Online auctions

Online auctions

Online auctions can be fun and a great way to grab a bargain, but you need to be careful - not all auctions are the same and there are risks involved. Before you join or register to participate in an online auction, make sure you know what sort of auction you are looking at and what rights and responsibilities you have. You should also take steps to minimise the risks of something going wrong.

Types of online auctions

Marketplace online auctions

Online marketplace auctions are now a popular way of buying, with a well known example being eBay. In these ‘virtual’ markets, a business sets up the website and provides a set of rules and guidelines, but it is mostly left to the individual buyers and sellers to deal directly with each other and make the market work. It is important to note that the business running the website is not directly involved in the auction process and is not an agent for the seller.

Traditional auctions

Traditional auctions have been around a long time - just think of an auctioneer banging down the hammer with a cry of ‘sold’ and pointing to the highest bidder. In this case, the auctioneer has acted on behalf of the seller of the goods. Traditional online auctions operate in the same way, but instead of interested buyers gathering together in person, an online auction house uses a website to create a virtual auction.

Auctions conducted by businesses

There are many forms of this auction, in which the business running the website offers their own products for sale:

• low bid auctions: the lowest unique bid received is the successful bid
• high bid auctions: the highest unique bid received is the successful bid
• beat the clock auctions: each new bid increases the auction duration, with the highest bidder at the end of the auction winning
• reverse auctions: the role of the buyer and seller are reversed and the sellers compete for your business.

Don’t participate unless you understand exactly how the auction works. The auction website should provide important information such as terms and conditions or safe trading guidelines. See if the auction site has any processes in place for dealing with problems such as dispute resolution procedures, buyer protection policies or complaints handling policies - and whether you are eligible.

Don’t get caught with unexpected fees and charges

Before you join an online auction, know all the costs involved with registering, bidding and winning. With some of the newer or more novel types of auctions, you may be charged to bid, even if you don’t win. You may also have to pay administrative fees and subscription costs and you will nearly always have to pay for delivery if you do win. If the terms and conditions look tricky or confusing, you may be safer to shop elsewhere.

Your rights when buying from an online auction

Whether online or in person, you need to be particularly careful when you buy from an auction – most auctions are a case of 'buyer-beware' and there are normally no returns or refunds if something goes wrong with your purchase.

When you buy at auction, you are still entitled to expect that the seller will provide the product as it was advertised: they cannot mislead you about the product or its attributes. For example, if you bought a green leather couch, they cannot send you a red one.

Whether you buy from a business or private individual, the seller must have the right to sell you the goods. It is unlawful for someone to sell you something which was stolen or that they didn’t own. If there are any restrictions on ownership, these should be made clear to you before you buy. 

In other situations where you have problems with a purchase at auction or from an individual seller on an auction website, you may need to seek legal advice.

The auction site is usually not a party to the transaction and therefore may not be responsible or liable if there is a dispute about your purchase.

If you are having problems with a purchase from an overseas-based business or website, it may be more difficult for you to resolve any issues that arise. Visit our webpages Buying from overseas, Buying from overseas and Online shopping – when things go wrong for more information.

STOP: Is it really an auction?

Some auction sites give you an option to buy immediately without having to bid (e.g. the 'Buy it now' option on eBay). If you are willing to pay the listed price, you can buy without going through the bidding process. This type of sale is not an auction so you may have additional rights under consumer protection laws. However, if the seller is a private individual, you might not be able to rely on consumer protection laws to remedy your problem.

See our publication Consumer Guarantees for more information about your consumer rights.

Top ten online auction tips

1. Check out the seller – auction sites usually have a feedback rating system for buyer and seller comments
2. Check out the auction site – consumers will often post comments on online discussion forums
3. Do not agree to do business privately 'outside' the auction site – it could be a scam, and you may lose any fraud protection offered by the website
4. Find out everything about the item – ask questions or request extra pictures
5. Make sure you’re getting a good deal - shop around and know the total cost
6. Only pay using a secure payment system – this is indicated by a padlock symbol and a web address starting with https://
7. Consider using a reputable escrow agent for valuable items - they will hold a payment in trust until you receive and accept the item
8. In case of a dispute, keep a copy of all documents – this includes printed and electronic records of all bids, item descriptions, emails and receipts
9. If you have a problem, contact the seller first - they may want to resolve the problem to avoid negative feedback
10. If you cannot resolve a problem with the seller, refer to the auction website – it may offer a dispute resolution service or buyer protection scheme.

For more great tips on online shopping, check out our Tips for a fine time shopping online publication.

Watch out for scams

Most online auction sites put a lot of effort into spotting scammers, but you need to be careful too. Stay one step ahead of the scammers - visit our SCAMwatch website to learn more about online shopping and auction scams, how to protect yourself or to report a scam.