eBay Lawsuit Aimed at Antitrust, Unfair Competition Laws

eBay (EBAY) now has its hands full with two lawsuits aimed at the eBay Live Auction platform. One eBay Live Auction seller is suing eBay for affording an unfair competitive advantage to another eBay Live Auction seller who's being sued (along with eBay in an unrelated lawsuit) for allegedly shill bidding on the platform.

eBay Live Auctions (eBay, Inc.) has not been without its hiccups with its live auction platform. In October 2006, GoAntiques, which sells its wares on eBay Live Auctions, was accused of creating the appearance that a live auction was taking place when, in fact, a computer was generating the bidding to protect reserves. Judge Sargus for the Southern District Court of Ohio approved a class settlement on behalf of consumers.

Now it appears that Hot Jewelry Auctions, which operates under the eBay user names of Paramount-Auctions, Jewelry-Overstock-Auctions and WJoutlet has been sued for shill bidding on eBay Live Auctions.

In a separate matter, Windsor Auctions, Inc. operating under the eBay user name WindsorAuctions-USA has sued eBay under federal antitrust laws and California's anti-competition laws. Windsor's suit alleges that George Molayem (who operates Hot Jewelry Auctions) had use of a tool, which afforded Mr. Molayem the opportunity to batch upload his products/listings in small groups on an hourly basis, thus, driving his listings through the front of eBay core during an entire twelve-hour auction event. In essence, Mr. Molayem's products flowed through eBay core ahead of ALL other live auction sellers and even those of regular eBay sellers within the jewelry category.

eBay has demanded that the court dismiss the suit contending that Windsor Auctions could have gone to eBay directly and taken advantage of all of the tools offered to eBay direct clients. However, Windsor Auctions was directed by eBay Live Auctions to Live Auctioneers, LLC when it originally applied to eBay Live in 2005.

According to Live Auctioneers, LLC website, Live Auctioneers issued a press release dated July 16, 2004 in which Live Auctioneers announced that eBay had entered into a seller referral agreement whereby eBay Live Auctions sends live auction clients directly to Live Auctioneers. Windsor Auctions began selling on eBay Live in July 2005.

eBay has also informed Windsor Auctions that their eBay user names (corporate and personal) will be suspended on April 6th. The suspension affects WindsorAuctions-USA, JewelryAuctions and all personal user names associated with the CEO of Windsor Auctions. On April 11th, eBay and their attorneys will appear in court to argue their motion to dismiss, in the interim, WindsorAuctions-USA will be suspended five days before the hearing of the motion.

WindsorAuctions-USA has traded on eBay for over three and a half years and has maintained a feedback rating of 99.9% and has sold over 27,000 items through eBay Live. In fact Windsor Auctions was a centerfold featured article in eBay Entrepreneur entitled "Beyond Borders" in April 2007. This begs the question of why eBay would suspend a user, which has proven itself over a period of years to be an exceptional eBay seller.

In contrast, Hot Jewelry Auctions has message boards on CNET devoted to its business practices and complaints filed on RipOffReport.com (keyword - Paramount Auctions). No doubt, the suspension of WindsorAuctions-USA will cast suspicion upon eBay, as a retaliatory response to Windsor Auctions in exercising its constitutional right to file an action against eBay.

The Core of the Problem...

eBay core is what drives listings to potential buyers. As eBay announced last month, the default for all eBay listings will result in buyers being presented with items that serve up the "Best Match" based upon specific keywords and associated values. The current eBay search default is "Time Ending Soonest".

The advantage to flowing through eBay core (with timed accuracy) is that products/listings under the current search default of "Time Ending Soonest" appear at the front of core based upon how much time is left before a product/listing expires. If a seller has the ability to push their products/listings to the front of eBay core consistently, every hour on the hour, then it stands to reason that such a seller will gain market share from top placement exposure.

In the past, many sellers on eBay paid for eBay keywords in order to drive traffic into their eBay stores or straight into specific listings. The eBay keyword program served up banners and promotional boxes in all eBay categories.

