The BBC’s Alexis Akwagyiram just published an article today on shill bidding, no not in penny auctions but auction sites like eBay, and it sure seems as if the UK and other countries are taking the subject of shill bidding (cheating) seriously. Read the article: How do you Catch Online Auction Cheats?
Shill bidding sure sounds like cheating to us and if it isn’t yet fraud here in the US we hope that lawmakers take notice soon.
Take, for instance, the Fraud Act 2006. The Fraud Act 2006, applicable in England, Wales and Northern Ireland, according to Ian Williamson, of Bird & Bird LLP, to the BBC “anybody bidding against themselves could also face prosecution under the Fraud Act” and that “a conviction under the Fraud Act can lead to a maximum fine of £5,000 per offence and up to 12 months in prison!” That’s a whole year in prison for shill bidding, wouldn’t you think that if an individual set out to, as we said in yesterday’s article, “get rich quick,” would think twice about defrauded consumers if the possibility that he could go to jail for committing fraud was there? We don’t think so. What about the script developers that are providing the shill bidding capabilities? Should they too be liable for aiding & abetting, by providing the means with which to cheat consumers?
Also from the BBC article, “An eBay trader has been given a community service order and made to pay nearly £5,000 in fines and costs for bidding on his own items to increase the price.”
Shill bidding is being taken seriously by eBay, they are said to invest over $9 million/a year on technologies to combat & detect shill bidding! But who is there to stop and prosecute penny auction sites that are shill bidding? No one, yet, at least not to our knowledge.
Let’s take a look at penny auctions and explain shill bidding (once again):
What is a Penny Auction?
A penny auction is an online “auction” site that commonly offers new items for sale, unlike eBay, the site’s owner owns and sells the product.
- To bid in a penny auction users must first register on the penny auction site, purchase bids in the form of bid packages, bids usually cost $0.75 each and then start placing bids.
- Users will see the auction timer countdown with their name showing and think they could be the winner, their name may be showing as winning at 5, 4, 3, 2, — well then another bidder places a bid and time gets added to the clock again, this could-be vicious cycle continues until the bidder up when the auction clock hits zero wins with no opposing bids placed. These auctions are pretty fast paced and can sometimes last for hours if not days and yes there are pitfalls, i.e. faulty Internet connection, storms, Internet cafe’s, late for an appt., etc.
- With regular pitfalls aside, users should know that there are penny auction sites that have and are shill bidding and the media and the FTC among others, should take this seriously before it gets out of hand even further.
What exactly is a shill bidder?
Well, a shill has been known to be someone connected with a company’s management that fabricates experiences/ fake reviews/ with the company to portray the company in a positive light masked as a real customer. In penny auctions, yes there are even shills (those that create fake reviews), shill bidders are the company/employees/friends/relatives that get free bids and bid against the paying users that spend their $0.75 or so, to try to win an item. Yes, even if a site is shill bidding they will let users win, sometimes after they have gotten the bidder to purchase enough bids to cover the cost of the item or to even make the site “look populated.” A shill bidder can also be a fake bidder, yep, that’s right, not even a person at all but a computer program that has been programmed, either by the penny auction operator or their script developer/programmer to place bids against real paying bidders, and any one penny auction site can have hundreds if not thousands of these fake bidders bidding against the users that are paying by the bid.
The very fact that there are penny auctions that are shill bidding (we’ve presented dozens of instances here) could even lead consumers to think twice before trying penny auctions, but we do believe there are some sites that are not shill bidding, it’s just hard to really know for sure.
Which is why a true third-party audit should be performed over these penny auction sites by reputable firms. For instance, BidCactus.com, the first penny auction to receive true auditing, was recently examined by Earnest & Young and was found to be shipping items to their users, and not shill bidding (view the report).
The BBC posted the contact of the UK’s Consumer Direct contact for Trading Standards (#08454040506) to investigate shill bidding. If you’re in the UK and suspect an online auction to be shill bidding (including a penny auction) we’d suggest you contact them.
Here in the US users should contact the FTC, we’re just not too sure when they will see shill bidding in penny auctions.
The BBC article is right, shill bidding is basic fraud, we’re just dismayed that so many people are getting away with it.
Photo Credits: Don Hankin/Flickr/CC by SA 2.0
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NOYB July 6, 2010, 3:37 am
I don't know what FBI agent you spoke to, but if he said shill bidding was not fraud he's wrong. FBI agents are people, and some of those people are dumb, some like John Connally are criminals currently in jail for aiding the second most Wanted Person in the world (Whitey Bulger, if you don't know). You should not be posting repeatedly, as you have been, that an FBI agent told you there was nothing illegal about shill bidding. While it may be true that an FBI agent said that, WHAT the FBI agent said is not true. I could say someone told me that the moon landing was faked, and that would be true – someone did tell me that. But WHAT that person told me is not true, and it would be irresponsible for me to keep repeating it.
OPlease July 6, 2010, 12:08 pm
I find it very hard to believe that an FBI agent told you shill bidding was not a crime. It's fraud. How could it NOT be a crime to lure people to a site and have them pay their money based on the site claiming that they are bidding against other people just like them, and that they have a chance to win items at a really low price, if in fact they are bidding against employees or automations of the company that are designed to drain customers of money and PREVENT them from winning things at a low price? It's not a gray area, it's open and shut. Even IF, and it is a BIG BIG IF, an FBI agent told you that, you as a supposed investigative-type person and sentient individual should say 'That doesn't sound right' and do some more research.
OPlease July 8, 2010, 6:25 am
Why was my comment removed? There is NO DOUBT that shill bidding is fraud and illegal in the US. A company cannot falsely claim that bidders are bidding against each other when in fact they are bidding against the company’s employees or automations. A company cannot entice people to bid on their auctions with deals that others got when in fact those others are company employees or automations, and with company employees or automations being used to prevent items from actually selling cheaply. If and FBI agent actually did tell you that such fraud is not illegal he’s not much of an FBI agent. And you are not much of an investigator if you blithely accepted such a questionable opinion. You should have done a lot more research, rather than accepting a clearly mistaken opinion.
auctionwatcher July 9, 2010, 8:29 am
Yes, you're correct. He did tell me that and I should have studied the law further. Your comment was left unapproved because I had edited out the FBI as you had suggested & . Thanks