Penny Internet Auctions: Be Careful

How would you like to buy a 19-inch HDTV made by Vizio for less than $10? It’s possible, but it’s also likely that you will shell out $20 or $30, and end up with nothing.

Welcome to the world of penny auction Internet sites – where most consumers will get ripoff.

It’s a growing phenomenon with a business model that is guaranteed to let the owners make money while most players lose money – not unlike casinos.

Here is the way it works at – one of the major penny auction sites that is heavily marketing its services:

You pick an item – which can range from electronics to gift cards – and bidding starts at 0. Bidding is either by one or two cents, depending on the merchandise.

Every time you bid, it costs you 60 cents. After you bid, anyone else has 20 seconds to bid up the price. That person then pays 60 cents for his or her bid. The 20-second clock starts running again, and it goes on until there are no bidders left. So your first bid of one cent costs you 60 cents. The next person bids two cents and pays 60 cents for the bid. You then bid three cents and pay 60 cents for that bid.

Starting to get it? So let’s say a television set is sold for $10. That means that 1,000 bids were placed at 60 cents each, bringing the owner of the web site $600.

More likely, the television set will go for a couple of hundred dollars, in a process involving thousands of bids.

Now that is if the bidding is honest. A browse on the internet indicates there are hundreds of complaints claiming that the bidding is rigged at some of the penny auction sites, with sham bids to drive up the price and to increase the number of bids. Others complain that even after the site shows they have won the item, bidding has been renewed.

Jill Farrand, the spokeswoman for QuiBids, says that site is run legitimately and that players have a chance to use their lost bids to purchase items at “online retail value,” using their losses to make up part of the payment.

Farrand says that not even members of QuiBids employees’ families are allowed to bid on products.

“Auto-bots and shill bidding are some of the ways penny auctions get a bad reputation,” she wrote me. “One bad apple spoils the whole bunch. We try to be as transparent as possible and we believe that by working the way we do, ethically and morally, we’ll continue to build and keep strong relationship with our users.”

The site was launched last year, she said, by Matt Beckham, a 27-year-old Oklahoma native with a marketing and finance background. Farrand says more than 60,000 successful auctions have been conducted in less than a year.

The site, she notes correctly, has a QuiBids101 section, an introductory section that appears to accurately portray the odds of winning sought-after products, and that provides instructions on how to get the most out of your bidding dollars.

QuiBids has a B- rating from the Better Business Bureau, with 15 complaints, all of which were resolved.

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1 Comment on "Penny Internet Auctions: Be Careful"

  1. It’s very easy for penny auction sites to shill bid, some can’t make enough money and don’t even ship out items. Please feel free to visit our year old penny auction blog and discussion forum, we watch the penny auction industry and try to expose scams when we find them. We offer a place for users to discuss their experiences and leave penny auction reviews. Thanks for creating more awareness of penny auctions and the possibility for dishonest practices. -PAW

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