It’s been just over 3 years since penny auctions came to the US, and after 3 years I still find penny auctions that are using automated bot bidders to bid against real paying penny auction bidders.
Quite frankly I am tired of this practice being allowed at all on the Internet. Yet just today I found yet another person advertising how great and profitable the penny auction business model is, especially because you can steal from paying users.
Whoever thinks bot bidding is not theft is clearly not thinking correctly. Entrepreneurs who succeed by lying and cheating are not entrepreneurs at all.
Flippa is a popular platform that allows users to buy and sell websites. Today I came across an ad for the sale of the penny auction site GizmoBids.com.
Though they state that they site does not yet generate much profit or traffic, to appeal to would be buyers they go on to explain just how easy it can be to make money by running the site.
From the penny auction ad:
“The profitability of the site can be missed by some, but is easy to explain.
Each Credit costs the bidder 10p or as defined by you . Credits are used to increase the price of an “auction” by 1p and can be redefined by the admin.
We also have a auto bidder on the website so if the item doesn’t make the money to cover the item the website wil bid until the right price is made.”
Reminds me of this penny auction owner who took pride in stealing from penny auction bidders.
One interested user asked if it was legal to run the penny auction site in Canada. The seller replied by telling him that it was legal. I hope that all interested penny auction owners know that by using auto bidders, by manually shill bidding, you are cheating consumers and that is clearly not legal.
In fact the developer who created the penny auction script that is on GizmoBids came under fire in the United Kingdom by the Office of Fair Trading, they made it clear that using bots to bid against paying consumers is illegal.
UK Office of Fair Trading Cracks Down on Penny Auction Script with Bot Option
Not all penny auctions cheat, but it’s really hard to know for sure whether or not a penny auction is legitimate, so just keep this in mind if you plan to bid on any penny auction site.
The Entertainment Auction Association was set up to bring credibility to the penny auction industry by calling on legit penny auctions to get audited and agree to follow a code of conduct that excludes dishonesty such as shill bidding. If you’re interested in starting a penny auction and running a legit business definitely check it out.
In case you’re looking for more information on penny auctions, join our free penny auction forum.
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I Ali February 1, 2012, 5:10 am
I believe the action of claiming a new bid(by the website) is a false claim by the owner/operator of the website and can easily be classed as misrepresentation, which technically voids the contract/agreement between the bidder and the owner.
Misrepresentation:
A misrepresentation is a false statement of fact or law which induces the representee to enter a contract. Where a statement made during the course of negotiations is classed as a representation rather than a term an action for misrepresentation may be available where the statement turns out to be untrue. There are three types of misrepresentation: innocent misrepresentation, negligent misrepresentation and fraudulent misrepresentation.
The affect of a finding of misrepresentation is the contract is voidable ie the contract exists but may be set aside by the representee. The remedy available depends on the type of misrepresentation, but generally consists of rescission and or damages. The right to rescind the contract may be lost in some circumstances. The law relating to misrepresentation is mainly found in common law with the Misrepresentation Act 1967 providing some further details.
Source: http://www.e-lawresources.co.uk/Misrepresentation.php