Buying and Selling at Auction – Changes to consumer law

June 20, 2014

in Corporate & Business

Corporate & Business


Another important change to consumer law that will affect both suppliers and consumers is in the area of buying and selling at auction.  Recent changes tighten the rules around auctions that are conducted by auctioneers.


The Fair Trading Act defines an auction as:

  •  an offer to sell on behalf of a seller;
  • by an auctioneer;
  • bids are made in real time;
  • and the property is sold when the auctioneer indicates.

This is to be contrasted to online bidding processes such as ‘TradeMe’ or ‘eBay’ which are not auctions, as property is sold directly by a seller to a winning bidder and not through an auctioneer.  Online bidding platforms such as ‘TradeMe’ are usually just a venue for members to buy and sell property.  However, there are also new consumer laws around buying and selling online which will be covered in a future article.

New Rules for the Conduct of Auctions

Amendments to the Fair Trading Act and the Consumer Guarantees Act mean that the Consumer Guarantees Act now applies to goods and services sold at auction and the conduct of auctions is now regulated by the Fair Trading Act.

The Fair Trading Act now regulates the conduct of auctions including by imposing on auctioneers:

  1.  An obligation to make a notice of the terms of the auction readily available before the auction. For example, by making brochures of the terms available or where potential bidders are not attending the auction, terms must be available on a readily accessible web site.
  2. An obligation not to accept vendor bids unless:
  • The terms of the auction specify that vendor bids are permitted;
  • The auctioneer identifies each vendor bid as it is given;
  • The property is offered for sale with a reserve price and the vendor bid is less than the reserve price;
  • An obligation to account for and pay the auction proceeds to the vendor following a sale by auction. The auctioneer is required to account within 10 working days after the sale of any goods other than a sale of land where the Real Estate Agents Act 2008 applies instead. This requires a real estate agent to hold money received for at least 10 working days unless the parties agree for it to be released earlier than that.

Other provisions of the Fair Trading Act including misleading and deceptive conduct and false representation will continue to apply to goods sold by auction.

The Consumer Guarantees Act will apply if the seller is ‘in trade’ and the property is usually purchased for personal, domestic or household use. Where the Consumer Guarantees Act would normally apply, the seller may exclude the application of that Act if the property is purchased by a person who is also ‘in trade’. However, they can only do this if the notice of auction terms clearly states that this exception applies.

Therefore sellers looking to sell their goods by auction and consumers purchasing at auction, need to be aware of their respective rights and obligations under these new laws.

We are experienced in all aspects of commercial and business law.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Simon Milne

09 379 0055 or 03 477 8870


The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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