The Fair Trading Act (FTA) has rules in place on how an auction will be conducted lawfully by an auctioneer. An auction is defined as:
- an offer to sell on behalf of a seller
- by an auctioneer
- bids are made in real time in person, by telephone or via the internet
- the property is sold when the auctioneer indicates.
This does not include online bidding processes such as ‘TradeMe’ or ‘eBay’ which are not auctions, as property is sold directly by a seller to a winning bidder and not through an auctioneer.
- make a notice of the auction terms readily available before the auction, eg on their web site
- not to accept vendor bids except as set out below
- account for and pay the auction proceeds to the vendor following a sale by auction within 10 working days after the sale of any products, other than a sale of land.
Vendor bids are any bids by the vendor or any person acting as an agent for the vendor, usually made by the auctioneer. These are not allowed unless:
- the terms of the auction specify that vendor bids are permitted
- the auctioneer clearly identifies each vendor bid as it is given
- a reserve price has been set and the vendor bid is less than the reserve price.
An auction starts when the auctioneer invites the first bid and ends when the auctioneer makes it clear that bidding is closed. Any bid may be withdrawn before the end of the auction for that item.
Dummy or shill bids
Dummy or shill bids are bids that are made by people who appear to be genuine bidders, but are in fact being made on behalf of the vendor to raise genuine bidding. These are illegal except as outlined above.