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Wed Jan 11 2012 09:06:55

Lawsuit Raises Questions about eBay's Role in Auction Process

By: Ina Steiner

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A seller has sued eBay over the way its proxy bidding feature works - the plaintiff complains that in instances when multiple bidders have set their ceiling for the item, the final selling price should be the highest of those maximum bids - in other words, the bid ceiling of the highest bidder.

You can read about the lawsuit in Wednesday's EcommerceBytes Newsflash article, which includes a link to the fulltext of the lawsuit.

The lawsuit is perplexing, since eBay has had the same system in place for years and it mimics the "left bid" system that auctioneers use at traditional auction houses. The feature actually encourages shoppers who don't want to be on hand to participate in last-minute bidding to leave a bid - otherwise, they might forget to come back to bid on the auction.

In 2008, eBay acknowledged it needed to provide more information about the bidding conducted through proxy bids: "To help educate users who aren't as familiar with proxy bidding, we're adding the option to let members see all the past proxy bids that were placed on an item. In short, buyers will be able to see the full bid history, including when our system automatically raised a buyer's bid to beat a subsequent bid,... One thing to be sure of - just like today, the high bidder's current proxy bid is not revealed."

At some point, eBay changed the name of the feature from "proxy bidding" to "automatic bidding" - no doubt a suggestion from its lawyers - though the help page describing the bidding feature still states, "We'll place bids on your behalf."

The plaintiff states, "Evidently concerned that the term "proxy" denotes an agency relationship (which would run counter to eBay's representation in its User Agreement that it acts as a neutral venue and does not get involved in the transaction), eBay has since changed the name of its bidding process to "Automatic Bidding." But whether terms "Proxy Bidding" or "Automatic Bidding" or something else are used, the process works in the same way, and does so in a manner that contravenes eBay's User Agreement by aligning eBay with bidders to the detriment of eBay sellers."

While I think the proxy bidding system helps sellers rather than hurts them, this lawsuit raises the issue of eBay's role in the auction process. Real life auctioneers place bids on bidders' behalf, but eBay is not an auctioneer. By placing bids on buyers' behalf, are they acting as an auctioneer or auction house? (eBay killed its live-auction platform in 2008 at least in part over liability concerns.)

There's no question potential bidders would think twice before leaving a proxy (automatic) bid if the system worked as this plaintiff desires. Among the auction-bidding issues I would have expected eBay users to be more concerned about are eBay's decision to mask bidders identities and its practice of changing bid increments without notification.

What do you think of proxy bidding, and how important is it to sellers in the scheme of things?




Comments (38) | Permalink

Readers Comments

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

This user has validated their user name. by: Stockmiser

Wed Jan 11 09:47:19 2012

Sounds like semantics to me.

We're talking about an automated process here that is initiated by the buyer.  I can see potential liabilities if the software fails to perform as promised, but not that it somehow ''aligns ebay with the buyer''.  

I think I understand what the seller is saying - that if ebay auctions worked like live auctions, the bid would be the bid - period.  If the current bid price is $100 and someone bids #1000, then it's $1000.  But this isn't that kind of auction.  It's an automated, program driven auction that allows the buyer to use an automatic bid process.  

It's an odd lawsuit.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: Ron

Wed Jan 11 10:14:24 2012

Yeah, I'm not a big fan of eBay these days, especially since the program of "innovative disruption" started 3 to 4 years ago.  But, this is a ridiculous lawsuit - the proxy system, given the time limitation, is not a detriment to sellers at all, in fact, I would argue that it is to sellers' advantage in that bidders are prone to overbid in order to cover any potential competitive bid attempting to snipe the auction at the end of the time limit.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: Scotty

Wed Jan 11 10:56:55 2012

Goofy or not....ebay is looking for any reason to pull the auction format....and I think they would use any reason at all to justify doing this.  Would not surprise me at all if they are behind this to create the ''excuse'' to kill auctions....they are that socio-pathic.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: Jodi

Wed Jan 11 11:39:32 2012

That is one silly lawsuit. I don't think eBay wants to dump auctions-if so why do they offer the ''free'' option so often?

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: Rich

Wed Jan 11 11:48:48 2012

Only in America can people file any lawsuit they want with no risk of penalty. Ebay's thrown away millions; actually billions probably; with their foolish auction process, but this lawsuit is bogus and people who bring these kinds of suits should be financially punished for wasting the courts money and time.  If you don't like the bid process as outlined by Ebay, then don't sell on Ebay.  A private business can set up the bid process any way they want.  It is really stupid that someone can bid $50 and win for $10 but that's how ebay foolishly set it up.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: Bob@eBay12K

Wed Jan 11 11:49:50 2012

I think ALL bids should be proxy (automatic) and all buyers be directed to bid their maximum at the time they bid.

But effectively, that's what happens now anyway.  Because one can still re-bid their proxy anytime.  Thus any 'nibble' is effectively nothing more than a one time 'automatic' bid anyway.

This suit is pointless.  eBay is not acting as an agent because they are not making an autonomous decision (directed or otherwise) -the timing of enacting any action is pre-determined by the bidder's high proxy (and other bidding), not by the venue.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

This user has validated their user name. by: Anonymous Annie

Wed Jan 11 11:56:27 2012

Stockmiser observes: ''It's an odd lawsuit.''

You know, I'm no friend or defender of eBay/PP... but I have to agree that this one is truly weird.  

