Laws Regarding Selling Products on Auction Sites in Minnesota

Auction Gavel

This post is part of a series of posts entitled A Legal Guide to the Internet. For a comprehensive list of articles contained in this series, click here.

Businesses of all sizes are finding avenues to use the Internet to market their products. One of the more recent trends, especially for smaller businesses, is the use of Internet auction sites for both sale and purchase of products.

Types of Internet Auctions

There are two main types of Internet auctions. In an ascending price auction (often referred to as a “forward” or “English” auction); a seller puts up product for sale on the seller’s own site or an Internet “marketplace” site, and bidders place bids in ascending amounts. After a pre-determined time, the top bidder pays the seller, completes the transaction and the product is shipped. could be considered an ascending price auction site.

In a descending price auction (often referred to as a “reverse” or “Dutch” auction), a buyer announces its product needs on its own or an Internet “marketplace” site and sellers submit their lowest price. After a pre-determined time, the seller selects the lowest bid, completes the transaction and the product is shipped.

Auction Seller and Buyer Rules

Most auction sites have a method whereby buyers can rate sellers and sellers can rate buyers. Sellers are prohibited from placing false testimonials in their auctions. Sellers must also refrain from placing bids on their own products to increase the price. As reported on the Federal Trade Commission’s web site, “(t)hese practices are not only unethical, they’re also fraudulent.” Sellers also may not offer illegal items through Internet Auctions. The Federal Trade Commission provides additional details to protect sellers and buyers on their website.

This and the following posts have been copied or adopted from A Legal Guide To The INTERNET – Sixth Edition, published through a collaborative effort by the Minnesota Department of Employment & Economic Development and Merchant & Gould.