiencing fraud – a problem compounded by the growing popularity of auction sites in Australia. This increasing popularity may lead to increased online auction fraud. Without appropriate data collection systems, information regarding the level and types of online auction fraud cannot be — 163 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

accurately ascertained. This data is necessary to assist law enforcement agencies, policy makers, industry participants and others in combating online auction fraud.

RECOMMENDATION 1: Introduction of uniform online auction data collection systems by law enforcement agencies R1.1

Law enforcement agencies should develop data collection systems that identify online auction fraud.

R1.2

Each law enforcement agency should develop data collection systems that are consistent so they can compare data and compile national data.

R1.3

An agency should be responsible for collecting, producing and reporting national data on online auction fraud annually.

6.1.2 CONSUMER COMPLAINTS Consumer government departments generally were able to provide data for this project on online auction consumer complaints. (See section 4.2.2) However, the data used inconsistent complaint categories (e.g. the type of legislative breach). This makes it very difficult to compile accurate national data. Furthermore, some departments do not record specifically about online auctions. This is problematic, because if the department receives a complaint regarding misleading and deceptive conduct at an online auction, it may record it as a misleading and deceptive conduct complaint without reference to the online auction. Many online auction complaints may not be identified. Government agencies need to improve data collection systems to help ascertain accurate online auctions consumer complaints data. In Australia, no organisation or agency collects all the Australian consumer complaints data about online auctions to determine what issues consumers are facing. In a recent discussion paper, the E-commerce Working Party of the Ministerial Council on Consumer Affairs questioned whether available complaints data provide a good gauge of issues faced by consumers buying goods and services online.166

166 Online Shopping and Consumer Protection Discussion Paper, Standing Committee of Officials of Consumer Affairs: E-commerce Working Party, May 2004, p 14.

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RECOMMENDATION 2: Introduction of uniform online auction data collection systems by consumer government agencies R2.1

Consumer government departments should develop data collection systems that identify online auction complaints.

R2.2

Each consumer government agency should develop data collection systems that are consistent so they can compare data and compile national data.

R2.3

A department should be responsible for collecting, producing and reporting national data on online auction complaints annually.

6.1.3 NATIONAL DATABASE The Consumer Sentinal is a complaint database developed and maintained by the US Federal Trade Commission (FTC). Consumer Sentinel collects information about consumer fraud and identity theft from the FTC and over 150 other organisations. From January to December 2005, the Consumer Sentinal database received over 685,000 consumer fraud and identity theft complaints. The US database allows information sharing amongst relevant government agencies to assist them in their investigations and prosecutions. It also provides information on fraud trends. The Consumer Sentinal identified online auctions as a leading consumer problem in the US. (Section 4.3.1) A similar database in Australia would be useful to assist government agencies to combat unlawful activity at online auctions. This should be part of a larger database that contains internet related complaints generally or alternatively all consumer fraud/complaints data (both offline and online issues). However, the priority at this stage is for law enforcement agencies and consumer government agencies to develop data collection systems that allow for the compilation of national data on online auction consumer complaints and fraud. (See Recommendations 1 and 2, sections 6.1.1 and 6.1.2)

OPTION 1: Development of a national consumer complaints/fraud database O1.1

Law enforcement agencies and consumer government agencies could undertake a joint project to develop a database of complaints and fraud involving consumers. The database would include information on online auction matters. — 165 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

O1.2

Relevant government agencies could access the national database to help them investigate and prosecute online auction unlawful activities. The database would also allow agencies to identify current trends in consumer complaints and fraud.

6.2 Complaint handling/fraud investigations 6.2.1 LOW FINANCIAL LOSSES The majority of buyers surveyed (58%) had not spent more than $200 on the most expensive item they have bought at an auction site and 25% had spent between $201 and $500. (See Section 5.3.1.2) Eighty-three per cent have not spent more than $500 on an item. Buyers commonly buy relatively small value items, such as DVDs, CDs, textbooks, cosmetics, clothing and motor parts. Some government agencies may hold the view that online auction fraud is not a problem, and consequently not dedicate adequate resources to combating it. (See, for example, section 4.2.1.2) This poses a problem but can be corrected by introducing new policies regarding the handling of online auction cases/enquiries. (See Recommendation 3 below.) However, the biggest problem with investigating online auction cases/enquiries for both law enforcement agencies (i.e. police departments) and consumer government agencies (e.g. ACCC) is the relatively small value of each transaction. For example, it is difficult for police departments to dedicate resources to investigate online auction fraud cases that do not involve significant losses. This is a difficult problem that needs further consideration. We recommend below that relevant stakeholders, through an appropriate forum, should meet and explore solutions regarding problems identified in this report – including this issue. However, the development of better data collection systems or even a national database – such as the Consumer Sentinal discussed above – may help government agencies identify auction users that have engaged in fraud or unlawful activity involving many Australians. This would help to justify investigating and prosecuting auction fraudsters who have ripped many people off even if each transaction involved only a relatively small financial loss.

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6.2.2 JURISDICTION Few consumers have used law enforcement agencies and consumer government departments to try to resolve problems experienced at an auction site – only 5.6% of buyers surveyed who experienced problems contacted the police, and only 1.9% contacted a government regulator like the ACCC. (See section 5.3.3.2) Interestingly, 16.9% of buyers surveyed who experienced problems at an auction site did nothing to try to resolve them. These figures indicate that there are complaint handling problems by police departments and consumer affairs offices. For example, one member of the NSW Police told us that the service usually refers complaints regarding online auctions to the relevant office of fair trading. (See section 4.2.1.3) And as discussed in section 4.2.2.4, the Department of Consumer and Employment Protection in Western Australia (DOCEP) told us that: The Consumer Protection Call Centre, does receive calls about internet auction sites. To date, calls have generally been considered to be matters between private individuals, and not matters that qualify as ‘commerce or trade’, which would allow further investigation by the Department for Consumer and Employment Protection (DOCEP). Callers are typically encouraged to seek legal advice and/or raise the matter with the WA Police Service.

The complaint handling problems of law enforcement agencies and consumer government departments arises from online auction complaints being incorrectly referred elsewhere in circumstances when the complaints are within their jurisdiction. For example, fair trading offices should not automatically assume that an online auction transaction is a private sale and encourage complainants to seek legal advice or go elsewhere. There are many instances when an online auction transaction is a consumer transaction (see sections 2.1.2 & 3.5.2). In addition, there are instances when the consumer may have a claim against the auction site operator. (See section 3.5) In these circumstances, consumers should not be referred elsewhere by fair trading offices. Finally, the incorrect referrals by law enforcement agencies and consumer government departments results in some consumers being referred from one organisation to another and back again. As a consequence these consumers often stop pursuing their complaints due to frustration.

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RECOMMENDATION 3: Review of complaint handling policies between law enforcement agencies and consumer government departments R3.1

Consumer government departments and law enforcement agencies should review their complaint handling policies to determine whether they are handling online auction complaints correctly. They should consider the issues raised in this report, particularly the legal issues in chapter 3.

R3.2

Consumer government departments and law enforcement agencies should agree on which organisation has jurisdiction to handle an online auction complaint, and when a matter should be referred to another agency/department/organisation. There will be circumstances when more than agency/department will have jurisdiction. The agreement should outline how these type of complaints should be handled so as to avoid duplicity and to save resources.

6.2.3 ONLINE AUCTION INDUSTRY Of the buyers we surveyed who experienced problems at an auction site, 50.7% contacted the auction site operator directly in order to resolve these problems. This was the second most common method of resolving problems, behind contacting the seller directly (79.8%). (See section 5.3.3.2) Of the buyers surveyed who experienced problems at an auction site, 39% of them either never or only a few times successfully resolved problems they experienced when buying items at an auction site. The high number of unsuccessfully resolved complaints indicates that there are problems with the complaint handling processes of auction site operators. These problems include: •

auction site operators not being easily contactable

•

auction site operators not being very helpful when they handle complaints.

One in four of the survey respondents (see section 5.3.5.1), were of the view that there are flaws in the way online auction websites operate which can and ought to be fixed. We asked these respondents to tell us what, in their view, auctioneers ought to do to remedy these flaws. Responses included that customer service/complaints processes should be improved. (See chapter 7) Responses regarding customer service/complaints process are provided below.167 Please note that many comments made by consumers during consultations refer to eBay. This may be because of the

167

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popularity of eBay and its very large market share in Australia (see section 2.2) which makes it likely that more comments will be made about eBay than any other auction site service. Customer Service and Complaints/Dispute Resolution Better customer service rather than automated responses. EBay needs to stop using automated answers when there are problems. EBay should provide users with telephone access to staff to assist with problems. Follow up when things go wrong. EBay's attitude seems to be that as a buyer, you're on your own if things go wrong, where they could take action against the seller. I have had some problems – and have not received feedback from eBay even though I had proof that I had not received an item. I was disappointed in having no response or help. The auctioneer could do more to improve resolution services. Currently the period is very long. They should have some kind of customer service. … needs to communicate better with sellers when problems arise instead of sending non applicable emails as answers. EBay charges a $25 fee for resolving disputes -- doesn't even cover postage for buyers… A more timely complaint resolution service – current system allows respondent to have 30 days to respond to a complaint – and then they don't usually respond anyway. Complaints are not handled well. There is a time limit on making complaints – this can be a problem when waiting for an item to ship from overseas. During project consultations, the Australian Consumers’ Association stated that one of the biggest consumers issues regarding online auctions seems to be that there “…is an impression that auctioneers like eBay being essentially uncontactable.”

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RECOMMENDATION 4: Review of complaint handling processes of auction site operators R4.1

Auction site operators should review their complaint handling processes and consider how they can improve them so that more problems experienced at auction sites can be resolved successfully.

6.3 Consumer education 6.3.1 RISKS AND PREVENTION A significant portion of online auction users in Australia appear to be experiencing problems when shopping at online auction sites: 48% of buyers surveyed experienced problems when buying something at an online auction website. (See section 5.3.3.1) Common problems include paying for items and not receiving them (22% of buyers surveyed) or receiving items that are different to what was advertised/described (almost 20% buyers surveyed). The number of online auction buyers that have experienced problems is quite high. This indicates that consumers are not adequately aware of the risks involved and how to protect themselves so as to reduce the risk of something going wrong. Some problem areas include: •

payment methods

•

completing transactions outside of the auction website

•

likelihood of experiencing a problem

•

overseas sellers

•

interstate sellers.

6.3.1.1 Payment methods Eighty-four per cent of buyers surveyed had used direct bank deposit into the seller’s account to pay for an item bought on an online auction site (this was the most common payment mechanism used – see section 5.3.1.3). Thirty-one per cent of buyers surveyed had paid by cheque or money order. Seven per cent of buyers surveyed had sent cash directly to the seller. Only 1% had used an escrow service. Paying by direct bank deposit, cheque, money order and sending cash are payment methods that do not offer the protections that credit cards and online payment — 170 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

services such as PayPal do (e.g. reverse a transaction when item has not been received). 6.3.1.2 Completing transactions outside of the auction website Almost one in every three buyers surveyed (31%) are prepared to go off an auction site to complete a purchase. Twelve per cent didn’t know. Most were prepared to do this in circumstances where they feel they can trust the seller, they feel that the transaction is relatively safe, where the item is of low value, and where the item is difficult to purchase elsewhere or is not permitted to be sold on the auction site or in Australia. Most commonly, users are prepared to do this where they consider the risks to be relatively low. A portion of buyers surveyed were always prepared to complete a purchase outside the auction site. (See section 5.3.2.3) There is a significant risk of fraud to consumers when completing a transaction outside the auction site. For example, fraudulent sellers can use information from a legitimate auction and encourage buyers to pay for an item offered for sale from another seller. Furthermore, completing a transaction outside an auction site may prevent a consumer from making a claim under any insurance scheme that a site might have.168 6.3.1.3 Likelihood of experiencing a problem Eighty per cent of buyers surveyed thought that it was either not very likely or not at all likely that they would not receive the item they bought at an online auction website. Seventy-one per cent of buyers surveyed thought that it was either not very likely or not at all likely that they would receive an item they bought that was different to the item advertised/described. Buyers have a high level of confidence that they will receive what they paid for and that it will be what was advertised/described. This confidence seems to be problematic when you take into account that approximately 22% of buyers surveyed have not received an item that they paid for (approximately one in every five buyers) and almost 20% of buyers surveyed (approximately one in five) have received an item that was different (including being of lesser value) to what was advertised/described. Buyers may have a level of confidence in online auctions that does not reflect the risks.

See e.g., Offers to Buy or Sell Outside of eBay at 17 July 2006.

168

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6.3.1.4 Overseas sellers Twenty two per cent of buyers surveyed said they did not care where the seller is located. This is problematic because it is difficult to enforce your rights and seek redress from an overseas seller. 6.3.1.5 Interstate sellers If the seller is located in Australia, the majority of buyers surveyed (76.7%) said they did not care where in Australia it is. This is problematic for buyers when they wish to enforce their rights and seek redress in circumstances when a fair trading office or police department is not taking any action against a seller. In such circumstances it is difficult for a consumer to undertake proceedings against a seller in another state (e.g. issuing proceedings in a local tribunal/court) as it is costly and inconvenient to do so.

6.3.2 CONSUMER RIGHTS Despite the high number of online auction buyers that have experienced problems (48% of buyers surveyed), there have been a relatively low number of complaints made to law enforcement agencies and consumer government departments. The low number of complaints indicate that consumers are not adequately aware of their rights. Some problem areas include: •

business sellers

•

fixed price sales (no auction)

•

where to make a complaint.

Consumers do not appear to be using courts/tribunals to enforce their rights – see section 5.3.3.2. (In Australia, only one case was found where a user of an online auction site had claimed a breach of consumer protections laws through legal proceedings – see section 4.2.2.11.) However, this is likely to be because of the relatively low value of online auction transactions. The majority of buyers surveyed (58%) had not spent more than $200 on the most expensive item they have bought at an auction site and 25% had spent between $201 and $500. (See section 5.3.1.2) Small financial losses may deter consumers from initiating proceedings to enforce their rights due to the inconvenience of doing so and any additional costs that may be involved (e.g. solicitor fees).

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6.3.2.1 Business sellers Three out of every four survey respondents (475 responses in total including some people who had not bought an item at an online auction site) did not care whether the seller is a business or an individual. Buying from a business offers extra protections to consumers because consumer laws apply. Buying from an individual in circumstances when it is not “in trade or commerce” is a private transaction and offers fewer protections to consumers. (See chapter 3 and in particular sections 3.5.2 and 3.5.3) 6.3.2.2 Fixed price sales As discussed in chapter 2, U2C e-auction sites allow items to be bought at a fixed price and through an auction sale. When businesses sell goods to consumers at a U2C e-auction site at a fixed price (where there is no bidding, e.g. “Buy It Now” feature on eBay) they must comply with the implied statutory warranties and conditions. (See sections 3.2.1.2 and 3.5.2)169 Buyers were asked whether they thought that their legal rights were different or the same when they bought an item at an online auction site by auction sale compared to a fixed price sale. Four out of every five buyers surveyed (81%) said that their legal rights are the same regardless of the way they purchase at an auction site. Accordingly, the majority of online auction buyers do not appear to be aware of the legal protections available when purchasing fixed price items at auction sites. 6.3.2.3 Where to complain From the buyers surveyed who experienced problems at an auction site, 39% of them either never or only a few times successfully resolved problems they experienced when buying items at an auction site. This represents 18% of total buyers surveyed (or almost one in every five). Furthermore, 13% of total buyers surveyed have never resolved problems experienced at an auction site (more than one in 10). This means that there could potentially be a lot of buyers using online auction sites who have experience problems at auction sites that have not been resolved. For example, if there are three million online auction users: 540,000 may either never or only a few times successfully resolved problems they experienced when buying items at an

Business sellers in Victoria or businesses selling to consumers in Victoria must contain these conditions in relation to goods sold at U2C e-auctions sites by auction in addition to fixed price sales. (See sections 3.2.1.2 and 3.5.2) 169

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auction site; and 390,00 of those 540,000 buyers may have experienced problems and never have successfully resolved any of them. The high number of unsuccessfully resolved problems experienced by buyers at auction sites indicates that many consumers are not aware of where to make a complaint. This is supported by the relatively low number of complaints made to law enforcement agencies and consumer government departments previously discussed.

