My legal memo

MEMORANDUM OF LAW

TO:       eBay's general counsel               

FROM:     Kim Parrish

DATE:     February 23, 2008

RE:       Issues facing eBay France with regards to the Council of Sales' claim that eBay France is in violation of the Auctions laws in France. 

 

Question Presented

Does ebay fall under the restictions oF an online auctioneer house or should they be classified as an online auction broker? If they are cosidered an online auction broker, does the auction act of 2000 still apply?

 

Brief Answer

     Because eBay does not take possession of the items being sold on its website and makes no guarantee for those items they are only acting as an auction broker, not an "Auctioneer" or "Agent." EBay is, therefore, not in violation of the French Auction Act of 2000, which requires the company obtain permits, provide quality assurances, and arrange shipping services, among other guarantees to their French citizens (Sayer,2007).

 

Statement of Facts

     In December 2007, the French government, specifically the Council of Sales, pursued legal action against eBay, suggesting that eBay France was not in compliance with France's auction laws. They argued that eBay had not properly applied for auction permits and is not providing the proper customer safeguards, which are required by the Council's 2000 Auction Act.

 

 

Discussion

Does ebay fall under the restictions of an online auctioneer house or should they be classified as an online auction broker? If they are cosidered an online auction broker, does the auction act of 2000 still apply?

 

     In France, traditional auction houses and online auctions are strictly regulated by the Council of Sales and the Auction Act of July 10, 2000, which is a modernization of the Auction Act of 1841. The Act specifically regulates traditional auction Houses and online auctioneers, but does not regulate online auction brokers. The main subject for consideration then, is whether or not eBay falls under the title of online auction broker or online auctioneer. The main difference between to the two classifications is the level of involvement that the agent or broker plays in the transaction. According to Article 3 of the Auction Act of 2000, an auction regulated by an auctioneer is "the offer for sale of movable property over the internet by a person acting as the 'agent' of the owner of this property for adjudication to the highest bidder constitutes a public action sale," which can be regulated by the Council of Sales (Misse & Belin,2007). The Auction Act goes on to define an agent as someone who temporarily takes over the property of the seller and acts on their behalf to negotiate the highest bid from among the buyers. In France, the auctioneer is a "public official, registered under the regulatory authority of the Minister of Justice, and authorized to conduct auction sales, [and is]in charge of defending the seller with payment guaranty and of protecting the buyer with authenticity guaranty" (www.auction.fr, 2005).

     The French government believes that eBay is an auctioneer, and acting in that capacity eBay has not obtained the proper permits and is not providing the necessary guarantees to their customers, which violates the Auction Act of 2000. eBay's top management, in contrast, has been quoted saying that they are only "facilitators" or brokers of auctions, and that "eBay has invented a new way of buying and selling, which has been adopted by 10 million French people," where they are merely brokers of the transaction, not agents (qted in Out-Law.com). In other words, eBay's official position is that they are an online auction broker and not an online auctioneer.

     For the French government's claim to be true they would need to prove eBay is an auctioneer: according to French law, eBay would need to be an agent of the items being sold. To act as an "Agent" under the Auction Act eBay would need to take possession of the item being sold and sell them on behalf of their owner (auction.fr, 2005). EBay would also need to regulate the shipment and money transfer of the items being sold. EBay purposely does neither of these actions. They do not regulate shipping, because the items are all over the world and some do not need to be shipped, nor do they claim ownership over the items, because this would hinder the speed and openness of the transitions on their site. Their goal is to provide an online forum where online buyers and sellers can meet to exchange goods. EBay has a commitment to be a"venue to allow anyone to offer, sell, and buy just about anything, at anytime, from anywhere, in a variety of pricing formats" (eBay user agreement, 2008). This open policy allows for a much greater diversity of items being sold and gives a lot more flexibility to their customers. EBay's website does keep tract of bids, but that is the only service they provide, they never claim to act on behalf of the seller. Thus, eBay is best defined as an online auction broker, not auctioneer, and aims to give their buyers and sellers the most freedom possible.

