Penny Auction Sites: Bidder Beware

In the ads for penny auction sites like QuiBids, you hear of bidders who won cars, computers, TVs and other pricey items for just a few dollars. Curious about how these sites worked, our investigative in-laws at Consumer Reports recently scrutinized them and found that while the one winning bidder might get a good deal, you’re more likely to spend a bundle to end up with nothing.

“You could get a bargain, but generally, you stand a very small chance of winning the amazing deal they advertised,” said Tony Giorgianni, associate editor, Consumer Reports. “For everyone who gets an amazing deal, many others spend a lot of money only to be disappointed.”

In a number of ways, these sites operate like traditional auctions, with potential buyers placing ever-increasing bids until the clock runs out and the highest bidder wins.

But where these sites differ from traditional auctions is that it isn’t free to bid. Bids are often sold in pre-paid packs, with sites charging anywhere from $25 to $60 for the smallest packs. Some sites do offer refunds on unused bids, though sometimes within only 30 days of when you buy them.

So once you make a bid, that money is gone. And if you’re not the winner, you’ve just spent money solely for the chance to bid on something. CR gives the example of someone who places 100 60-cent bids on a $2,000 computer. If you’re the winner, you’ll pay whatever your bid was plus shipping charges in most cases. But if you lose, you’re out $60 and have nothing to show for it.

As for people who think they will cleverly sneak in near the end of the auction snag the prize without having to buy too many bids, Consumer Reports warns:

First off, lots of your fellow bidders will have the same plan, which is why you’ll typically see a flurry of bids coming in as the clock is about to run out. And whenever someone bids, up to 15 to 30 seconds or so is added to the remaining time. As a result, you never know when an auction will end, even if the clock has ticked down close to the last second. Participants often bid again and again, extending the auction sometimes by hours or even days. That’s especially likely to happen for hot products such as iPads, big-screen TVs, and other electronic gadgets. Some bidders get so carried away that they’re determined to win no matter how many times they have to bid and how unreasonably high the price goes.

Back in August, we asked Consumerist readers if they’d ever tried one of these sites, and many of you expressed a high level of skepticism. It looks like your doubt-radar was spot-on in this case.

Read the full story from Consumer Reports here.

Comments

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  1. HeySuburbia says:

    Of course most people end up spending a bunch of money and getting nothing. That’s how they’re able to give a few people such good deals on stuff and still make money.

  2. Wasp is like Requiem for a Dream without the cheery bits says:

    I thought there was an article on this before? And not the one mentioned in the article.

  3. raydee wandered off on a tangent and got lost says:

    They are scams. I’ve seen dozens of “auctions” like this in online communities with an in-game currency, and whenever I do, I point them out to the people in charge because they are scams.

    Charity auctions might get away with this sort of thing, but buying a bid is still a very underhanded method of getting people–once you’ve bid a certain amount, you’re increasingly reluctant to stop bidding because you’ve “already invested so much.” It’s insane. It’s stupid. It’s … manipulative psychology, which is how these things work.

    • kungfu71186 says:

      Not really a scam, it’s just gambling. It’s like putting coins in a slot machine. It has the same effect to that, so if you can control yourself when gambling in a casino, then don’t this. I do know that sometimes these sites will fix bids the first time. So, you can actually win something the first time and then after that it becomes quite difficult.

  4. Mr. Fix-It says: "Canadian Bacon is best bacon!" says:

    I bet the guy who thought of this sits in a gold-plated, diamond-studded bathing vessel and just rubs himself with money…

    “TREASURE BATH!” :D

  5. [censored] says:

    In other news, it was recently discovered that water is wet!

  6. Costner says:

    Imagine bidding on something where the auction keeps getting extended and extended for days. The only way this really would work is if you had a team and could take shifts to ensure you win. For a big item like a car, it might be worth it even if it costs $5,000 worth fo bids because you can end up with a $25,000 car.

    Even on a smaller item spending $150 in bids to win an iPad for example would be a great deal… but once you factor in your time sitting in front of a computer to win something any potential “winnings” quickly evaporate. If you have a team of people and have to split the winnings, this makes it even less worthwhile.

    If people do this for entertainment more power to them (it is probably cheaper than stuffing $20s in a slot machine), but if they do this because they fell for the marketing and honestly think they can win a 50″ Samsung TV for $40… they are idiots.