RECOMMENDATION 5: Consumer education on e-auction risks and consumer rights R5.1

Law enforcement agencies, consumer government departments, auction site operators and other relevant organisations (e.g. consumer NGOs) should educate consumers to increase their awareness of the risks involved in shopping at online auctions, and better inform them about how to reduce those risks. Areas to focus on include: payment methods; completing transactions outside of the auction website; likelihood of experiencing a problem; overseas sellers; and interstate sellers.

R5.2

Law enforcement agencies, consumer government departments, auction site operators and other relevant organisations (e.g. consumer NGOs) should educate consumers to increase their awareness and better inform them of their rights when shopping at an auction site. Areas to focus on include: business sellers; fixed price sales (no auction); and where to make a complaint.

6.4 Increased consumer protection Despite consumers' lack of awareness of the risks involved at online auctions, they do appear to recognise that some risks exist and are willing to accept those risks: •

The vast majority of buyers surveyed who experienced a problem at an auction site (91%) said that, after experiencing problems at an online auction site, they were willing to accept the risk and would still buy an item there in the future

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•

The relatively low value of online auction transactions170 may indicate that consumers recognise that risks exist when shopping at online auctions and therefore are reluctant to enter into high value transactions

•

Fifty-five per cent of buyers surveyed thought it was quite likely (33%) or very likely (22%) that a fake bid will be placed on an item they are bidding for at an online auction website

•

Twenty-eight per cent of buyers surveyed thought it was quite likely (21%) or very likely (7%) that they will be subject to fraud or unlawful activity at an online auction website. Twelve per cent didn’t know.

Consumers’ willingness to accept risk at an auction site is a difficult policy issue that needs careful consideration. One could argue that so long as consumers are adequately informed of the risks involved, how to reduce them, and what their rights are when something goes wrong, then nothing more needs to be done. After all, it is up to consumers to take responsibility and protect themselves from unlawful conduct at online auctions – the ‘let the buyer beware’ or caveat emptor approach. A contrary argument is that no matter how adequately informed consumers are of eauction risks and their rights, there are some unlawful activities at online auctions that consumers cannot be protected from and require regulatory intervention to combat. For example, it could be argued that user registration systems at online auctions do not adequately verify the identity of users so that fraudulent sellers can be identified, located and prosecuted. This may be overcome by legislatively prescribing higher standards for verifying users’ identities. It could also be argued that the low value of the majority of e-auction transactions means that an industry complaints body is needed to handle complaints because consumer education cannot prevent all problems from arising and consumers need to seek redress when there is a problem. At the moment, law enforcement agencies and consumer government departments may not be adequately handling online auction complaints because they cannot justify using the resources required to investigate and prosecute low value transactions. Consumers also are not willing to

The majority of buyers surveyed (58%) had not spent more than $200 on the most expensive item they have bought at an auction site and 25% had spent between $201 and $500 (see Section 5.3.1.2). Eighty-three per cent have not spent more than $500 on an item. Buyers commonly buy relatively small value items, such as DVDs, CDs, textbooks, cosmetics, clothing and motor parts. 170

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use courts/tribunals for similar reasons. An industry complaints body that is free to consumers and able to make binding decisions may overcome these problems. There are many arguments that can be made and there is no easy solution. The issue of consumer protection at online auctions is a complex one that needs careful consideration from relevant stakeholders. Below, we recommend that relevant stakeholders, through an appropriate forum, should meet and explore solutions regarding problems identified in this report. However, when considering the issues, stakeholders should remember that the ultimate goal is increased consumer confidence. Consumer confidence is generally recognised as a problem in e-commerce. At the moment, the majority of online auction transactions are relatively low in value.171 This may be because consumer confidence in online auctions is low due to its inherent risks. If consumer confidence were to be increased with regard to online auctions, consumers may be more willing to enter into high-valued transactions. With the popularity of online auctions in Australia (eBay Australia alone has over three million members) and the number of businesses trading there, there is a real opportunity for e-commerce to grow significantly if consumer confidence were to increase. This however may not occur if the regulatory approach is one of ‘let the buyer beware’.

OPTION 2: Improved verification of users’ identities O2.1

Legislatively prescribe higher standards for verifying users’ identities at online auction sites.

OPTION 3: Introduction of an industry complaints body O3.1

Introduce an industry complaints body to handle complaints that is free to consumers and able to make binding decisions.

6.5 The next step The CLC has made some recommendations and considered options on many key issues, but we have not comprehensively dealt with every matter. This is mainly because of the number of issues that we encountered, and also because some issues

171

See n 170 above. — 176 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

are complex and require further consideration. At this stage, relevant stakeholders should meet and consider how best to implement the recommendations made. Furthermore, relevant stakeholders need to explore solutions regarding the more complex problems identified in this report – those requiring further consideration. In doing so, they should take into account the options provided here. Finally, there should be ongoing assessment of any recommendations or next steps that are implemented to evaluate whether they are achieving the desired outcomes – that is, are they reducing the number of consumers experiencing problems at online auctions and increasing consumer confidence? We envisage that stakeholders meet at regular intervals to make these assessments. Relevant stakeholders should include: •

state and federal law enforcement agencies (e.g. Australian High Tech Crime Centre, Victoria Police, Federal Police)

•

state and federal consumer departments (e.g. ACCC, Consumer Affairs Victoria)

•

online dispute resolution companies (e.g. SquareTrade)

•

auction site operators

•

consumer interest organisations (e.g. Australian Consumer Association)

•

credit card companies and online payment providers (e.g. Paypal)

•

representatives from the banking industry

•

representatives from relevant internet industry associations.

RECOMMENDATION 6: Relevant stakeholders to meet and discuss issues R6.1

Relevant stakeholders, through an appropriate forum, to meet and: consider how best to implement any of the recommendations made and options considered that are deemed appropriate; explore solutions regarding problems identified in this report that need further consideration and are complex.

R6.2

Relevant stakeholders should meet at regular intervals so as to examine the progress of any changes implemented and — 177 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

determine whether the desired outcomes of reducing the number of consumers experiencing problems at online auctions and increasing consumer confidence are being met. Issues that relevant stakeholders should consider include: •

how law enforcement agencies and consumer government departments can handle online auction complaints that involve relatively low financial losses

•

whether the regulatory approach to online auctions should focus on consumer education only, or whether increased consumer protection is also necessary (e.g. legislatively prescribe higher standards for verifying users’ identities at online auction sites). If increased consumer protection is necessary, then whether this should occur through legislative intervention or through self-regulation. One option may be to develop an industry body that develops codes that deal with consumer issues raised in this report like complaint handling and verification of users’ identities

•

whether an industry complaints body is needed to handle complaints that is free to consumers and able to make binding decisions.

OPTION 4: Introduction of an online auctions industry body O4.1

Development of an industry body that develops codes that deal with consumer issues raised in this report like complaint handling and verification of users’ identities.

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CHAPTER 7

Consumer Suggestions and Feedback In chapter 6, the CLC suggested options and recommendations based on the findings of this project. In this chapter, we have allowed consumers to have their say by providing some of their own suggestions and feedback. We took some of these into account when formulating our options and recommendations. However, we consider it valuable to provide suggestions and feedback from consumers in their own words. We asked survey respondents (see section 5.1 for survey methodology) whether they think that the providers of online auction sites do all they reasonably can to operate their sites safely, or whether there are flaws in the way these sites operate that can and ought to be fixed. Most survey respondents (67% – see section 5.3.5.1) were of the view that providers of online auction websites do all they reasonably can to operate their sites/services in a way which is safe for users. Twenty-five per cent however were of the view that there are flaws in the way online auction websites operate which can and ought to be fixed. We then asked the respondents what, in their view, ought to be done by auction site operators to remedy these flaws.172 In addition, at the end of the survey, respondents could provide any extra information/feedback regarding consumer issues at online auctions that they wished.173 Below are some of their suggestions and feedback which we have broken into themes. As with the comments included in Chapter 6 many comments made by consumers refer to eBay. This may be because of the popularity of eBay and its very large market share in Australia (see section 2.2), which makes it likely that more comments will be made about eBay than any other auction site service. User Protection More protection can be given to both buyers and sellers which will then make online auction more safe. As I have been burned twice on eBay not getting my items I say they ought to be fixed but am unsure how they can be.

172 173

There were 120 responses provided in total. 76 Responses were provided. — 179 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

User information Provide more information on what to do if auction does not turn out how you want. User identification, verification and registration One hundred point identity verification should be compulsory. Compulsory identification checks for sellers! All good sellers would be willing to. EBay has the biggest scams, need verification system. EBay should do more to verify sellers and be quicker to act against scam sellers. More information should be held by the auction site to confirm the sellers identity. Much more stringent registration polic[ies] are required. Proper member authentication systems to help against fraud, get rid of dodgy overseas sellers who try to con buyers through expensive postage and counterfeit products. There needs to be a more stringent identity verification to combat fraud. There needs to be some limit over the number of registrations an individual can have. E.g. one individual should only be permitted to register a maximum no of times, to ensure transparency. Verification of new members needs to be a lot tighter Transparency in where the seller and goods are located. A closer inspection of people opening accounts to stop all the fraudulent listings. Limit one account to each person regardless. More transparency in regard to both buyers and sellers. Seller protection Not enough seller protection from nasty customers. There's not enough protection for sellers from fake buyers. Higher security Security to stop scammers.

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Strict security should be implemented. Regulatory issues A move away from the self-regulatory model towards a model whereby auction sites are regulated by an external body with various powers. The should be a law which is uniform across Australia that protects both sellers and buyers, is clearly defined, simple, transparent (no hidden small prints). Postage and handling There should be a postage section listing all postage costs regarding weight, size etc for Australia and overseas to prevent overcharging in the name of postage. Stopping overseas sellers putting ridiculously low prices but highly inflated shipping costs. … many times the seller charg[es] you too much [in] shipping fees [and] when you receive the product you can see how low fees they paid for post and handling. The only thing I have found about being a buyer at on online auction is that sellers seem to over quote the postage and profit from it. I believe the bidding price should also include postage. So when you make a bid you also enter your location so that the price you see is the TOTAL price. Nothing worse than winning a book for $3 and then having to pay $9 in postage. A big flaw. Monitoring/compliance Scammers and hijackers – need to be policed much more vigorously by eBay. Security. Banning fakes from listing. Taking action quickly when scams are reported, to prevent members from suffering fraud. So many hackers, not enough people monitoring them. Stop the scammers and make sure what they were selling was indeed genuine. There should be more monitoring of fair play and trading between individuals as not everyone knows what they can and cannot do. More regulation somehow, of the sellers in particular (monitoring their transactions more closely). eBay doesn't monitor fraudulent/unlawful activity. Their policies are not enforced.

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Am generally appalled at eBay's reluctance to properly monitor its auctions to ensure compliance with relevant legislation, [for example] sellers of perfume to sell with Express Post as an option when it is 'illegal' to ship perfume by air or indeed Australia Post. EBay needs to pay more attention to buyer issues with overseas sellers circumventing eBay rules at the expense of buyers. Shonky dealers need to be policed a little more. Insurance Lost items in post not covered by site ‘insurance’. Have protection for all buyers. They say there is, but I have yet to see it happen for me. Fraud About 95% of ebay is fraudulent [stuff] from overseas. EBay could do a lot to clamp down on this. EBay allows Asian sellers to flood the market with junk, inflated postage costs trapping many Australian buyers. EBay has too many fraudulent sellers who either sell counterfeit goods or no goods at all and try to rip off the consumers and ebay NEVER does anything about it. I am often sent 'spoof emails' asking me for credit card information. I have contacted eBay numerous times to resolve this, however little is being done to track down the origins of such emails. Stolen goods? Have you thought of covering illegal purchases in your survey? For example, kids getting a hold of weapons? Fraud prevention Fixing security issues that allows for fraudulent activity. Items need to be checked against possible fraud, fake items. There needs to be some sort of recourse for fraudulent activity – to protect both parties. Feedback Feedback deadlines (three months) should be extended or removed to allow for shipping delays from overseas. — 182 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Feedback should be compulsory. Non paying bidders should not be able to leave feedback for things they never paid for – they have no right to comment on what they did not purchase. The feedback system is flawed. Feedback does not reflect the quality of the transaction, because people are worried about receiving retaliatory [negative feedback]. A more fairer way of leaving feedback, eBay etc. Sellers often won't leave feedback until buyer does. Buyers & sellers can use threats of negative feedback to get what they want. Often feedback left does not actually reflect purchase/sale due to [negative] feedback threats. Feedback from other consumers is very important when buying/selling and should be focused on more. Fake items I am disturbed by the number of sellers in Asia selling fake designer clothing brands. For this reason I will only purchase from individual sellers, not large power-sellers. I purchased only one item described as 'new' when it was clearly old and faulty. Once was enough – its a jungle out there!! I think something has to be done about fake items… I have noticed a lot of fake designer clothing, and last year a friend bought what turned out to be a fake Samsung mobile phone. The only major fault in online auctioning is the lack of 'guarantee' of products being genuine however the returns policies probably makes up for this. Fake bids Seller making bids on their own items. Shill bidding seems rife, there must be more eBay can do. Buyer protection is inadequate. Sellers can not sell without being banned yet a buyer only gets three chances. Fraudulent listings which are reported take too long to be pulled. There are fake bids that you don’t know about and a lot of people try to push the price up by registering a new name and bidding with it with no ratings at all and bidding at a rapid pace. Fake bidding is high on eBay.

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Online auctions needs to be cleaned up. They could be a great way to sell items but… services like eBay encourage fraud. If something doesn't get done, it will taint the other extremely useful services like online banking. Enforcement … a 'three strike rule' enforced for infringements. A more hard lined approach to abusers of [the] system. Most sites have a policy, but don't stick to it. There are still people being scammed from overseas sellers. They need to be eliminated and banned from ebay.com.au. This relates to my opinion that eBay aren't vigilant enough with regards to fraudulent listings, and the fact they are hypocrites at times relating to their own rules! Being more specific about what is and isn't allowed to be listed and actually cancelling banned item listings. …no ‘punishment’ to dishonest seller. EBay are too quick to suspend sellers on silly things – email box full, false reporting by competitors – but non paying bidders and scammers have no probs. ask eBay about the way they try to phone you. Once, and if number engaged, bad luck if line used to dial up net. Customer Service and Complaints/Dispute Resolution Better customer service rather than automated responses. EBay needs to stop using automated answers when there are problems. EBay should provide users with telephone access to staff to assist with problems. Follow up when things go wrong. EBay’s attitude seems to be that as a buyer, you're on your own if things go wrong, where they could take action against the seller. I have had some problems – and have not received feedback from eBay even though I had proof that I had not received an item. I was disappointed in having no response or help. The auctioneer could do more to improve resolution services, currently the period is very long. They should have some kind of customer service. — 184 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

… needs to communicate better with sellers when problems arise instead of sending non applicable emails as answers. EBay charges a $25 fee for resolving disputes – doesn't even cover postage for buyers. A more timely complaint resolution service – current system allows respondent to have 30 days to respond to a complaint – and then they don't usually respond anyway. Complaints are not handled well. There is a time limit on making complaints – this can be a problem when waiting for an item to ship from overseas. I have enjoyed a generally high level of service from eBay sellers, the only online auction site I use. I found that eBay did not want to know/didn't care about the fake item I purchased and were not at all helpful in the correction process. No communication with 'real-life' people from eBay. All responses are like templates. I don’t understand the English and now lost my money. I am a single mother. Very upset. EBay don’t care as long as they get their fees paid! EBay/PayPal dispute resolution charges $25, not worth it when sales… under $30. Should not be a time ending for disputes as some sellers stall until the time is up, then nothing can be done to resolve issue, and no feedback can be given for that item either. PayPal has a 45 day policy-claims are not accepted after that – eBay has a 60 day policy and an item worth under 25 dollars is not considered worth the effort... excluding postage and other costs. Not enough is done to help people who have been ripped off by sellers. Auctioneer responsibility and duty of care Auction websites should provide more help and share responsibility when things go wrong. EBay don't care as long as they have collected their fees. EBay distances itself very much from its users auctions and does very little in terms of helping either the buyer or seller. I believe it needs to take more responsibility for what happens on eBay. Perhaps items and payments should go directly to eBay for them to hold and then they send it out. People send items to eBay, they auction them for you (to ensure description is correct) then send them off once payment received and forward payment to seller. Site owners should take more responsibility for what happens on their site. — 185 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

They should be responsible for any kind of misuse of their service. No idea, they should think of something or accept liability for accepting payment from members. EBay need to be more accountable. Contacting Police/Fair Trading Offices When coming across suspicious possibly fraudulent activity relating to online auctions I have found it difficult to find an institution/authority to report such instances. Better policies to use online auction websites Returnable goods due to damage or malfunction in the first few weeks should be at the cost of the seller. Rules should be set that are mandatory for sellers and buyers. The policies and who hold[s] responsibility for handling my money is not made clear, there are no instructions on how to use the auction service. There should be stricter punishment for people with bad feedback scores or for people who have not sent an item when payment has been received (i.e. after a couple of complaints should be kicked off and details sent to police). All Sellers should be subject to strict terms and conditions such as ‘damaged goods are NOT to be sold’. If so, buyer gets refund. All goods being traded must be able to be returned unless stated otherwise. Make sure there are strict guidelines as to the descriptions placed on products, especially whether an item is an authentic designer product. Ensure sellers either produce item or refund money. Payment mechanism EBay would be better if they weren't so in favour of PayPal. Use of credit card is known to be dangerous. I use a specific card and it is used only for that type of transaction. I am now FAR more cautious. I will only buy from people with COD or pick up facilities. I have had no problems, but my son who works in a bank said that he gets many questions regarding peoples rights when things have not gone to plan.

