Should All Auction Sites Be Regulated?
May 29th, 2010
The question of whether auction sites should be regulated has been brought to the worlds attention with the increased number of auction sites available these days. Can auction sites be trusted to be run honestly and fairly without regulation?
The concept of regulation raises so many questions such as who would regulate? How would they regulate global auctions? What should be regulated? Where does regulation stop? Who will pay for it? And so on. All incredibly difficult and for the most part impossible to get right. As with any regulation there are also unexpected consequences. Would regulation simply stifle innovation or competition due to higher costs?
Of most concern is that the introduction of regulation will encourage users to become less discerning about their actions. If users think someone is regulated they tend to act less cautiously, trusting a site to act the way they should rather than treading carefully. It also encourages the blame culture, such that when things go wrong (as some will always flaunt the law) they look to blame the government rather than the site and taking proper responsibility. Regulation always has unintended consequences, but are these consequences outweighed by the benefits of regulation? Or is it better for the market to simply name and shame?
Theft
One concern with auction sites is that items could be stolen in the real world and sold through these sites. In theory, shoplifters could create a new form of organized crime where merchandise was regularly stolen and then sold online. Unregulated auction sites could result in a new wave of crime with these auction sites just being a new, easy way for criminals to unload stolen merchandise.
Fraud
Some argue that auction sites should be regulated because the sites themselves may not be on the up and up. Some sites have been known to drive the prices up on their auctions by having their own bidders place bids to keep auctions going. Sometimes the bidding on an auction stops at a relatively low price and results in loses or only small profits for the auction site. Recognizing this, some auction sites employ fake bidders to drive the price of items up and to increase their own profits. Regulation might prevent this type of fraud.
Can unregulated Auction Sites just Do Anything?
Unregulated auction sites could be selling inferior merchandise that is not as it was advertised. They may not send the auction items to the winners at all or win their own auctions. Is (proper) regulation the most effective answer or can the markets simply ferret out those unlawful few that give the majority of honest auctions a bad name? Will regulations really stop this kind of behaviour? And at what cost?
While it is easy for online auction sites to take advantage of bidders and criminals to take advantage of online auction sites, it will be incredibly difficult and expensive to stop this behaviour through regulations.
The market should be given a chance to name and shame dishonest sites and the law should then intervene to punish those concerned. Regulation will only cost money and prevent innovation, which at the end of the day brings the greatest value to us all. Regulation will also increase the costs of doing business and reduce competition and lead to higher costs…costs that will likely far exceed the cost of any fraud that might be prevented. I for one would like to let markets name and shame…(and a great place where dodgy sites are exposed is Penny Auction Watch’s Hall of Shame and Legit or Not) and only if markets fail at this task move to a more rigid regulated model.
Categories: Buyer Auctions, Penny Auctions
