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 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.
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.
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.
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