     This does not mean that eBay does not want to protect its clients; in fact they take great measures to do so. One example is their use of seller ratings where buyers can rate the sellers, making sure any dishonest sellers are not used again. Furthermore, even though eBay does not regulate the payment of their goods they do suggest users use companies like paypal^TM which provide some liability protection that eBay does not. EBay takes these steps because they are committed to their customers, not because they are auctioneers or forced to do so by law.

 

Conclusion

     EBay has a commitment to its users to provide the greatest access to products available. They are committed to letting sellers commune directly with buyers, and therefore take on the role of broker, not agent, and are not bound by France's Auction Act of 2000 which regulates Auctioneers and Auction houses, but does not regulate brokers.

Bibliography

 

auction.fr. (2005). "auctioneer."   Retrieved February 22, 2008, from http://www.auction.fr/uk/divers/savoir.html.

Brigitte Misse, J.-L. B., Murielle Cahen. (2007). "ARE INTERNET AUCTION SALES LEGAL UNDER FRENCH LAW?"   Retrieved February 23, 2008, from http://www.ibls.com/members/docview.aspx?doc=755

ebay.com. (2008). "Your User Agreement."   Retrieved February 24, 2008, from http://pages.ebay.com/help/policies/user-agreement.html.

OUT-LAW.COM. (December 5, 2007). "Auction watchdog says eBay is illegal in France."   Retrieved February 24, 2008, from http://www.channelregister.co.uk/2007/12/05/france_says_non_to_ebay_broker_claims/.

Sayer, P. (2007). "French auction regulator sues to close down eBay France."   Retrieved February 23, 2008, from http://www.infoworld.com/article/07/12/03/French-auction-regulator-sues-to-close-down-eBay-France_1.html.

           

 

 

 

 

 

--
Kimberly Parrish
Global Partners MBA
Kimberly.Parrish@gmail.com
770-366-3936

Greer Law Paper

MEMORANDUM OF LAW

TO: Professor Benjamin Greer

FROM: Shawn Butler

DATE: February 24, 2008

RE: Regulatory Action of French Council of Sales vs. eBay Inc. France

STATEMENT OF FACTS

France's auction house regulatory Authority, Council of Sales, challenges the legality of eBay France, the France-based division of the California, USA online auction and shopping website company eBay Inc. The Authority asserts "that eBay's French site 'should be held to the same standards as other auction houses in France,' which are required to acquire a special permit from authorities that includes guarantees of consumer protection."1

The requirement of permits allows the Authority to impose regulations regarding auction houses aimed at preventing the inadvertent sale of stolen goods, counterfeits, and frauds.

eBay Inc. responds by stating that it "has 'invented another way of buying and selling' not covered by the law on auction houses."3 The company's claim is that they are not an auction house but a "facilitator"4 or a brokerage company for sellers and buyers.

The Authority said "that eBay's failure to abide by the rules governing auction houses leaves consumers open to exploitation by unscrupulous eBay users, and could make it easier for users to sell fakes or to evade tax."4

QUESTIONS PRESENTED

A. Is eBay correct in its allegation that it has invented something completely different from an auction house using its online auction and marketplace model?

B. Should eBay fall under the same rules regulating auction houses and be responsible for the validity of the goods traded through its service?

DISCUSSION

A. eBay defines itself on its website as "[t]he World's Online Marketplace®, enabling trade on a local, national and international basis. With a diverse and passionate community of individuals and small businesses, eBay offers an online platform where millions of items are traded each day."6 This careful avoidance of the term "auction" in their own description neither states that the company operates, by its own definition, as a brokerage or an auction house.

However, for the opposition, the semantics does not appear to be the key issue. "The Council said that it did not accept eBay's assertion that it was simply a broker and not an actual auctioneer. 'What is the difference?' [Council chairman Christian] Giacomotto said to The Times. 'They charge a commission to the seller and a commission to the buyer. These people cannot say they are responsible for nothing at all. If you rent your house to someone who sets up an illegal casino in it, then you share part of the responsibility.'"4

The logic presented by Chairman Giacomotto is verifiable; that the owner of a house bears partial responsibility for illegal activities that occur in the house on the part of the renter is well represented in precedent. Whether or not this scenario relates to the online auction sector is still a matter of deliberation.