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Auction fees I visit eBay more than 10 times a day. I buy from eBay at least twice a month. I sell on eBay about twice a week. Their fees keep rising. I had a major problem with automatic direct debiting – once I opted for the direct-debit, [there] is no option to cancel. One problem I have is the fees the auction sites charge. They seem to be very high with paying their seller account. For example, eBay's direct debit fee of $8 being charged for unsuccessful bank requests. Auctions sites such as eBay have turned me away simply because their listings fees are excessive. They expect payment regardless [of whether] you sell the item, that becomes very expensive for non retail sellers such as myself. Fees are getting very high for the standard of protection and service that is offered by eBay. EBay fees are far too high. Risks So far I have had a pretty good experience overall selling and buying on eBay, and I will continue eBaying but always with some caution. People who don't know much about the internet are probably right to stay away from buying online - it can be dodgy at times. But for those that know what they're doing, it's easy to buy heaps of stuff online and not get burnt. EBay runs well, you need to be careful. I have had scammers try to take me off line for high value items. Ebay warned me by direct email that I may be being scammed but it was pretty obvious. Global shopping/communicating great, but not being able to touch/feel a liability. Am very wary of having to deal with Australia Post who are not reliable. Police are investigating a fraud affecting more than 20 others. This has made me more wary but I continue to bid for goods on the site where the fraud occurred as the auctioneers usually sell direct rather than member to member. Sometimes if you bid for the used products you have to take care and its better not to buy a used products from online auction as there are possibilities to get unworth[y] stuff. General Verification of buyers details, upgrade of feedback system, all listing fees credited if NPB, more involvement from management in dispute resolution.

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Seller issues Its not easy to retract a sale item if the buyer breeches terms and conditions. Selling is too difficult and buyers do not read ad then complain – i.e. buyer wanted film in a camera, was very irate, buyer of coat complained about the way I folded it. Positive experiences As a buyer… so far so good with eBay! Generally online auctions are pretty good locally. I am a big fan of online auctions, buyers and sellers are usually far better mannered than other shops. Love the convenience and appreciate the safeguards in place at eBay. I enjoy looking for items on eBay, especially collector’s items and out of print books, which are hard to obtain through shops, or are ridiculously overpriced. Online auctions are based on trust in the inherent goodness of most people. Online auctions are easy, fun and make products that are out of production/print readily available. The fairest and best site is definitely Oztion. Oztion is great as you can list items for free. Oztion is Australian owned and run, and is cheaper then eBay to sell. There will be difficulties at times with any form of buying, buying online is no different. Being a full time seller we love it. I prefer to buy/sell at an Australian site called Oztion… They have no listing fees and the administrators respond to you question efficiently and promptly. Consumer awareness of rights The survey helped me think about the issues involved. I am now determined to read the rules etc of eBay and consider what remedies are available. PS I only buy from Australian sellers but have had products arrive from overseas. Online I wouldn't exercise my rights as if I were shopping in a business. It’s like a garage sale. The description is important though because you can't see it! But I wouldn't pursue legal anymore than I would at a garage sale. Win some, lose some. Addictive They [online auctions] are very good but can be quite addictive when you first begin to use them and it is easy to overspend. — 188 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Appendix 1: Survey

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Appendix 2: Survey respondents Table A2.1 AUSTRALIAN STATE/TERRITORY SURVEY RESPONDENTS LIVE IN (SURVEY WAS FOR AUSTRALIAN USERS ONLY):

% OF TOTAL SURVEY RESPONDENTS (510 IN TOTAL)

VIC NSW QLD WA SA TAS ACT

82% 9% 4% 2% 1% 1% 1%

Percentages may not add to 100 due to rounding.

There were no survey respondents from the Northern Territory. In terms of gender, the majority of respondents were female (63%). 37% were male. Table A2.2 AGE GROUP OF SURVEY RESPONDENTS:

NUMBER OF TIMES ENTERED

% OF TOTAL SURVEY RESPONDENTS (510 IN TOTAL)

196 102 90 76 34 10 3

38% 20% 18% 15% 7% 2% 1%

19-25 26-35 36-45 46-55 56-65 16-18 Over 65 Percentages may not add to 100 due to rounding.

Table A2.3 POSTCODE OF SURVEY RESPONDENTS HOME ADDRESS:

NUMBER OF TIMES ENTERED

1

3337

19

2

3020

16

3

3011

13

4

3030

13

5

3038

11

6

3023

9

7

3028

9

8

3029

9

9

3032

9

10

3037

8

11

3040

8

12

3058

8

13

3021

7

14

3000

6

15

3012

6

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16

3013

6

71

3216

2

17

3041

6

72

3305

2

18

3064

6

73

3434

2

19

3429

6

74

3437

2

20

3025

5

75

3802

2

21

3338

5

76

3806

2

22

3015

4

77

3850

2

23

3018

4

78

4503

2

24

3039

4

79

4570

2

25

3043

4

80

2000

1

26

3044

4

81

2011

1

27

3111

4

82

2017

1

28

2560

3

83

2029

1

29

2759

3

84

2031

1

30

3031

3

85

2044

1

31

3033

3

86

2049

1

32

3046

3

87

2077

1

33

3055

3

88

2084

1

34

3083

3

89

2100

1

35

3095

3

90

2131

1

36

3101

3

91

2145

1

37

3121

3

92

2170

1

38

3141

3

93

2171

1

39

3142

3

94

2221

1

40

3175

3

95

2250

1

41

3183

3

96

2258

1

42

3196

3

97

2287

1

43

3340

3

98

2291

1

44

3442

3

99

2336

1

45

3660

3

100

2354

1

46

3977

3

101

2422

1

47

4127

3

102

2430

1

48

2280

2

103

2460

1

49

2615

2

104

2464

1

50

3016

2

105

2528

1

51

3024

2

106

2566

1

52

3034

2

107

2590

1

53

3042

2

108

2594

1

54

3056

2

109

2680

1

55

3065

2

110

2747

1

56

3067

2

111

2758

1

57

3068

2

112

2760

1

58

3082

2

113

2770

1

59

3132

2

114

2776

1

60

3134

2

115

2778

1

61

3150

2

116

2905

1

62

3156

2

117

3003

1

63

3163

2

118

3022

1

64

3166

2

119

3036

1

65

3178

2

120

3047

1

66

3181

2

121

3048

1

67

3182

2

122

3049

1

68

3212

2

123

3051

1

69

3214

2

124

3052

1

70

3215

2

125

3059

1

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126

3061

1

178

3658

1

127

3070

1

179

3717

1

128

3071

1

180

3756

1

129

3073

1

181

3777

1

130

3074

1

182

3779

1

131

3075

1

183

3793

1

132

3076

1

184

3825

1

133

3079

1

185

3862

1

134

3085

1

186

3871

1

135

3102

1

187

3910

1

136

3103

1

188

3959

1

137

3104

1

189

4012

1

138

3106

1

190

4019

1

139

3108

1

191

4034

1

140

3113

1

192

4075

1

141

3122

1

193

4163

1

142

3126

1

194

4165

1

143

3129

1

195

4215

1

144

3130

1

196

4304

1

145

3131

1

197

4502

1

146

3138

1

198

4508

1

147

3144

1

199

4510

1

148

3149

1

200

4551

1

149

3161

1

201

4670

1

150

3162

1

202

4800

1

151

3165

1

203

5023

1

152

3168

1

204

5032

1

153

3169

1

205

5035

1

154

3172

1

206

5044

1

155

3173

1

207

5073

1

156

3177

1

208

5096

1

157

3184

1

209

5115

1

158

3185

1

210

6007

1

159

3186

1

211

6028

1

160

3193

1

212

6058

1

161

3195

1

213

6069

1

162

3199

1

214

6110

1

163

3202

1

215

6160

1

164

3205

1

216

6163

1

165

3206

1

217

6210

1

166

3221

1

218

6330

1

167

3264

1

219

6488

1

168

3280

1

220

6640

1

169

3321

1

221

7248

1

170

3350

1

222

7260

1

171

3377

1

223

7325

1

172

3427

1

224

7330

1

173

3431

1

225

9726

1

174

3444

1

175

3461

1

176

3564

1

177

3629

1

NUMBER OF TIMES POSTCODES WERE PROVIDED

* Some survey respondents did not provide their postcode.

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479

Appendix 3: Additional survey and focus group results 5.3 Bidders and buyers 5.3.1

BUYING BEHAVIOUR

5.3.1.1 Frequency of buying Focus group discussion During the focus groups, we sought information to help us better understand why buyers at online auction sites bought items as frequently as they did. From the discussion with the focus groups, we found that for some buyers participating in online auctions had almost become an addiction: they were online many times a day for several hours at a time, searching for bargains and checking the progress of auctions in which they had placed a bid. For others, checking the site was part of their daily routine, but they usually confined this to one visit a day. These people tended to be browsers who would impulsively bid for something that took their fancy, even if they had not previously considered buying such an item. The focus group participants provided the following responses: Question: How often do you do it? Weekly. Always. – Group 1 (Staff) I probably look on eBay every day, or every second day. I’ve got the eBay bar at the top, so it’s just there. You can type in while you’re doing whatever. Meant to be doing an assignment or something, you’ve got eBay there, so [laughs] you know, procrastination tool. – Group 2 (Students) — 201 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Question: Do you do it every day? Yes, I will do it every day. I will check my email, and it will have an eBay icon, and something’s been emailed to me and I’ll click on it and see what I have bid on. And it’ll be something I bid on and totally forgot. ‘Oh that sounds familiar..’ I want it, start bidding for it. – Group 3 (Students) Question: What about others of you? How often would you go on? Probably once a day, or every couple of days, when I’m selling things, to see what the prices are at. - Group 2 (Students) Question: Has it turned into an obsession with you? Yes, over a period of time. It depends on how bored I am, it depends on internet access as well. If you’ve got internet access and you’ve got absolutely nothing to do – and that includes all your homework – you just quickly browse and that browsing turns into hours of bidding. – Group 3 (Students) I have a look every day, but I might spend five minutes, I might spend an hour. If there’s something there I wanted to buy, I’d spend an hour, finding ones in the right place. If it’s something that just crossed my mind, I might just go and have a look at it, just go and check how much those things cost. But then having said that I’ve bought probably four things on line today. Once you put a bid on, you’re pretty much on there until the end of the bidding. – Group 2 (Students)

A few of the focus group participants were collectors for whom online auctions offered a rich source of goods. They were frequent but focused visitors. That’s the beauty of it for a collector. You can spend years crawling through stores or whatever. You’ll find it on eBay within a week probably. – Group 1 (Staff) I think that’s one of the problems of comparing it to off-line auctions. It doesn’t just replace off-line auctions, it’s a place like collectors’ fairs and small shops and a lot of the things. And you can actually put things in the ‘watch’ list. I’ve found when I go to collectors’ fairs, I’ve always just grabbed everything. — 202 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

– Group 1 (Staff)

Others went online to look for something they specifically wanted. Their visiting patterns were episodic. When they were looking for something specific, their visits were frequent; but they might go for weeks or months without visiting at all. I’ve done it [purchased something] four times. Over six months. But it was six specific things, to save money [and] after I went through all the shops and I couldn’t get what I wanted. – Group 1 (Staff) It’s quite sporadic for me. It’s basically whenever I need something, or whenever I have something that I want to sell. One of the things that I bought last year was a digital camera. So I spent maybe a few hours researching different models of cameras, then looked on eBay to see if people were selling them and to see what they sold for previously. My main motivation is to buy something cheaply, so if I can buy it cheaper at a shop or at a swap meet or some other source, then I won’t buy from eBay. – Group 2 (Students) I wouldn’t use it just for browsing, I’d use it if I needed something, or if I had an item that I wanted to sell. – Group 4 (Students) I do every now and again to see what’s up, see if there’s anything I might consider buying. Could be once a week, could be twice a month. Depends on what I’m after or how much time I have. – Group 4 (Students)

5.3.1.2 Amount spent Focus group discussion During the focus groups, we sought information to help us better understand what types of items consumers were buying at online auction sites. Respondents in the focus groups spoke positively about their buying experiences. The types of items they had bought commonly were relatively small items, such as DVDs, CDs, textbooks, cosmetics, clothing and motor parts. However, some people had bought consumer durables and some quite expensive items, including a pair of sunglasses for $400. One or two men had also bought cars (although for relatively low prices). — 203 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Some purchases were obscure, such as a page from a Greek magazine advertising cigarettes bearing the name of the buyer’s daughter. One young man had bought a breathalyser. The responses give included: Question: What sort of things have you bought at online auctions? At the moment its like textbooks. In January, February and December you pick up all your university textbooks for like $10-15. I don’t think there is a lot that I haven’t bought. I bought tap shoes for my daughter, I bought clothes, I bought a digital camera, jewellery , books, DVDs, CDs, videos, a piece of magazine from Greece (laughs). Question: Why did you buy that? Because my daughter’s name is Xanthia and there’s a cigarette brand in Greece called ‘Xanthia’s Cigarettes’. I started off buying things like handbags, stuff like that, then I got into clothes, which was a bit dangerous because half the time it doesn’t fit. I work in a sort of cycle. I buy stuff off eBay that hasn’t been marketed properly and get it real cheap and then sell it off with a better picture and better description. Question: What things have others of you bought at auction online? Primarily just CDs, DVDs, some clothes because you couldn’t get that brand here, only in America. I buy mostly computer stuff and telephones. I’ve bought books, computer parts, clothes. I’ve also bought a plant puppy for a vanilla plant because they are quite expensive – Group 2 (students) I bought two, what do you call those things you put in the digital cameras? SD card? Yeah, I bought two of those. In my work I do a lot of industrial abseiling so I bought a couple of things for work, and I went to pick the things for work up because I buy from that person quite a lot. I go round and see him and I’ll be like, so while I’m here, what else have you got? So I’ll use the auction to get something and I’ll go round there and just get something else that they would have auctioned. I’ll buy it from them. Question: What have you bought in your great waves of enthusiasm?

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Oh, please! Mobile phones, a DVD, clothes, what else, I can’t remember, shoes, cosmetics. The last thing I bought was a breathalyser. Set me back 20 bucks. They’re about 60 bucks in the shops, aren’t they? Yeah, about that. I bought a guitar for a friend not too long back, then I bought sunglasses, Oakley’s. Last year I bought some old runners. I like getting runners from the old days. Question: Are you a bit of a retro? Retro stuff’s cool stuff, though.. Back in 1990 there were watches, these Nintendo watches and they had games on them and I think some of them sell for like 200 bucks, but I’m not going to pay that much. But I collect old watches with little characters on them. They used to make watches with little 3D characters, little plastic 3D characters, and they’re so hard to find now. – Group 3 (Students) Question: Tell me a bit about what you’ve bought. Car stuff. Performance parts for the car. You can buy an exhaust system, you can buy a turbo, an intercooler. Every time I need something I just check on eBay first. Question: What else have you bought? I’ve bought a glass grinder for my mother. I bought fragrances from eBay as well. I’ve purchased sporting apparel, sporting goods. Question: What about others of you? Clothes, shoes, handbags. Jewellery, DVDs, a USB stick for the computer, and make-up. Stuff for my camera, bags and lenses and things. I’ve bought some car parts, some sporting equipment. I got a snowboard, DVDs, a few odds and ends. Concert tickets, DVDs, CDs, videos, kids toys, motorbike accessories, we’ve bought some cameras for the kids for Christmas, a computer, parts like memory.

