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BBB Tip of the Week: Penny auction sites

The Washington State Attorney General’s Office has reached a settlement with ArrowOutlet.com, a penny auction site that rigged auctions using a bidbot – automated software – to bid up the price of electronics and other goods.

Because penny auction sites charge per bid, Arrow Outlet’s bidbots cost bidders more to keep bidding. In some cases the bidbots won, so Arrow Outlet pocketed the money from each real bid and, without an actual winner, kept the item as well. This deceptive tactic violates the state’s Consumer Protection Act.

In the settlement, the company will stop all of its auctions and pay restitution to its customers. In order for people to receive restitution, they must request a claim form at https://fortress.wa.gov/atg/ formhandler/ago/ ArrowOutletForm.aspx.

Before bidding, be aware of some penny auction basics. The site may have a hefty registration fee. Nearly all make you buy “bid packages” up front, usually at a rate of $50 to $100 for 100 bids. And the trickiest of all is the auction timer add-on. This last feature adds more time to the auction with each bid, making the auction process and endpoint unpredictable.

Bidders could spend tens, hundreds or even thousands and not win a single auction. And remember, if you do win an auction, the final auction price is not your only cost. The cost of every bid you made in order to win plus the final auction price is the total cost.

Beware, bidbots are not the only way an auction site can force bids upward. They can hire real people – shills – to bid up the auction.

Before you take a gamble on a penny auction site, read every word of the fine print and understand the rules.

To find out more, check out the FTC’s Consumer Alert “Online Penny Auctions: Nothing for Something?” at http://www.ftc.gov/bcp/edu/pubs /consumer/alerts/alt041.shtm.

If you are unable to resolve issues you have with an online auction site, file a complaint with the Federal Trade Commission at ftc.gov/complaint, the Washington State Attorney General’s Office at http://www.atg.wa.gov , and the BBB at www.bbb.org or by calling 509-455-4200.

Erin Dodge, BBB editor