Essex Technology Group sued eBay for terminating Essex’s right to trade on the eBay auction system after Consumer Depot, a competitor of Essex, accused Essex of “shill bidding,” and eBay subsequently terminated Essex’s ability to trade on the eBay site. Shill bidding occurs where a seller places a bid on its own item in order to artificially increase the price or interest in that time. In granting eBay’s motion for summary judgment, the Tennessee court relied on the eBay User Agreement, which provided that eBay could suspend or terminate the agreement if eBay “believes a user is a threat to the marketplace.” The court found the user agreement to be valid and enforceable, rejecting Essex’s claims that the agreement was unconscionable and illusory as insufficiently definite. The court disagreed, concluding that the “belief” provision does not give eBay an unlimited right to suspend or terminate, but a right that is tempered by a “good faith reasonableness standard.” Consequently, the court held that as long as the termination provision is exercised reasonably and in good faith, the provision is enforceable.

TIP: Be careful to balance a need to terminate a clickwrap contract like website terms of use for consumer misconduct with risks that too-flexible termination clauses might be viewed as unconscionable or illusory. Inclusion of reasonableness standards should help in avoiding an unconscionable argument..