If your eBay store offered jewelry, you could buy hundreds of keywords within the category of jewelry and your eBay keyword ad would pop either at the top of the search results page and/or on the left hand side navigation bar. eBay sellers paid for these ads based on a pay-per-click basis. The amount charged per click was based upon what a seller was willing to pay by bidding on keywords specific to their product line. If a seller selected a keyword such as "diamond jewelry" the seller/advertiser would have the option to display their ads at a rate based upon their daily budget.

The higher the budget a seller/advertiser set for their eBay keyword ad campaign, the more clicks they would receive. The ability for any eBay seller to flow product through eBay core, would negate the need to advertise through the now expired eBay keyword program and/or through existing pay-per-click ads offered by Google (GOOG) or Yahoo (YHOO).

As a Live Auction seller, Windsor Auctions uploaded listings through eBay's partner Live Auctioneers. When a catalog is uploaded in eBay Live, the auction seller is presented with an option to select how long their auction event will last. In the past, all Live Auction events were automatically set to last for twelve hours (no exceptions) however, as the years passed, the option to select a shorter auction duration were offered to clients who were direct to eBay Live .

The option to select the duration of the auction (from a set twelve-hour period) was changed to allow eBay (direct) Live Auction sellers the ability to select the duration of their auction for a minimum of three hours on up to twelve hours. In this case, if a direct to eBay Live Auction seller averages 60 pieces per hour, the seller could initially upload 180 pieces for the first three hours and then upload 60 pieces per hour thereafter.

The complaint filed by Windsor Auctions alleges that a competitor (within the jewelry category) batch uploaded listings into eBay Live using the time duration tool. While the competitor initially set his auction for the twelve-hour duration, he also utilized the same tool to batch upload his products into eBay and timed those listings to flow through core on an hourly basis.

The advantage of flowing hundreds of listings through core (on an hourly basis), while hundreds of live auction sellers must patiently wait, as their listings flow through core (for up to a twelve hour period), places the timed listings of the competitor at the forefront of eBay core.

The ability of every Live Auction seller (direct to eBay or not) to push their listings through eBay core on an hourly basis, would undoubtedly clutter core and essentially set both regular eBay listings and eBay Live listings on the ultimate collusion course.

Disclosure: none

Comments

[jrkirk]

We have sold antiques on eBay for 10+ years, and have noticed that eBay Live Auctions always sell for more than the items we list each day. And that is in spite of the fact that some of the sellers have very poor feedback (less that 96%), and also charge a significant buyers premium. This made no sense to us, but now I understand why this can (and does) happen. Ebay needs to apply the same shill bidding rules to Live Auctions that they apply to normal listings every day. Allowing auction houses to shill bid on their own items with special tools is still 'shill bidding', and this cannot be tolerated. It's just a shame that it took legal action for ebay to get serious about this problem. Big auction houses got special treatment from eBay for years, it seems to us, and the little guy that sells on ebay every week, and again got the short end of the stick. How long has eBay been aware of this? And why has not something been done sooner? jk

[JewelryBlogger]

This is a large story and the updates will be numerous during the upcoming weeks. Documents and emails will published as they become available. All documents and emails, which may be posted and part public records and/or provided through available sources, will be posted on SeekingAlpha.com and JewelryBlogger.com

[debipier]

Thankyou for sharing such a wealth of information!!

Ebay is messing with livilhoods of people by the millions and it's nice to see them be exposed for what they truly are...

As a former seller on ebay, leaving with 100% feedback, I will no longer support that greedy, lieing, business...

I WILL BOYCOTT UNENDING!!

[debipier]

Thankyou for sharing such a wealth of information!!

Ebay is messing with livilhoods of people by the millions and it's nice to see them be exposed for what they truly are...

As a former seller on ebay, leaving with 100% feedback, I will no longer support that greedy, lieing, business...

I WILL BOYCOTT UNENDING!!

[JewelrySeller]

So let me get this right...there is a tool available to eBay Live Auction platform sellers that lets them specify/adjust listing end/time duration to allow them maximum exposure for a listing/set of listings. Sounds an awful lot like the auction extender tool that eBay prevented core site sellers from using in January of 07 after much internal debate. The tool allowed for continues auction duration extensions that bumped the duration out at the last moment as it was moving up in the 'ending soonest', thus giving a listing multiple 'ending soonest' exposures before it ultimately ended. The tool improved sales (and reduced fees) for many sellers who used it, but eBay implemented policy in Jan 07 banning use of extender tools (see AuctionBytes.com for multiple stories). Their reasoning? It provided a bad buyer experience, and was a form of search manipulation. The tool on the Live Auction platform seems to offer the same seller advantages, the same poor buyer experience, and the same eBay policy violation.

