Class Action Lawsuit Filed Against eBay Because Of The Way Its Auctions Work

from the oh-come-on dept

It seems you can find people to file a class action lawsuit against just about any crazy thing these days. The latest, as pointed out by Eric Goldman (with the complaint embedded below), is someone filing a class action lawsuit against eBay claiming all sorts of violations for the way eBay's auction system has always worked. Here's the basic issue. eBay developed a rather clever system back when it launched to handle bidding. You don't just put in your next bid -- you put in what's supposed to be the maximum you're willing to bid on an item. But the auction system itself always goes for the highest bidder's lowest increment above the second highest bidder. If that sounds confusing, let's take the language from eBay's own site, and quoted in the lawsuit:

1. The current bid for an item is $10.00. Tom is the high bidder, and has placed a maximum bid of $12.00 on the item. His maximum bid is kept confidential from other members.
2. Laura views the item and places a maximum bid of $15.00. Laura becomes the high bidder.
3. Tom’s bid is incremented to his maximum of $12.00. Laura’s bid is now $12.50.
4. We send Tom an email that he has been outbid. If he doesn’t raise his maximum bid, Laura wins the item.

This is how eBay has always worked. And it's a perfectly reasonable business model choice that eBay did because it makes life much more convenient for users. Rather than having to put in place each bid, you can set the most you're willing to pay and rest assured that you'll just have to pay the next increment above the second highest bid. Of course, in practice, the bidding rarely works that way, with people often feeling pressure to raise their highest bid, or wait until the very end to snipe the bid. But, overall what could possibly be the problem with this system?

Well, according to the lawsuit, this all seems to be a conspiracy to defraud the seller of the full $15 that Laura bid. The fact that she only pays $12.50 is apparently due to eBay failing to "act neutrally" and instead "inject[ing] itself into the transaction by intercepting the bid aamount [sic] before it is received by the seller." Seriously.

Once again, this is how eBay has worked forever, and it's pretty clearly explained on the site. It's a business model choice that makes plenty of sense. It's not some breach of contract, or "tortious interference" or "unfair competition" or "unjust enrichment." It's just a business model. In fact, if eBay were really being nefarious, wouldn't it set things up the other way? After all, since eBay gets fees as a percentage of the sale price, if the company were really being sneaky, it would try to force everyone to pay the higher bid. If anything, it seems like eBay's structure is designed to help people, not to unjustly enrich itself...

Filed Under: auctions, automatic bidding, business models, class action
Companies: ebay