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A pair of sunglasses, clothing, a poker set, and sporting memorabilia, like framed, sort of memorabilia, like a Brownlow medal, for example. Question: You bought a Brownlow medal? No, like a framed thing, with the winner and a photo, limited to 500 or something. Question: What would be the most that you’ve spent on an online purchase? I’ve bought a TV and a mountain bike. I bought three mini-bikes for 27 hundred. I spent $400 on that pair of sunglasses. Question: What sort of bargains have you scored? I got a six-year-old camera bag for five bucks, and that was a pretty good bargain for me. Fifty dollars in the shop. I bought myself a PlayStation 2, and I went hunting for a game, call Juiced, a car-racing game. And it had recently come up to the stores and it was I think about $100, and this one was only $32 including postage, and it’s been excellent. I know a good one but before I tell you I need to let you know I’ve got a ten year old daughter. I got two tickets to Jesse McCartney for the price of one. – Group 4 (Students)

Some of the respondents in the focus groups said that they had discovered that retailers were using online auction sites to reach buyers: Recently I bought a dishwasher off eBay, and they’ve [the retailer] been using it as [advertising] so when you go to buy it, you go to the warehouse. They do everything through eBay. Question: So they’re just using eBay as a means of reaching you? Absolutely, and they all have warranties and everything. They’re all new products. Question: Are those products auction or fixed price purchases? Auction, but they’re all above a price where they sell them. If it’s below the price that the seller wants it to sell at, obviously they can refuse the sale. [I paid] $760 and you’d pay about two-and-a-half to three thousand dollars. They can do that, they don’t need to advertise, they don’t need to chase bad debts, because eBay does it for them. — 206 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

And they put so much quantity through, they can lower their prices and still make a profit. – Group 1 (Staff)

5.3.1.3 Buying preferences

Business or individual We also asked the focus group respondents whether they preferred to buy from either individuals or businesses. Overall, there was no clear preference; for every person who reported a good experience or postulated a positive reason for dealing with one or the other, someone else reported a bad experience or postulated a negative reason. The respondents who prefer to deal with a business argued that this usually meant they were getting the benefits of a ‘brand’, including a warranty. Others countered this by saying that businesses could be difficult to deal with and unresponsive to complaints. The respondents who preferred to deal with individuals argued that most people were prepared to ‘do the right thing’ and make good any deficiencies without demur. Others countered this by saying you really didn’t know who you were dealing with and that avenues of redress would be limited. The focus group participants provided the following responses regarding these issues: Yeah, and I would choose to bid from a dealer rather than an individual. When I buy manuscript papers and things like that, you can get them from all kinds of people, but I’d rather get them from a dealer, than an individual. I feel a dealer’s more authoritative, I believe more of what they say about the item. Sometimes individuals don’t quite get it right, they don’t even know the words to use, so how much can they know? When I’m buying computer things, I’d much rather get them through a dealer. The same reason: you open the package the same, you can browse through their other kind of products, so you know. I was buying a USB stick. You can see 15, 20 of the same USB sticks that they’re selling every day, so you know that they must be selling a good product. Question: When you say ‘dealer’ who do you mean? With what I’m buying, they’re like a shop, but they probably don’t have shops, because a lot of antique dealers and antiquarian stuff will have closed their shops now, and they only sell on the internet.

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Question: How do you identify them as a dealer? You can go and see if they’ve got a website or their own on-line store. I always picture them in a shop behind a cash register, you see, if I have to ring up, or anything. I’m a collector, and I’ll have fads of collection. I’ve been through manic moments. If I want to buy a DVD or I want to buy a CD, I’ll buy it from an individual if it’s a hard to find thing. If I want to buy the latest copy of a movie that hasn’t been released in Australia, I have no problems with going through a store in America that sells via eBay. Then it’s likely to be pirated. I’ve got some dealers I go back to and I can email when I’m looking for something, that I’ve met up through eBay. It helps you with the trust. Yeah, once you’ve had a successful transaction with someone, you don’t have any problem with buying from them again. You feel comfortable. – Group 1 (Staff) If there’s a possibility that I can look at a website, like, there’s a business but they also want to use eBay, I like to go and check up and have a look. I basically just look at their feedback and other items that’ve been sold. I went through a phase where I bought about 20 bikinis, so I kept buying them from the same person. I knew that the goods were brand new. People that you’ve had past transactions with and they’ve gone smoothly, you’re sort of more inclined to trust. I’ve actually had a bad experience with trying to bid with a company, so I’d be more inclined to bid with like an individual person. They’re more reasonable. If you get it from an individual, you can at least contact them and they’re usually reasonable people. That’s my experience as well. I’ve transacted with a business on one or two occasions and they were pretty surly people, and I just was rubbed up the wrong way by it. – Group 2 (Students) Question: Do you prefer generally to deal with individuals or companies? Companies. I prefer individuals. Companies sell so much shit.

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Question: What’s the difference? Individuals sell shit too, we’ve just heard lots of examples. I guess I prefer people that don’t sell that much stuff. Question: Some of you said companies. Why do you prefer companies, those of you who said that? Even though it’s probably not true, it seems like they’re more reputable, but they could be anyone. – Group 3 (Students) Question: Would you prefer to deal with a company or would you prefer an individual? Depends what the product is I think. For example, if you’re buying a set of car speakers, and there’s an eBay store. Say they’re valued at $700 and they’re flogging them for about 200 bucks ‘buy it now’. You just question the quality and where they’re from. Something like that I’d rather maybe pay that bit extra from a single person. So things like that that are just sort of made in bulk, I just query. I think with a company, you pay a bit more but you get better security, whereas from a person it’s the opposite. You tend to pay less so you get less security. And warranty as well. – Group 4 (Students)

5.3.1.4 Auction v fixed price purchases Respondents who have purchased fixed price items The focus group participants also responded to questions regarding whether they preferred to buy an item through the auction process or at a fixed price. For some of these respondents, the benefit of the fixed price sale was that they could have the item instantly, and they were prepared to pay more for this benefit. When opting for a fixed price purchase, these respondents were aware that they were forgoing the chance to get a real bargain, but were more concerned about saving time. The responses from the focus group regarding these issues were:

Question: Have you ever purchased at fixed prices? I have. It was a game, for my brother’s birthday, and there were two options fixed price or what do you call it … — 209 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

‘Buy it now’. ‘Buy it now’ and also the bidding one. And even though it was like thirty dollars difference… Question: The fixed price was higher was it? Yes, um, there was a whole week still to go and I wanted stuff real quick, so I figured, it doesn’t really matter, I just bought it. Yeah, a couple of things I’ve bought fixed price. One of them, that was the only option, and I wanted it so I bought it. The other one was, it was higher than the auction price and I just didn’t want to miss out. Another thing I actually purchased with the buy it now, they included postage and handling in that price, so it was that price and that’s it, whereas with the bidding, even though you may have actually got it at a lower price, you may have ended up paying more with um the postage and handling involved. – Group 2 (Students) Question: Do you always purchase at an auction, or do you sometimes purchase a fixed price item from an auction site? GROUP: Both. Question: And what will determine whether you do one thing or the other? It depends on how much you want it, like if it’s ‘buy it now’, you can just get it without having to bid for it and think you might not get it. Question: Would the fixed price be usually higher or lower than the auction price? Around the price. Usually higher. When you get some big sellers which will sell say 10 of the same of the things, like cards that go in your camera, the same person might have had 15 or 20 of them. Some of them were fixed price, some of them were auction, but if you go and have a look at each different one, they’ve got a different postage price for each one, so you might go oh, fixed price I’ll get a deal, but you pay the postage price for that item a lot higher than you would pay if you bought it at auction. A lot of people in Hong Kong sell their stuff for $1 but you have to look at the postage price, because some of them are like $25.00. I’ve fallen for that a few times. The first thing I bought, I bought it for $2, but postage was $18..

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I know you don’t need to be reminded, they’re quite dodgy over the net, you’ve got to be careful as well. – Group 3 (Students) Question: Do you ever buy from an auction site at a fixed price? Yup. If I wanted it quickly. Something rare. Or the comparison of the ones that are listed for auction look like they’re going to go for more than that other one, fixed price. So you just save yourself the auction. If I was willing to pay that much for it anyway, rather than wait three days for an auction to end, I’d be happy to get time for the sake of five extra or 10 extra dollars and wait, and then it’d probably go higher anyway. Sometimes, I’ve noticed, the seller has base auction price and buy it now and there’s only like one dollar difference between the two. – Group 4 (Students)

During the focus groups it became apparent that a major attraction for buying items online at auction sales was because people felt they could get a bargain and because they found the bidding/auction process fun and/or exciting. For example, when asked what attracted them to online auctions, focus group participant’s responses included: The prices. – Group 1 (Staff) I like the fact that you can get a lot of things, there’s such a huge market, and a lot of things are really quite cheap. You can often get a really good bargain. Especially with electronic equipment. Cut out the middle-man, and you can get things really cheaply. – Group 2 (Students) Saving money. – Group 3 (Students)

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Trying to find a bargain. – Group 4 (Students)

Focus group participant’s responses relating to the fun and excitement of online auctions included: You’re bidding against another person and sniping at the last minute. Don’t waste your time bidding at the start of the auction, but at the last minute, and you don’t know how many people are logged on, and what price it’s going to go for and it’s going to be very quick. – Group 1 (Staff) Not so much competitive but just a little bit of fun. Like you put an offer forward, and if you’re lucky, you win. You sort of get an adrenaline rush, especially when you’ve got someone else there directly bidding against you and you’ve got 41 seconds and, 21 seconds, and you’re upping the bid and all that sort of stuff. You cheer like you’ve won it and you know you’ve got to pay. That’s what also makes it exciting, the idea that you’re getting people from all around the world fighting for that one thing you want. It’s that feeling of being connected. – Group 2 (Students)

5.3.3

RISKS INVOLVED

5.3.3.1

Likelihood of problems

The type of problem likely to be experienced We asked respondents in the focus groups questions about how much they trusted the online auction process and their experiences with some of the problems they had encountered. The general attitude appeared to be that users of online auction sites felt that they would ‘prevail’ over wrongdoers who misuse the site. A number of the respondents also revealed that they had been wrongdoers themselves and that they had sometimes ‘prevailed’ and sometimes had not. These respondents showed little shame or guilt about misusing the online auction site, and it appeared that the guiding principle was caveat emptor. For example, many of the respondents reported that they had been ‘ripped off’ when they first started using an online auction site,

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but then they learnt to ‘survive and prosper’ and seemed to have no hesitation in ‘ripping off’ others. This attitude was not universal, but it was quite widespread. The focus group respondents’ sense of trust when using an online auction site seemed to be influenced by three factors: their own experiences; a tacit expectation that, in the long run, they would have more successes than failures; and what they saw the online auction site doing to protect users. In relation to eBay, for example, the site operator was seen to have tightened up its procedures, to have introduced insurance to protect buyers, and to have aligned itself with the PayPal system of payments. These, in addition to the ‘feedback’ system, appear to be what buyers’ trust rested upon. The focus group participants provided the following responses regarding whether they trust online auction sites and some of the experiences they have had: Question: You said that eBay is one you can trust. How do you know you can trust them? I’ve heard a lot of bad things about it, but I also know that no-one’s been burned by it, so that’s good, kind of reassuring. Question: How could you know that? There’s a whole lot of fraud emails that look like they’re from eBay, that say, someone’s bought this from you, and gives you this link, but actually it’s a fraud site. I bid on one item which never arrived, that was problematic, I just gave up in the end, I just didn’t know what to do. Question: Did you part with the money? Yeah, because they don’t send you anything until you pay. I’m sure they mailed it. And once I paid someone twice accidentally, and he emailed me and said you’ve paid me twice! And then he immediately reversed the payment. I think when eBay started up it didn’t have all of those precautions in place, so I think a lot of people might have got burnt initially, because it was an honour system, but now there are actually a lot of procedures in place and a lot of security, insurance basically, so that if you do get burned, you are covered. I’ve done hundreds of deals, I think I’ve only ever been screwed once, and that was early, and I’ve been doing it since 1998. I’ve bought an iPod which wasn’t really brand new. I had a difficult time with the seller. At the end I just had to go through the dispute centre with eBay. They just handled my claim and eBay refunded the money.

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Question: What happened to the iPod? Oh, I got a free iPod out of it. Question: Did you give him bad feedback? Definitely. Question: Did you pay through PayPal? No I didn’t, but now I wouldn’t buy anything outside PayPal because of security. It happened to me, I think it was early on in eBay. I rang the place in America and he just said he’d mailed it, so I didn’t know. I try not to buy expensive items and in my mind I think I can afford it if I lose, you know, up to a hundred dollars or whatever. Question: Do others of you have a kind of ceiling like that? Every time I spend. I think I’d be loath to spend hundreds of dollars on something from overseas, whereas if it was in Australia, I think I’d feel a lot more secure. I just feel, it’s in my neighbourhood, basically. I don’t really have a ceiling that I think about, but certainly there’s a ceiling there. Question: Now [female], you’ve bought a reverse cycle air conditioner for 200 bucks or something? They were literally pushing through about 10 to 15 air conditioners through the auction every day. We looked at their approval rating and all their feed back was very positive and they had may different types payment forms and the warehouse was in Melbourne, so you could actually go and physically pick it up ourselves. I look at where they come from sometimes too. If they’re shipping something from Bulgaria or China and they say they’re registered in the US, but then you see the item location is in Hong Kong, you sort of go okay, it’s not quite the way I’d like it to be. It’s going to be a cheap import from Asia or something like that. Question: Are you saying that the higher the number of transactions, the more trustworthy they probably are? The higher it is, the harder it is for them to fraud. If someone has five transactions in the last six months and they’ve all been very good, they could have all been from friends. That’s a lot harder if they’ve got a lot of transactions. But maybe I’m wrong.

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If they’ve just had five items sold in the recent past I look at their ID history. If someone has changed his name three times, fake. There is no price good enough that I’ll buy it. I look at the items they sold. It sort of gives you an idea of what type of person they are and also, if it all looks good and sounds good to me, then I’ll try this person. I might get burned every once in a while. Question: But not many of you have been burned by the look of it? GROUP: No. In relation to choosing a person, it’s not simply the overseas thing, it’s not simply a matter of trust, it also a matter of complexity. If something goes wrong, it’s just damn hard to deal with the whole thing overseas, compared with here. You know the ground rules, you know the social [mores], you know everything, it’s easier to deal with. So it’s not just a matter of trust. – Group 2 (Students) Question: You were just saying that sometimes you will get a warranty of some sort. In what circumstances? It just depends on whether you buy it from an actual company, compared with, like, just a person. I bought an MP3 player and the headphones broke, so they let me send the headphones back to them and they sent me some new headphones. Question: Who were you dealing with? Were you dealing with a company? No, it was just one person, but they were selling a lot of stuff.. Question: Is it a risk that they don’t have proper title to the goods? No, it’s not a risk, If it is a risk, then it’s not unique to them.. Anything second hand, anywhere, you don’t really know. Question: So the risk is no greater online then going down to the shop? It is a little greater because you can’t track anything on eBay. If they find you selling fraudulent stuff first of all you get suspended and you won’t be able to sell on eBay or buy from eBay ever again. Question: So you’re saying eBay themselves have a kind of enforcement procedure. How much faith have you got in it?