[AuctionsAreGreat]

eBay has also informed Windsor Auctions that their eBay user names (corporate and personal) will be suspended on April 6th. The suspension affects WindsorAuctions-USA, JewelryAuctions and all personal user names associated with the CEO of Windsor Auctions. On April 11th, eBay and their attorneys will appear in court to argue their motion to dismiss, in the interim, WindsorAuctions-USA will be suspended five days before the hearing of the motion.

Only Windsor and eBay would know this information and I doubt eBay is releasing it. It seems obvious this article's origins are Windsor and this is an effort to try and publicly pressure eBay into not suspending him. Windsor I’m sure is much less interested in the selling practices of others as they are in being locked out of the platform for biting the hand that feeds them. It is my understanding there is no special access afforded any seller and sellers are only limited to their imagination, intelligence and creativity. Complaining somebody is more skilled than you is un-American.

Knowing the auction industry as I do you would know it is routine for auctioneers to bid against reserve if a reserve exists and the sale doesn’t claim to be an absolute auction or a no reserve sale. Floor bids on eBay Live Auctions is the only way for the auctioneer to perform this routine industry acceptable practice. Imagine you are the consignor to an auction of something valuable or dear to you; do you want a reserve in place to protect the final hammer price? My guess is you do.

Most of these sales for jewelry have a reserve in place up to cost or melt value and it’s stated in the terms and conditions. This is not sinister or hidden, who would have a business model based on selling one dollar bills for a dime? I bet no one here would. Here’s the catalog description of any GoAntiques sale:





GoAntiques offers a plethora of Art, Antiques and Collectibles from over 1,700 professional members worldwide. These experts have amassed a myriad of extraordinary items for your buying pleasure. And with their expert knowledge, you can rest assured that you will be thrilled with every purchase. We are confident that you will find not only excellent merchandise, but also outstanding value in each of our upcoming catalogs.

Bidding Information
Bidders may leave absentee bids on items they wish to purchase. For bids placed on the goantiques.com website, GoAntiques' Auctioneer will bid for the absentee bidder which will be displayed during the Live Auction and on eBay’s bid history as an "Auction Floor bid". The Auctioneer will also be responsible for protecting the reserve of the seller which will also be displayed as an "Auction Floor bid". "Auction Floor bid" is the designation given by eBayLiveAuctions to bids made by the Auctioneer in either situation. An additional notice will be posted during the auction by GoAntiques identifying such bids as "Auctioneer's bid for seller". All bids left by eBay bidders will be marked with the user's eBay id.
Also, our Silent Auctions allow you to leave absentee bids on any item that you wish to bid on. Only items that receive bids prior to the auction will come up during the auction. If you see something that you must have, be sure to leave your bid prior to the start of the auction.

This does not seem miss-leading to me and more about a disgruntled seller.

[AuctionsAreGreat]

Jewelry Seller, the way I read it is the live auction seller who uses the duration strategy to it’s fullest is merely helping the core version of the listing reflect the real closing time. If you have a 500 lot sale posted all to end at midnight but the reality is the listings will be closing steadily between 6 pm and midnight and the seller loads them in batches to better reflect this over that 6 hour period that is better for the buyer and the seller. The other side to your argument is buyers who complain that the item was offered and closed before they had a chance to bid on it because it looked like it was closing later but in fact it had been up for auction hours before the listed time. There are two sides to every story.

[JewelryBlogger]

To: AuctionsareGreat - You stated: the way I read it is the live auction seller who uses the duration strategy to it’s fullest is merely helping the core version of the listing reflect the real closing time. If you have a 500 lot sale posted all to end at midnight but the reality is the listings will be closing steadily between 6 pm and midnight and the seller loads them in batches to better reflect this over that 6 hour period that is better for the buyer and the seller. "

Problem is if just one seller is using the tool then he's got the advantage over ALL other Live Auction sellers. You then have to reconcile how to control how many items should flow through core so core is not cluttered with nothing but live auction listings.