B. The overt reason given by the Council to impose the requirement of licensing on eBay France is to protect the consumer, but they also are interested in protecting other auction houses. "This is unfair competition, because other auctioneers have to make sure they are transparent and that they provide guarantees," Council chairman Christian Giacomotto told The Times. 'Our ambition is not to regulate the world, but we want groups such as eBay to accept their responsibility.'"4

The responsibility mentioned here is the requirement to purchase insurance against fraud on the part of the auction house which puts the house itself responsible for authenticating that the goods bought and sold on the site are verifiable and legally obtained. Currently, eBay takes no responsibility for fraud committed via its website.

Which laws can be applied to the company is again dependent on the way that it is determined the company is doing business, whether as an auction house or as a brokerage. "[The July 2000] law makes a clear distinction between the activities of online auctioneers, which have a mandate from the owner of the goods to sell them to the highest bidder, and online auction brokerages, where no third party intervenes between the buyer and the seller to complete the sale. Online auctioneers must obey the same rules as physical auction houses, in particular taking responsibility for delivering the goods to the buyer, but auction brokers are almost exempt from regulation, except where the goods sold are "cultural products" such as books, CDs, or DVDs, according to the regulator." 3

Finally, other matters that should be considered are the cases cited parallel to this regulation by the council in France. "Last month, [November 2007,] the regulator filed suit against the online car auction site Carsat.fr seeking a similar court injunction to halt its activities, which it said were being conducted without due authorization, and warned that other online auctioneers faced similar action."3

"French regulation of internet businesses recently failed when the Government lost a case in which it tried to prevent an online gambling company from operating. A Maltese horserace betting site, Zeturf, had a ruling banning it from operating overturned in July by France's highest court, the Cour de Cassation. That court said that France's state monopoly on gambling broke EU competition rules."4

It could be construed that similar financial and monopolistic motivations could be spurring the regulatory Councils investigations into eBay France.

CONCLUSION

eBay has been a successful and fast-growing company since its inception in 1995 and currently operates in 30 countries. The reputation for fraud on the website is well documented. "It is estimated that about a quarter of all ancient coins and about two-thirds of all antiquities sold on eBay are modern forgeries."5

A. eBay defines itself as something new that falls outside of the scope of auction houses or brokers. By this definition, they are attempting to fall outside of the legal limits regarding both institutions. The best comparison, however for eBay would be to not claim to be something brand new, but rather to be something that is already understood by governmental agencies.

The action and model of eBay is much more similar to the current function of newspaper classified advertisement sections that have been posted online. In the case of online classifieds, zero fault or responsibility is assigned to the posting agent as it regards fraud. A simple disclaimer that buyers should be cautious and careful in their transactions via the media serves to prevent the allocation of guilt.

B. By finding eBay to be subject to the same requirements as an auction house and responsible for verifying its goods and services will leave the company financially responsible for fraud on its site. This additional monetary responsibility will quite possibly change the model of eBay from an online auction to an online marketplace, in order to avoid the impending financial burden. If France's Council determines the requirement of a permit, it is likely that other countries will impose the same restrictions.

Rather than having to follow the laws regarding auction houses, or even the more relaxed laws regarding brokerages, eBay should be held to the legal regulations that apply to other vehicles that simply connect buyers and sellers together, like classified advertising and public bulletin boards. The Council of Sales is misguided in its attempts to apply the July 2000 law to the French division of the eBay company.

RESOURCES

1. http://www.caltradereport.com/eWebPages/page-two-1198255692.html

2.http://www.reuters.com/news/video?videoId=72200&videoChannel=5

3. http://www.infoworld.com/article/07/12/03/French-auction-regulator-sues-to-close-down-eBay-France_1.html

4.http://www.channelregister.co.uk/2007/12/05/france_says_non_to_ebay_broker_claims/

5. http://rg.ancients.info/guide/counterfeits.html

6. http://pages.ebay.com/aboutebay.html?_trksid=m40