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Old 01-11-2012
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Default Lawsuit Raises Questions about eBay's Role in Auction Process

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 newsletter 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?

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Old 01-11-2012
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This is a pretty interesting lawsuit. Curious as to where it will lead.
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Old 01-11-2012
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Very interesting indeed....
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Old 01-12-2012
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What a waste of money. What could this possibly achieve for anyone?
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