‘Fair Warning’ – 7 Legal Risks of Auction E
Website design By BotEap.comOnline auctions (or electronic auctions) are big business and can catapult a regional auction house onto an international stage with access to new and dynamic global markets.
Website design By BotEap.comCompanies like eBay have added all kinds of auction capabilities to their websites to engage users and add excitement. But running an online auction, an auction that is conducted over the Internet, raises many legal issues for both the seller and the buyer.
Website design By BotEap.comThis article discusses ways to mitigate organizational risks that arise from adding an auction to a business website. The information does not constitute legal advice and organizations considering an online auction should always seek expert opinion.
Website design By BotEap.com1. What type of auction?
Website design By BotEap.comYou might think of an auction as a sale where buyers offer the highest price for an item and the fall of the auctioneer’s hammer confirms the deal. This english auction is the most common type, but there are others, and each carries its own risks and legal liabilities, including:
- vickrey auctions – the highest bidder gets the item at the price offered by the second highest bidder;
- Dutch and Yankee auctions – auctions formatted to handle a situation where a seller wants to sell multiple identical items;
- First Price Sealed Bid Auction – All parties make a single offer and the highest bidder wins and pays what he offers. The main difference between this and English auctions is that bids cannot be openly viewed or advertised unlike the competitive nature that public offerings generate;
- Reverse Auction – where the roles of buyer and seller are reversed. Multiple sellers compete for the buyer’s business, and prices typically decrease over time as new offers are made. They do not follow the typical auction format where the buyer can see all the offers and can choose which one they prefer. Reverse auctions are used efficiently in a business context for contracting.
- Bid Fee Auctiono Penny auction requires customers to pay for bids, which can increase an auction price one unit of currency at a time
- the method by which bids will be processed;
- how winning bids will be handled;
- how winning bidders will be notified;
- the use of “reserve” prices (a secret price below which no offer is accepted); how disputes between bidders will be handled;
- how merchandise and payments will be shipped;
- refund and return policies;
- information on fees, membership eligibility requirements and feedback mechanisms;
- the jurisdictions and laws of which country will apply.