Auckland car salesman convicted of dishonest online auction bids

Auckland car salesman Craig James Rutherford has been fined $12,100 in the Auckland District Court today on 11 charges of breaching the Fair Trading Act (FTA) by shill bidding during the sale of cars on the Trade Me auction website.

Between 1 January 2009 and 13 October 2011 Mr Rutherford, then manager of Cheapcars NZ Ltd, trading as Repocars, used seven different memberships to place 4,567 bids on 405 Repocars auctions. The total value of these affected auctions was $1,232,597.

In online auctions, shill bidding is the practice of a vendor selling goods under one username but bidding on them with another username, or through other users controlled by the vendor.

This is the second case of shill bidding on online vehicle auctions the Commission has prosecuted this year. In May, an Auckland based car company, The Auto Company (Millenium) Limited, was fined $42,000 for similar breaches of the FTA. That fine was on top of over $122,000 already paid in compensation to affected consumers and Trade Me.

In sentencing Mr Rutherford today, Judge Field told the defendant "While I can accept there was some pressure on you to obtain a minimum price, that did not include an ability to act in the way you did, which was illegal and immoral"

“Your activities have impacted upon TradeMe's good reputation. The fact that you say it is rife only highlights the need for denunciation and deterrence."

Commerce Commission Head of Investigations, Ritchie Hutton, says the practice of shill bidding is dishonest.

“Shill bidding undermines what is supposed to be a transparent auction process. It creates the appearance of higher interest from other bidders in the goods and this increased bidding activity causes genuine bidders to re-evaluate their initial valuation and bid more as it appears they have undervalued the goods, therefore paying an artificially inflated price for the car.”

“This activity not only affected genuine car buyers, it also had potential to damage Trade Me’s reputation as a trusted online marketplace. If shill bidding is tolerated, consumer confidence in Trade Me auctions as a reflection of the true offer and demand for a good could be compromised.”

“A broader effect of sustained shill bidding is the distortion of prices in the market generally. Trade Me is New Zealand’s biggest motor vehicle market and consumers may use the website to assist them in judging the value of vehicles,” said Mr Hutton.