UBid.com Accused of Defrauding 300 Users
May 10 2000
The legal challenges for auction sites keep mounting, with uBid .com becoming the latest to be served with a class-action suit alleging deceptive business practices.
The suit charges uBid, based in Chicago, with defrauding approximately 300 people who placed winning bids on personal computers but never got them because the auction was later canceled.
The uBid suit could pose a serious threat to the company's business model, which takes a hands-off approach to the sale and shipment of merchandise on its site. Should uBid lose, the company could face greatly increased liability for the transactions that take place in its virtual auction house.
Similar challenges face eBay .com and Yahoo.com. Last month, eBay was sued by a group of bidders who unknowingly purchased fake sports memorabilia on its site. In March, Yahoo was sued by game manufacturers Nintendo of America , Electronic Arts and Sega of America over the alleged sale of illegal game copies on its auction site.
The auction sites contend that they should not have to monitor their users' actions. If forced to police every transaction, their argument goes, their operations would be seriously impeded and could grind to a halt.
But Brian Murphy, the lawyer representing the bidders in the uBid suit, said he hopes that legal actions like his would merely force online auctioneers to adhere to the same legal requirements that govern their offline counterparts.
"Hopefully, it will make them more compliant in terms of their contractual relationships" with online bidders, Murphy says. UBid "won't let anyone cancel bids, but [uBid] will cancel orders with impunity."
The lawsuit claims that uBid sent e-mail to those named in the class-action, congratulating them for placing winning bids and stating, "You should be receiving this order shortly." Later, those same winning bidders got a final e-mail stating that "errors were made" during the April auction and that their orders for Pentium III computers could not be filled.
The errors in question were a starting bid price of $3 and a computer count of 959 - numbers that should have been reversed, according to uBid, which says that a Chicago-area company auctioning off the machines, identified as Computers UR Way, was responsible for the mistakes.
Computers UR Way could not be reached for comment on Wednesday.
UBid said it since has cancelled its relationship with the computer supplier.
"It was a human error, but it was a big one," says uBid spokeswoman Nevenka Todorovic, adding that uBid will explore ways to avoid repeating such mistaken listings in the future.
She said uBid has a disclaimer on its site that alerts users to the fact that while certain sellers in its auctions are approved by uBid, products in some auctions are shipped directly from the vendor. In those cases, vendors are responsible for final delivery.
None of the winning bidders were charged for taking part in the auction, she said.