Fair Trading Act
Buying and selling at aucon
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FACT SHEET
JULY 2018
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JULY 2018
FACT SHEET
Fair Trading Act
Buying and selling
at auction
Aucons have always been a popular sales technique,
used to sell many types of goods and services from small,
inexpensive items through to cars and houses.
Many dierent types of bidding processes are commonly
referred to as aucons. For example, aucons on Trade Me.
The Fair Trading Act prohibits misleading and decepve
conduct and false representaons. These rules apply to all
types of aucon process whether they are conducted by
auconeers, online aucons, tenders or other compeve
bidding process.
>
For informaon on the other key Fair Trading Act
provisions that apply to aucons (misleading and decepve
conduct and false representaons), please refer to our
website www.comcom.govt.nz/fair-trading/fair-trading-act-
fact-sheets
Who do the rules apply to?
The Fair Trading Act (Part 4A subpart 4) apply to aucons
conducted by auconeers, where a fee or commission is
charged.
These rules don’t apply to aucons such as those on sites
like Trade Me or to charity aucons. This is because in an
online aucon like Trade Me, goods are sold directly by a
This fact sheet is intended to help consumers, sellers (vendors) and auctioneers
understand their rights and obligations under the Fair Trading Act and Consumer
Guarantees Act when buying or selling at auctions conducted by auctioneers.
seller to a winning bidder, and not through an auconeer.
An online bidding plaorm is usually just a place for
members to buy and sell property directly to one another.
And in a charity aucon, usually no fee or commission is paid
to the person conducng the aucon.
>
Informaon about online aucons such as Trade Me and
eBay aucons is available in our fact sheet Buying and selling
online at www.comcom.govt.nz/fair-trading/changes-to-the-
fair-trading-act/fact-sheets/buying-and-selling-online/
The Consumer Guarantees Act 1993 applies to goods and
services sold at aucons and by tender.
In this factsheet the term “property” refers to goods and
services as dened in the Fair Trading Act (s2(1)).
What type of auctions do the
rules apply to?
The rules apply to auctions that are conducted by (or on
behalf of) anyone who carries on business as an auctioneer,
and:
→
the property is sold on behalf of a seller
→
bids for the property are placed with the auconeer
in real me, whether in person, by telephone, via the
internet, or by any other means
and
→
the property is sold when the auconeer indicates.
Fair Trading Act
Buying and selling at aucon
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FACT SHEET
JULY 2018
A person is carrying on business as an auconeer if they are
in trade and charge a fee or commission or other payment
for the sale (Auconeers Act 2013 s5(3)).
The phrase “on behalf of a seller” means that the oer of
goods or services makes it clear that the auconeer is selling
someone else’s property for them, as an agent or similar.
They are not selling their own property. Property is not sold
“on behalf of” someone if the owner of the property sells it
directly.
Who is an auctioneer?
Auctioneers include:
→
those registered under the Auconeers Act 2013 or not
required to be registered
→
those engaged by a registered auconeer to conduct
aucons on its behalf
→
some motor vehicles dealers and real estate agents even
though they are exempted from registraon under the
Auconeers Act.
Violet is organising a charity aucon event and asks
her friend, George to conduct the aucon. George
is not a registered auconeer but does work as
an auconeer for the local aucon house. George
agrees to conduct the aucon free of charge with all
prots from the sale of the goods going to Violet’s
chosen charity.
The charity aucon is not covered by the Fair
Trading Act aucon rules or the Consumer
Guarantees Act. This is because George is
conducng the aucon in a personal capacity and is
not charging a fee for conducng the aucon. So, he
is not carrying on business as an auconeer.
If George did not usually work as an auconeer, the
answer would be the same.
EXAMPLE
Auctions in action
Fair Trading Act
The Fair Trading Act auction rules:
→
require that a noce of aucon terms is made available
for consumers to view before and during the aucon
→
state that the aucon starts when the auconeer invites
the rst bid and ends when the auconeer makes it
clear the bidding is closed
→
provide that a bid can be withdrawn at any me before
the end of the aucon
→
allow vendor bidding in certain situaons
→
treat the property as being sold at aucon if it is unsold
at the end of the aucon but the auconeer accepts
within one working day of the aucon an oer from a
consumer who aended the aucon.
