A GUIDE FOR

BUYERS AND

SELLERS

AUCTIONS

INTERNET

FEDERAL TRADE COMMISSION FOR THE CONSUMER
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Whether you’re looking for acollectible or thinking about

selling that treasure you discovered in

the attic, an Internet auction may be just

the thing for you.

Since their first appearance in 1995,

Internet auctions have become one of

the hottest phenomena of the web.

They offer buyers a “virtual flea

market” with an endless range of

merchandise

from around

the world —

and they give

sellers a

“storefront”

from which to

market

everything

from sports

memorabilia to computer systems to

millions of international buyers.

Whether you’re a buyer or a seller,

there’s a smart way to “do” Internet

auctions. Here’s how to make sure you

get the most from your auction action.

HOW AUCTIONS WORK

Internet auctions are bazaars. In most

cases, sellers offer one item at a time,

but sometimes sellers offer multiple

lots of the same item. The auction web

sites often refer to auctions of multiple

items as “Dutch” or “English”
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auctions. At some sites, the seller may

be required to sell all items at the

price of the lowest successful

bid. At other sites, the

seller is entitled to the

prices bid by each of

the highest bidders.

Occasionally, Internet

auction sellers set a “reserve

price,” which is the lowest

price they will accept for an item. Some

sites disclose the reserve price during

the auction.

The bidding for each auction closes

at a scheduled time, when the highest

bidder “wins.” In the case of sales of

multiple lots, the participants with the

highest bids at the close of the auction

are obligated to buy the items. If no one

bids at or above the reserve price, the

auction closes without a “winner.” At

the close of a successful auction, the

buyer and seller communicate —

usually by e-mail — to arrange for

payment and delivery of the goods.

KINDS OF AUCTIONS

Internet auctions can be business-toperson or person-to-person.

Operators of business-to-person

auction sites have physical control of

the merchandise being offered and

accept payment for the goods.
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In person-to-person auctions,

individual sellers or small businesses

offer their items for auction directly to

consumers. Generally, the seller — not

the site — has physical possession of

the merchandise. After the auction

closes, the seller is responsible for

dealing directly with the highest

bidder to arrange for payment and

delivery.

PAYMENT OPTIONS

Buyers may have several payment

options, including credit card, debit

card, personal check, cashier’s check,

money order, cash on delivery and

escrow services. However, all sellers

do not accept all forms of payment.

Credit cards

offer buyers the most

consumer protections, including the

right to seek a credit

from the credit card

issuer if the product

is not delivered or if the product

received isn’t the product ordered.

Typically, sellers using business-toperson auction sites accept payment

by credit card. But many sellers in

person-to-person auctions don’t.

Usually they require payment by

cashier’s check or money order before
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they send the item to the winning

bidder.

Some sellers agree to use an

escrow service. For a fee — generally

5 percent of the cost of the item, paid

by the buyer — an escrow service

accepts payment from the buyer via

check, money order or credit card. The

service releases the money to the seller

only after the buyer receives and

approves the merchandise. This helps

protect buyers from ending up emptyhanded after paying their money. The

flip side? Using an escrow service can

delay the deal. As with any business

transaction, investigate the escrow

service’s reputation before signing on

to the service.

Occasionally, sellers agree to send

items COD, with the buyer paying

when the item is received.

CONSUMER CONCERNS

According to the Federal Trade

Commission, Internet auction fraud

has become a significant problem.

Most consumer complaints center on

sellers who:

• don’t deliver the advertised goods;

• deliver something far less valuable

than they advertised;

• don’t deliver in a timely way; or

• fail to disclose all the relevant information about the product or terms of

the sale.
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If Youre

A Buyer...
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Quick Tips for

Buyers

 Identify the seller and

check the sellers feedback rating.

 Do your homework. Be

sure you understand what

youre bidding on, its relative value and all terms

and conditions of the sale,

including the sellers return

policies and who pays for

shipping.

 Establish your top price

and stick to it.

 Evaluate your payment

options. If possible, use a

credit card. It offers the

most protection if theres a

problem. Consider using

an escrow service if the

seller doesnt accept credit

cards.
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KNOW THE SELLER

• Find out who you’re dealing with.