    • IgnoramusEtIgnorabimus says:

      the people who actually win these just leave a small program running to take care of the bidding

  7. Jawaka says:

    I don’t think that anything new has been uncovered in this story. While its true that the chances of winning may be low I don’t see anything unethical about the process. If people can’t control themselves then that’s their own fault.

    • Rocket80 says:

      I agree – it’s like calling a casino a ‘scam’. I mean, sure in a way it is, but we all know what’s up and just use it for fun and entertainment.

  8. lehrdude says:

    Not to mention sites that use shills to pump up the prices with bids in order to get “real” users to pump more bids into the system…

  9. blogger X says:

    It’s kinda like eBay, isn’t it?

  10. jono_0101 says:

    i dont see them as scams, you just have to know what you are getting into, the only one of these sites ive ever used is quibids, and they allow anyone to purchase the item for auction at full price, even if you dont win, and they sbubtract the amount of the bids you used on the auction, the way i see it is this, if you want to buy an ipad, and youre planning on spending say $500, buy $500 worth of bids, maybe youll get the ipad for $100 and have a bunch left over, if not and for some crazy reason you use up all of your bids, you can just buy it from the site, and they will subtract the value of the bids, and youll just have to pay the shipping, and you arent out any more than you were going to spend anyway, plus you dont have to be at the computer, because you can set up an auto bid, so you arent wasting time sitting in front of the computer during the auction either

    these sites are a gold mine for the owners, mainly because people go into them with unrealistic expectations of what they are going to get out of it

    • Galium says:

      So what good would it do me if I set up an auto bid when I am trying to get a big screen tv? I do not have any reason to buy another auto, unless it was to sell the auto and buy the tv with the money. Maybe I should let Otto bid for me on the tv, but with my luck, Otto would bid more then the tv is worth.

  11. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    I understand how eBay works, you bid on an item. Other people bid on an item. If you are the high bidder, you pay for item and most of the time it arrives in the mail. But the losing bidders don’t also pay for the item.

    What a clever scam! I wonder how it’s even legal, other than it’s fully disclosed that’s what’s going on.

    • ajaxd says:

      I think you misunderstood how these penny auctions work. They work exactly like eBay except you pay for the right to bid. So losers don’t pay for the item but they pay to big. On eBay “sniping” – trying to place a bid at the last second on an item with seemingly low price – is a common tactic. Unlike eBay penny auctions be extended indefinitely with more and more bidders trying to snipe and more money is spent on bids.

      This seems legal but highly unethical. Probably eventually as more people complain this type of auction will be outlawed.

  12. Speedstr says:

    I always been skeptical of these bidding sites. Not only do you have to prepay your bids, but who’s to say that the company can’t program a bot to bid at the last second to raise the price or extend the auction? Even though I can’t prove it, there seems to be too many ways to manipulate the auction in the site’s favor. Either way, more often it seems like the site wins money hand over fist in these auctions.

    • JayDeEm says:

      I think the only thing that keeps the company from employing some kind of shill-bid bot is the fact that if someone were able to prove it was happening (say, an disgruntled employee), that would be the end of Quibids. One well publicized incident would pretty much kill a site like this.

    • DFManno says:

      Who’s to say that anybody “wins” at all? The company can always create a shill buyer to “win” the auction. That way they needn’t have to pay for the merchandise and make their money on the bids coming in.

  13. SabreDC says:

    This isn’t anything new. We used to call them “Chinese auctions” which I have no idea if that’s racist or not. I apologize if it is… I grew up in a small, ignorant town.

    You buy raffle tickets and enter them on prizes.

  14. Phil Keeps It Real [Consumerist] says:

    This is essentially gambling, sort of like the claw & stuffed toys machine, where the odds are never in your favor. I have heard of a very few random incidents where people did win something cool for a very low price. I’d stay away!

  15. farker says:

    I have to sheepishly admit that I signed up for Quibids to check it out…they had a coupon code on one of those horrendous late-night infomercials showing smiling happy people winning iPads and cars. I think the coupon was for $15 worth of free bids.

    BEWARE that if you try this, a credit card is required to sign up and they WILL charge you $60 for an extra pack of bids if you don’t un-check a box. Definitely very scammy, and not worth the time it takes. I never won anything and spent the $15 in bids very quickly.

    • DrRonster says:

      Treat these sites as I treat Publishers Clearing House. Virtual Credit card from your bank’s website. One and done with the card #.

