On March 21st, just 5 days after we noticed that Swoopo.com was down “due to technical issues,” (the first penny auction site is still down today) a class action lawsuit was filed in California against Swoopo’s Entertainment Shopping, Inc. The class action is defined as including “Everyone in the United States who has purchased bids on Swoopo.com after March 21, 2007.” On March 23rd Swoopo’s German corporation, Shopping Entertainment AG filed for bankruptcy.
The plaintiff initiating the class action, John Hernandez, alleges that Swoopo’s auctions constitute lotteries under California law, stating that they violate both the California Penal Code § 319 and California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200. Claims are stated to exceed $5,000,000.
“A lottery is any scheme for the disposal or distribution of property by chance, among persons who have paid or promised to pay any valuable consideration for the chance of obtaining such property or a portion of it, or for any share or any interest in such property, upon any agreement, understanding, or expectation that it is to be distributed or disposed of by lot or chance, whether called a lottery, raffle, or gift enterprise, or by whatever name the same may be known.”
“As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.”
Just last month another lawsuit was filed that includes not only Swoopo, but 4 other penny auctions, collectively: Beezid, BidCactus, BigDeal and QuiBids. That complaint alleges that penny auctions are illegal gambling. Damages being sought: $25,000,000.
It’s one thing if a bidder is being blatantly ripped off by shill bidding practices and non-receipt of items, but it’s a whole other story, in my opinion, if bidders are willfully spending money on bids knowing that they may not win anything at all. The penny auction sites that have been and are engaging in stealing from bidders should be the ones being sued & prosecuted.
What could this mean for the penny auction industry?
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