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At last! Consumer rights for online auctions

More than a decade after TradeMe was established, consumers will finally have rights against traders when it comes to buying goods by auction.

james cain online auctions buyer rights idealog?If you are one of the many New Zealand businesses that sells its goods through online auction sites like TradeMe, you could be in for quite a surprise this year.

Amendments are coming in June to our consumer laws – including the Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA) – that may well affect your business.

The amendments are the most significant set of changes to our consumer-related legislation in nearly 20 years. For an ever-increasing number of small-medium size businesses, however, the decision to grant rights to consumers who buy goods through online auctions is highly significant.

Most people are familiar to some degree with the protections afforded to consumers under the CGA. What they may not be aware of is that the CGA’s protections do not currently apply to goods which are supplied by auction or competitive tender.  Nor might they be aware that the FTA does not currently require a person selling goods online to disclose if they are a trader (versus a private individual selling an item on a one-off basis).

Under the current law, if I visit TradeMe and see a pair of shoes I like being offered for sale, the only detail I am given about the seller is the account name, ‘derek123’. I have no idea if ‘derek123’ is an importer or private individual. If I successfully bid for those shoes my purchase is not currently protected by the CGA, regardless of whether ‘derek123’ is a trader or individual.

If however I bought the same shoes using the ‘Buy Now’ button my purchase is protected by the CGA – provided ‘derek123’ is a trader – because a ‘Buy Now’ transaction is deemed to be the same as physically visiting a retailer and buying goods in-store.

But that uncovers another problem: I don’t know if ‘derek123’ is a trader or private individual, so how do I know if I can enforce my rights if, for example, my shoes fall apart two days after I get them?

Amendments to the CGA and the FTA fix these problems. The relevant section of the CGA (s41(3)) is being repealed as of June 17, meaning from June 18 the protections afforded by the CGA will apply to goods bought by auction and competitive tender on TradeMe as well as by ‘Buy Now’.

In addition, online traders will no longer be able to trade under the radar: a new section in the FTA (s28B)(2)), which also comes into force on June 18, will require online vendors to make it clear to potential purchasers that they are operating ‘in trade’. So it is that going forward consumers’ purchases will be protected by the provisions of the CGA (and the FTA).

Fifteen years after TradeMe was established, consumers will finally have rights against traders in respect of goods bought by auction.

A word of advice to any business that sells its goods through online auction sites and has managed to avoid the nets of the CGA and FTA to date: if you don’t have sufficient or the right liability insurance in place, you would be wise to contact your broker.

Ben Cain is an associate at James & Wells and a LEADR accredited mediator. You can reach him at [email protected]

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