Can You Trust Penny Auction Sites?
Aug 28, 2012 06:14 PM EDT by John Brandon, LAPTOP Contributor 
You’ve probably seen the ads for BeeZid.com, QuiBids.com or SkoreIt.com. These penny auction sites entice you to place bets on such drool-worthy gadgets as an iPod or MacBook Pro, seeming to promise deals of 90 percent off or better. However, as I found out by participating in numerous auctions over the span of an entire week, these sites are, at best, unregulated and unscrupulous. At worst, some could be illegal, especially if they use automated bids.
“The main problem with penny auction sites is that it is difficult to verify the legitimacy of the sites,” said Kyle-Beth Hilfer, an attorney in New York who studies tech trends. “Because these online auctions move so fast, consumers can lose a lot of money very quickly, even with legitimate sites.”
Anthony Giorgianni, an adviser for Consumer Reports, echoes this sentiment, saying the sites can be dangerous because you’ll need to visit frequently to win. There’s an illusion of imminent victory, but few people are actually victorious. And even when you do win, he says, the final cost of an item may be higher than the price you would find at an outlet store or through a legitimate auction.
The FTC Steps In
The Federal Trade Commission started investigating the legitimacy of penny auction sites last year, and issued a warning about how they work and the nasty surprises consumers may encounter. For instance, the FTC warns, “Many complaints about penny auctions involve late shipments, no shipments or shipments of products that aren’t the same quality as advertised.”
The government agency goes on to tell consumers to be wary of insecure payment options, hidden costs and misleading terms. Basically, consumers looking for a bargain will find that penny auctions are not all they’re cracked up to be.
Yet there’s a reason they exist. We all crave the latest shiny gadgets — Apple MacBook Pros, the Apple iPod, a Kindle Fire — whether we can afford them or not. And these companies know it. Interestingly, while such sites as QuiBids.com certainly include everything from golf clubs to knife sets, the most popular, front-page auctions are almost always related to gadgets. And discount prices are especially alluring for Apple products, which typically sell for a set price at every e-tailer.
Bidding With Points = Danger
In my first foray into the wild world of penny auction sites, I lost about $20 before I even knew what I was doing. One of my early discoveries: You’re not actually bidding with pennies. This is an ingenious trick: You typically pay about 60 cents for each “penny” bid. But during the actually bidding process for an item, the bid amount goes up only one penny per click.
The sites seemed designed to encourage random clicking, not shopping for specific items. You can’t find items easily because there are so many links, colors and prices. You end up feeling like you have to just start clicking on any auction to win something.
Dangerous or Illegal?
My overall experience: Penny auction sites present an illusion of victory, but the reality is that you can spend hundreds and only win occasional auctions.
Hilfer says the ongoing legal debate regarding penny auction sites centers on whether skill or chance is the predominant factor in determining a consumer’s success. If chance is the main factor, these sites could be considered illegal gambling or illegal lotteries. So far, the case law has been inconclusive.
Yet even if there is skill involved, Hilfer says, these sites could still be dangerous because many in the past have employed deceptive techniques to increase bidding activity.
One argument suggests these sites are using “shill bids” generated by software programs. During an auction for a MacBook Pro, you might not be bidding against another human at all, but the site itself places bids to make it seem like there’s a flurry of activity, an attempt to make sure you bid often.
In the end, this is what makes penny auction sites so dangerous, and it may lead to their demise. The FTC may eventually move to regulate these sites, making sure every bidder has an equal chance (say, even if you are on a slow Internet connection). In the meantime, we would steer clear.
Can You Trust Penny Auction Sites?
- Penny Auction Sites Explained
- Testing the Auction Sites
August 29th, 2012 at 11:31 pm
Hey John,
Thanks for your post about penny auctions.
I agree with you that the advertising for these websites can be somewhat misleading, but in all fairness, most advertising that we’re exposed to as consumers is a bit misleading. You highlighted the fact the penny auction websites, at this point, are completely unregulated. But again, in all fairness, you failed to mention that the industry leaders (QuiBids, BidCactus) have submitted themselves to outside accounting firms who have verified the legitimacy of all bids placed.
