On 14 December 2020, a small group of MPs introduced an early day motion to Parliament calling on the Government to introduce legislation banning the resale of products bought using automated bots (EDM 1272). The motion was spurred by the widely reported shortage in retailers’ supplies of PlayStation 5 gaming consoles. Many of those consoles were acquired by ‘scalpers’ using bots and rapidly became available on secondary sales platforms where vendors were offering multiple units for sale at prices over double the item’s Recommended Retail Price.
In this scenario, scalpers operating individually and in groups profited at the expense of consumers who were left empty-handed, some having waited in virtual queues for hours. Retailers also reported frustration at the damaging impact the bots had on their websites’ performance, including on the automated queuing systems set-up to provide a fair opportunity for customers to access available stock.
The EDM is unlikely to do more than bring the matter to Parliament’s attention. Despite the EDM attracting more signatures than average (32 MPs had signed at 29 January 2021), given the COVID-19 pandemic and more pressing items for government’s attention, it seems unlikely to be a priority. That said, the use or potential misuse of bots in the manner employed by scalpers raises a particular moral quandary that the pandemic itself has the potential to highlight, so we have chosen to look more closely at this phenomenon.
‘Bots’ and ‘scalping’
Bots are a widespread tool used in many forms and guises, legitimately and illegitimately. While there are chatbots used to deliver customer service functions usually performed by employees in store or over the telephone, there are also malicious botnets that are groups of bots used to carry out various destructive activities such as Distributed Denial-of-Service attacks.
Our focus here is on automated bots that operate at great speed to target and acquire products specified by their controller, in bulk or individually, on retailers’ websites for onward sale at inflated pricing. The practice is known as “scalping”.
The bot technology automates the process a human would follow on a retailer’s website to add a product to their virtual basket and check out, performing the transaction almost instantaneously. Some bots are able to trawl multiple websites simultaneously, purchasing products wherever they are first in stock or purchasing some from each location. The “Carnage Bot”, that claimed to have acquired 2,000 PlayStation 5 consoles on 19 January 2021, shortly after retailer GAME restocked its supply, is but one example.
In ordinary circumstances, the age old debate about profiteering at the expense of consumers is one that ultimately comes down to individual viewpoints: the operation of free market economics (supply, demand and competition) where opportunists capitalising on demand for a particular product is merely the ‘norm’; as opposed to the view that the actions of those like scalpers constitutes exploiting an unfair advantage to the detriment of ordinary consumers and creates a controlled, uncompetitive secondary market for products. Against the backdrop of the pandemic, however, the debate is far less theoretical.
The pandemic has demonstrated the risks of supply chains being put under pressure and caused a necessarily accelerated shift from the bricks-and-mortar high street to even greater online commerce. What if scalpers were to use bots to secure stockpiles of essential products for resale at a premium? We might hope that inevitable public outrage at the scalping of necessities – and a sense of moral duty on the part of the scalpers – might prevent this conduct. You only need look at the incidences of grossly inflated prices for sanitising products and face masks that were reported in 2020 to see that these factors may not provide the hoped-for deterrent. Such activities would, therefore, require legislative intervention.
A precedent in sporting and gig tickets
The underlying problem of re-selling products for inflated prices is not a new one. The resale of football and other event tickets has long been subject to legal and regulatory scrutiny.
The resale of football tickets is prohibited without the club’s express permission by Criminal Justice and Public Order Act 1994, s.166. There is also a ban on using bots to acquire tickets for “recreational, sporting or cultural event in the United Kingdom” under Breaching of Limits on Ticket Sales Regulations 2018 (the “Regulations”).
The Regulations create the following offence, which is likely to be indicative of what the MPs who tabled the early day motion have in mind for other products.
3. It is an offence for a person to—
(a) use software that is designed to enable or facilitate completion of any part of a process within regulation 2(b) [purchase tickets online]; and
(b) do so with intent to obtain tickets in excess of the sales limit, with a view to any person obtaining financial gain.
4. For the purposes of regulation 3 it does not matter whether the offer in regulation 2(a) [offer for sale of tickets for a recreational, sporting or cultural event in the United Kingdom] is made, or anything is done to obtain tickets, in or outside the United Kingdom.
The offence above would clearly need some adaptation to effectively address, for example, the fact that scalpers are said to have used bots on multiple websites to acquire many consoles whilst staying within the sales limit of each individual website.
