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(Continued from page 16) bids. There is a countdown clock that restarts every
time someone places a new bid. Some websites even
allow users to set up automatic rebids if they are out-
How penny auctions work bid. The total price of the item “won” is determined by
the number of bids, so you could end up paying well
In some ways, online
penny auctions are in- over the retail value of the item you’re bidding on.
ternet bidding sites that Generally, you have also lost the money spent on the
share some similarities used bids if you lose the bid.
with legitimate auction Let’s say the auction is for a new computer with a
sites like eBay. Howev- stated retail value of $599. The bidding starts at $0,
er, the BIG difference is increases in 1 cent increments, and one “lucky” bid-
that consumers who der “wins” the computer for $30. The winning bidder
bid on penny auctions must pay for each bid they is given credit for the bids he has “spent” at $0.60
make regardless of whether they win or lose the each. It is not unusual to see individuals bidding hun-
auction. dreds of times, so if the winner in this example bid

Generally, anyone interested in bidding in a penny 300 times, that winner paid $180 for their 300 bids, if
auction must pay a registration fee before gaining each bid cost $0.60. Still, this does not seem like a
access to bidding. While not required by all penny bad deal for the winner; $180 for a $599 computer,
auction websites, this fee is often described and even if it is a system, you could get on Amazon for
charged in what many consider an underhanded $399.
way. For example, it is typical for a consumer to If a penny auction item sells for $180, the auction site
make a query regarding online penny auctions. If has received 18000 incremental 1 cent bids, which
the consumer provides credit card information, that cost the bidders as much as $10,800! Penny auction
credit card is immediately charged $60 - $99 as part sites often promote themselves as “social media”
of the registration process. Often consumers provide buying and stress the social nature of their sites.
credit card information without realizing they are au- What they don’t advertise is how addicting these sites
thorizing any payment. can be. $10 gift cards can go for over $20 when bid-
ders’ egos apparently overrule all common sense.
An Auction Example
And I can virtually guarantee that YOU will not get
As stated above, penny auctions’ business model that computer for $180.
immediately charges any- An individual cannot determine which penny auction
one furnishing them a sites are “legitimate.” Some state attorney generals
credit card number of at have found that some penny auction websites use
least $60, which buys 100 “shills” that automatically outbid people, making it vir-
bids.
tually impossible to win items at a reasonable price.
Some of these shills are software programs that show
a fake username to persuade consumers that they
Most new bidders bid on are bidding against a real person. As a result, several
one or two auctions, lose penny auction sites have disappeared, never shipping
their 100 bids ($60), and
quickly realize getting a bargain wasn’t as easy as it items won. Other sites have sold financial information
about users or put additional charges on credit cards
looked. These sites count on the addictive nature of without permission.
almost winning an auction, maybe losing by a penny
or two, to encourage a percentage of bidders to buy Conclusion and Recommendation: Avoid Penny
more bids. Sometimes a substantial discount is of- Auctions
fered - i.e., if you sign up right now, you can get 200 While online penny auctions may sound like an at-
bids for the same $60.
tractive deal at first, consumers should be very wary
Penny auctions usually allow losing bidders to apply before handing over any money or credit card infor-
at least part of the money spent on bidding towards mation. It is doubtful that consumers will save any
buying the product at their retail price. However, money by using the service to purchase goods, and
penny auction sites, including DealDash, often sub- much more probable they will be ripped off.
stantially overstate the retail price of items, so buy-
ers are usually either overpaying or perhaps getting
completely ripped off.

How the Auction Works
The bidding for an item typically begins at $0 and
then increases by one cent each time someone

Cyber Awareness Bulletin 17 October 2021