South Africa May Deem Penny Auctions Illegal Gambling

south african flagAccording to an article posted today by Jan Vermeulen for MyBroadband.co.za News, Smokoo may become illegal gambling: DTI, South Africa may soon put all penny auctions operating in the country under gambling regulations and ban their operation.

“Earlier this year one of South Africa’s top information and communications technology (ICT) lawyers said that penny-auction sites could run themselves afoul of consumer protection regulations and South Africa’s gambling laws.”-MyBroadband.co.za

According to South Africa’s proposed consumer protection regulations, if enacted into law penny auctions would be in violation. From the South African Department of Trade and Industry’s Draft Regulations – Consumer Protection Act – November, 2010,  (7)”No fee may be charged for participation in an auction, but this does not apply to refundable deposits.”

Penny auctions may also fall under a the category of a “Mock Auction” -which states, “A mock auction is an auction in which – goods are sold for less than the highest bid, or part of the purchase price is repaid or credited to the purchaser, the right to bid for goods is restricted to persons who have bought or have agreed to buy other goods; or any goods are given away as gifts. (2) No person may promote, take part or conduct a mock auction.”

We contacted authorities in South Africa about a week ago, but have not yet received a response. The period for public comment may have already past. We’ll keep you up to date.

Currently South African penny auctions include Smokoo, Bidchaser, Kooldeals and ViaZiz. Smokoo has introduced themselves on our forum and states on their site that they are independently audited by an international auditing firm.

Smokoo.co.za recently auctioned off a Mercedes and has a BMW queued to end in 13 days. The site seems to be quite popular in South Africa (and controversial) with 43 pages of ended penny auctions, Smokoo currently holds an Alexa ranking of 26,243, 174 in ZA.

What’s you opinion? Do you think penny auctions run afoul of gambling laws?

Join our penny auction forum!

Photo Credits: AttributionNoncommercialShare Alike Some rights reserved by lildude

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7 comments… add one
  • Steve February 16, 2011, 4:33 pm

    Good article, I am curious if more and more countries start classifying Penny Auctions as gambling if this will put pressure on the US to make the same move. At this point I honestly don’t think the industry is in any danger, if these bans continue to happen all the penny auctions will have to do is move their servers to hosting companies with locations in the Caribbean or another location where it is still legal and continue on. Similar to sports/casino gambling sites.

    Reply
  • Belinda March 7, 2011, 5:12 am

    If Penny Auctioneers want to operate they should be registered under the Gambling Act of whichever country and abide by the respective laws and taxation. Moving the sites to remote locations is possible but the respective countries with legitimate gambling laws can block access on a countrywide scale. If they can block certain website access in China they can do it in South Africa too. Clearly, Penny Auctions are gambling and no different to a Slot Machine in a casino.

    Reply
  • Penny Bids October 21, 2011, 8:32 am

    I am a fan of penny bids because I have won an iphone for super low low price. Thanks for sharing an informative post. Keep posting! Staying tuned for more.

    Reply
  • Fred July 31, 2012, 5:07 pm

    Penny auctions are not gambling. Many sites are not transparent enough in their dealings though, although definitely not all. Who amongst us wouldn’t chane 20 to 50 bucks for a better than average chance of winning extremely cheap products we might not otherwise have a chance to buy. The odds are in your favour as long as you do your research…

    Reply
  • Rory January 24, 2015, 8:20 pm

    After much anticipation LiveBids Auctions has been launched in South Africa. LiveBids offers a unique online buying and selling platform that incorporates different aspects of various social media.

    This means that a choice of interests, following friend’s, search hundreds of products while buying items for a fraction of the cost and selling them to make real profits.

    LiveBids aims to help buyers and sellers fully connect in trade with seamless transactions. It is an online marketplace that is simple, interactive and social. It allows users to experience a real-time marketplace, buy products lower than the market value and socially follow buyers and sellers.

    Two formats are used, namely online auctions and pay-per-bid. The first of these is the traditional online auction model, where items are sold to the highest bidder. The second is a pay-per-bid model, where would-be buyers purchase credits to bid on items. These credits go to the seller, which is how it is possible to purchase big-ticket items for nominal amounts.
    The founders of LiveBids, Rory Vollmer and Paul Hoft, explain that “the idea was to create an online marketplace that was simple, interactive and social, helping buyers and sellers connect and trade. The marketplace is completely people driven”.

    Please visit http://www.livebids.io to empower yourself by becoming an online buyer and seller today!

    Reply

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