Home | Thailand Law Firm Referral | Thailand Law Journal | Thailand Law News | Directory

 

Liability for negligence act
Another common law action that online auction participants can take against fraudsters or wrongdoers is the common law action against negligence act. In other words, victims can take action against fraudsters in their negligence act. This principle has been asserted in many English common law cases. A good example can be seen in the two cases of Derry v Peek52 and Bradford Third Equitable Benefit Society v Border.53 In the Derry v Peek case, the court asserts the principle that one would be liable in their negligence act if he knew that his statement was false, or is reckless or consciously indifferent as to whether his statement is true or not. Furthermore, the negligence liability also apply to where a statement is made truthfully but the maker subsequently becomes aware of its falsehood and does nothing about it according to the court decision in Bradford Third Equitable Benefit Society v Border.

In the online auction environment, fraudsters usually make a false statement with regard to qualification and specification of the product. This is because they intend to disguise their commercial partner in the quality and value of the product for example, they may sell a counterfeit product while misguide their partner by representing a copyright product photograph in order to introduce the product. Of course, their partner may receive a counterfeit goods rather than genuine copyright one. Furthermore, in `second chance fraud’, fraudster makes false statement by posing falsify representation photos from another fixed price website to.introduce product in eBay notwithstanding he/she does not actually sell it.54 From these facts, it apparently see that fraudsters do a negligence act because they all conscious knowing with their falsify statement and also they know their statement on online auction have falsehood and they do nothing about it. Therefore, fraudsters liable for their negligence act in falsify statement and fraud victim can enforce right in any loss and damages in those negligence acts.

(2) Statutory rights

Misrepresentation Act 1967

Apart from common law rights, the online auction participant may take action against the fraudster under the statutory right in Misrepresentation Act 1967. The Act states that;

Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently"55

In the online auction environment, fraudulent practice always convey with the misrepresentation statement. As said above, the user may misrepresent an introduction photo or in description of the product for inflating the value of their product or for the benefit of their scam scheme. Of course, this fraudulent practice is a misrepresentation in the statement that is shown to any other online auction participant. Therefore, under this Act, the online auction participant who suffers from loss and damage under misrepresentation in the photo or description of goods on an online auction website can claim over their statutory right in loss and damage and the fraudster should be liable for any loss and damage.

Consumer Protection (distance selling) Requlation 2000
Consumer .Protection (distance selling) Regulation is another statutory right option that gives legal remedies to the online auction participant. This is because this statute applies to protect the consumer or purchaser online against fraud. For instance, with this regulation, the purchaser in the online auction website has the right to receive clear information about the goods and services before deciding to buy. Moreover, this act provides the cooling off period of seven working days in which online auction participant can rescind the contract56 and also there are provide more crucial credit card protection against fraud.57 However, as mentioned above, there is a lack of direct regulation in dealing with online auctions. The protection with this statutory regime is limited only to the fraud victim on- a fix-priced online transaction. For instance, the statutory regime only activates on ‘instant win/buy' or "buy it now service"58 transaction not the auction sale on the internet.59

III. Criticism of existing solution
As illustrated above, there are various self-regulation and legal prevention of fraud in the online auction environment. However, the question still arises about whether the existing solution is capable to effectively prevent occurrence of fraud in online auction website. This section will criticized how appropriate the existing regime is nowadays.

1) Failure of self regulation regime Failure of Feedback System
Whilst the feedback system has been recognized by many critics as the tool to improve the level of fraud protection., it is unlikely to seriously protect fraud in the online auction website. The first reason is the nature of the online auction system itself. With the online auction system, the user can easily register on the website as a member to freely sell and buy on the website. Therefore, one user can have various account names in online auction websites. This explores the opportunity of fraud that one fraudster may commit a fraud and leave from the website with their profit from a fraudulent act. Of course, with this behavior, the wrongdoer does not need to pay any attention to the feedback system because they can take a huge profit and can continue to do fraudulent act with their other accounts.

Also, the nature of the feedback system will make it vulnerable to deal with newly scammer scheme. A good example can be seen in the "second chance offer fraud". With this scam technique, the consumer usually deals on high value asset transactions such as automobiles. Scammer may used to be a good record seller in the online auction website. In other words, scammer may receive high positive feedback on online website. However, one day, they may use these trusts on feedback forum to create successful scam scheme with the huge profit. Otherwise, even the scammer receives negative comments from victims, but small amounts of comment do not impact. the reputation of fraudsters. Therefore, they can continue to act fraudulently.

In addition, with this nature, the feed back system does not prevent any fraud that occurs during process of bid such as, `shill bidding'. Not only does not prevent a fraud from the shill bidding but also feedback system may encourage a fraudulent practice with the deceptive feedback or feedback abuse which blurred the information in creditability of the fraudster. For example, the shill bidder can post fraudulent feedback under another of his username and leave fraudulent positive feedback to another. This positive feedback, of course, encourages ability in fraud of wrongdoer user and also distracts the purchaser or seller in buying online auction with the reality circumstance.

Another reason is about the reliability of the results of the feedback itself. Of course, this may seriously affect the efficiency of the monitoring role in the feedback system themselves. The factor that can affect the reliability of results of the feedback is the system itself. This is, because, the feedback system discourages user from posting the negative comment on the forum. In practice, the user may face a large number of obstacles in posting negative feedback. The first obstacle is that he/she will see several warning that he/she has to be liable for what they said on the feedbacks system.

52..(1889) 14 App Cas 337. See also Daniel Tunkel, Stephen York, Hammond Suddards & Edges, e-commerce a guide to the law of electronic business (2nd ed 200) Butterworth, London.
53.. [1941] 2 All ER 205.
54.. In this case, fraudster contacted a doctor from florida who was selling porche on a fixed price site call Auto trader.com. Posing as an interested buyer, the fraudster asked the doctor to send additional photos of the car via FedEx to an address in San Francisco. He then used those photo and specific information about the doctor's car post on eBay motor. Of course, the selling has never been done because the reserve price in eBay. Then fraudster may contact directly with their purchaser and offer the lower price if they wired money directly to seller. Surely, the purchaser have never pick the porche and may loose money. See Ina & David Steinee, Online Escrow Fraud Hits eBay Members,.Oct. 25, 2002 at <http://www.auctionbytes.com/cab/abn/y02/mlO/i25/sol> access on 3/7/2005.
55. Misrepresentation Act 1967 section 2.
56. Consumer Protection (distance selling) Regulation 2000 Reg 8.
57. Consumer Protection (distance selling) Regulation 2000.
58. Some online auction site such as eBay, the purchaser can buy instantly at that price state by the seller.
59. Consumer Protection (distance selling) Regulation 2000 Reg 5 (1) provides that the Regulation does not apply to those distance contracts such as auction sale.

 
 

 

© Copyright Thailand Law Forum, All Rights Reserved
(except where the work is the individual works of the authors as noted)