Jane puts a painng up for aucon at a local
aucon-house (which is a registered auconeer).
The aucon house inspects the painng, and the
catalogue describes it as a “Ralph Hotere 1969 Oil
on Canvas.”
Tom wins the aucon, but later is expertly advised
that the painng is a copy. Tom has relied on the
descripon given by the aucon house and the
aucon house is in trade. The aucon house is likely
to have breached the Fair Trading Act. Jane may
have also breached the Fair Trading Act if she is in
trade or was a party to the misrepresentaon.
EXAMPLE
A person is carrying on business
as an auctioneer if they are in trade
and charge a fee or commission or
other payment for the sale.
Fair Trading Act
Buying and selling at aucon
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FACT SHEET
JULY 2018
Notice of auction terms
The terms of the aucon must be readily available to all
potenal bidders before and during the aucon; for example
by posng a noce at the entrance of an aucon room or
making brochures of the terms available. Where potenal
bidders are not aending the aucon in person, the terms
must be available on a readily accessible website.
The notice of auction terms must be in writing and include:
→
if any reserve price applies
→
if vendor bids are allowed
→
if the vendor is in trade.
These rules only apply to property that is usually purchased
for personal, domesc or household use.
If dierent terms apply to dierent lots, the aucon terms
noce – or the auconeer before starng the aucon of
each lot – must idenfy which terms apply to each lot.
The auconeer may contract out of the Consumer
Guarantees Act if the buyer of the property is also in trade,
but only if the noce of aucon terms clearly states that this
excepon applies.
Vendor bids
A vendor bid is a bid made by the seller or any person on
their behalf (including an agent or auctioneer). The Fair
Trading Act auction rules allows an auctioneer to accept a
vendor bid during an auction where:
→
the noce of aucon terms species that vendor bids
are permied (for that lot)
→
a reserve price is set
→
the vendor bid is below the reserve price
→
the auconeer clearly idenes each vendor bid when
it is made during the aucon.
Auconeers should clearly idenfy vendor bids; for example,
the “seller is bidding” or “vendor bid”, rather than using
phrases like, “the bid is directed at me” or “the bid is with
me”. Given the fast moving nature of aucons, auconeers
should avoid jargon that makes it unclear whether the bid is
on behalf of the vendor or from a prospecve purchaser.
If the property has not sold because the highest bid did not
meet the reserve (passed in), then any adversing or other
representaon using a vendor bid as the amount at which
the property was passed in is misleading.
Sam is selling his car at a vehicle aucon and sets
a reserve price of $5,000. One person bids on his
car and Sam bids against him. The car passes the
reserve price. The auconeer keeps taking Sam’s
bids, saying “the bid is in the room” rather than
clarifying that the seller is bidding. This is illegal
under the Fair Trading Act. Sam has misrepresented
the price of the car by bidding above the reserve
price, and the auconeer has breached the aucon
process rules.
>
You can read more about how the vendor bidding rules
apply to other bidding processes (including online aucons
such as Trade Me and eBay) in our fact sheet Buying and
selling online at www.comcom.govt.nz/fair-trading/changes-
to-the-fair-trading-act/fact-sheets/buying-and-selling-online
EXAMPLE
Fair Trading Act
Buying and selling at aucon
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FACT SHEET
JULY 2018
After the auction
Within 10 working days of the auction, the auctioneer must
give the seller the proceeds of the sale (less auction costs
and fees) and an account of the sale. Details of the sale
must include:
→
the winning bid
→
the amount of any tax
→
the auconeer’s commission or other deducons
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the net amount payable to the seller.
A seller can ask for the proceeds and an account of the sale
earlier than 10 working days. In this case, the auconeer
must comply with the request within ve working days.
An auctioneer does not need to comply with these post-
auction requirements if:
→
the seller is in trade or is selling goods not normally
purchased for personal, domesc, or household use
or consumpon, and the seller agrees that these
requirements need not apply
→
the aucon was for land or an interest in land and was
conducted by a licensed real estate agent where the
provisions outlined in the Real Estate Agents Act
applies instead.
Consumer Guarantees Act
The Consumer Guarantees Act will apply if the seller is in
trade and the property is usually purchased for personal,
domesc or household use. People are not usually in trade
when they sell property they inially bought or acquired for
personal use and this is oen the case for online bidding
sites like Trade Me.
