Penny auctions are a new introduction to the Internet, and are proliferating. The most popular ones are www.beezid.com, www.bidsauce.com, www.quibids.com, www.bidrivals.com, and www.dealdash.com. A penny auction is nothing like eBay. Users do not post the auction items for sale, but rather the owner and operator of the auction site is selling the items. The items sold on penny auctions are usually high end electronic items like laptop computers, iPads or digital cameras. But the main difference between a penny auction and eBay is that bidding at a penny auction is not free. Here’s how it works.
Bidding at a penny auction is not free. You need to buy a package of bids, which can often cost as much as one dollar per bid (depending on the particular auction site you use). What this means is that each time you make a bid, you spend one dollar. This is completely different than eBay, where you can bid for free and only have to pay money if you are the winning bidder.
The price that the operator of penny auction sites offers for an item usually starts at $0 or $.01. Each bid (again, which can cost up to one dollar depending on the particular penny auction site you are using) bumps up the price of the item for sale by a penny or two. It also adds a certain amount of seconds to a countdown clock which times the bidding. Even if you are the winning bidder, you have not won the item itself, but simply have won the right to purchase the item at a final price set by the operator of the penny auction site. As an example, if you are bidding on an iPad which has a $50 final price attached to it, and you have placed 200 bids that cost one dollar each, if you win the bid and therefore the right to purchase the item at the final price attached to it, you will have paid $250 for the iPad.
There are allegations made by some users of penny auction sites that winners of bids often find it very difficult to get the item that they have purchased. Many times, the winning bidders are forced to wait weeks in order to get their items, and in some cases the penny auction websites simply close down without notice, thereby causing the bidders to not only lose the money that they have paid to purchase the bids, but also causing many members to not receive items that they purchased.
Penny auctions are a lot like gambling. Every bid you make costs you money, unlike a traditional auction where you only pay if you win. In penny auctions, consumers spend money on bids with the hope of winning a prize, the prize being simply the opportunity to purchase the item at a discount. But as is true with traditional gambling, the vast majority of the bidders who use penny auction sites lose money – the total amount of money people pay for the bids that are used to bid added together with the price of the item often exceeds the value of the item itself. Furthermore, many of the penny auction sites have “automatic” bidding programs where the customers can have the auction site bid for them: the automatic bidding programs can be designed to place bids for the customers at specific time when there is no chance of winning, thereby wasting the bid altogether.
If you or someone you know has been deceived by a penny auction, please contact us to discuss your legal rights.