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I reckon it’s crap whatever they are doing. The same person all they do is change their name, cancel their credit card or the bankcard that they registered with, set up another name and do it all over again. I don’t think that. I’ve had plenty of strikes against me because I always bid on items and never buy anything. Question: Why is that a strike against you? They hate people who do that. I don’t plan to do it. It just happens. I bid and I win. I don’t expect to win and they harass and say deal with this now and I just ignore them and I get a negative score. So I’m like a bad buyer. Question: EBay rates you, do they? Yeah. You have like a certain percentage. When you’re buying something you see 99.9% so you know they’re reliable. But the rating system could be deceiving. You’ve got to be careful. Question: Do you mean a percentage of feedback references? Feedback, because that’s the big thing. If they’re a person or a company and they’re reliable and they’re selling thousands of items, all have been sent properly, everyone’s given positive feedback. You’ve got no problems. You know this person will be reliable, as opposed to a person selling one item and getting 100% or a person having zero feedback. Beware. I recently went to buy something off eBay and the feedback was 99.7% positive. But it’s because they had sold like 10 million things on there. When we got into it later, they actually had 500 negative feedback in the past month just because they sell in masses. So the feedback is deceptive like that. Question: Do you all check the feedback? Always. That’s why it takes hours. Question: It’s the rate that’s important? And also when people leave comments. You look at what they’ve complained about because sometimes things are still in the post and people leave a negative feedback. So you get people who leave negative feedback for things like that when the problem’s with the postage and not the item. Question: Have you ever been dudded in an online purchase?

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I have. I just bought a book. It wasn’t very expensive – about $18. Apparently eBay doesn’t cover you unless its over $20. And it just never arrived. [The seller] didn’t respond to emails, the phone is disconnected, they were no longer a registered user. I almost did. Like I said, the intimidation thing works. This person overseas was selling a brand of ties, Burberry, and when I paid them – they received it, obviously – and it didn’t arrive within seven days I started to email him. When I went back on eBay their user name was deregistered. So I emailed them and threatened if you do not send me the goods I will get my bank to get to you and then I will get my money back and you will be in trouble mate. I know your bank account so don’t mess with me. And then seven days later after I got my tie. I bought a record for $4 and it was stated as ‘as new’, I played it and it was skipping. And I gave the person negative feedback and he said, ‘Well how was I supposed to know? If I played it, it wouldn’t be “as new”’. – Group 3 (Students) Question: Do you trust eBay? I do. The first item I ever purchased was a mountain bike. I was very apprehensive. I paid a bit of money. And it was in perfect condition, brand new bike, and no problems at all. So since then I’ve been up the garage and found a few things and put them on eBay and I haven’t had any problems at all. Question: How much faith have you got in the feedback process? Well, if someone isn’t happy with something they’ll definitely put it up there as negative feedback. I also look at the date they joined eBay. Someone that’s long term and got a good rating, they’ve obviously been doing what they say they are. When I bought the video camera, it’s a company based in Sydney, and they had quite a bit of bad feedback, and when I read it, it was a common theme saying that they need to buy an adapter plug. So, you really need to look into it. Someone said to me, I look at this feedback, and when it’s negative, I in fact look at the negative feedback, and then I look at the negative feedbacker’s own record. Now have you ever done that? Yeah. I’ve looked at that before. Because two people said to me they did just have a conflict between themselves so they give each other bad feedback. Question: Is that a concern? Is the feedback index generally reliable or is it, is it open to rorting, such that it makes it unreliable?

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It’s not 100% reliable anyway. I had one thing I bought, I only paid $7 for it, but she had total 100% good feedback, and the item never came. Question: Have you ever bean cheated? I just didn’t get my item. Because I only paid $7 so, that was many years ago. I sent her many, many e-mails and she kept sending me back e-mails that were – like, each time that I got an e-mail – which was probably a month between each one, it was a different lie. – Group 4 (Students)

5.3.2.2 Buyers’ assessment of risks We asked focus group respondents about the risks they perceived to exist using an online auction site. The most commonly identified risks were misrepresentation, goods not being delivered or arriving damaged, absence of a warranty, and potential misuse of personal information (the buyers’ name, address and credit card details). However, few of the respondents were bothered by these perceived risks. Further, the respondents appeared to take the view that all buying and selling had risks and that online transactions were no different. In particular, risks associated with intellectual property rights, such as pirated versions of CDs or ‘rip-offs’ of designerlabel clothing, were considered of no account (and some respondents had trading in pirate goods themselves). The only risk that did matter to some of these respondents was that they might be caught and suspended from the online auction site, and it appears that these respondents consider this risk low enough to be worth taking. There was also a widespread belief among focus group respondents that the feedback system was subject to manipulation and blackmail, and this was something they factored into their decisions about who to deal with. Despite this, the feedback system was an important part of their decision-making process. Other than feedback, the respondents used a variety of strategies to minimise risk: chief among these was the use of PayPal (so that money was not transferred to the seller until the buyer had received the goods in a satisfactory condition). Another strategy was having a maximum amount of money that they were prepared to spend online. Some respondents also preferred to deal with local sellers so they could view the item or collect it personally. Nearly all of the focus group respondents read the seller’s terms and conditions carefully, especially the terms regarding cost of postage and handling. One of the respondents appeared to have developed a kind of tactical aggressiveness that was designed to put the other party on the ‘back foot’ and thus ensure that the transaction was completed to her satisfaction. The focus group participants provided — 218 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

the following responses in relation to the risks they perceive to exist using an online auction process and the strategies they use to try to minimise the risks: Question: What are the risks? Misrepresentation is what I’ve heard of most of all. And you get the pirate version, I mean I’ve done that with a DVD. Question: What other the other risks? Quality. Like getting no scratches, perfect iPod, great screen and it was covered in scratches. Question: Is there a risk that it won’t turn up at all? Yeah, that happened to me. I didn’t tell my husband either. The item mightn’t work, and there’s no warranty, so the little computer thing, if it breaks, that’s that. That’s my bad luck. Question: Is that risk worth taking? Yes. I had looked everywhere for something similar, and there is nothing, there is only this device, and so it was worth taking. And it was worth, oh, a hundred dollars. Question: How have others of you calculated the risks? I’d say, ‘I’m prepared to lose this amount of money if it all goes wrong’ and compare the costs: $100–125 something, you think, oh yeah, I’m prepared to lose that. I think also comparing the cost of what it is retail, are you willing to take that risk? $750 dollars for an air conditioner that’s usually about $2,500? Yeah, I’m willing to take that risk. And its brand new. You feel a lot more confident if it’s a brand new product and then there’s a warranty. I think if it’s second hand then, maybe, that issue would come into it more. – Group 1 (Staff) One reason why I turned away from it because one of the CDs I bought – the picture was fine but it was in a foreign language. I was expecting to be in English. What always concerns me is, let’s say a guy has business and he is trying to sell stuff, what stops him from getting some friends or making up some accounts and making up some phoneys for feedback? — 219 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

You’d actually have to have ten different friends, and you’d actually have to have something to sell, because what if someone else bids for it, and then you’ve got to pay the listing fees and eBay’s commission. It’d be too expensive to do it. If you go to someone who hasn’t made any sales or has got five, and they’ve got all positive feedback you might go, oh yeah, a bit dodgy. But when they’re at a hundred or two thousand and it’s all positive or maybe one negative, it’s pretty safe. Someone I know, he was selling a quite an expensive keyboard, and his father put a bid in on it. They had different address, different phone numbers, different everything, but they had the same credit card details. EBay’s found that link and said, nup, fraudulent practices, you’re both banned for life. Sometimes they can manipulate the feedback. My brother was buying something and the site was saying that you can return the product. When he wants to return, the seller was telling my brother, you have to give me positive feedback first, then I will take back your stuff. If not, I will not take back your stuff. There’s a lot of blackmailing going on, on eBay. People will say, if you leave negative feedback, right, then we’ll leave negative feedback for you. I’ve bought things and then all of a sudden they’re not an eBay member any more so, there’s a problem. I don’t get a refund. – Group 2 (Students) Just a couple of weeks ago we bought a computer from a guy who was down in Elwood, and we got a brand new computer for $390. Question: Is there any risk that that computer might have been purchased in the pub? That it may in fact be stolen? Well, he said that he made it himself, and from the way that he sort of described it, it sounded like he knew what he was talking about, and when he rocked up it was definitely not a brand name computer. Question: Do you read the seller’s terms carefully? GROUP: Yes. Especially their postage and handling and stuff, because sometimes they’ll list something that’s 10 cents, and their postage and handling is $59.99 or something. I would say that it is very important to read every line because I remember there was a story about someone saying, like, I sell a box of new telephones, I mean a new box of telephones, and he was actually selling a box for like four hundred, three hundred dollars. — 220 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Question: Selling a box? Yes. And the website say if you read, really read, he’s actually saying he’s selling a box. So it’s not his fault and you cannot blame him. I usually just see how long they want me to pay, because sometimes I want to buy something now but I can’t pay for it for like a week or something, so I usually look at that, and postage definitely. Their refund and return policy as well. And whether you’re able to pick up the item as well. I remember looking at something once, when I was getting the digital camera, and this guy was selling it and, people were complaining that the instructions were not in English, and he said well you should have read the terms and conditions, and I looked at his page and it’s just unbelievable how small the writing was. So I just decided not to trade with that person after reading that. Question: Do you have a sort of a ceiling, a limit you’re willing to spend on an online item? You might set yourself a limit, like $100 or whatever, but people sell houses and cars on eBay. I’d obviously be a lot more reserved about buying a house through eBay than I would through a real estate agent. I reckon it depends on the item. If it’s something that there’s a possibility that it will get lost in the post or that the buyer might or the seller might not actually be legitimate, you only put on what you’re prepared to lose. Question: Let me put this to you. There’s a Mercedes Benz on offer, and the Mercedes Benz might cost $95,000 if you went down to a car sales yard. But you’ve got a really good idea that this at auction on eBay, it might go for $60,000 and you would be $35,000 better off. But, even $60,000 is a lot of hoot. Now, would you be prepared to bid for an item of that size where the saving would be huge but so would the outlay? I’d probably just bid the 60, and if it doesn’t go ahead, I’ll just forget about it. Question: But you’d be prepared to be in it for that sort of saving? Yes. I don’t know that I’d do it. With a really expensive thing, you start getting into the territory of it being an asset, and I would be worried about the legal things, like do you legally own it? I just look for the small items. Those things [car, house] I’d rather pay the extra and make sure I’ve got a warranty.

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No, I probably wouldn’t buy anything massive on there. – Group 2 (Students) Question: What are the risks, if any, that are associated with buying at online auctions? Fraudulent, fake, pirate copies, and damaged, second-hand and they don’t tell you, damaged, not even delivered. Dummy bidders. Customs, like you have to pay extra if it gets through customs. Question: What protective strategies do you use? How good you are at intimidating people. Sometimes you have to push them, threatening. If you know how eBay operates and if it looks like they haven’t been dealing with eBay for very long and they’re newbies, you can tell them, ‘Look, this is the policy. If you do not buy or sell this I am going to report it to eBay and in this process you will get a negative feedback and if you get at least three you will never be able to use eBay ever again.’ Question: So you just make this up as you go along? Oh no. I make sure of it before, because they all threatened me back then when I didn’t know anything about eBay. Question: But is what you’re saying about three strikes and you’re out: is that all true? Yes. I happen to be one of those naughty people that got suspended and I just registered with a different name and I got in. Question: What did you get suspended for? I was selling to some moron that received the goods then complained about me and it was like a cheap item like a $5 or $10 one and I told them about the defects and stuff like that beforehand and they said ‘yeah yeah that’s fine’. When they received it they complained about me. Because he bought four of these items, that’s four strikes already so naturally I got suspended Question: So one of you’re risk management strategies is to be aggressive? You’ve got to be straightforward and you’ve got to be formal. No need to use swear words but be straight along the line and tell them. Question: What other risk management strategies do you use? PayPal. PayPal insures you.

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If it’s something in Melbourne that I want to buy, quite often I just ring up say, ‘Hey I can’t really tell from your photos, I’m interested in coming to see it, what’s you’re address?’ And sometimes I go down and look sometimes I won’t bother but I’ve got the address and if something goes wrong I’ll say, ‘Hey…’ Question: In what circumstances would you take a risk? From what I’ve heard you’ve bought items which on the whole aren’t terribly expensive? I’ve bought two cars off eBay. GROUP: Wow! I was looking for a gun. They wouldn’t sell me a gun. You have people selling their wives and people selling their kids; yeah weird stuff like that. Question: Have any others of you purchased large items? I bought scooter, it cost $2000. Digital camera, 600 bucks. A mobile phone, 700. – Group 3 (Students) Question: What are the risks associated with this caper? Not receiving your item. It’s not what they said it was. Getting it broken in the post. Buying something from overseas and it’s also a lot harder to chase up if it doesn’t arrive because there’s a lot more avenues and you don’t know what to do. No warranty. If you buy a high priced item from overseas you might get held at customs. And you’ll have to pay. Our friends just bought a model plane from Canada and he had to pay a certain customs duty, which ended up being about the same as the price that he bought the plane for. So he ended up paying twice for the item. If you import anything over a thousand dollars in value overseas it is subject to duty and GST. So that’s why when I have people import things

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in shipments, I say just do it [for] $900 so they’re not hit with anything, and do a separate one. I didn’t know about that. [Hardly anyone did.] Question: Is that ever mentioned on the website? They try and disguise it, I’d say, because a lot of people say duty and GST is not applicable to us and that whatever happens at your side it’s your problem. The obligation’s on the buyer. Most of the international sellers that I’ve looked at are come out of the US, they have huge pages which if you print it would be about five, ten pages worth of description and, about half of those pages are just conditions and rules and its in small print just like a contract. Question: Do you read those conditions? I haven’t read all of them, but if I buy a higher priced item I want to make sure I’m all covered so. If it’s international. Question: What are the critical things you’re looking for in the fine print? Postage. How long you’ve got to pay. Some people say three days, five days or a week. Insurance. Some people put insurance is required, especially if buying things from Hong Kong. Question: Who requires insurance? The seller. Question: Why is it in their interest? Well they get more – like, for instance, you can buy the iPod things from Hong Kong, they’re really cheap, about $30. But postage is $50. And the insurance is a compulsory $30. So you’re actually paying a lot for it, in your postage and no way can it cost that much to post it. Question: So in fact it’s a way of extracting a higher price out of you under the guise of postage and insurance? Yep. And not only that, they get more money that way, if they add the plus 30 because eBay doesn’t charge them a final seller fee. Question: They’re paying the fee on the actual price component?

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On the selling price. So whatever the postage is, eBay doesn’t touch. So that’s where they get more money out of that as well. Question: What are the other things that you do, because looking at the fine print is one way of minimising the risks we’ve been talking about? I think there’s something called an escrow service, or something like that. You give money to an independent third party, when the seller sends the good and it arrives, you confirm with the third party and they pass the money on to the seller. Question: Have others of you heard of an escrow service like that? Heard of it, but I’ve never used it. I haven’t used it. I researched a bit of it.

(No one had used an escrow service) Question: What are the other protective mechanisms you might use? PayPal. Question: Do others of you use PayPal? As a buyer, sure, yeah. They have buyer protection now through PayPal too. It’s got something to do with if you don’t receive your item they do something about it. I don’t know exactly what it is. I think they’ll cover you. If your item doesn’t arrive, and they’ve sort of investigated it and it’s fair enough – you were ripped off – they’ll cover purchases to the amount of like $400 or $500 I think. Question: What’s been the largest amount you’ve ever spent on one purchase? Oh, probably about $150. I don’t use it for large purchases. If I was going to spend thousands of dollars I wouldn’t do it over the internet. I wouldn’t even buy from a company website for thousands of dollars. I’d go and actually deal with a person. – Group 4 (Students)

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5.3.2.3 Level of risk taken Completing transactions outside of the auction website

Below are some of the survey responses about the circumstances in which buyers would be prepared to complete a transaction outside an online auction website (divided into themes):

Second chance at purchasing item previously bidded for After an unsuccessful auction has finished or if item in successfully bid on by someone else and they withdraw. Saves relisting etc. I have been offered a second chance to buy an item I did not win at auction. I have purchased the item outside of the eBay system. Avoiding fees Avoiding auction by agreeing on price. Sometimes a different payment method may be agreed to e.g. instead of using PayPal (thus incurring fees for the seller) it may be agreed to do a direct deposit into their bank account (if they are in Australia). If it's cheaper that way Bargain/good deal/rare item If a good deal is offered. If the object i was buying was very essential and hard to get. Only if it was a rare item or considerably cheaper than retail price. Buyer confidence/trust has been established After a considerable amount of communication with the seller. After ascertaining that the seller is genuine. If the seller lived locally and I had been in landline not mobile telephone communication with them and they had given me a real not postal address. Low value item If I could easily contact the seller or the item was really much cheaper and under $20 because eBay wont cover you for items under $20 anyway. — 226 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Payment on item inspection/delivery If I was picking up the item from a store or from their house, and I was paying for it on pickup. If it was to meet up and pay face to face. We are doing that at the moment. Seller had two different prices on the same item and due to their mistake we are completing transaction outside of eBay. Only because they are local and we can pick the item up though. Previous dealing(s) with seller For instance, I bought some cologne on eBay from a seller and after the sale they invite you to buy from their website for a slightly cheaper price. If I had already bought from the vendor and trusted him or her. Where further goods are negotiated in the same parcel or delivery. Where I had an established relationship with a trusted seller. But still only under extraordinary circumstances. Safe payment method If directed to secure site like PayPal. If the seller could provide alternate method of transaction that was secure and where I would be confident that I would be insured in the event of something going wrong. Seller feedback/reputation If the sellers feedback was exceptional. Seller is a business If they are an established business, have a return policy and warranty. As long as they appeared to be a reputable online business with a good feedback score from other users. Seller location If the seller lived in or around my area. Seller's external e-commerce site Only if the alternative website is a trusted site to complete the transaction.

