As you step outside one early October morning feeling the cool breeze of Fall on your face, that familiar mix of excitement and dread hits you:  holiday season is just around the corner.  As your thoughts of lights and laughter fade, you think of your dwindling bank account and wonder, how am I going to pay for all those gifts this year? [$60.00-on-09-07-2011] You get to work, open up your laptop and glance at your inbox.  To your surprise, you’ve received an intriguing e-mail advertizing the just-released version of the iPad at 90% off.  You think, well that would be an awesome gift for my boyfriend!  Curious, you open the email, and it leads you to an online penny auction website.


How Penny Auctions Work

You learn that users can purchase bids and take part in the auction of very expensive items from flat screen TVs to digital cameras and more.  Every time a bid is placed, the total cost of sale of the item bid on increases by one cent.  Also, the auction does not have a set ending time; the bidding could go on for days.

In order to make a bid, you have to buy the right to do so.  Bids usually cost between $0.60 and $1.  There’s a timer that counts down toward zero and the last user to make a bid before the time runs out wins the item; however, each time a bid is placed, the timer is reset to as little as 10 seconds, allowing more bids to be placed.  This sets users up for a game of chicken.  []

Users are told the number of others that are bidding on an item; so as each user continues to bid, he or she is betting on the notion that other bidders either run out of purchased bids or decide to bow out of the bidding war.  In this competitive bidding environment, users may place hundreds – even thousands – of bids on an item worth a small fraction of what was spent to bid on it… and usually end up empty handed, out the money spent on those bids. Since the initial price of an item up for auction typically starts at $0.00, the prospect of winning that very pricey iPad for just a few bucks seems likely.  However, penny auction sites are often plagued by unscrupulous schemes, which have deprived consumers out of their hard earned cash.


Learn to Recognize Potential Scams

While some penny auction sites are legitimate, the industry is not regulated.  So, even though you can actually win and receive items for a fraction of their retail price, this outcome seems to be rare.

1.  Fraudulent Bidding: There are two common types of fraudulent bidding that occur on penny auction sites:  shill bidding and bidding bots. []

Shill bidding occurs when anyone, usually those that run the penny auction site, bid on an item with the intent to artificially increase the price of the item.  This not only increases the end cost of the item, but also results in users spending more money bidding on that item, due to a seemingly increased desirability for that item.

With bidding bots, fake user profiles are created and run by the penny auction site owners, and those accounts are used to place phony bids in order to cover the cost of running the penny auction site.  A real bidder can’t tell the difference, and may continue to spend money bidding on an item against a fake bidder.

2.  Items Won Never Delivered: Often times when users win items, they will receive a tracking number for each item being shipped; however, all too frequently, days turn into weeks and weeks turn into months.  The item won is never delivered, and customer service has no useful information to convey.  When this happens, disgruntled users might eventually be refunded the money they paid for the item won and never received; however, this amount is usually only a fraction of the money spent bidding on that item.  Many times, the amount spent purchasing bids is not refunded, or it will be refunded in the form of bid credits to your account with the penny auction site – the site that by that time you want nothing to do with, ever again.

Also, many new penny auction sites shut down after a short run.  Rarely, sites will make sure users receive the items they won and are refunded for unused bids before they shut down the site.  Yet, more likely, sites are not that generous and end up depriving consumers of their unused bids and items won.

Scambook has received a large amount of reports about penny auction sites, many conveying common grievances.  Consumers have complained about the following:  1) confusion about having to pay in order sign up for the site and/or bid on items$200.00-on-05-13-2011];

2) being told that due to a glitch in the system, the user did not actually win []; 3) items won were not delivered [$600.00-on-10-06-2010]; 4) the site was shut down before the user was able to draw on all of his or her bid credits;—Switch-for-17.50-on-08-19-2011; 5) there was not a customer service phone number listed on the site [—Switch-for-17.50-on-08-19-2011]; 6) bidding bots were being used to place bids [$100.01-on-07-28-2011]


Take Control!

What should you do if you are the victim of a penny auction site’s shady tactics?

1. File a report with the Federal Trade Commission, the nation’s consumer protection agency.  You can file a complaint with the FTC by clicking here:

2.  File a report with your local Better Business Bureau.

3.  Help yourself and others by reporting your experience to Scambook and commenting on similar posts!!  When you share your story, others will feel compelled to share theirs, and we will all take part in cleaning up the penny auction industry!  And if you’re wondering if you should take part in a penny auction, but sure to search Scambook for complaints first!


