[geeks] eBay question

[Dan Sikorski]

Geoffrey S. Mendelson wrote:
> IMHO the difference was that before eBay, auctions were not a very
> popular thing. There was one big auction house in Philly where I lived
> and a few private auctions, but probably 99% of the population had
> never been to a real auction (as opposed to a charity one at a church,
> school. etc).
>   
I would disagree.  Auctions are frequently used to liquidate an estate 
or to quickly sell real estate.  Around here, school systems have 
regular auctions.  An auction is appropriate whenever the market price 
of an item is unclear, either due to scarcity or high demand.  "In 
economic theory <http://en.wikipedia.org/wiki/Economic_theory>, an 
auction is a method for determining the value of a commodity 
<http://en.wikipedia.org/wiki/Commodity> that has an undetermined or 
variable price <http://en.wikipedia.org/wiki/Price>." (1)
> With eBay, it's become "mainstream". Isn't it time to enforce the 
> existing laws? IMHO if the owner won't sell at a price below the reserve.
> that should be the advertised minimum bid, not something made up which
> has no basis in reality.
>   
I believe that your contempt for reserve price auctions comes from 
either not understanding them, or not understanding the laws governing 
offer and acceptance.

There is nothing wrong with reserve price auctions.  What law do you 
feel it is violating?  When you participate in an auction, you agree to 
it's terms and conditions.  Ebay pretty clearly states it's rules, 
terms, and conditions, and adheres to them.  That said, several aspects 
of a traditional auction serve a different purpose in an online 
auction.  In a traditional live auction, the seller of an item could 
hold a reserve price in a sealed envelope.  The auctioneer does not need 
to know this reserve price, so as to not influence the bidding.  On 
ebay, this allows a seller to generate interest in the auction.  when 
you place a winning bid that does not meet the reserve price, it very 
plainly states to you that the reserve has not been met, and provides a 
link to further explanation.  In a real estate transaction, this reserve 
price could provide a safety net, to ensure that outside factors 
(weather, influence from other bidders, auctioneer, etc.) do not cause a 
sale at an auction for an abnormally low price.  If the seller has no 
interest in protecting him/herself in that way, they do not need to set 
a reserve price.  Since the existence of the reserve price and sometimes 
it's amount is disclosed from the beginning of the auction, there is no 
surprise to the bidder.  It is very much based in reality, is not made 
up, and is fair to both seller and bidder.  On top of that, the seller 
can optionally sell to a winning bidder who has not met reserve.  In 
fact, it has happened to me with an ebay auction before.  

 From a legal perspective, "An *offer* is an expression of willingness 
to contract on certain terms, made with the intention that it shall 
become binding as soon as it is accepted by the person to whom it is 
addressed, the "offeree"." (2)  When a store advertises a computer for 
$400, it is an offer to sell.  The vast majority of people who see that 
offer exercise their right to refuse the offer, but some accept the 
offer and purchase the computer.  An auction for the same computer that 
starts at $1 is not an offer to sell it for $1, it is a means to attract 
offers to buy the item.  The bidder puts forward an offer to buy at 
their bidding price, which the seller has the right to refuse.  These 
are two different methods of coming an agreement on a transaction, but 
are both perfectly legal.  These are basic concepts of Business Law.

    -Dan Sikorski

(1) http://en.wikipedia.org/wiki/Auction
(2) G.H. Treitel, /The Law of Contract/, 10th edn, p.8. as quoted in 
http://en.wikipedia.org/wiki/Offer_and_acceptance