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When the seller also has a store such that other items can be added to the auction item and save on shipping costs, and payment is still through a secure facility such as PayPal. Where the seller has a shop or outlet I can visit to obtain the goods immediately. To by-pass rules or restrictions For specific products that may not be legal to sell on auction site. I have done this in the case of an o/s seller whose goods were only available in that country, but required my providing a different mailing address, etc.

5.3.3

PROBLEMS AND DISPUTE RESOLUTION

We asked the focus group participants about the way they dealt with problems they encountered using an online auction site. These respondents were not inclined to deal with problems by reporting them to the police or using a legal process. They recognised that the online avenues of redress were limited but, because they were familiar and instantly accessible, they preferred this way of attempting to resolve disputes. Their responses were: The only problem for me when I get burned, is I’m not an Australian citizen, I’ve been in this country about three-and-a-half years now. I was in the situation that if I did get burned I would have no idea where to go. I’d go eBay. I’d go to eBay first because they’ve got it set up so that everything’s in place to protect you. I wonder how long eBay’s arms can reach, though. Say you buy something from Bulgaria, for example, worth hundreds of dollars, what can they possibly do? I think use their own insurance. That’s what it is basically, that’s what they do I think. It’s worth a huge amount to them to keep you happier, especially if they see that you’ve done a lot of business, whether it’s selling or buying. It’s word of mouth, basically, Yeah, recommendations. They will protect you, that’s what they do, I mean they’ve got very, very good systems in place to detect fraud, and they watch them. You just have — 228 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

to try and put something up that’s in breach of copyright. They have people that trawl through that thing, and it’s gone as soon as you list it. And if you try and sell a kidney, and they take it [down]. They’re bound to have a fraud section that just spends the whole time just looking at things like that. I know my credit card has internet fraud as one of its benefits, and I presume most of them do now. This is where PayPal is really good too, so you know you’re going through a secure system. It never used to be owned by eBay, but they own it now, because they realize how good it was, and it’s linked directly back to your bank account and it makes it easier to get overseas funds into Australia. Question: Do you use escrow services? No, can’t be bothered. I mean it’s just not something we do in Australia. It’s not very common is it? I mean it might be more common in the US. I didn’t even know what escrow was when I first saw it. I’ve heard of it, but I don’t know what it is. It’s like using an intermediary to collect the payment. Once you’ve received the goods, they pass the money on. I can’t see the point of that. – Group 1 (Staff) They’ve developed a thing now where you can get a re-imbursement. It takes six, like six weeks or so. I didn’t receive the item and all of a sudden they’ve left eBay. I’d proven to eBay that I’d paid for it, and tried to contact the seller. They still get all of the emails, even they’re not a member, and there’s a way of getting their details as well, like they’re phone number and stuff, if you’ve had a transaction with an eBay member. They had a fake number. I got, it wasn’t all of it, it was like 80 per cent of what I paid. Question: Did eBay say why it wasn’t a hundred per cent? No. We bought – it was falsely advertised – the guy advertised memory, and he was in Italy, and it was a very rare type of memory that he was advertising, and so there was a very high price that was going for it, and so we were prepared to pay all of the costs, and when the memory finally arrived, it wasn’t at all what the guy said it was, and it was just standard memory that was worth about ten cents, and we’d paid a couple of hundred dollars for it. Because it was an international thing, quite often — 229 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

you pay with PayPal, which is affiliated with eBay, and they have a really good dispute resolution process, and so we were able to get our money back. There’s a certain amount that they guarantee. I haven’t looked fully into it but I know that you’re sort of covered by eBay and PayPal. Yes, under eBay I think it’s $400 plus $25 postage, and there’s also the PayPal which was I think $1500. Question: Have you used PayPal? Particularly with the international transactions, but also when it’s something that will be a hundred dollars or so, like a larger transaction. If it’s just ten dollars I just do bank deposit. Question: Does it cost you money to use PayPal? I don’t think so. Only for the seller, not for the buyer. If you’re paying with money with your PayPal account to someone else’s PayPal account I don’t think there’s any cost involved in that. I’ve always paid with bank deposit express, because I just don’t feel comfortable yet to use my credit card on the Internet. Question: Why? Because everyone in the world looks at eBay, and my Dad used to work in the fraud squad in Perth, and he’d say he’d get about a thousand calls a week from eBay, saying that people are doing dodgy things finding out people’s bank details. I still prefer the idea of going to the bank and filling out a deposit slip if I’m going to be putting money into a seller’s account. Someone tried to hack into my account once to get my credit card details. This was like three years ago, so I couldn’t remember what I’d done, and I got an email one day from eBay’s fraud investigator, saying some big spiel. It had the eBay sign and everything, it looked professional, and they were saying that they needed my credit card number for something, I can’t remember what it was but it was believable, and it turned out that I got an email from eBay like the next day saying that we’ve realised your account is being hacked and not to give out any details. Question: Does anyone use an escrow service at all? I used once. I think it was a computer, a Mac 500, something like that. The seller actually asks you to go through escrow, otherwise he won’t sell it to you.

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– Group 2 (Students) Question: Is any kind of consumer protection that the law provides? I think there is a separate site that oversees it but I don’t know what they’re called but they told me to go to it once. I mean some other dispute resolution. Question: Is that a government law enforcement thing? I don’t know. I think if the person selling to you was a business you might be covered by the Trade Practices Act or something like that but if you’re buying off an individual or you buying second hand I don’t know. Sometimes. . . I don’t know. . .is there something where you get a 10-day cooling off period? There’s some protection if you buy a house off eBay because they’re houses and the same laws apply to that I think that apply to if you buy a house (in the conventional way). You can bring it up to consumer law and that’s like a long thing, long process. Painful. Question: Would you use the conventional legal processes to recover for loss on an online transaction or not? I just pay via Paypal. Depends how much you paid for the item. I couldn’t see myself in that situation (going to law). Yeah I wouldn’t. I don’t know anything about the legal system but the first place I’d go is probably to the cops. – Group 3 (Students) Question: Can you tell me anything about the kind of consumer protection laws that might protect you? You’re covered by the TPA. You could complain, but you’d have to weigh up whether or not the cost of litigation would be worth it. You could spend thousands of dollars in court chasing something for $200. I probably wouldn’t even chase them through VCAT because that’s a fair amount of money. Question: Would you resort to the law? — 231 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

For $2200, yeah, probably. It would be probably very annoying, and it would take up a lot of your time. Question: Where would you go? How would you start? I think I would have probably started with Department of Consumer Affairs. Question: What do others of you think about this? Would you go outside the online policing system? I don’t see why – let’s face it you know, you either buy something at the shop, or you buy it on eBay. Like eBay’s just massive. It’s pretty legit. I wouldn’t know about Consumer Affairs. I’d go to the police station, but they’ve got nothing to do with eBay so that’s obviously me being young and not knowing what else is out there. I wouldn’t know how to chase sort of thing. I would have rung Consumer Affairs. Question: You mentioned about the insurance scheme, of PayPal and of eBay. So there’s two. Are there circumstances that you’re aware of that they won’t cover you? I’m sure there would be but again, it’d be there if you wanted to read it, but you know, don’t read it. Haven’t come across it, basically. Unless you actually come across something, you probably wouldn’t read it. – Group 4 (Students)

5.4 Sellers This section looks at the issues faced by sellers who use online auction sites. It considers: •

sellers’ behaviour, including the frequency of selling and the amount they sold items for (5.4.1)

•

sellers’ understanding of the risks involved with using on-line auctions (5.4.2)

•

the problems encountered by sellers, including the type of problems encountered and sellers’ experiences with dispute resolution (5.4.3)

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5.4.1

SELLING BEHAVIOUR

5.4.1.1 Frequency of selling

Respondents who had not sold an item The majority of the survey respondents (56%) had never sold an item at an online auction site. When we asked why they had not sold an item at an online auction site, the most common response provided (42% of all non-sellers) was that they do not sell things online generally. The next most common response (30% of all non-sellers) was that they are not interested in selling an item at an online auction. Nineteen per cent of non-sellers said they do not feel that they are adequately protected if something goes wrong. Only 4% of respondents said that they do not trust the internet as a way of buying or selling online. See section 5.4.1.2 of the report. Twenty-one per cent of non-sellers gave ‘other’ as their response to being asked why they had not sold goods or services at an online auction site. These answers included: that the process of listing items was too difficult, expensive or confusing or that they do not trust the process or think they would not get a good price; they have nothing to sell; or that they intend to list something for sale at an online auction site in the future (or would consider doing this) but just has not done this yet. The following are the responses given (broken into themes): The process is too difficult, expensive, confusing or not trustworthy Because it costs money to list the item. Don't have a digital camera for listing purposes. I don’t feel experienced enough as yet to sell. I do not have ready access to the internet at home so cannot easily monitor enquiries and the pick up of sold merchandise from one's home etc is a nuisance thing to arrange. I do not feel that i would get good price for my item. Not sure about payment e.g. providing banking details. I don’t have credit card and scare people scam me for money. Don’t have anything to sell Don't have things to sell. — 233 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Have not had the need to sell anything online, but I believe it is a great way to do so as you have a huge potential customers, and it is a convenient and cheap way to advertise. Have tried to sell or plan to sell in the future I *tried* selling stuff, but no one wanted it. I have not yet looked in to how to set that up and how to receive payments safely. Will be putting items on eBay next week. Still learning how to do it.

5.4.2

PROBLEMS ENCOUNTERED

5.4.2.1 Frequency and nature of problems

Nature of problems When we asked the sellers what type of problems they had experienced, the most common response was that the seller had received payment late for an item they had sold (26% of total sellers surveyed – see section 5.4.2.1 of the report). Twenty-two per cent of sellers said they did not send the item they had sold because payment was either not made or was invalid. Twelve per cent of sellers said they did not receive payment at all. Thirteen per cent of sellers surveyed selected ‘other’ as a response to what problems they experienced as when selling at an auction site (Survey Q 50). Below are some of the responses provided regarding the problems sellers have experienced when selling items on an online auction site (divided into themes):

Auctioneer As soon as the site get bigger, they don’t look after their customer. Bid withdrawal Buyer withdrew bid late into auction due to ‘entering wrong amount’ and didn't re-bid, leaving my item at a high value that deterred bidders until the last day or so when bid was withdrawn and item price went down $30 and didn't have time to get bid backup. Buyer error/fault

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Buyer asked for cheaper postage option, no insurance and complained when $2 item arrived broken. Buyer paid and wanted to pick up goods in person, took three months to do so. I sold a bike COD and the guy made me lower the price upon inspection of the bike. He decided the bike was not what he expected. Prick. Buyer claimed to have received item in worse condition than in what it was sent. I sent item brand new but the buyer said it didn’t work properly Fraud Fraudulent buyers trying to use fake credit cards. Illegal buyers tried to contact me and buy my product for four times what is was worth in order to gain my personal details. Sell items to fraudulent buyers – have to complete NPB to get fees back. Payment issues Slow payers who muck you around. Buyers who ignore communications. The buyer took weeks to send payment. Received only part payment – still waiting on the rest. Buyer chose to pay by a method I don't accept. I had to refuse the payment and get them to pay again by an acceptable method. Postage and handling Item broken in mail. Item was misplaced in post by Australia Post and therefore item was delivered extremely late. Buyers not supplying correct postage details. Terms of sale Buyer did not read the 'terms of sale' correctly. The buyer disregarded both the payment and delivery instructions. I had a clearly stated no return policy and the buyer reversed the charges and subsequently affected my credit rating.

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Other Buyer's account was suspended – not sure why.

5.4.3

SELLERS EXPERIENCES

We asked the focus group participants about their experiences as sellers. For many respondents, selling online provided a good opportunity to get rid of unwanted goods that other people wanted. For others, such as collectors, it was just another means of exchange. For some, it was an opportunity to make money. The responses were: Question: What sort of things have you sold? I’ve sold books, CDs, DVDs, mobile phones, I got one for Christmas, I didn’t want it, I sold it. I’ve sort of sold a bed frame, I’ve sold a bike, a ski jacket. That was my household that I dumped with my parents. After three years, it’s got to go. I’ve got to get rid of all of this, so I sold it all on eBay. Question: Did you succeed in selling your ski jacket and bed frame and bike? Yep. First problem is that I sold it [the jacket] for a euro. And that didn’t discourage you? No, not at all. By the time I sold it I wasn’t really banking on making any money out of it. I went to my mum and said well, now I’ve got to post this one-euro jacket. Question: What about others of you who have sold? Retro light fittings. When I bought the house we’re in and in the process of renovating, there were a lot of old, sort of very classy 60s style lights. We were actually wanting to throw them out, and they were in perfect nick, a friend of ours, said well, why don’t you just put them on eBay and have a go at selling them, because they have all that kind of stuff. We didn’t expect to sell them for a lot. It’s just more or less to get rid of them, and we did it as more of ‘oh this will be a bit of a hoot’, want to see what happens.. Question: How did you set the price? They were pretty low, because we didn’t really care. We worked out the reserve, and we got quite a few bids. It was amazing. I was trying to sell comic books, I was pretty sure that I’d get a good price, they’re all in mint condition, and I know they’re worth something, and I was hearing stories about people selling ski jackets and wedding dresses, — 236 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

and I thought they’ve got a great price here, I’m going to make some money, but I think I put a low price, a group of comics I put together, maybe a set of 10, I just put $36 down, and I know they were worth $160 dollars at least, but I didn’t get any bids at all, but I think that might be because I had no profile, I don’t know. Question: Why were you prepared to sell for $36 when you thought they were worth $160? I had that feeling in the back of my mind, that if someone bid higher, then I would just get one of my mates to um… Shell bidding… EBay are very good at detecting that. It’s dummy bidding. People have been known to set up a fake ID, and so that if you sell something on eBay, someone might put a bid in, and you can just up it a little bit, so that hopefully it’ll get higher and higher and higher, and whoever the sucker is at the end pays for it. Well, that’s what happened with the iPod that we were interested in. The seller of the one we originally bought, he was bidding on another one that he owned, and so he was up-bidding. The one we bid on he didn’t bid on, but the other one that he was selling, he was upping. Question: How do you know that? Because you can see who has put in bids. His name was the same name as the seller – it was the same guy. He’s an idiot! He’ll be caught within a matter of seconds, and eBay will cancel his ID. How do you know that eBay have good protection mechanisms from shell bidding? When I first started out in the late 90s, I thought, ‘Oh, this is a good thing to do.’ I tried it and they eventually catch you. Question: What did they do to you? They said: ‘You can’t do that’. [Slaps his wrist.] ‘We’ll cancel the fake ID, buy you can still keep your licence.’ So they didn’t get rid of me as a seller or a buyer but they will catch you. Question: So your cards are marked and if you put it on again, you lose your licence? Possibly, yeah, but I mean it’s not hard to do if you get someone in Perth to do it. You could get a friend to do it if you wanted to, but they might have sophisticated software that can track your auction, and they’ll see if the same bidder bids on all the different auctions. To be quite honest, at the end of the day it’s lots of work and it’s not worth doing. — 237 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Question: Has anyone else who has sold at auction, not told us of their experiences selling? A box of videos, box of deep space nine videos, huge box. The postage would be worth way more than what it was worth. Sold them very quickly, 120 bucks. Question: Is that the price you wanted for them? We didn’t care; we needed the space in the house. It’s like a garage sale on line. Question: What I’m hearing is that the stuff that you people have put up for sale has been material of modest intrinsic value to you, however valuable it might be to somebody else. And you would have let your comics go for 36 bucks? Yeah, I just wanted to give them a good home, rather than just gathering dust underneath my bed or whatever. Question: Would you sell on line something that was really of some value to you? Probably give it a go. The risk for the seller is pretty low. Because you get the money before you send it! It’s buyer beware, isn’t it? Question: Do you commonly put a reserve on? Not always. It depends on the product. People who put stupid prices on their items don’t sell them. People want it to start low. For example, you know if something might be worth 150 US dollars, start it at $9.99 US and put a reserve on it. People will bid, but if you put 75 US dollars on it they go, ‘Oh, I don’t think so’. Question: Have you sold at fixed prices? I think I have a couple of times but I prefer not to. Question: Do you use the same sites for selling as you do for buying? Yeah. I just use eBay, the others are just crap. They don’t have the number of people. Question: What’s your liability? If you sell, if you take money off somebody and then for some reason or other it didn’t arrive, what exposure do you have? With eBay, you do have their safe harbour precautions. If it’s something in Australia I’ll send it express post so you get a number that they can track. You can prove that you’ve sent it basically. And it’s the same for overseas