  16. maruawe says:

    the thing I have seen on these site is when the clock gets close to zero it seems that a flurry of bids resets the clock as high as 30 seconds…. So I just moved on to another site. time limit actions do have a reset ,I go to a lot of auctions. I have seen it closed because of a minimum bid was not reached but never reset ans start again………In fact the only reset that i ever saw was when the auctioneer screwed up (and admitted it ) and started from the beginning and that was because he did not hear that a piece had been replaced on the listings.

  17. form3hide says:

    Here is the thing with these sites: don’t bid on anything you’re not willing to spend full price for.

    I was in the market for a new DSLR, specifically the Canon T3i. Saw it on Quibids and figured, why not? If I didn’t get a steal, I’ll just use their buy now feature and pay full price.

    I ended up getting the camera for about $125 — or a fraction of the overall cost. A steal, yes, but I knew in my mind that I was willing to spend full price if I didn’t win.

    Now take my brother who was determined to get an iPad on quibids. $400 later and he still hasn’t won an iPad. I like to make fun of him and tell him for a bit more he could have just bought the thing.

  18. Maltboy wanders aimlessly through the Uncanny Valley says:

    Another tax on stupidity/greed.

  19. Gravitational Eddy says:

    I’ve been banging the drum on these for about a year now, and still people try to tell me that it’s legit.
    OK, it may be legit. It may actually be a legal business model, but it does do one thing very well: make lots of money for the site owners.

    I have a sneaky idea that most (if not all) of these items up for auction are one-off “deals”, each and every one of them owned and paid for by the site owners.
    If I could sell my Ipad through these guys and get just a percentage of the cash they rake in (in addition to my asking price) I’d almost have to say “EBay? Never heard of it…”

  20. Robofish says:

    My Coworkers were all doing this and they won some early auctions. They were warned that those are setup to make it easy. As it went on all of them started losing ridiculous amounts of money.

  21. Oranges w/ Cheese says:

    How is it an auction if you have to pay EVEN WHEN YOU LOSE? WTF.

  22. humphrmi says:

    I fail to see how these sites differ from online Texas Hold ‘Em sites that our government is busy shutting down.

    You put some money into your “account”. During the game, you move money from your account onto the “table”. Depending on how you and other human players play, you either get the whole pot or nothing.

  23. Retired Again says:

    Out of boredom one day I jumped into QuiBids. Took less than 24 hours to wise up and note it wasn’t flowers I was smelling. I exercised my refund request and I DID get a refund … but they tried to talk me out of it. Sadly the company rep did not even understand how QuiBid actually worked. Sorta like Vegas – penny at a time.

  24. bdgbill says:

    I can’t understand how these things can possibly be legal. I mean, you couldn’t just ut an ad on TV selling raffle tickets to buy a new car (unless you run a legal charity) but this is exactly the way these “Auction” sites work.

    There is nothing even remotely auction-like about these sites. It’s a raffle, the tickets are cheap and you have no idea when the winner will be chosen. One day, somebody at the FTC who actually uses the internet will stumble on these sites and they will be shut down.

  25. PittPanther says:

    This is just amazing!

    I spent 5 minutes looking at a set of golf clubs on Quibids. First of all because bids cost money, no one bids until the clock is below 10 seconds. Everything on the site just sits at $0.01 until very close to the end.

    And as others have already said, the clock keeps resetting every time someone bids, so there is no fixed end. I’m checking these clubs that are now up to $16.00 (can probably buy them outright for $400), and it’s the same 6 logins bidding against each other. Because there is no fixed end, I bet each of the guys is afraid to Not bid, for fear that one of the others will win. So they all keep bidding, throwing their money away each time, resetting the clock.

    I’ve never seen anything like it. The only way to “win” is to get lucky, and have everyone else except you choose to skip a bid cycle.

  26. g-anon-dorf says:

    wouldn’t it be funny if the auction runners had computer scripts that automatically win? They wouldn’t lose any money.

  27. shthar says:

    This is the funniest thing I read today.

  28. ancientone567 says:

    One thing you can count on is greed and stupidity. Bid up sheeple!! lol I want your money for nothing and my chicks for free!!!

  29. jim says:

    its essentially a lottery. lots of people pay to play, 1 person wins. there is no difference.

  30. Yorick says:

    isn’t this more like a raffle, where you buy a ticket to win a prize? except that you then have to pay for the prize …