Going once! Going twice! Crash! – When are online auctioneers liable for auction website issues?

Internet connectivity and bandwidth issues have become a common headache for those of us whose work and social lives have largely been moved online amidst COVID-19-related restrictions.

But what happens when the website crashes in the midst of an online public auction with potentially millions of dollars or more at stake? This has emerged as a serious question for licensed auctioneers running virtual public auctions in Alberta.

Licensed auctioneers owe various duties to vendors (people selling their items in an auction) and bidders (people bidding to purchase the items).

Under the Public Auctions Regulation, auctioneers in Alberta are generally required to ensure that a public auction sale is open to everyone who wants to make a bid in the sale. It is an offence under the Regulation to unreasonably exclude someone from a public auction, potentially punishable by a fine or imprisonment, or both.

An auctioneer also owes a duty of care to a vendor to exercise proper skill and care in the sale of the vendor’s property, outside of their obligations under the Regulation. The specific requirements of this duty will depend in part on the language of the contract between the vendor and the auctioneer. But typically, the auctioneer will commit to sell the vendor’s consignment at a “public auction”. This also gives rise to a duty by the auctioneer to ensure the auction is in fact “public”, in that it is accessible by members of the public who wish to make bids.

There are no specific rules dealing with how licensed auctioneers should run online auctions, or what happens when there are problems with the auction website. In the absence of specific rules to the contrary, the general expectation that the auctions will be accessible to the public would presumably apply to online public auctions.

If an auction website experiences problems during a live auction, such that bidders are prevented from bidding, then technically the auctioneer has failed to ensure public access to the auction. A bidder who has been excluded in this fashion may be able to sue the auctioneer for a violation under the Public Auctions Regulation. A vendor may also be able to sue for such a violation.

A vendor may also be able to sue the auctioneer outside of the Public Auctions Regulation. The website issues may have resulted in a vendor’s items being sold for lower amounts than would have been the case if all of the interested bidders had been able to place their bids. In this case, the vendor could potentially sue the auctioneer for negligence, based on the vendor’s economic loss.

Lawsuits for negligence based purely on economic loss can be very difficult to win. It helps significantly if the lawsuit is based on one of the categories of economic loss already recognized by the courts. In this case, one applicable category could be “negligent performance of a service”. Where an auctioneer commits to sell a vendor’s goods at a public auction, they generally have a duty to do so competently. It is difficult to see how an auctioneer has met their obligation to competently sell a vendor’s goods through public auction if the auction was not, in fact, public, due to issues with the auction website.

Even if the auction website was run by an independent web host, this would not relieve the auctioneer of their duty to competently sell the vendor’s goods at a public auction. The auctioneer might want to sue the web host for the website problems, but the vendor could still sue the auctioneer for the money they lost as a result of these problems.

The likelihood of succeeding in such a case would depend in part on (1) the wording of the contract between the vendor and the auctioneer and (2) any evidence the vendor has to show that excluded bidders would have paid more money if they could have properly accessed the website to make bids.

In response to concerns communicated by the Auctioneers’ Association of Alberta, the Government of Alberta committed in December 2020 to review the Public Auctions Regulation to ensure adequate protections for people participating in online auctions, but so far no such changes have been made.

This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.