It is specifically against the rules for a seller to cancel all bids and end the auction early without a winner IF it is because s/he deliberately set the Starting Price lower than s/he was willing to sell for, and it hasn't reached that high. This is considered fee avoidance because eBay charges a substantial fee for sellers to have a Reserve Price so they aren't promising to sell as low as their Starting Price.
But there are legitimate reasons (or semi-legitimate, like a local sale) why a seller would have to do so, and a few years ago eBay got tired of having to divine the subjective intent of a seller who took that action, so it adopted some procedures that make it less attractive to do so with that intention: it can only be done before the countdown reaches 12 hours AND it charges a fee (the FVF% for that seller in that category times the highest cancelled bid) when s/he does so (with the first such fee per calendar year waived to allow for the very occasional legitimate reason for doing so).
I'm not sure whether the waive is automatic the first time per calendar year or whether you have to contact Customer Service to get it waived.
The "free" listings are not really "free". You get a monthly allowance (250 for most categories for most sellers) of waivers of the Basic Insertion Fee, but that does not cover any other fee including the Final Value Fee, any optional upgrades in the listing, or special fees like the one for ending an auction early if it has had a bid.