Verify the seller’s identity before

you place your bid, and be wary of

sellers who you can’t identify. Some

sellers may use a forged e-mail

header, which makes follow-up

contact close to impossible.

• Get a telephone number for the seller

and use it to confirm that you have

some way other than e-mail to

contact the seller.

• Check to see how the seller has

treated other buyers. Some auction

sites post feedback ratings of sellers

based on comments by other buyers.

This may give

you some idea

of how you’ll

be treated, but

beware of

“shill” testimonials.
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"

• Before you bid, find out what form

of payment the seller will accept. If

the seller accepts only cashier’s

checks or money orders, decide

whether you are willing to take the

risk of sending your payment before

you receive the product.

• Find out who pays for shipping and

delivery. Generally, sellers specify

the cost of shipping the item and

give buyers the option of express

delivery for an additional fee. If

you’re uncertain about shipping

costs, check with the seller before

you bid.

• Check on the seller’s return policy.

Can you return the item for a full

refund if you’re not satisfied with it?

If you return it, are you required to

pay shipping costs or a restocking

fee?

• If you have any

questions about

the item, e-mail

or phone the

seller. Don’t

place your bid

until your

questions

have been

answered.
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KNOW THE PRODUCT

• When considering

whether to

place a bid,

know exactly what

you’re buying. Read

the seller’s description

of the item or service, and if a

photograph is posted, take time to

look at it closely.

• Try to determine the relative value

of an item before you bid. There’s no

guarantee that something is a good

deal just because it’s on the Internet

auction block. “Brick-and-mortar”

stores and online price-trading sites

may be good reality checks on price.

If you find a bargain at an auction

site, remember the adage about

deals that seem too good to be true.

They usually are.

• Read the fine print. Look for words

like “refurbished,” “close-out,”

“discontinued” or “off-brand,”

especially when shopping for computer gear or electronic equipment.

• Consider whether the item comes

with a warranty, and where you’ll

get follow-up service if you need it.

Many sellers don’t have the expertise or facilities to provide services

for the goods they sell. If that’s the

case with your seller, be sure you’re
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willing to forfeit that protection

before placing a bid.

KNOW THE AUCTION SITE

• Check how the auction works. Don’t

assume that the rules used by one

Internet auction site apply to another. Some sites offer step-by-step

tutorials that take potential buyers

through the bidding process. Taking

a few minutes to go through the

tutorial might save you frustration

or disappointment later.

• Find out what protections the auction site

offers buyers. Some

sites provide free

insurance or

guarantees for

items that are

undelivered,

inauthentic or just not

what the seller claimed.

BIDDING

• If you decide to enter the bidding,

proceed with caution. Establish

your top price and stick to it.

• Don’t bid on an item you don’t

intend to buy. Remember that if

you’re the highest bidder, you are

obligated to follow through with the

transaction. Auction companies
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often bar “non-paying bidders” —

those who back out of a deal —

from future bidding.

• When bidding, take steps to protect

your privacy. Don’t give out personal identifying information like

your Social Security number,

driver’s license number or bank

account number. No seller should

need it.

• Save all your transaction information. Print or make note of the

seller’s identification, the item

description and the time, date and

price you bid on the item. Print and

save a copy of every e-mail you send

or receive from the auction company

or the seller.

WRAPPING UP THE DEAL

• After you receive an e-mail with

news that you’ve “won” an auction,

arrange to pay for your purchase.

Pay with a credit card, if possible,

but it’s likely

that the
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seller will require payment by

certified check or money order.

• If you’re not comfortable sending a

certified check or money order to

the seller, consider using an escrow

service or paying for your item cash

on delivery.

WHERE TO TURN FOR HELP

If you run into a problem during your

transaction, try to work it out directly

with the seller or with the auction web

site. If that doesn’t work, file a

complaint with the Federal Trade

Commission by calling toll-free 1-877-

FTC-HELP (382-4357) or visiting the

FTC’s web site at www.ftc.gov.

