A Word of Advice

13 May 2005

Riding the online auction trend – and avoiding problems
Part 1 of 3

Everybody’s doing it. Even Cherie Blair, wife of the British Prime Minister, is reportedly a regular user. Maybe you’ve had a dabble or you know of friends, family or colleagues who are riding the latest retail trend of buying and selling through online auctions.

In this article, the first in a three-part series, we provide tips to online auction buyers to help you avoid any pitfalls. In the second article we’ll outline tips for sellers. And in the final part, we’ll look at your rights if things go wrong.

Are online auctions actually auctions?

One thing that consumers often ask is whether online auctions are indeed auctions. Auctions in New Zealand are governed by a law called the Auctioneers Act, which means that auctioneers are required to be licensed. It is not clear if online auctions meet the definition of an auction in the Auctioneers Act, so you may find the online auction operator does not have a licence.

Unlike at a traditional auction, in an online situation you won’t be able to examine the goods firsthand before you buy them and you’re not present at a live auction along with other bidders. This means you should take extra steps to ensure the transaction runs smoothly.

Before you place a bid

• Use a reputable site. Ask around for a recommendation. A site should clearly state its terms and conditions, rules for buying and selling, privacy policy, provide a feedback facility, and offer a payment service. The site may also provide information about online auction scams, or how to report such activities to the auction site.
• Find out if the site offers access to a dispute resolution process. If you can’t resolve the dispute yourself, it is reassuring to know you have the backup of the auction provider.
• Familiarise yourself with the bidding process.
• Check how much you would pay for the item if you bought it new, or a similar item in a local auction or second-hand store.
• Factor in any postage/freight costs you may need to pay.
• Find out all you can about a seller’s trading history on the site. Many sites post feedback ratings of sellers – as well as buyers – based on comments from users. If you find negative comments, consider carefully whether or not to trade with this seller.
• If buying from an overseas site, make sure you know what currency the prices are in and what that converts to in New Zealand dollars.
• Know what form of payment the seller will accept.

When bidding

• Establish your top price and stick to it.
• Keep a record of all item descriptions, your bids and any correspondence in case of a dispute.

Paying

• Consider using a payment service. This involves an independent third party that holds payment in trust until you receive and accept the item from the seller.
• Check out any payment service suggested by the seller before agreeing to use it.
• If buying from a company or using a payment service, consider payment by credit card where you can. You may be able to reverse the charge if you don’t receive the goods.
• Consider insuring expensive items against loss or damage in transit.
• If receiving the item by post, request it be sent using a traceable courier service.
• Keep a record of all transactions/receipts.

After the purchase

• Use the site’s feedback function so others know what to expect – be it good or bad.