You have probably heard of Internet penny auctions where they tell you that you could win an iPad for $10 or a 55 inch HD TV for $20. Millions of people have actually played – most of them losing.
Westport is the home of one of the largest penny auction sites – Bidcactus – which was sued recently on claims that the site is nothing more than illegal gambling.
Bidcactus, along with Oklahoma headquartered QuiBids, have been targeted by a Texas law firm for possible class action lawsuits, seeking millions of dollars in damages, legal fees and to force the companies to clearly state on their site that its gambling not an auction.
Bidcactus said it denies the claims in the Hartford Federal Court suit and will defend itself against the charges. QuiBids is also defending itself saying it is doing nothing improper. It has sought to dismiss the lawsuit.
There are scores of other sites, called penny auctions, where consumers pay a fee to bid on an item and every time someone bids on that item, its price goes up by one or two cents.
As an example of how the typical penny auction site works:
Let’s say you want a new iPad. Bidding starts at 0. It costs you 60 cents to make a bid. After you bid, anyone else has 20 seconds to bid up the price. That person then pays 60 cents for his or her bid and the price goes up by 2 cents. 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.
So let’s say the iPad gets sold for $25. That means that about 2,000 bids were placed at 60 cents each, bringing the owner of the web site $1,200 for a $500 gadget.
Great for the web site, too bad for the 1999 people that lost hundreds of dollars.
Jill Farrand, the spokeswoman for QuiBids, has told CtWatchdog, that unlike some other site, his 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.”
Steven M. Mendelsohn, the named plaintiff against the Westport firm, is from Arizona, is not a person a jury would be very sympathetic to. His lawyers hope that a judge will grant them class action status, which would include everyone who lost money at the auction site.
His attorney, Roger L. Mandel, paints Mendelsohn as a fool, who spent more than $15,000 on the site, and got less than $6,000 in prizes, before realizing that he was getting ripped off.
Mendelsohn also appears to have been addicted to the site, bidding for several months on a whole host of items, ranging from a steam mop to Wal-Mart gift cards.
“However, the shocking amount of money he lost was not immediately noticeable to Plaintiff. It took weeks for Plaintiff to realize that he had lost and the total amount he had lost,” states the lawsuit.
I have no idea what the outcome of the lawsuits are, but don’t be a fool like Mendelsohn and let other suckers bid on these sites. Go to eBay where there are real auctions. Remember, nothing of value is free, and no one is going to sell you a new iPad for a few dollars.
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