In the first prosecution of "shill bidding" in the UK, an eBay seller has admitted ten charges of using a second eBay account falsely to inflate bids on items offered under his main account. Paul Barrett was prosecuted under the Consumer Protection from Unfair Trading Regulations 2008, in a case which has implications beyond the specific practice of shill bidding.

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The Consumer Protection from Unfair Trading Regulations, which implemented the Unfair Commercial Practices Directive into UK law, came into force in May 2008. The Regulations swept away much of the UK's old, fragmented consumer protection law, and introduced to the UK for the first time a general obligation on traders not to treat consumers unfairly. Enforcement of the Regulations is delegated to Trading Standards, and can be carried out through a variety of means, such as by way of referrals to the Advertising Standards Authority or by civil or, in the most egregious cases, criminal proceedings.

North Yorkshire Trading Standards have now secured a conviction against an eBay seller who used a second account to bid on his own auctions, driving up the prices, a practice known as "shill bidding". Paul Barrett also used his alternative eBay account to leave positive feedback about himself, misleading bidders into believing his reputation as a seller was good. Both of these practices constitute false claims that the trader is not acting for the purposes of his business, or a false representation that the trader is a consumer. These are among 31 types of commercial practices which are considered "always unfair" under the Regulations, even if they have no effect on the purchasing decision of the consumer to whom they are directed.

Mr Barrett used his secondary account to inflate bids on dozens of items he was selling, including mobile phones, a cash register and a car. He has now pleaded guilty to ten separate offences and although he has not yet been sentenced, under the Regulations he could be fined up to £50,000. Mr Barrett has since claimed that he did not know that what he was doing was illegal, but this would have been irrelevant to his case, as the offences he committed were strict liability.

It is unsurprising that criminal liability should attach to shill bidding, but there are aspects of this case that are of broader interest. The first is that, in addition to shill bidding, Trading Standards appear to have found it relevant that Mr Barrett was engaged in "sock puppetry", the practice of leaving bogus positive reviews of a product or, here, a person. This case is a reminder that companies conducting viral or word of mouth marketing should take care that any messages they, or people acting on their behalf, leave on blogs or e-commerce websites relating to their own products or services are clearly identified as marketing messages and could not be mistaken for independent comments.

Secondly, Mr Barrett appears to have been held liable as a "trader" under the Regulations, which only relate to commercial practices as between a trader and a consumer. This is despite the fact that reports suggest that Mr Barrett's eBay sales appear to have been only distantly related to his business as the proprietor of a minibus hire firm. This may suggest that Trading Standards are taking a broad approach to the definition of "trader" under the Regulations, being a person acting for purposes relating to his business. It is possible that if Mr Barrett had entered a defence the court might have taken a different view of his status, in the context of these auctions, as a trader. However, for the moment traders should not assume that the fact that they are operating outside their main business excuses them from complying with the Regulations.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 21/04/2010.