E-Bay, Inc. was absolved of liability for fraud, common law fraud, breach of covenant of good faith and fair dealing, and breach of contract in New Jersey state court in a suit filed by one of its sellers. The seller had listed a vacation resort on E-Bay’s auction website with a low minimum bid and a reserve price of nearly $ 4 million. The seller received four bids for the property, the first three for approximately $2.5 million and the fourth for the reserve price. After learning of the reserve price, the high bidder withdrew his bid on the grounds that he had not read the auction listing carefully. No further bids were received once the reserve price became public.
Real estate and securities may be listed on E-Bay’s auction website, but due to laws governing brokers of those items, only “non-binding bids” may be made for them. Non-binding bids, according to E-Bay’s user agreement, are “merely a means of introducing potential sellers to interested potential buyers.” Normally, under the bid retraction policy set forth in E-Bay’s user agreement, users are not permitted to retract bids.
The seller contended that E-Bay was obligated to prevent the high bidder’s withdrawal because E-Bay’s bid retraction policy did not specifically exempt non-binding bids. The withdrawal of the high bid “cast a shadow” over the item, causing other potential buyers to decline to bid on the item.
E-Bay responded, and the court agreed, that other parts of the user agreement implied that the bid retraction policy exempted non-binding bids, specifically the language that the non-binding bid policy was a “separate policy” wherein there was no bid retraction policy. Moreover, the court found, the federal Communications Decency Act, 47 U.S.C. § 230, allowed Internet service providers like E-Bay to avoid liability for its failure to police bid withdrawal – an obligation to prevent improper bid retractions, the court held, would be “overly burdensome and detrimental to the free flow of information on the Internet.”
Finally, the court concluded that the plaintiff had suffered no damages because the bids were non-binding to begin with. This rather conclusory final argument did not address the plaintiff’s complaint that he was deprived of the opportunity to receive other bids because of the “shadow” cast by the withdrawn bid. The only way to make sense of the court’s contention that there were no damages is to assume that non-binding bids have no value at all, which clearly isn’t the case if eBay is able to attract sellers of real estate and securities to its service.