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items I always kept the overseas docket, so I can prove to eBay that I’ve sent the item. Question: Now [female], when you flogged the lights, what paperwork did you do to protect yourself or did you do nothing to protect yourself? Very minimal. We made email contact with the people. We set up ours as a direct debit. They had all our details we had emails of confirmation and we organized that they picked up and that they just came to where we were and picked it up. It was very straightforward. Question: What about others of you? Who hasn’t sold? I haven’t. I just couldn’t put in the effort it often probably doesn’t match the return. I guess you’d have to photograph it. I don’t know. I’d have to find out how to do it and you’ve got be around for the person to pick it up and then make those arrangements or else you’ve got to post it or deal with the delivery in some way. I don’t know what else you have to do but I really can’t be bothered finding out. It depends on how often you’re going to sell. If you’re just once or twice a year then maybe it’s a bit of a hassle but if you’re up into the couple of hundreds like I am it’s worth it. I sell, I buy, I can’t help it. Question: As far as you’re aware, if you are a seller and were thinking about your exposure are there any laws that you might be subject to as a seller? My understanding is I’d come under Australian laws. Consumer protection, all that sort of thing. I don’t think the Americans on eBay would have any jurisdiction over what I’m doing. They’d be able to cut my membership off or whatever but I mean I’ve heard of cases where the police have been involved in fraud. – Group 1 (Staff) I’ve sold PS2 games. I had something like 25 PlayStation 2 games, and we’ve traded in about half, and we got all these new games and you’d sell them on eBay and make 80 or 90 bucks back. DVDs, clothes. Office tables, and this big desk. A few other bits and pieces, some office stuff that we had, just some lamps and so on. We bought all this office stuff and my brother’s moved out, he doesn’t need the stuff, so we have to try and make some room. Accessories. I used to make earrings and sell them. And car parts. He’s doing up his engine and getting rid of the old parts. I’ve sold, like, computers, mobile phone. I’ve sold laptops, computer parts, clothing, a few books, and just some odd things. We had a big clean out a while ago, a whole lot of stuff. — 239 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Question: What I’m hearing is that the stuff you’re selling is on the whole not highstakes stuff to you. It may have value in the monetary sense to other people, but for you it doesn’t have high value. Now am I hearing that correctly or not? GROUP: Yup. The only thing that I’ve sold that was sort of valuable to me was a laptop, and it was less than a year old, it was quite good, but we’d just got a new one. Question: What were the really good things about selling online? Knowing that people are interested. Just knowing that people were interested makes you feel like you’re actually sort of achieving something, getting to your goal, which is making a sale. It’s like a giant garage sale, where everyone in the world can come to it so you’re not going to get left over with stuff. It’s just exciting. I find it exciting. Just seeing how much people will pay for my crap. Question: If you set a price, how do you do it? I start everything at 99 cents because it attracts more people. There’s a risk there it could go for two dollars, but if you know that it’s something that’s going to sell and sell high, then you know you’re fees are lower and it attracts more people. Question: Now (student) what price did you put on your computer? I think we started at 99 cents. You can see how many people are interested. The figures are there about how many people are watching it and it’s a lot more exciting than listing it in the Trading Post, then you don’t have people ringing you and annoying you and stuff to sell things. So it’s just there, it’s done, they’re contacting eBay not you. People are probably more willing because it costs nothing to send an email, but to make a phone call, whether it be mobile or home line or something, they might not bother. It’s easier. They can just straight away make a decision. One of the best things that I like about selling things on eBay is you can get money for stuff that you’d otherwise throw out or give away. Question: You’ve only mentioned eBay as the platform for selling. Have you used any other? I’ve looked at Amazon, once.

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New Zealand has one called Trade Me, and I had a look on that because my relatives are in New Zealand and they were telling me about it. And for New Zealand it’s pretty good, up there with eBay. Is that the one that has the sniping system? Yeah. Question: What sniping system? One phenomenon surrounding bidding on eBay is sniping, where basically you sort of work out how much you want to spend on an item, and then you’ll bid when there’s like five seconds to go. So, if you outbid someone, they can’t put in a higher bid. But in this system that [participant] was talking about, if someone has made a bid within the previous five minutes, the auction is extended by five minutes, so you don’t get a false low result, because the auction keeps going until everybody’s put in their highest bid. Question: What are the risks associated with selling? One of the risks of selling is that you’ll have someone that will bid on your auction and they won’t pay. And you’re still stuck with all the fees, and no-one’s given you any money. And getting negative feed back when you haven’t done anything [wrong]. I was selling on eBay, someone withdrew their bid. Some PlayStation game I had on there was going for about eighty bucks, and then the highest bidder retracted their bid, and it had about a day to go or something, and it went from $80 back down to about $26. Just because they’ve retracted their bid, they’ve knocked all the bids down. I remember with the payment options, using Western Union wasn’t recommended I think by eBay. And there’s another one, something called PayMail or something like that, paying cash through the mail or something like that. Question: Do you feel, as sellers, exposed at all to consumer affairs laws? It’s a bit scary. Sometimes sold a couple of dodgy things on there. I went to Thailand a couple of years ago and, yeah, kind of sold a couple of fake things, knowing that they were fake. Sold it as real. The actual designers they’ll go through eBay and they will sort out what’s real and what’s not and they’ll tell eBay about it, and yeah, I got a bit of trouble. Question: You got fingered did you? And what happened? EBay gave me a warning, and they said, if we find that you’ve done it again then you’ll be suspended, and so I didn’t.

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Question: They rub you out for life? Yeah they can. I have a lot of faith in the way that it’s set up and so I rely more on the way that the whole feedback system works and the way that people are obviously selling stuff to make, to make some kind of profit and they want to be able to be on eBay in the future, and so it’s in the seller’s best interests to not do dodgy things. And it’s also in the buyer’s best interests to not be dodgy as well. So I probably feel more protected by the system rather than the consumer affairs laws. Especially, I mean, I wouldn’t even know where to start. It would be expensive, it would be time-consuming, and you might be talking about twenty bucks or thirty bucks, and so in that respect eBay I think looks after people quite well. I suppose with consumer affairs it’s like you know the law it sort of hovers over you, whilst eBay, it’s like you’re locked in this little game, and you have to play by the rules, and if you don’t play by the rules you’re locked out. So you don’t feel as threatened by the law and the consumer affairs. Question: But you don’t want to be locked out of the game? Yeah. What I’m trying to say it that you take the rules more seriously than the actual law. It’s a self-regulating system. If you’ve got people that are doing dodgy things, they’re only going to be able to do it so many times before people just will not trade with them any more. EBay itself calls itself a garage sale type of thing, so really, when it comes down to consumer affairs laws, all we’re doing is putting an item up there, and the only thing that would be governed by it is the validity of what we say the item is. So long as the seller’s put in, okay this is an item of such and such value, it does have a scratch here, or it’s got a mark there, or it’s twelve months old or whatever, and then, whoever wants to pay whatever for it, if they get ripped off, it’s their fault not ours. – Group 2 (Students) Question: Are you selling at fixed price, or do you prefer to auction your stuff when you sell it? Auction. Question: Why? Obviously because I can go to my mate, can you bid on this, this price, blah, blah, blah. .

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You can get more too. Some of our games, a couple of people bid over $85 for them, which by the time you put on postage which was $10, that’s $95. Question: What about others of you: do you all prefer selling at auction or selling at fixed price? GROUP: Auction. Question: What sort of things have you sold on online auctions? I sold from my old work a printer thing. They were selling them at work for like $1 and I was getting rid of them for like $20 max and some of them were faulty but I the guy was pretty happy for the price he was getting. Some went for five bucks they didn’t care if they were faulty. I’ve sold a whole stack of PlayStation 2 games because we got them cheaply on a deal where you trade in two games or three games and you get one of the brand new ones for free. So we were buying like $7 or $8 games and trading them in and getting the new ones and then selling them. It cost us $7-10 for the other games so it cost us $30 to buy three cheap ones then we traded them in on the deal that the shop was offering and we got the new one and we sold them for $80 or $90 each. Question: How much would they retail for? About the same. Some people were paying more than the retail price because once you added on the postage it was ridiculous, we were laughing, but I put them on at 99 cents so people could pay what they wanted. Question: What have others of you sold? Two cars. Lots of stuff around the house – books, TVs and stuff. Question: The TVs – they go? Well they go when I sell them. I sold a TV to a woman in Perth. I said to her it’s got to go all that way you want to get insurance. ‘No insurance, I don’t need insurance.’ Sent it over there, she emailed, ‘Oh it doesn’t work.’ Well it got damaged in the post, it’s not my fault. Dealing with people like that, they take up a lot of time. Question: Had you bought the cars online? One, yeah. The first car I bought it was an Alfa Romeo. The auction ended like two in the morning. Sometimes if you’re buying at auction it ends at a stupid time and people don’t wait up to see the end of it so you often you can get a good deal by buying stuff when it ends at a time when no one’s around. I bought this car. It was a complete car plus it had a spare motor and a spare transmissions and five alloy wheels and five tyres to fit. And it all came in one lot. I bought it at 2 o’clock in the morning for $800. Brought it home, I got the wheels and tyres and straight away listed them. Someone from Sydney won (the wheels) but emailed me to say, ‘I don’t — 243 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

really want the tyres I just want the wheels.’ So I sold the tyres a second time, sold the spare engine and gear box. Made about $1000 out of that, then I sold just the car and I got $1000 for the car. People must have been watching it. The same car comes back up and some fool pays more than I paid for it in the first place. I’ve just sold old textbooks from VCE and stuff like that. You don’t make good money on them, but better than having them lying around. I’ve sold an engine, I’ve sold safety cones… Question: Where did you get the safety cones, if it is not a rude question? Is that still running? That tape? Moderator: I’ll stop it and you can tell us. Question: Apart from engines and safety cones, what other bits and pieces have you sold? I’ve sold a wall unit that a tenant left at a property that belongs to my parents, that went for $150. A bike helmet. Pirated stuff – DVDs. Good old DVDs, don’t you love ’em! And they were good quality ones, you know what I mean? Question: Did you buy them as pirates, and then on-sell them? Yeah. I’d watched it already and made my own copy, just burn it quickly and just leave it stacked up and then you’ve just got stuff lying around. I told them that it’s a copy, that’s the funny thing, I told them it’s a copy, if you’ve got a really leading brand DVD it won’t play on it. Question: When you put it up in your listings that it’s a copy, and it’s a DVD, won’t eBay jump on you? At the start no, but now, watch out! But back then, they were pretty slow. Question: How long ago was this? A year and a bit ago. They hadn’t actually established the intellectual property and stuff like that, but now they do. I guess a lot of people complained. Question: What about you guys? BMX bikes, and old runners, just stuff that not many people have. Question: So do you recycle the stuff that you purchased on the web? Yeah. I just seem to collect stuff and then I get over it and collect something else. I had to get rid of them (the bikes) when I moved back home. I bought each bike for maybe $100, and one of them sold for $160

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and another sold for $250 because they’re rare. People will pay whatever. There’s no set price. We sold a lot of movies. We’d watch for a new movie or a new game that would come out, and then we’d burn it and sell them. Question: You’d sell the copies? Yeah, ha! Question: Would you advertise them as copies? Nah! Question: What are the risks involved in selling? I had to deliver a bike to someone, and he was a big guy, and he wasn’t happy, so I gave him 20 bucks off – well, he made me, actually. Question: And then you started running, did you? Oh yeah, I just got in the car, yep. Question: So that’s one risk, the risk of reprisals, what are the other risks as a seller of online auctions? Getting negative feedback for something crap. GROUP: Yeah. Question: When it’s not deserved? GROUP: Yeah. When someone claims to eBay that you didn’t send them anything, and even if you haven’t given them your address, eBay will actually give them your address, your name, your phone number, all of your details. Question: Are there other risks, apart from the ones that we’ve talked about, involved in being a seller? Fees, like when you have to pay eBay fees. They’ve got an option to do a direct debit, and you can either do a direct debit or a one-time payment. And I signed up for a direct debit, so they were taking it out monthly, then I asked them to stop it, and they didn’t stop it and there’s no option for you to stop the direct payments. You have to get in contact with them, and that’s really bad. Question: Do they give you a statement of the fees? Yes..

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There is no real head office for you to just knock on the door. Everything’s on line. You find it very hard, and the people that answer your questions are really stupid. Question: Can you do anything to protect yourself as sellers? If you sell something, and the person doesn’t pay, you tell eBay and they will send them an email and then (the buyers) agree to cancel the transaction then you get your fees refunded, but if (the buyers) say no they didn’t agreed to cancel it, you still have to pay your fees. So if you’re selling something big, you might have a big chunk of fees that you’ll have to pay. Even if your item doesn’t sell, you’ve got to pay your listing fees, they’re not much, but eBay takes 5% of the sale price. – Group 3 (Students) Question: Now let me talk to you a bit about selling. I know you’ve been busting to tell me about selling. What sort of things have you sold? The whole contents of your attic by the sounds of it. I’ve sold lots of different things. I’ve recently just sold some of my textbooks from last year, and I’ve sold unwanted presents, like my stepmother gave me some soap, which I decided I didn’t actually want, and somebody was willing to pay $25 for a bar of soap, so I decided I would sell it to them for that. I used to work at the Australian Football League, and the amount of stuff that they would just throw out. Someone like me who has access to eBay went, ‘oooh, hang on, I’ll just take that and I’ll go home and sell some stuff’. Question: What sort of stuff? There’s so many publications, like a 2006 stat book, or the AFL Grand Final this, or the season fixture that. They just get in bulk amounts and they’ve just got this massive backlog of them at the headquarters, and they were just throwing them out one day so I grabbed a couple of boxes and sold them for $25 each and that’s clear profit. I sold this – it was like a – you know collector cards, there was a framed set of 16 and it must have been obviously a rare one, there was someone from each club, and had signatures, and it had gold around, it looked pretty fancy, and they were going to throw that out as well, and I thought I’ll take that, and it went for about $280. I’ve sold some Holden posters. My cousin works for Holden as a mechanic, so he gets all these – they just chuck them out. And he came across these posters, especially these limited edition posters of 5000 and they’re numbered, and I listed them for $40 and they always sell. One poster. So I’m loving it. I put it in for $40, but some sell for $60.

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Question: Do you put them all up together? I just put one at a time, because if you put four or five at the same time, you’re less likely to get a higher price for each. Question: What about others of you. What have you sold on eBay? Wheels, DVDs, CDs. I’ve sold some of my textbooks. My husband does all the selling. At the moment he’s selling some really rare WWF videos, wrestling videos. He sells CDs. He picked up a rare CD the other day for $6, and the last one sold for $40. So hopefully we can sell ours for $40 as well. Question: Anybody buy stuff on the auction site, and then resell it on the auction site? I have, yeah. I’ve re-listed something I bought six months ago! Yeah, I’ve re-listed clothes and things that I’ve bought, and then I’ve got sick of, and so I’ve put them back on eBay. I haven’t made a huge profit. Question: Now thinking about yourselves as sellers, for a moment. What’s your feedback look like? [Replies of 100%] Question: Anybody ever had an experience of negative feedback? I’m about 98.2, I think. Question: What are the risks involved in being a seller? People won’t pay for the items. The risk is that you have to go to the hassle of re-listing. Question: Someone was saying the other day the eBay fees are going up. Have you heard anything about that? They’ve gone up a couple of times already. It’s still pretty reasonable, I think. It’s not too much. Question: Do you know what it is? Yeah, it’s a percentage. Question: What is the percentage? The higher you sell it for the less the percentage.