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: AHumin

Wed Jan 11 12:03:46 2012

I am very against a lot that Ebay does (just about everything).  However, in this case, the person suing is being ridiculous.  Maybe Ebay should explain it better but, even in a live auction, a person who leaves a left bid doesn't pay the price of the left bid.  They start the price at a reasonable price and then the left bid might get the item for much less if people don't bid against him.  If Ebay starts putting in the highest bid they're willing to go, the buyer just might as well bid.  

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: AHumin

Wed Jan 11 12:07:15 2012

Ron's comment is very accurate.  Most of the people commenting on this are pro Ebay which, in this case, makes sense. "Proxy" bidding is actually in the best interest of the seller and often brings the price up.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: anyone out there yet

Wed Jan 11 12:13:29 2012

Just a case of rich lawyers getting richer.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: andanotherthing

Wed Jan 11 12:36:57 2012

Here in the UK we operate a normal auction process as follows:

a group of potential buyers (PB) gather, the bidding is started, and each PB bids until they reach their max, until ultimately the item is sold.

The auctioneer might also agree to act on behalf of a buyer who cannot be physically present at the auction.  That buyer will leave a maximum bid with the auctioneer, and the auctioneer will bid on their behalf until the the buying in the room ceases and/or the maximum bid is reached.  If the buying in the room has ceased, and the maximum bid is such that the auctioneer is allowed ONE MORE incremental bid to secure the item, the auctioneer will then to that close the auction and the absentee bidder has the item.

No-one in the room knows what the absentee bidder's maximum bid is.

Surely this is what eBay does but on a multiple "absentee bidder" basis.  The seller is aware that this is how it's done, they don't have to use eBay, so they shouldn't complain.

I don't often find myself piping up for eBay but the seller(s) who launched this action in my view are behaving speciously.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: dragonmum

Wed Jan 11 13:09:07 2012

Also not to defend that site, but any experienced buyer knows they can always use a snipe service to make certain their highest bid gets noticed. The highest bidder does win, even though the bidding doesn't reach the max they'd be willing to pay. When I sell my goods at live auction (which is even more expensive than e***), I don't expect all the bidders to max out what they would potentially pay. If they would pay $50, but no one else bids over $25, the next bid is going to be $26, not $50! When I was an e*** seller, I had the same expectation. Obviously someone who doesn't understand how auctions work. I hope the lawyer was stupid enough to take this one on contingency, because they'll earn just what this suit is worth - negative money!!

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: nobody

Wed Jan 11 13:19:37 2012

I used to love when people used the proxy system, back when I sold on ebay. What I hated was when that idiot, Margaret Whitman, added the auction killer "watch list". I knew then and there that the heydays of ebay were over, and sure enough, it went nowhere but down after that. Whitman ruined ebay long before jd came along.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: dave

Wed Jan 11 13:21:30 2012

As some folks have already tried to point out, live auctions frequently allow absentee or "left" bids to be executed on behalf of buyers. There is nothing unusual or unfair about Ebay's computers executing these types of bids. The plaintiff does not understand how live auctions work. He is perhaps confused by a sealed bid process which isn't really an auction. In that case, the highest bid wins at the maximum they offered to pay. The bid increments could be more reflective of the experience of a live auction. That is, as the price gets higher, the increments increase as well.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: Brian Cohen
Web Site

Wed Jan 11 13:23:35 2012

The suit sounds nutty to me.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: Paul A

Wed Jan 11 13:24:39 2012

I hope the lawyer was smart enough NOT to take this on contingency, so the plaintiff will be punished with having to pay his lawyer when the case gets thrown out.  That's really the only penalty for filing a foolish lawsuit.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

This user has validated their user name. by: Philip Cohen
Web Site

Wed Jan 11 13:25:13 2012

I do hope that the shyster that is representing this guy was not stupid enough to have taken the case on a "no win no fee" basis.

But, how could any one, even this idiot lawyer, think that it was lawful/ethical for the auctioneer to disclose the maximum bid of an "absentee/proxy" bidder?

The real problem with eBay’s proxy bidding system is, as most of us already know, if the shill bidding seller is smart enough, the eBay system will disclose the maximum proxy bid. This dill apparently has not yet figured that out.

eBay / PayPal / Donahoe: Dead Men Walking.

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

This user has validated their user name. by: Bijoux Dragon
Web Site

Wed Jan 11 13:38:45 2012

I do business at several live auction houses and sometimes I am online during bidding but usually I leave my maximum bid but bidding starts at the minimum and goes up in set increments.

The lawsuit is ludicrous in its focus.  eBay breaks their stated policy of 'just a venue' by dictating payment forms allowed, by requiring PayPal, and by prohibiting direct contact between buyer and seller.  Going after those would make for an interesting lawsuit but proxy bidding, an industry accepted method of bidding, is laughable.  Some lawyer has too much time on his hands!

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

by: ncaaref This user has validated their user name.

Wed Jan 11 14:34:15 2012

I think that this is someone that doesn't understand how the auction process works.  We just as well just tell everyone what the Reserve on an item is if we are going to let everyone know what our maxium bid is.  Now If you want a real lawsuit that should be filed lets talk about eBay's DSR.  Now there is a system worth a lawsuit!!!!

Lawsuit Raises Questions about eBay's Role in Auction Process   Lawsuit Raises Questions about eBay's Role in Auction Process

This user has validated their user name. by: Ming the Merciless

Wed Jan 11 15:17:24 2012

Over the years I have become so cynical about anything having to do with ebafia that I refuse to eliminate the possibility -- however remote -- that this is a friendly lawsuit ultimately designed to get ebafia out of the auction business.

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