Although the Commission cannot

resolve individual problems for

consumers, it can act against a

company if it sees a pattern of possible

law violations. You also may want to

contact your state Attorney General or

your local consumer protection office.
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If Youre

A Seller...
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Quick Tips for

Sellers

 Provide an accurate description of the item youre

selling, including all terms

of the sale and who will

pay shipping costs.

 Respond quickly to any

questions bidders may

raise during the auction.

 Contact the high bidder as

soon as possible after the

auction closes to confirm

details of the sale.

 Ship the merchandise as

soon as you receive payment.
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YOUR LEGAL OBLIGATIONS

• Federal laws prohibit deceptive or

misleading acts in commerce, including Internet auctions. You are

required to advertise your product

or service and the terms of the sale

honestly and accurately.

• Sellers are prohibited from placing

“shill” bids or false testimonials.

Some sellers improperly create a

fake identity and bid on their own

auctions to drive up the offers.

Likewise, some sellers place glowing testimonials about themselves in

the comment section of Internet

auction sites. These practices are

not only unethical, they’re also

fraudulent.

• Sellers are prohibited from offering

illegal goods through Internet auctions. While many auction sites

monitor their sites and attempt to

delete illegal items, the ultimate

responsibility for ensuring that a

sale is legal rests with

the seller and buyer.

Some auction sites

post a list of

prohibited items

as a guide.

• After the auction closes,

sellers are required to ship the

merchandise within the time frame

designated during the auction or, if
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no time frame is specified, within 30

days. If you can’t meet the shipping

commitment, you must give the

buyer an opportunity to cancel the

order for a full refund or agree to

the new shipping date.

ADVERTISING YOUR PRODUCT

• Describe your item or service — and

its condition — as fully and accurately as possible, including

whether it’s new, used or reconditioned.

• Anticipate questions buyers might

have and try to answer them in the

description of your item or service.

When possible, include a

photograph of the

item. The saying

about a picture

being worth

1,000 words rings

especially true in

Internet auctions.

• When putting an

item up for auction, set the minimum bid at the lowest fair price

you’re willing to accept. Specify

who will pay for shipping, and add

whether you’ll ship internationally.

• State your return policy in your

auction description, and if you

require the buyer to pay shipping

costs or restocking fees for returns.
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Tell bidders where to get follow-up

service. If you don’t provide service

for the item, say where the bidder

could get it.

THE ART OF THE DEAL

• If a bidder asks a question about the

item you’re selling or the sales

terms, respond as quickly as possible.

• When the auction closes, print all

the information about the transaction, making a note of the buyer’s

identification, the description of the

item and the time, date and price of

the bid. Print and save a copy of

every e-mail you send and receive

from the auction site or successful

bidder.

• Contact the winning bidder as

quickly as possible after the auction

closes. That’s the time to confirm the

final cost, including shipping

charges, and to tell the buyer where

to send the payment.

• Most sellers in person-to-person

auctions require buyers to pay by

check or money order because they

don’t have the capability to accept

credit card payments. These payment methods offer fewer consumer

protections than credit cards, so be

aware that some buyers may not be

comfortable using them. Some
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online auctions and third parties

enable sellers to accept credit card

payments. Review the terms of these

offers carefully. If you accept credit

card payments, bill the buyer’s

credit card account only when

you’re ready to ship the product.

WHO CAN HELP

If you run into a problem during your

transaction, try to work it out directly

with the buyer or the auction web site.

If that doesn’t work, file a complaint

with the Federal Trade Commission by

calling toll-free 1-877-FTC-HELP (382-

4357) or visiting the FTC’s web site at

www.ftc.gov. Although the Commission cannot resolve individual

problems for consumers, it can act

against an individual or company if it

sees a pattern of possible law violations. You also may want to contact

your state Attorney General or your

local consumer protection office.

For more information from the

FTC about your responsibilities when

advertising or shipping products, ask

for a copy of the Guide to the Mail and

Telephone Order Merchandise Rule. Call

the FTC toll-free at 1-877-FTC-HELP

(382-4357) or access the publication

online at www.ftc.gov.
IF YOURE

A BUYER...5

IF YOURE

A SELLER...13
Federal Trade Commission

www.ftc.gov

For The Consumer

1-877-FTC-HELP

September 2000