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Question: Any other risks? Someone’s unreasonable and gives you negative feedback, when you’ve explained everything. Question: Does eBay have fine print that applies to you as sellers? Probably. Question: But you don’t know. Do others of you know anything about the fine print that eBay might have that applies to you as sellers? Not really, no. You take it as, if you’re an honest person you’re right in describing the item as what it is. Question: But when you join eBay as a seller, they don’t say, well, if you’re going to be a seller here, these are the conditions? Well you have to supply bank account details and other details to confirm that you are who you say you are. There are terms and conditions, you never read those, you just tick the box at the end. It has become a lot easier to be a seller on eBay. When I first discovered eBay and I used it at home and all that kind of thing, I actually couldn’t go on because I didn’t have a credit card. But these days all you can do is you can just put your home number then they’ll just call you straight away and this voice will come on and say the number so you don’t even need a credit card so it’s definitely gotten easier. But as far as terms, I don’t know.

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Appendix 4: Focus group discussion outline COMMUNICATION LAW CENTRE ONLINE AUCTIONS FOCUS GROUPS DISCUSSION OUTLINE 1. What attracted you in the first place to online auctions? (Probe: Prefer auctions as a means of trading; bargain-hunting; convenience; breadth of opportunity; like doing online transactions; hobby or pastime).

2. How often do you participate in online auctions? (Probe: More often as a buyer, or as a seller?)

3. What online auction services do you use for buying? Why?

4. And when do you mainly do it? (Probe: During the business day; at night; at weekends; on holidays.)

5. I want to talk for a few moments about buying at online auctions. What sort of things have you bought at an online auction? How do you decide what kind of things to buy?

6. What are the really good things, if any, about buying at online auctions? (Probe: Bidding as opposed to fixed-price purchasing.)

7. What, if any, are the risks associated with buying at online auctions? (Probe: Not receiving what you think you’ve paid for; not receiving anything at all in return for your money; not having any comeback on the seller by way of guarantees or refunds.)

8. How do you protect yourself from these risks? (Probe: types of payment method; choosing carefully who to deal with; using escrow services; reading the seller’s terms carefully; buying only relatively small items.)

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9. How well do these protective strategies work for you? Have you ever been cheated in an online purchase? (Probe: Did you resolve the problem? How?)

10. There might be some risks you can’t protect yourself from. What might these be? And in what circumstances would you take such a risk? Or would you not take a risk you couldn’t protect yourself from?

11. Can you tell me anything about the kind of consumer protection that the law provides for buyers at online auctions? (Probe: Have you ever used them? How effective would you say they were?)

12. Now let’s talk about selling at online auctions. What sort of things have you sold at an online auction? How do you decide what kind of things to sell?

13. What are the really good things, if any, about selling at online auctions? (Probe: Bids as opposed to fixed-price sales.)

14. What online auction services do you use for selling? Why?

15. What, if any, are the risks associated with selling at online auctions?

16. How do you protect yourself from these risks?

17. How well do these protective strategies work for you? Have you ever been cheated in an online sale? (Probe: Did you resolve the problem? How?)

18. Can you tell me anything about the kind of consumer protection that the law provides for sellers at online auctions? (Probe: Have you ever used them? How effective would you say they were?)

19. Is there anything else you would like to tell us about your experiences as either a buyer or seller at online auctions?

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Appendix 5: Auction site operator questionnaire

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Appendix 6: Consultation list Table A6.1 outlines organisations/individuals that we contacted for this project and who provided information/feedback. Table A6.1 Organisation

Contact Person

Provided Information /Feedback?

Consumer Government Departments and Related Organisations Kevin Bell

√

Louise Sylvan (ACCC)

X

Therese Dupe

√

Michael Funston

X

[email protected]

X

Colin Neave (Chair)

X

Consumer Affairs (NT)

Geoff Gaskell

√

Consumer Affairs (SA)

Margaret Phelps

√

Consumer Affairs and Fair Trading (Tas)

Jennifer Lee

√

Consumer Affairs Victoria

Adam Creed

√

Andrew Maurer

√

Patrick Walker, Stephany Durack Anne Cousins (Consumer Affairs Victoria)

√

ACT Office of Fair Trading Australasian Consumer Fraud Taskforce Australian Competition and Consumer Commission Australian Securities and Investment Commission Commonwealth Attorney-General's Department Commonwealth Consumer Affairs Advisory Council (CCAAC)

Department of Communications, Information Technology, and the Arts (Online Policy Division) Department of Consumer and Employment Protection (WA) E-commerce Working Party - Standing Committee of Officials of Consumer Affairs (SCOCA) Fair Trading Operations Advisory Committee Standing Committee of Officials of Consumer Affairs (SCOCA)

Neil Power (Commonwealth Treasury)

X

√

David O'Connor, Malcolm Finger Fiona Fitzpatrick

X

Michael Keelty

X

Nigel Phair

√

Northern Territory Police

Paul White

X

NSW Police

Jim Baldwin

√

Queensland Police Service

J C Banham

√

Malcolm A Hyde

√

S A Tilyard

√

Victoria Police

Peter Wilkins

√

Western Australia Police Service

Paul Langdon

√

NSW Officer of Fair Trading Office of Fair Trading (QLD) Law Enforcement Agencies Australian Federal Police Australian High Tech Crime Centre

South Australia Police Tasmania Police

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√

Dispute Resolution Adrian McGirr Cara Cherry Lisco

X X

-

X

Robert Wilson, Derek Wilson

√

eBay Australia (www.ebay.com.au)

Alastair McGibbon, Katrina Johnson, Daniel Feiler, Matthew Poblocki

√

Grays Online (www.grays.com.au)

-

X

Magistrates Court of Victoria (Melbourne) SquareTrade (www.squaretrade.com) Auction Site Operators * Amazon.com Auctions (http://auctions.amazon.com) AuctionTrader (www.auctiontrader.com.au)

Philip Druce

√

Christine Turner

X

-

X

Albert Naffah

X

Andrew Woodward

√

Colin Neave

X

David Bell

√

Tiffany Zaporowski

X

Gerard Brody

√

Alison So

√

Member Email List was Used

X

Tony Hill

X

Peter Coroneos

X

National Centre for Crime and Justice Statistics (NCCJS) – Australian Bureau of Statistics (ABS)

Terry Byrnes, Chris Liberi

√

Law Council of Australia (E-Commerce Committee)

Philip Argy (Chair)

X

Oztion (www.oztion.com.au) # TradeMe (www.trademe.co.nz) ** Yahoo! Auctions (http://auctions.yahoo.com) Financial Services Industry Mastercard Visa Australia and New Zealand Banking and Financial Services Ombudsman (BFSO) Australian Bankers' Association Paypal Australia Consumer/Public Interest Non-Government Organisations Consumer Law Centre Victoria Australian Consumers' Association Members of the Federation of Community Legal Centres (Vic) (Peak body for Victoria's 51 Community Legal Centres) Internet Society of Australia Industry Organisations Internet Industry Association Other

* Auction Site Operators were asked to answer the questionnaire in Appendix 5 # The questionnaire in Appendix 5 was sent to popular auction site operators at the time. Subsequent survey findings showed that a significant number of Australians use Oztion (see table C2.1 in section 2.2.2 of the report). Due to timing constraints Oztion was not provided with the questionnaire but instead was asked to comment on the draft report (see 1.5.2.4). ** The questionnaire in Appendix 5 was sent to popular auction site operators at the time. Subsequent research showed that a significant number of Australians use TradeMe (see table C.2.3 in section 2.2.2 of the report). Due to timing constraints TradeMe was not provided with the questionnaire but instead was asked to comment on the draft report. (See section 1.5.2.4) TradeMe indicated that they would be happy to discuss with us anything in the draft report but timing constraints prevented us from doing so.

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BIBLIOGRAPHY 1. ARTICLES/BOOKS/REPORTS AusInfo, Canberra, National Competition Policy review report, (1999) Dal Pont, G. E. Law of agency (2001) Federal Trade Commission (US), Consumer Fraud and Identity Theft Data Complaint Data: January – December 2005 (January 2006) available at http://www.consumer.gov/sentinel/pubs/Top10Fraud2005.pdf at 19 June 2006 Finch "Consumer Protection on the Internet" in Going Digital 2000: Legal Issues for E-commerce, Software and the Internet (2000) Fisher, Simon AgencyLlaw (2002) Halsbury’s Laws of Australia (at 2 May 2006) 15 Agency, 30 Auction Kono, Toshiyuki, Christoph, G. Paulus & Rajak, Harry (eds) Selected Legal Issues of E-commerce (2002) National Competition Council, Assessment of governments' progress in implementing the National Competition Policy and related reforms: 2003 - Volume two: Legislation review and reform (2003) National White Collar Crime Center (US) and the Federal Bureau of Investigation (US), IFCC 2002 Internet Fraud Report (2002) Ramberg, Christina Internet Marketplaces : the Law of Auctions and Exchanges Online (2002) Reynolds, "E-auctions: who will protect the consumer?" (2002) 18 Journal of Contract Law 1 Sorensen, "Internet auctions, consumer protection and the Trade Practices Act" Deacons News and Insights, January 2004 http://www.deacons.com.au/news/articles.asp?nID=522 Washington State Attorney General’s Office (US) and the Center for Law Commerce and Technology at the University of Washington Law School (US) Bidder Beware: Towards a FraudFree Marketplace – Best Practices for the Online Auction Industry (April 2001) (authors: Paula Selis, Anita Ramasasry and Charles S. Wright) Washington State Attorney General’s Office (US) and the Center for Law Commerce and Technology at the University of Washington Law School (US) Update to the report “Bidder Beware: Towards a Fraud-Free Marketplace – Best Practices for the Online Auction Industry” (June 2002) (authors: Paula Selis, Anita Ramasasry and Charles S. Wright) at 18 July 2006

2. CASES ACCC v Internic (1998) ATPR Applied Business Technology Pty Ltd v Grandmaster Computers [1990] FCA 36 — 255 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379 Blomley v Ryan (1956) 99 CLR 362 Caspi v Microsoft, 732 A 2d 528 (1999) Causer v Browne [1952] VLR 1 Chelmsford Auctions Ltd v Poole [1973] QB 542 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 E v Australian Red Cross Society (1991) 27 FCR 310 Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631 Evagora v eBay Australia & New Zealand Pty Ltd [2001] VCAT 49 Henderson v Pioneer Homes Pty Ltd (1990) ATPR 40-159 Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433; [1988] 1 All ER 348 International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644 ; 32 ALJ 160 Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; 79 ALR 9; 62 ALJR 389 Olley v Marlborough Court Ltd [1949] 1 KB 532; [1949] 1 All ER 127 Parker v South Eastern Railway Co (1877) 2 CPD 416 Petersen v Moloney (1951) 84 CLR 91 ; 25 ALJR 566 Shearson Lehman Hutton Inc v Maclaine Watson & Co Ltd [1989] 2 Lloyd’s Rep 570 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 Taco Co Of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163; [1971] 1 All ER 686; [1971] 2 WLR 585 Ticketmaster Corporation v Tickets.com Inc, 54 USPQ 2d 1344 (2000) Trumpet Software Pty Ltd v Ozemail Pty Ltd (1996) 34 IPR 481

3. LEGISLATION Auction Sales Act 1973 (WA) Auctioneers Act 1996 (NT) Auctioneers and Real Estate Agents Act 1991 (TAS) Collusive Practices Act 1965 (VIC) Crime Act 1958 (VIC) Criminal Code Act 1995 (Cth) Trade Practices Act 1974 (Cth)

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Fair Trading Act 1987 (SA) Fair Trading Act 1999 (VIC) Estate Agents Act 1980 (VIC) Property Agents and Motor Dealers Act 2000 (QLD) Property and Motor Dealers Regulation 2001 (QLD) Property, Stock and Business Agents Act 2002 (NSW) Sale of Goods Act 1896 (QLD) Sentencing Act 1991 (VIC)

4. OTHER SOURCES ACCC, “Preliminary sweep results show Internet scammers still out there”, Press Release, 16 February 2004 http://www.accc.gov.au/content/index.phtml/itemId/481135 ACCC, Internet auctions: what you should know before you bid or sell, August 2000 AuctionTrader, Merchant Services Terms and Conditions at 7 May 2006 Australian Bureau of Statistics, Household Use of Information Technology (2004-2005, 8146.0) Consumer Affairs Victoria, Online Auctions, eCommerce Fact Sheet, 2001 http://www.consumer.vic.gov.au/cbav/fairattach.nsf/Images/factsheet_ecommerce_auctions/$ File/auctions.pdf Consumer Affairs Victoria, Preventing unfair terms in consumer contracts, November 2003 eBay Australia User Agreement at 14 May 2006 eBay Fact Sheet (as of 31 December 2005), at 27 April 2006 eBay Privacy Policy, at 7 June 06 eBay, If Something Goes Wrong: Overview, available at http://pages.ebay.com.au/help/confidence/problems-ov.html Fleur Doidge, "New online auction site aims at resellers", IT News, 29 August 2005 Fran Foo and Munir Kotadia, “Crushing the Web's dark forces” ZDNet Australia, 1 August 2005 Garry Barker, "Shoppers tap into eBay", The Age, 5 May 2004 GraysOnline Auctions – Bidder Agreement at 7 May 2006 Harris Interactive online auctions survey commissioned by the National Consumers League (US) and released on 31 January 2001 at 7 July 2006 — 257 — GOING, GOING, GONE © 2006 COMMUNICATIONS LAW CENTRE LTD

Innovation and Technology Statistics Update - Bulletin No. 9, December 2003, Australian Bureau of Statistics Internet Scams, Fraud Trends January - December 2003, National Fraud Information Centre available at http://www.fraud.org/2003internetscams.pdf Jason Hill, "Auction action", The Age, 24 July 2003 May Wong, " PayPal problems persist" News.com.au, 13 October 2004, available at http://www.finance.news.com.au/common/story_page/0,4057,11060121%255E14305,00.html Ministerial Council on Consumer Affairs, Joint Communique (2 September 2005) < http://www.consumer.gov.au/html/joint_communique/jointcommunique_september2005.htm > at 13 May 2006 Ministerial Council on Consumer Affairs, Strategic Agenda (September 2005) Ministry of Fair Trading (Western Australia), Draft National Competition Policy review of the Auction Sales Act 1973, Draft report (2000) National Consumers League, Internet Scams Fraud Trends January-December 2005 available at Nielsen//NetRatings NetView (home & work panel measurement, March 2006) Offers to Buy or Sell Outside of eBay at 17 July 2006 Office of Fair Trading (Qld), Unfair Contract Terms Discussion Paper: What do you think about unfair contract terms? (14 December 2004) Online Shopping and Consumer Protection Discussion Paper, Standing Committee of Officials of Consumer Affairs: E-commerce Working Party, May 2004 Oztion User Agreement 7 May 2006 OZtion, ‘OZtion Analyses Top 3 Australian Online Shopping Categories for Christmas’ (Press Release 23 November 2005) OZtion, ‘OZtion Announces Results for First Year of Operation’ (Press Release 13 January 2006) OZtion, What is OZtion? < http://www.oztion.com.au/company/whatisoztion.aspx> at 28 April 2006 Paul Ham, "eBay's bazaar market place", The Age, 2 July 2002) Review of Building Consumer Sovereignty in Electronic Commerce, A Best Practice Model for Business, Discussion Paper, Commonwealth Treasury, November 2003, available at http://www.ecommerce.treasury.gov.au/bpmreview/content/discussion.asp?NavID=5 Standing Committee of Officials of Consumer Affairs, Unfair Contract Terms Working Party, Unfair Contracts Terms Discussion Paper (2004) The Current State of Play, Department of Communications, Information Technology and the Arts, December 2003, available at http://www2.dcita.gov.au/ie/publications/2004/01/csop/eservice) Use of Information Technology [1301.0-2004], Australian Bureau of Statistics, 2004

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