Legislation to address scalping will need to be more broadly drafted to criminalise the use of bots to acquire products more generally. This is likely to need the support of retailers and manufacturers as well as consumers.
What can be done in the absence of legislation?
In the absence of legislation (and there is of course a serious question about how any such legislation would be enforced), technology is most likely to offer a solution to the scalping phenomenon. We also look below at the legal measures that businesses may take to deter scalpers.
Technological solutions
If a retailer is concerned about scalping on their website, the starting point is usually to implement a technological solution in an attempt to restrict or block the use of bots. There are multiple software solutions available to do that, the most common being CAPTCHA.
These solutions are not failproof. Scalpers have long been able to subvert these measures by tweaking their bots. Such solutions may also block bots employed by third parties for legitimate purposes that are beneficial to the retailer, impact on website performance or compromise the user experience.
Legal solutions
A brief review of various leading retailers’ online terms and conditions (“T&Cs”) shows frequent use of general terms and conditions that arguably prohibit the use of bots. Examples include provisions:
- To prevent use of the website in a manner that causes access to it to be interrupted, damaged or impaired, or that inhibits its use by others.
- Prohibiting the use of the website for commercial purposes.
- Expressly excluding the practice of screen scraping (albeit that practice usually involves the extraction of data about a product or service to facilitate it being offered by a third party for a premium).
Businesses may take the view that the individuals involved in scalping are unlikely to be deterred by knowing that their actions are breaching the website T&Cs. However, including specific terms in the T&Cs, which form an agreement with customers, gives retailers options which may act as a deterrent to scalpers, particularly if retailers pursue those options, even if only in a few instances to make an example of scalpers. However, for the reasons given below, taking on the scalpers legally is not without difficulty.
First, retailers can rely on the T&Cs to investigate, cancel and avoid transactions identified as potentially having been placed by bots or exceeding a particular sales limit (e.g. one console per customer). In respect of PlayStation 5 sales, GAME is reported to have conducted ‘order checks’ such that even though scalpers had received order confirmation emails, GAME would not finalise orders and take payment for them until it had verified that only one console had been purchased per customer. The issue with this approach is that, as noted above, scalpers can trawl multiple websites to obtain large quantities of a product whilst staying within sales limits set by individual retailers. They can also use multiple online identities, payment methods and delivery addresses to circumvent the retailers’ checks.
Second, retailers could bring proceedings seeking an injunction against a scalper to prevent breach of the T&Cs. Although, this would be difficult given that (as noted above) it is straightforward for scalpers to mask their true identity and details online.
Third, the scalper would of course be in breach of the T&Cs, so retailers could sue for breach of contract. Again, though, bringing a claim for breach of contract would be difficult because the retailer has often suffered no provable damage referable to an individual scalper or group of scalpers. While the retailer’s website’s performance may have suffered, it has received the agreed price for the product concerned. Proving the harm to website performance against a scalper or scalping group is likely to be very difficult evidentially. This may be addressed through, for example, a liquidated damages clause for a prescribed breach. To be valid, this would need to be set by reference to, for instance, the costs of identifying and dealing with the breach. The amount concerned is unlikely to offer a substantial deterrent, given how lucrative scalping is for those involved in it.
Conclusions
For now, the principal remedy must be one of self-help: having T&Cs in place that allow a retailer to stop or not fulfil a transaction where use of bots is suspected or identified and investing in technology to protect against bots. That way, the scalpers never get the product and the very purpose of their activities is stopped before it begins.
The obvious downside of retailer intervention is placing a further burden on businesses to effectively police their customer base. However, should legislation be enacted it is almost inevitable that part of the process of eliminating the use of bots is in any event going to fall on retailers, and possibly on websites where the products are resold. If a business has built a reputation for not tolerating bots and scalpers, has in place strongly worded T&Cs and has invested in technology to protect its website, it is likely to be better positioned if and when legislation arrives.
Andrew Taplin is a partner at CMS specialising in commercial dispute resolution, including claims involving IT contracts, financial services, trading platforms and providers. He can be contacted on +44 20 7524 6463 and andrew.taplin@cms-cmno.com.
Leah Grolman is an associate at CMS specialising in commercial dispute resolution, including IT, civil fraud and procurement disputes. She is a member of the Society of Computers and Law and can be contacted on +44 20 7367 3607 and leah.grolman@cms-cmno.com.
