Court orders shill bidding car dealer to pay back deposit

Shill bidding is where a seller either bids on their own goods to drive the price up, or has someone else do it for them. Photo / 123rf

A car dealer who used a shill bidder to drive up the price of a van he sold online has been ordered to give the buyer her money back.

A shill bidder is where the seller of an item will either bid on their own product in an online auction, or have someone they know bid for them to inflate the price. The practice is illegal in New Zealand.

A Disputes Tribunal decision released this week saidthe woman bought a van through an unnamed online auction website and paid the dealer a $4000 deposit.

But she then noticed a Facebook friend of the dealer had pushed the vehicle’s overall price up by $4000 through the bidding process.

She referred the matter to the auction website which concluded “the auction had been rigged through ‘shill bidding’ and she did not have to go through with the trade”.

However, she was unable to get her deposit back and so she turned to the authority.

Disputes Tribunal referee Paulette Goddard said the Fair Trading Act forbade people from selling goods or services while engaging in deceptive or misleading conduct.

While the dealer said the pattern of bidding wasn’t conclusive of shill bidding, nor that the second bidder had acted in concert with him, Goddard sided with the evidence provided by the auction website and ordered the dealer to refund the woman’s money.

According to the Commerce Commission, a seller is only allowed to bid on their own online auction or get someone to bid for them if the online auction has a reserve price, the vendor bid is below the reserve price, the bid is clearly identified at the time it is made as a vendor bid.

Trade Me, New Zealand’s largest online auction website, has been explicitly clear that shill bidders are not welcome on its website and has threatened to ban anyone they find doing it and refer them to the Commission.

“Apart from being illegal, shill bidding is dishonest and uncool. It seeks to manipulate the auction process and results in consumers paying more than the market value for goods,” they said on their website last year.

In 2013, one of the country’s largest car dealers- Auto Co Ltd - was fined $42,000 after it was found to have scammed Trade Me users out of more than $100,000 by shill bidding on auctions with a $1 reserve.

It was estimated the company had done it on more than 500 of its own auctions.

In another suspicious bidding decision the Disputes Tribunal released this week,

a buyer won an auction for a $30,000 sports car that included a range of parts.

But the seller refused to release the vehicle even after the buyer had travelled from a different city to collect the vehicle.

The seller claimed there had been some “collusion” in the bidding that meant the car sold for less than it should have.

“It is clear that [the seller] did not get what the goods were worth from the sale. However, he cannot repudiate the contract for that reason,” the tribunal ruled.

“He was obligated to supply the goods and take the loss.”

But instead of ordering the seller to give up his vehicle, which has since been stripped of parts, the tribunal ordered he pay the buyer $30,000 in damages arising from the breach in contract.