Under the Consumer Guarantees Act, goods must:
→
match their descripon
→
have no undisclosed defects
→
be t for their normal purpose
→
be safe, durable, and of a reasonable quality
→
be acceptable in look and nish.
Tom buys an olive-picking machine at the local
aucon-house but soon discovers that it is not
working. Tom wanted to use the olive-picking
machine on his lifestyle block where he grows olives
as a hobby. The Consumer Guarantees Act is unlikely
to apply as an olive-picking machine is unlikely to
be usually purchased for personal, domesc or
household use. But Tom may have rights under the
Fair Trading Act if the condion of the machine was
misrepresented to him.
Jane goes to an aucon for a household refrigerator.
The seller (a company) states in the aucon
noce terms that any buyer who is in trade
will not be able to rely on the warranes in the
Consumers Guarantees Act. Jane buys the fridge
for her company’s oce, but discovers that it has
undisclosed defects and is not t for use. Jane
cannot rely on the Consumer Guarantees Act,
because the sale was business-to-business and the
Act was excluded by the aucon noce terms. She
may have rights under the Fair Trading Act, if there
was some misrepresentaon about the condion of
the fridge.
Where the Consumer Guarantees Act would normally
apply, the seller may exclude the applicaon of that Act if
the property is purchased by a person who is also in trade.
But they can only do this if the noce of aucon terms
clearly states that this excepon applies.
The Commerce Commission does not enforce the
Consumer Guarantees Act; consumers must bring their
own acon, which can include using the informal Disputes
Tribunal process. But any trader who makes misleading
representaons about the rights that consumers have under
the Consumer Guarantees Act (or under any other law)
may breach the Fair Trading Act which the Commission
does enforce.
>
You can nd out more about your rights under the
Consumer Guarantees Act at www.consumeraairs.govt.nz/
for-consumers/law/consumer-guarantees-act
EXAMPLES
Fair Trading Act
Buying and selling at aucon
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FACT SHEET
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Fair Trading Act
Buying and selling at aucon
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FACT SHEET
JULY 2018
This fact sheet provides guidance only. It is not intended to be denive and should not be used in place of legal
advice. You are responsible for staying up to date with legislave changes.
You can subscribe for informaon updates at www.comcom.govt.nz/subscribe
Contact us with informaon about possible breaches of the laws we enforce:
Phone: 0800 943 600 Write: Enquiries Team, PO Box 2351, Wellington 6140 Email: contact@comcom.govt.nz
The Auctioneers Act
The Auconeers Act 2013 requires any person who carries
on business as an auconeer to be registered. However
exempons apply, for example, secon 48 of the Real Estate
Agents Act 2008 and the secon 141 Motor Vehicles Sales
Act 2003. The Fair Trading Act aucon rules sll apply to
these aucons.
>
The registraon process for auconeers is managed
by the Ministry of Business, Innovaon and Employment.
You can nd out more about registraon and the online
register of auconeers at www.mbie.govt.nz/what-we-do/
auconeers-registraon
Registered auctioneers are required by the Auctioneers Act
to keep a written record of the details of each auction. This
includes details on:
→
the seller
→
the property
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the person who conducted the aucon
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the bids received
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the price of sale
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the date on which the proceeds were paid to the seller.
Sellers, the Commission and the police can ask to see the
wrien record of an aucon. The auconeer must make the
wrien record of an aucon available for inspecon by the
Commission if requested.
Penalties
Courts can ne companies found guilty of breaching
provisions of the Fair Trading Act up to $600,000.
Individuals may also be found guilty for breaching
the Act either by comming the breach themselves
or by aiding and abeng a company or another
person to breach the Act. The maximum ne for
individuals is $200,000.
The court can also impose a management banning
order against anyone convicted of these oences
on two or more separate occasions within a ten
year period.
Some provisions have a lower maximum penalty
including those relang to aucons, which have
a maximum ne of $10,000 for an individual or
$30,000 for a body corporate. The court cannot
impose a management banning order against
anyone convicted of oences that carry the lower
maximum penalty.
Registered auctioneers are required
by the Auctioneers Act to
keep a written record of the
details of each auction.