Are those who bid on their own items online, or who get friends and family to do it for them, breaking the law? Omar Bucchioni takes us into the murky world of “shill bidding” and looks at how unfair commercial practices regulations could lead to a fine of up to £50,000.
Topic: E-commerce
Who: Paul Barrett and eBay
When: April 2010
Where: Bradford Crown Court
Law stated as at: 28 May 2010
What happened:
Paul Barrett, an eBay trader from County Durham, is the first person in Britain to be convicted after he admitted 10 breaches of consumer protection laws although he said he was not aware he was acting illegally.
In 2008 two laws were brought into force (the Business Protection from Misleading Marketing Regulations 2008 and the Consumer Protection from Unfair Trading Regulations 2008-“CPUT”) to implement an EU Directive. For breaching these laws, Mr Barrett could be fined up to £50,000 (each offence carries a maximum penalty of £5,000) – the sentence of Bradford Crown Court is expected soon.
North Yorkshire Trading Standards officers started investigating Mr Barrett, a minibus hire company owner, after they received a complaint that he advertised and sold a mini-bus on eBay with false low mileage. The Renault Master Bus was advertised as having travelled 55,013 miles – but actually had 132,401 on the clock. The investigators found he was selling goods – which included a pie and pasty warmer priced at £127 – on the eBay auction website and boosted the value of goods he was selling on one eBay account by placing bids and positive feedback comments from a second account he held under a different name. The practice is known as “shill bidding”.
According to the definition provided by eBay, Shill bidding is when sellers – or someone they know – place a bid on their item to drive the price up. Often the people placing bids have certain information about the seller’s item that other shoppers aren’t aware of. To make sure no one gets an unfair advantage, shill bidding is prohibited on eBay.
Mr Barrett apologised, saying that eBay let him open up the second account and he gave all his personal details and home address to do so. He realised that the price was too low on some things and put the prices up using the second account.
On eBay website http://pages.ebay.co.uk/help/policies/seller-shill-bidding.html are published some examples of prohibited shill bidding activities:
- Jean runs a very successful business on eBay. Ben, one of her employees, wants to buy some of her products and decides to bid on them. But because he works at her company, he has access to information that wouldn’t be available to other eBay shoppers, giving him an unfair advantage.
- John is selling his extra MP3 player on eBay. During the auction his girlfriend, Jane, bids on the MP3 player even though she doesn’t intend to buy it. Another person, Dan, whose bid is higher than Jane’s ends up winning the auction, but he paid a higher price than he should have since Jane placed the phony bid.
- Sally is selling her car on eBay. During the auction, she gets worried that her car might sell for less than the amount she’s hoping to get. To make sure that no bidder can win her car for less than what she has in mind, she uses another eBay account to place bids on her own car, increasing the volume of bidding and raising the price to a level she thinks is fair.
- Bob is a high-volume seller on eBay and wants to be sure that he never sells at a loss. Rather than use the reserve price feature to set his minimum prices, he has someone place bids on his auctions, setting a hidden reserve price.
Why this matters:
It is not clear from available reports on the case which particular limb of the Consumer Protection from Unfair Trading Regulations 2008 was found to have been broken. It might be the “always unfair” commercial practice #22 in Schedule 1 (criminalised by Regulation 12) which is:
“falsely claiming or creating the impression that the trader is not acting for purposes relating to his trade, business, craft or profession, or falsely representing oneself as a consumer.”
Alternatively it might be the “misleading action” provisions at Regulation 5, with the false information in question being “the manner in which the price is calculated”.
Alternatively it might be the general prohibition at Regulation 3 (3) of commercial practices which contravene the requirements of professional diligence and involve actual or likely material distortion of the economic behaviour of average consumers with regard to the product in question.
Hopefully all will be revealed in due course, but eBay welcomed the conviction as they spend over £6m a year on countering fraud on the site. Hopefully this sentence will set an example and the case is also a welcome but so far all too rare instance of these still relatively new regulations being used imaginatively to police obviously unacceptable practices.
