Electronic auctions - procedures and particularities

1. Legal framework for electronic auctions

Legal definition

Article L. 321-3, paragraph 1, of the French Commercial Code defines an electronic auction as "the act whereby an agent offers an item of property to the public by electronic means. public auctions by electronic means to sell it to the highest bidder".

This legal definition clearly establishes three constituent elements:

• The existence of a mandate
• Competitive bidding
• Automatic auction to the highest bidder

These electronic sales are subject to provisions of the French Commercial Code governing voluntary sales of furniture by public auction (art. L. 320-1 to L. 321-38).

Distinction between auctions and brokerage

The legislator has made a clear distinction between two different operations:

Electronic auctions:

• Seller's mandate
• Awarded to the highest bidder
• Involvement of a third party to describe the property
• Forced conclusion of sale
• Responsible operator and guarantor

Electronic auction brokerage:

• Defined in article L. 321-3, paragraph 2
• Simply putting buyers and sellers in touch with each other
• No automatic award
• The parties are free to decide whether or not to conclude the sale
• Platform used solely as an intermediary

This distinction determines the applicable legal regime, the guarantees offered and the liabilities incurred.

2. Status of electronic auction platforms

Legal liability of web hosts vs. publishers

The legal status of an online auction platform determines its liability regime:

Hosting platform:

• Purely technical and passive intervention
• Limited liability (law of 21 June 2004)
• Exemption for illegal content of which it had no knowledge
• Obligation to act promptly after a report is made

Publisher" platform:

• Active role in online content
• Full liability
• Data control and knowledge
• No exemption scheme

Case law has clarified these criteria. In a ruling dated 1 June 2022, the Cour de cassation qualified as a publisher a platform that optimised the presentation of offers for sale. Similarly, in the rulings concerning eBay (Com. 3 May 2012), the Court held that this company played an active role that went beyond the simple activity of hosting.

Platforms' information obligations

Article L. 321-3, paragraph 3, of the French Commercial Code imposes a clear information obligation on brokers:

• Clear and unequivocal information on the nature of the service
• Access to information on the parties' obligations
• Express mention of the absence of an automatic award
• A clear distinction with voluntary sales websites

These obligations are designed to protect consumers from any confusion. The penalties can be severe: the Competition Authority can investigate violations and impose fines of up to double the price of the goods sold (capped at €15,000 for individuals and €75,000 for legal entities).

3. The special case of the right of withdrawal

Exclusions from the right of withdrawal

The Hamon Act of 17 March 2014 introduced a right of withdrawal for distance contracts. Article L. 221-18 of the Consumer Code provides for a fourteen-day withdrawal period.

However, Article L. 221-28 expressly excludes certain contracts from this right, in particular "contracts concluded at a public auction".

This exclusion is explained by the very nature of auctions, where the price results from open competition, which would make it economically inequitable to exercise a right of withdrawal after the auction.

Distinction between "live" sales and totally dematerialised sales

Case law and legal doctrine make an important distinction:

Live sales (live auctions broadcast online):

• Possibility of attending the sale in person
• Bids can be placed in person, in writing, by telephone or online
• Exclusion of the right of withdrawal for all bidders
• Application of the traditional public auction system

Totally paperless sales:

• Sale exclusively online
• No physical reception for the public
• Right of withdrawal applicable if the sale is concluded between a professional and a consumer
• Application of the rules governing distance contracts

This crucial distinction determines whether or not the successful bidder has a right of withdrawal.

4. Electronic sales of cultural goods

Specific regime applicable

Sales of cultural goods by electronic means benefit from a special regime:

• Application of the rules governing voluntary sales operators even to brokerage companies (art. L. 321-3, para. 3, C. com.)
• Obligation to declare to the Council of auction houses
• Compliance with guarantees specific to voluntary sales
• No need to have a room to store objects

This exceptional system aims to protect cultural heritage by guaranteeing the expertise, transparency and authentication of cultural goods put up for auction.

Definition of the cultural goods concerned

The cultural assets subject to this specific regime are those defined by the French Heritage Code, in particular article L. 111-1:

• Properties of historical, artistic or archaeological interest
• Assets other than national treasures
• Assets subject to the circulation regime set out in the French Heritage Code

Annex 1 to articles R. 111-1, A. 111-3, R. 111-13 and R. 111-17 of the French Heritage Code classifies these properties into fifteen specific categories, which include in particular:

• Archaeological objects
• Decorative elements in buildings
• Pictorial and graphic works
• Photographs
• Cinematographic works
• Sculptures
• Manuscripts and antiquarian books
• Scientific collections

When goods are classified as "cultural goods", this protective regime applies to electronic auctions. In addition to cultural goods, the diversity of goods sold at electronic auctions, including for example new goodsUnderlines the importance of a precise legal framework. In view of these particularities, and in order to navigate safely in the world of online auctions, the specialised legal support is essential.