From Kidneys to Iridium shares – what will eBay auction next?

1999-09-03

eBay kidneys are back in the news again. A similar tale, of an auction being pulled as it broke the rules, concerned Iridium. Such stories, hoaxed or unlawful, serve to illustrate the huge potential of auctions to sell, well, anything.

You will probably have seen the newest eBay kidney story by now (there was another attempt to sell a kidney in May, which was also pulled). As the “product” was removed from the site it had achieved a value of $5.75M. Pretty good for a body part, but probably worth it to someone. As for the Iridium tale, apparently Iridium had already filed for Chapter 11 bankruptcy prior to an opportunists’s attempts to sell their shareholding on the auction site. The Securities and Exchange Commission, not amused, requested that the offer be withdrawn: this was agreed, despite the “shares” no longer falling within the SEC’s jurisdiction. Of course, auctioning shares may leave you flummoxed – what is the stock market itself, if not an auction house? This serves to illustrate that people are prepared to auction, well, absolutely anything at all. And this is the crucial point.

As discussed in eRoad, a Vision Series report from Bloor Research, the auction is one of two mechanisms that are growing to eventually replace existing markets. The other is the pure market, which exists to sell products with a clearly defined value. Where the value of a product cannot be predefined, it must be turned over to the market where its value will be defined at the point of sale, that is, the auction. These two markets are not mutually exclusive: sites such as \link{www.lastminute.com, Last Minute} are profiting from the fact that the prices of travel products fluctuate wildly as they approach their sell by date. The success of eBay, and the rushed creation of me-too sites across the globe, are testament to the viability of auctions.

As the two stories above illustrate, however, the legal frameworks which govern auctions are not yet fully geared up. This is a global issue – for example, there is understood to be a thriving black market trade in third world body parts. The Internet may be the great liberator but it also opens the door to misuse on an unprecedented scale. Off-world banking is already being mooted: coordinated action is required before auctions are put out of the reach of even international law.

(First published 3 September 1999)