Nov. 3 (Bloomberg) -- EBay Inc., the world's largest Internet auctioneer, isn't exempt from German consumer-protection regulations that allow customers to return goods without giving a reason, the country's highest civil court ruled.

The Federal Court of Justice in Karlsruhe said EBay transactions between professional sellers and their customers are governed by the same laws covering other kinds of selling, such as through mail-order. EBay's deals don't qualify for exceptions in German law for auctions, it said.

``The consumer who buys a product in an Internet auction is exposed to the same risks as in other forms of distant selling,'' the court said in an e-mailed statement. Exemptions to protection rules should be limited to only a few cases, the judges said.

The ruling may make auctions less attractive for German consumers if sellers set higher minimum prices for items to offset the cost of returns, said Stefan Krueger, a Frankfurt- based partner at law firm Freshfields Bruckhaus Deringer who specializes in electronic commerce. Europe's biggest economy, with 15.7 million members, accounted for about half of EBay's $759 million in international sales last year, the company said.

Europe-Wide Effect

``The decision sets a precedent on consumer protection in auctions in Germany, but the question could also have relevance in other European countries,'' Krueger said in an interview. The law is based on a European Union directive and could land in front of the European Court of Justice in Luxembourg, the EU's highest court, if member states differ on the issue, he said.

San Jose, California-based EBay, which makes money by collecting a fee for the listing and a portion of the sale price, made more than a third of its $2.17 billion in revenue outside of the U.S. last year.

The ruling may become a hurdle for small sellers, making it more difficult for them to start an online business, EBay said on its Web site. More than 5,000 of EBay's members in Germany are so- called power sellers, meaning they have a trading volume higher than 3,000 euros ($3,800) a month, the company said.

``It is necessary to reduce the complexity of the obligations to a reasonable degree,'' EBay said in a statement.

``Customers can now participate randomly in these auctions and return their goods as soon as they don't like the color,'' Freshfields' Krueger said. ``It just needs a mouse click and there isn't even a risk involved.''

The case at issue centers on an unidentified jeweler who sold a diamond bracelet on the service and never received any money because the buyer wasn't happy with the purchase.

The case is VIII ZR 375/03.

To contact the reporter on this story: Corinna Budras in Frankfurt at cbudras@bloomberg.net

Last Updated: November 3, 2004 08:50 EST