Not only that, but many of these sites offer a Buy Now option. This means that if a bidder doesn’t win an auction, they can apply the value of the bids they place toward purchasing the item at retail price. This means the worst case scenario is that a bidder pays retail for an item.
I understand the risks of these auctions, and I choose to play in them. I’ve won over $10,000 of merchandise, over the course of three years, with an investment of less than $5,000. Sounds like a good deal to me.
Just want to make sure that the pros and cons of penny auctions are discussed.
Josh
September 2nd, 2012 at 8:21 am
There are many types of online auctions.A very unique but a good one to consider is called Zbiddy auction.The main advantage to using this auction is that the products you bid on are are brand new with a manufacturers warranty to go with it.Zbiddy is definitely worth trying.
September 5th, 2012 at 7:06 pm
I haven’t visited a lot of penny auction sites, but there is one that I am familiar with, and that is ibid2save. Hardly anything is a real deal. They had a popular DVD title up for bid with an automatic auction fee price and shipping price totaling about 18 bucks. They’re basically a regular retailer. Before the bidding even starts, you’ve paid normal price for the movie. They used to have great products for cheap, though. Back when they were newer. I guess they became established and got outrageous. Let me just say, though, penny auctions are a form of gambling. It had always bothered me when people choose to gamble and then whine when they don’t win. What do you think gambling is? You are not guaranteed anything. I wasted $1500 on penny auctions. I got caught up in the hype and I spent money I shouldn’t have. I won some awesome things, don’t get me wrong, but it wasn’t enough to cover my “investment” so ultimately, it wasn’t a good choice. Who do I blame for that? Me. Anytime you try to get something for nothing you are taking a risk. I wish more people would learn to take responsibility for their own actions.
September 10th, 2012 at 11:00 am
I’ve been following and reporting on penny auctions since 2009 and have seen many sites come and go over the past few years. As a result of being scammed myself in 2009 and seeing that there were no resources available I set out to launch http://pennyauctionwatch.com a penny auction blog and forum resource for consumers. With the help of the penny auction bidding community we’ve exposed a number of penny auction scams (i.e. sites that shill bid, fail to ship and end up just shutting down leaving consumers in the dust.) If anyone has any questions I’d like to invite them to join my forum http://www.pennyauctionwatch.com/forum and be sure to do your research before you decide to spend money on bids on any penny auction sites. Note: I prefer sites that offer a buy-it now option, this allows bidders to apply bids spent on purchasing items that they don’t win. Thank you!
September 19th, 2012 at 4:15 am
Great post John, and was not aware that the FTC had investigated it to such a degree.
When it comes to penny auctions, much like anything that requires you to gamble to a certain extent, it is about moderation and self control. I use penny auctions a few times per year and get a great deal, as oppose to bidding on many items and winning none. Looking for sites that offer a Buy it now option is a good sign as if you lose out on the auction, at most you pay full retail. Unless bidders are bidding on items they would never purchase otherwise.
Unfortunately, there will always be people out there looking to scam bidders, it’s the nature of the online business. If anyone is interested in signing up for a penny auction, do some research. As Amanda commented above, http://www.pennyauctionwatch.com is a great resource for this.
September 22nd, 2012 at 7:59 am
Nice post John.
Madbid.com is one of the trusted name in UK , It is also audited by BDO .
In past two years i won many auctions and saved a lot.
However most of the penny auctions sites are scams.
Thanks for your eye-opener post !
September 24th, 2012 at 2:28 pm
Penny auctions like quibids are tricky to win unless you know what you are doing. I suggest doing your homework before bidding. You should know the average price a particular item item closes at before jumping into the auction. You are not guaranteed to win, but it is fun to play especially when you use a strategy. I use http://www.QuiBidsReport.com to research before I play.