See Also

Penny Auction Fraud Alert: How You Can Lose by Winning
This Is Your Brain on Bargains: Why Sites Like NoMoreRack, BargainRoom and JustFab Are Hard to Resist
Bargain Hunting for Beginners: 10 Things You Should Always Haggle For

About The Author

Scambook is an online complaint resolution platform dedicated to obtaining justice for victims of fraud with unprecedented speed and accuracy. By building communities and providing resources on the latest scams, Scambook arms consumers with the up-to-date information they need to stay on top of emerging schemes. Since its inception, Scambook has resolved over $10 million in reported consumer damages.

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11 Responses

  1. John Smith

    Thank you very much for your great post about penny auctions. everything you have said has happened to me on I have been waiting for over a month for some of my won items so I decided to put in disputes with Paypal, I won a few but like you said Paypal only returns the few pennies you bid not the value of the item won. Its a great scam by koodeal. I will take your advice and report them to the links you post above. Thanks again.

  2. Debbie

    bidrack ripped me off…now I don’t know if I will be able to get all of the Christmas presents for my 15 grandchildren… I had thought that I won 7 of them on bidrack………….but I have never received them.
    it has been months since I have won them. I asked for my money back….. but that hasn’t happened either..

    do not use BIDRACK!!!!!!

  3. Robert Nickison

    Won several auctions, then they started charging 1.00 for every trnsaction, showing I had won a watch 5 mos ago, they to this day say they are working 24/7 to resolve this issue to find my watch, BS.Last time I posted on here, Bidrack started making posts from their employees, that I didn’t read fine print.

  4. BobZ

    bidrack hooked me for $75. I promptly reported it to my credit card company and they made good on it. Lucky!

  5. George

    Hi Scambook,
    I wanting to report a vendor who sold me a program to make money from home by the name of Robert Allen and his site = MSI(Multiple Streams of Income) for $97.oo on 7/7/2011. Order no; 2901502
    He gave me a 365day guarantee.

    I could not get his program to download and asked for a refund, but got NOTHING after how many tries. Every time i received a mail stating that this is your ticket number and that “someone” would get back to me—but never did!
    Long story. I send him an email directly to himself but it never gets delivered.
    Eventually i got a mail from another “Firm”–stating that i must give mr Allen a phonecall and ask for my refund, but i can not phone him from South Africa which is about 10,000km’s from him!
    Incidently i had to pay him directly NOT through Clickbank who one never has problems with.

    I’m telling you that this guy is a scammer–who can investigate him for my money back?
    I’m again seeing emails from him on my pc for other programs—so WATCH OUT FOLKS!


    • Melody

      I am sorry to hear about your misfortune George. Robert Allen is a very famous scam artist who has been scamming people for many years, unfortunately. He has had numerous businesses, has been on T.V. many times showing talk shows host and their watchers how to make millions over night. Everyone of his products are a scam and he is a millionaire if not a billionaire from his years of scamming anyone he can take a buck from. If anyone out there sees the name Robert Allen on anything click off, turn off, or do whatever you need to do to get away from this trickster. He took me for $6,500 on a real estate deal years ago and it took me about a year and a variety of organizations working together to get my money back, but luckily I did. You can not call Robert Allen, he has too many people working for him that intercede calls. This website has to know who Robert Allen is. You did the right thing posting here. I hope they can help you. I do know he and his wife are both working with one company called Usana, Inc. which sell vitamins and other products at inflated rates. Maybe someone can reach him through his Usana sales. He and his wife are at the top of the sales force. Also, the man who writes and sells the books “Chicken Soup for the Soul.” Mark Canfield was one of Robert Allens partners in the real estate business scam that I got sucked into. Though it was years ago, I do believe it was called “Multiple Streams of Income” at that time as well. I do not know if they are still working together. Few can believe Canfield was involved, but he definitely was an may still be. You just need the right people to speak up for you and you can get your money back. Did you send in your proof of sales to this site?

  6. Lillian

    The above sites are both rip offs. You have to purchased bids in order to bid on items that you aren’t ever going to win. Each time you bid the time left on an item goes up 15 seconds making it impossible for a popular item to ever be won. $99 was lost on the DealFun site plus the meanual items that I did win had to be paid for at the end of the auction. So why did I have to purchase a bid pack. Both sites operate on the sme principal and are total rip offs!!! I lost over a $100.on the ZBiddy site as well. Consumers BEWARE!!!

  7. Barbara

    To Lillian,
    I got onto the website NO MORE RACk website, some how I got onto the bidding site? I quit and then saw I was charged for bidding rights? I e-mailed the DealFun company and sent them a couple of nasty letters. They did put my money back into my account. This is a crazy way to shop! No one should do it unless you are rich…


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