But DealDash auctions usually run for several hours, or even days, so the costs of bids alone can exceed the cost of any item. Pstikyan seeks class certification, disgorgement of unjust profits, and damages for consumer fraud, false advertising, unlawful trade practices and unjust enrichment.
Class Calls Penny Auction Site DealDash a Scam The penny auction site DealDash made hundreds of thousands of dollars selling phony name-brand products, according to a class action from a Californian who says he lost thousands of dollars to the scam. The trick is that rivals can also bid 3p to ensure your bid is no longer unique, then enter their own unique bid of, say, 4p and take the lead.
Bids cost money unless you enter a free auction — to win credit that can only be used on BidBudgie. With penny auction websites everyone helps ramp up the price and, at some sites, as long as people keep bidding the auction never ends. If you win, how much you eventually pay depends on how many credits it took to place each bid, how many times you bid, and the eventual sale price. We took a detailed look at the bidding history for Madbid's recent LG TV auction, which required four credits per bid.
Madbid can make a lot more than the sale price on each item. But it often loses money too. Dr Mark Griffiths, professor of gambling studies at Nottingham Trent University, says bidding on these types of auctions is gambling: "Winning a penny auction is essentially chance-determined and does not depend on any discernible skill — a person can bid again and again with no certainty that they will ever win the product.
If there is no real skill in participating and it is essentially a chance activity, how is this not a form of gambling? The vast majority of people who bid on penny auction websites do not get anything for their money, except the hope of winning. But the UK's Gambling Commission has refused to acknowledge penny auction sites are gambling operations, something Madbid. A spokesman says Madbid is an "interactive social auction website … that features a 'buy it now' option, refund policies and interactive elements, creating a fun shopping experience that requires skill and strategy to land bargains".
The "buy it now" option allows users to buy a product at a slight discount off the RRP. If it is a product users have bid on already, they can use their spent credits to further discount the price. The internet is awash with penny auction forums where fans debate strategy and share tips, but there are also threads such as " Penny Burn Out?
By one estimate, there are now about penny auctions operating online and some of them have gone out of their way to distance themselves from the less reputable sites. So, first, know that the odds are against you winning and that some people consider it a form of gambling.
What they're doing may be perfectly legal but it helps that you keep a sensible perspective on what's actually happening. Second, the FTC has issued a consumer alert which details how these auctions operate and how to avoid some of the pitfalls: Online Penny Auctions: Nothing for Something?
Finally, always check out what others are saying online about any site you're planning to use -- but beware of those phony testimonials. Better to do a search with the name of the site followed by the word "scam" and see what comes up. Skip to main content Skip to primary sidebar. Don't Fall for this Strawman Scam ».
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