Enhancing Trust in Online Auctions : eBay's Australian Experience with Code and Law

Operators of online auction venues, such as eBay, face competing demands. Most of those operators are reliant on income from fees paid by sellers and therefore must provide technical innovations and a contract structure favorable to those sellers. Simultaneously, the operators must lower the risk of bidding on auctions hosted by the site to ensure a steady supply of potential buyers (and successfully completed auctions). Lowering the risk to the buyer and the seller in an online auction will tend to lower their transaction costs (the costs of engaging in the transaction itself) and may enable the auction website to generate network effects which increase its market share. This article examines the decisions resolving two disputes relating to online auctions hosted by eBay Australia. It highlights the inter-relationship between the common law and statutory law in regulating online auctions to provide higher degrees of trust (over and above that generated through the use of architecture, norms and markets), thus lowering overall risk and transaction costs for buyers and sellers. At the publisher's request, the full version of this article will only be made available on SSRN from 1 July 2008